Court Dismisses Insurer-Initiated Declaratory Action

On September 20, 2024, the U.S. District Court for the Eastern District of Missouri dismissed a declaratory action recently initiated by an insurer, based on the insurer’s attempt to apply a “total pollution” exclusion in a non-environmental, products-liability context. See Atain Specialty Ins. Co. v. Dollar Tree Stores, Inc et al., Case No. 4:24-cv-00787.

As pleaded in the insurer’s complaint, the coverage dispute arose from injuries allegedly sustained by a minor child after she “ingested the contents of a liquid breath mint container while under the supervision of her grandmother” who had purchased the mints. See ECF No. 1, at ⁋⁋ 1–2, 29, 32. The mints contained a “chemical known as cinnamal (hexyl cinnamaldehyde)” and potentially other “hazardous substances, including as [an] allergen, strong sanitizer, and/or corrosive.” See id. ⁋⁋ 30–31. As a result, a lawsuit was brought on behalf of the child against the retail store that sold the mints, which then named the mint manufacturer as a third-party defendant. See id. ⁋⁋ 4–5. In turn, the breath-mint manufacturer tendered the claim under its commercial general liability (CGL) policy. See id. ⁋⁋ 3, 6–7, 23.

After the claim was tendered, the manufacturer’s insurer initiated a declaratory action on June 5, 2024, seeking declarations that it had no duty to defend or indemnify under the CGL policy. See ECF No. 1. In support, the insurer invoked a “total pollution” exclusion, because the minor “suffered from caustic ingestion suggesting she ingested some type or irritant or corrosive substance,” which the insurer suggested entailed a defined “pollutant.” See id. ¶¶ 50–52. In response, on July 7, the insured manufacturer moved to dismiss the insurer’s complaint under Rule 12(b)(6), FRCP (ECF No. 18), which the court granted on September 20 (ECF No. 32).

Referencing basic principles of coverage interpretation as a starting point, the court noted that “the insurer bears the burden of proving the applicability of any exclusion from coverage” and the court should give a “reasonable construction [of coverage] so as to afford coverage rather than defeat coverage.” ECF No. 31, at 8–9 (citations omitted). Under that standard, the court found that the insurer’s position that breath mints entailed an excluded pollutant (an “irritant”) was an “absurd result,” especially when an endorsement in the policy identified “BREATH DROPS” as a covered product. Id. at 10, 13, 16–17. Ultimately, the court ruled that the exclusion was inapplicable and granted the motion to dismiss the insurer’s declaratory action. Id. at 17.