Brownlee v. Liberty Mutual Fire Insurance Co.

Dissenting Opinion by Watts, J. Respectfully, I dissent. The United States District Court for the District of Maryland certified to this Court the following question of law: “Would application of Georgia’s interpretation of the pollution exclusion contained in the insurance policy issued by Liberty Mutual Insurance Company [ (“Liberty Mutual”) ] to the Salvation Army as excluding coverage for bodily injuries resulting from the ingestion of lead-based paint violate Maryland public policy?” Unlike the Majority, I would answer the certified question of law with a resounding “yes,” and hold that it is a violation of Maryland public policy to apply Georgia case law that permits a pollutant exclusion in an insurance policy to be interpreted as a lead-based paint exclusion because Maryland has a strong public policy of protecting children from injuries caused by lead-based paint and of requiring exclusions for lead-based paint to unambiguously and specifically indicate that the exclusion applies to lead-based paint to be valid. Under the choice of law principle of lex loci contractus, “when determining the construction, validity, enforceability, or interpretation of a contract, we apply the law of the jurisdiction where the contract was made.” Cunningham v. Feinberg, 441 Md. 310, 326 , 107 A.3d 1194, 1204 (2015) (citations omitted). Nevertheless, the principle of lex loci contractus “is not inflexible and [ ] it does not apply to a contract provision which is against Maryland public policy.” Lab.

Corp. of Am. v. Hood, 395 Md. 608, 620 , 911 A.2d 841, 848 (2006) (citation and internal quotation marks omitted). This Court has stated, however, “that merely because Maryland law is dissimilar to the law of another jurisdiction does not render the latter contrary to Maryland public policy and that for another [Sjtate’s law to be unenforceable, there must be a strong public policy against its enforcement in Maryland.” Id. at 620 , 911 A.2d at 848 (citation and internal quotation marks omitted). The key issue in this case—indeed, the very issue posed in the certified question of law—is whether Maryland has a strong public policy of protecting children from lead-based paint poisoning and in requiring that lead-based paint exclusions be specifically identified in insurance policies such that application of Georgia’s case law is unenforceable and would offend the principle of lex loci contractus. On this key issue, I depart from the view of the Majority, as I would conclude that there is a strong public policy expressed by the General Assembly in Maryland that renders the application of Ga.

Farm Bureau Mut. Ins. Co. v. Smith, 298 Ga. 716 , 784 S.E.2d 422, 423 (2016) unenforceable. Establishing clear public policy, Md. Code Ann., Ins.

(1995— 97, 2011 Repl. Vol.) (“IN”) § 19-704, derived from former Md. Code, Art. 48A, §§ 734 and 736, concerning lead hazard coverage for rental property, provides, in pertinent part, as follows: (c) Exclusion of coverage.—Notwithstanding subsection (g) of this section, whenever an authorized insurer issues or renews a policy for an affected property, the authorized insurer may include in the policy a lead hazard coverage exclusion. An “affected property,” in turn, is defined in IN § 19-701(b) as follows: (1) “Affected property” means: (i) 1. a residential property constructed before 1950 that contains not more than one rental dwelling unit; or 2. a residential rental property that contains not more than one rental dwelling unit for which the owner makes an election under § 6-803(a)(2) of the Environment Article;[ 1 ] or (ii) an individual rental dwelling unit within: 1. a residential rental property constructed before 1950 that contains more than one rental dwelling unit; or 2. a residential rental property that contains more than one rental dwelling unit for which the owner makes an election under § 6-803(a)(2) of the Environment Article. (2) “Affected property” does not include property exempted under § 6-803(b) of the Environment Article.[ 2 ] IN § 19-704(c) does not provide that insurance policies containing pollutant exclusions are the equivalent of insurance policies containing lead hazard coverage exclusions.

Stated otherwise, as IN § 19-704(c) demonstrates, a lead hazard coverage exclusion is different from a pollutant exclusion. Indeed, IN § 19-704(c) specifically provides that, with respect to certain properties—affected properties as that term is defined in IN § 19—701(b)—insurers may include within an insurance policy a lead hazard coverage exclusion. In other words, IN § 19-704(c) is a very specific statute that provides for a lead hazard coverage exclusion under detailed identified circumstances; this statute does not authorize a pollutant exclusion to operate as the equivalent of a lead hazard coverage exclusion. Indeed, the majority opinion explicitly recognizes that IN § 19-704 does not apply to pollutant exclusions in insurance policies.

