Home Heating Oil Leak Is Covered Due to Pollution Ambiguity, Rhode Island Court Rules

The Rhode Island Supreme Court for the first time has found the definition of pollution in a commercial policy ambiguous enough to justify vacating a lower court’s summary judgment in favor of the insurer.

The insurer, Arbella Protection Insurance Co., had declined to defend Regan Heating and Air Conditioning against a claim by a customer who found 170 gallons of home heating oil in his basement during a Regan installation of a new heating system. Regan’s commercial package policy from Arbella included a pollution exclusion. Arbella contended and the lower court agreed that home heating oil constituted a pollutant under the policy and thus coverage was excluded.

But Regan argued that the policy was “reasonably susceptible of different constructions” rendering it ambiguous as to whether home heating oil was a pollutant and the policy should have been construed strictly against the insurer due to the ambiguity.

The policy does not cover “property damage which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time.”

Under the policy, pollutants are “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.” Oil, and more specifically home heating oil, is not explicitly listed as a pollutant within the policy’s definition.

Chief Justice Paul Suttell noted that this issue was one of first impression for the high court. Commenting that “‘diversity of judicial thought as to the meaning of terms in an insurance contract is proof positive” of ambiguity, Suttel concluded that the policy must be strictly construed in favor of Regan and ruled that the lower court erred in granting Arbella’s motion for summary judgment and in denying Regan’s motion for summary judgment.