Reed v. Auto-Owners Insurance

This appeal involves the proper construction of a pollution exclusion clause in a commercial general liability (“CGL”) policy. A residential tenant sued her landlord for carbon monoxide poisoning allegedly caused by the landlord’s failure to keep the rental house in good repair. The landlord tendered the claim to his insurance carrier under his CGL policy. The carrier initially defended the suit but later filed a declaratory judgment action requesting a determination of non-liability. The trial court denied the carrier’s motion for summary judgment based on the pollution exclusion clause, and a seven-judge panel of the Court of Appeals reversed on interlocutory appeal. The Court of Appeals held that the pollution exclusion clause in the landlord’s CGL policy unambiguously excluded the tenant’s claim from coverage. 1 We granted certiorari to decide whether the Court of Appeals erred in its interpretation of the pollution exclusion clause. We agree with the Court of Appeals’ judgment and analysis, and we therefore affirm.

1. Leslie Reed sued her landlord, Melvin Waldrop, for carbon monoxide poisoning allegedly caused by Waldrop’s failure to maintain the house she was renting from him in good repair.2 Waldrop tendered the claim to his insurance carrier, Auto-Owners Insurance Company (“Auto-Owners”), under his CGL policy. Auto-Owners assumed Waldrop’s defense under a reservation of rights.

On May 11, 2005, Auto-Owners filed a complaint for declaratory judgment in the Butts County Superior Court seeking a declaration *287of non-liability. Auto-Owners filed a motion for summary judgment based on the pollution exclusion clause of the policy, and the trial court denied the motion without explanation. Auto-Owners sought and obtained permission to pursue an interlocutory appeal.

A seven-judge panel of the Court of Appeals reversed. The majority held that a straightforward reading of the pollution exclusion clause, and in particular the provision defining a “[pjollut-ant[ ]” as “any solid, liquid, gaseous or thermal irritant or contaminant, including . . . fumes,” compelled the conclusion that Reed’s claim against Waldrop was excluded from coverage under the CGL policy. Two judges dissented.3 The dissenters would have held that the pollution exclusion clause in the CGL policy is ambiguous; that one reasonable reading of the clause is that it applies only to what is traditionally considered to be “environmental” pollution; and that, because ambiguous terms in insurance policies must be construed against the insurer, Auto-Owners was not entitled to judgment as a matter of law.

2. Under Georgia law, insurance companies are generally free to set the terms of their policies as they see fit so long as they do not violate the law or judicially cognizable public policy.4 Thus, a carrier may agree to insure against certain risks while declining to insure against others.5 In construing an insurance policy, we begin, as with any contract, with the text of the contract itself.6 Where the contractual language unambiguously governs the factual scenario before the court, the court’s job is simply to apply the terms of the contract as written, regardless of whether doing so benefits the carrier or the insured.7

Waldrop’s CGL policy requires Auto-Owners to “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” The carrier is also obligated to “defend any ‘suit’ seeking those damages.” It is undisputed that Reed’s complaint initiated a “suit” against Waldrop seeking “damages” for “bodily injury” as those terms are initially defined in the CGL policy. However, the policy also provides, under the heading “Exclusions,” as follows:

*288This insurance does not apply to ... ££[b]odily injury” or “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants . . . [a]t or from any premises ... owned . . . by . . . any insured.... Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. . . .

Reed alleges that she suffered “bodily injury” from the “release” of carbon monoxide gas “at. . . [the] premises,” i.e., the rental house, “owned . . . by . . . [the] insured,” i.e., Waldrop. As all parties recognize, the question thus narrows to whether carbon monoxide gas is a “pollutant” — i.e., matter, in any state, acting as an “irritant or contaminant,” including “fumes.” We need not consult a plethora of dictionaries and statutes to conclude that it is. After all, the very basis for Reed’s lawsuit is her claim that the release of carbon monoxide gas inside the rental house poison[ed]” her, causing her to suffer difficulty breathing, dizziness, insomnia, vomiting, nausea, headaches, and decreased appetite. Accordingly, we agree with the Court of Appeals that the plain language of the pollution exclusion clause excludes Reed’s claim against Waldrop from coverage under the CGL policy.

The dissenting judges in the Court of Appeals reached a contrary conclusion only by first identifying “the purpose” of pollution exclusion clauses generally and then surveying the “historical evolution of the text of the standard exclusion” before turning to the plain language of the pollution exclusion clause in the CGL policy issued to Waldrop by Auto-Owners. Looking through the prism of what one might expect to find based on this previously determined ‘‘purpose” and “historical evolution,” the dissenters concluded that the pollution exclusion clause “care” reasonably be read as being “limited to what is commonly or traditionally considered environmental pollution.”8 Nothing in the text of the pollution exclusion clause supports such a reading. In short, the dissenters’ focus on extra-textual sources of interpretation led them to find ambiguity in the pollution exclusion clause where there is none.

Judgment affirmed.