Without qualification, the Majority writes: “IN § 19-704(c) does not reference a duty for insurers to indemnify and defend lead-based paint claims through a pollution exclusion clause. It does not reference pollutants at all. Rather, it plainly states that insurers have the option to exclude coverage for lead-based paint related claims.” Maj. Op. at 599, 175 A.3d at 709.

With this admission, the majority opinion concedes that IN § 19-704 offers no support for the proposition that it provides guidance with respect to public policy in Maryland concerning allowing pollutant exclusions in insurance policies to act as lead hazard coverage exclusions. Nonetheless, the majority opinion concludes that “Georgia’s decision holding that lead-based paint is a pollutant, is not at odds with Maryland’s public policy where our General Assembly has not directly indicated otherwise[.]” Maj. Op. at 606, 175 A.3d at 710. The majority opinion apparently reasons that there is a lack of strong public policy against pollutant exclusions being treated as lead hazard coverage exclusions because the General Assembly has not expressly addressed the issue of pollutant exclusions covering lead-based paint.

The majority opinion, however, ignores the strong public policy implications of IN § 19-704(c)’s unambiguous permission of lead hazard coverage exclusions only, ie., lead-based paint exclusions must be clear and unequivocal. Significantly, in Sullins v. Allstate Ins. Co., 340 Md. 503, 506, 509, 516, 518 , 667 A.2d 617, 618, 620, 623, 624 (1995), in response to a certified question of law from the United States District Court for the District of Maryland, in a thorough and well-reasoned opinion, this Court determined that the terms “contaminants” and “pollutants” in a pollutant exclusion of an insurance policy were ambiguous and susceptible to different meanings, including meanings not encompassing lead-based paint, and that, in accordance with Maryland law, the insurance policy at issue could not be construed to include lead-based paint as a contaminant or pollutant, and instead was to be construed against the insurer as the drafter of the policy, such that the insurer was not relieved of its duty to defend in the underlying lead-based paint poisoning lawsuit. In Sullins, id. at 506-07 , 667 A.2d at 618 , the pollutant exclusion at issue, contained in a section labeled “Losses We Do Not Cover,” provided: We do not cover bodily injury or property damage which results in any manner from the discharge, dispersal, release, or escape of: a) vapors, fumes, acids, toxic chemicals, toxic liquids or toxic gasses; b) waste materials or other irritants, contaminants or pollutants.

In construing the terms “contaminants” and “pollutants,” and determining whether lead-based paint was a contaminant or pollutant, this Court observed that the terms were “susceptible of two interpretations by a reasonably prudent layperson. By one interpretation, these terms encompass lead paint; by another interpretation, they apply only to cases of environmental pollution or contamination, and not to products such as lead paint.” Id. at 509 , 667 A.2d at 620 . This Court explained that, “[wjhile lead is clearly ‘toxic,’ a reasonably prudent layperson may not view lead as a ‘chemical[,]’ ” and that “[similarly, a reasonably prudent layperson may not generally think of lead as an ‘irritant.’ ” Id. at 510 , 667 A.2d at 620 . This Court acknowledged, however, that a reasonably prudent layperson could consider lead to be a “contaminant” or a “pollutant” under the ordinary dictionary definitions of those terms.

See id. at 511 , 667 A.2d at 620 . On the other hand, this Court noted that “[a] reasonably prudent layperson may also interpret the terms ‘contaminant’ and ‘pollutant’ as not including lead paint.” Id. at 511 , 667 A.2d at 620 (emphasis in original). This Court further observed that courts in other jurisdictions had found the term “pollutant” both ambiguous and unambiguous with respect to lead-based paint. See id. at 511 , 667 A.2d at 620-21 .

This Court also examined the history of the pollutant exclusion, and determined that the history supported the conclusion that a reasonably prudent layperson may not consider lead-based paint to be either a pollutant or a contaminant. See id. at 513 , 667 A.2d at 621-22 . The original pollutant exclusions were drafted by insurers in response to environmental catastrophes that occurred in the 1960s to clarify that commercial general liability insurance policies did not indemnify knowing polluters. See id. at 514 , 667 A.2d at 622 .

