In Travelers Prop. Cas. Co. of Am. v. Klick, 2017 WL 3471357, 16-4000 (8th Cir. Aug. 14, 2017),  the Eighth Circuit affirmed the ruling of the District of Minnesota, finding injuries resulting from carbon monoxide flowing from a recreational fishing boat’s engine was precluded by a pollution exclusion in the insurer’s policy.

Christopher Klick and two friends, Lonnie Norberg and Jeffrey Wheeler, were aboard Norberg’s 25-foot fishing boat sold to Norberg a few weeks earlier by Rainy River Marine Inc. Norberg was near the front of the boat in the wheelhouse as the boat returned to shore. The boat’s engine was housed in an enclosed compartment beneath the wheelhouse. Norbert and Klick noticed the engine was not operating properly. Klick took the helm and Norberg opened the hatch of the engine compartment to check the engine. Unbeknownst to either, an exhaust pipe had broken off at the spot where it connected with the engine, expelling carbon monoxide gas into the engine compartment rather than through the exhaust pipe and out behind the boat.  As result, when Norberg opened the engine compartment hatch, carbon monoxide flowed up into the wheelhouse. Klick quickly lost consciousness and fell into the engine compartment. He awoke there several hours later severely burned and brain damaged from the carbon monoxide, although he survived; the gas killed Norberg and Wheeler.

Klick sued Rainy River, among others, in state court seeking damages for his injuries from the accident. Rainy River held a marine general liability insurance policy at the time of the accident that required the insurer to pay damages resulting from bodily injury.  The policy included a pollution exclusion that excluded injuries “arising out of” the “seepage, discharge, dispersal, disposal or dumping, release, migration, emission, spillage, escape or leakage” of pollutants into the “atmosphere.”

The insurer then sued Klick, Rainy River, and others, in the U.S. District Court in Minneapolis seeking a declaration the policy did not cover Klick’s injuries because of the pollution exclusion. The District Court granted the insurer’s summary judgment, and Klick appealed.

The Eight Circuit rejected  Klick’s arguments that the engine compartment did not contain “atmosphere” and that his injuries arouse out the engine’s initial “release” of carbon monoxide into the engine compartment, not the subsequent movement of the gas from the engine compartment to the wheelhouse.   In applying a Minnesota Supreme Court  decision, the Court found “atmosphere” as used in a pollution exclusion, meant “ambient air.”  Because the wheelhouse where Klick was exposed was not a controlled environment, the Court found  wheelhouse contained “atmosphere.”  The Court also reasoned the pollution exclusion is not limited to liability arising out of an initial “release” of pollutant or a “dispersal” or “migration” of the pollutant from an original source, and that the release of the gas from the engine into the engine compartment was also a cause of the injury did not make the exclusion inapplicable. The Court noted an injury can arise out of multiple causes with varying degrees proximity to the injury.

Klick is an example of courts applying pollution exclusion outside the matters involving environmental claims.  Further, insurers should be mindful of the Eighth Circuit’s unwillingness to limit the application of the exclusion to the initial release of the pollutants, but that the exclusion may apply to subsequent release of the pollutants.

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