That “sudden and accidental” pollutant exclusion, which specifically referenced “into or upon land, the atmosphere or any watercourse or body of water[,]” “was intended to eliminate coverage for damages from pollution of the environment.” Id. at 514 , 667 A.2d at 622 (citations omitted). Thereafter, in 1985, the insurance industry adopted the “ ‘absolute pollution exclusion!!,]’ which denied coverage for ‘bodily injury or property damage arising out of the actual, alleged or threatened discharge, release, or escape of pollutants’ and defined ‘pollutant’ as ‘any solid, liquid, gaseous or thermal irritant or contaminant including smoke, vapor, soot, fumes, acids, alkalies, chemicals and waste.’ ” Id. at 514-15 , 667 A.2d at 622 . In adopting the “absolute pollution exclusion,” and using environmental terms of art such as “discharge, dispersal, release, or escape,” insurers deleted as redundant reference to “into or upon land, the atmosphere or any watercourse or body of water.” Id. at 515 , 667 A.2d at 622 . This Court explained that there was “no indication that the change in the language was meant to expand the scope of the clause to non-environmental damage.” Id. at 515 , 667 A.2d at 622 (citation and internal quotation marks omitted).

Indeed, this Court concluded that the use of environmental law terms of art such as “discharge,” “dispersal,” “release,” “escape,” “contaminant,” and “pollutant” in the absolute pollution exclusion demonstrated that the insurance “industry’s intention was to exclude only environmental pollution damage from coverage!!.]” Id. at 515 , 667 A.2d at 622-23 . Accordingly, in Sullins, this Court determined that the history of the pollutant exclusion supported “our conclusion that a reasonably prudent layperson may interpret the terms ‘pollution’ and ‘contamination,’ in the circumstances of the case now before us, as not encompassing lead paint, a product used legally and intentionally.” Id. at 516 , 667 A.2d at 623 (emphasis in original). And, because the terms “pollution” and “contamination” were ambiguous, this Court held that they had to be construed against the insurer as the drafter of the insurance policy. See id. at 516 , 667 A.2d at 623 .

What can be gleaned from Sullins is that, where an insurance policy contains a pollutant exclusion with ambiguous terms—terms that could be interpreted to have multiple meanings when viewed by a reasonably prudent layperson— such terms must be construed against the drafter of the policy, ie., the insurer. Moreover, as explained in Sullins, tracing the history of the pollutant exclusion demonstrates that pollutant exclusions originated as a means of excluding coverage for damage caused by environmental pollution, not for damage caused by non-environmental pollution of the type that could result from the legal use of products in residences. Additionally, notably, Sullins supports the conclusion that exclusions from coverage for injuries caused by lead-based paint must unambiguously include lead-based paint as a pollutant to be valid. This is not the status of Georgia case law.

In 2016, in Ga. Farm, 784 S.E.2d at 428 , the Supreme Court of Georgia concluded that lead-based paint was a “pollutant” as defined by the applicable insurance policy such that the “pollution exclusion” in the insurance policy applied to exclude coverage of personal injury claims arising from lead-based paint poisoning. This is the case that the Majority finds to be controlling. In Ga.

Farm, id., Amy Smith (“Smith”), in her individual capacity and on behalf of her daughter Tyasia Brown (“Brown”), sued her landlord, Bobby Chupp (“Chupp”), for injuries that Brown allegedly sustained from lead-based paint poisoning that occurred in the house that Smith rented from Chupp. During the relevant time, Chupp’s house was insured under a commercial general liability insurance policy issued by Georgia Farm Bureau Mutual Insurance Company (“Georgia Farm”), which contained a “pollution exclusion” that provided as follows: This insurance does not apply to: [[Image here]] (f) Pollution (1) “Bodily injury” or “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants”: (a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured. Id. (ellipsis in original).

The insurance policy defined the term “pollutant” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkal-is, chemicals and waste.” Id. In the trial court, Georgia Farm argued, in pertinent part, that the pollutant exclusion applied to Brown’s alleged injuries from lead poisoning, ie., that the claims were excluded from coverage, and that, accordingly, it was relieved of its contractual duty to defend and indemnify Chupp in the lawsuit. See id. The trial court agreed and granted summary judgment in Georgia Farm’s favor, finding “that lead-based paint unambiguously fell within the policy’s definition of a ‘pollutant,’ and, as a result, Brown’s alleged injuries were excluded from