Pollution and Contamination Exclusion Precludes Coverage for COVID-19 Related Losses
By Ron H. Burnovski and Erin K. Rutherford
In Baylor Col. of Med. v. XL Ins. Am., Inc. and ACE Am. Ins. Co., the Fourteenth Court of Appeals affirmed summary judgment in favor of the insurers on claims asserted for COVID-19 related losses. The Court of Appeal held there was only one reasonable interpretation for the word “virus” as used in the insurers’ policies’ Pollution and Contamination Exclusion. Baylor College of Medicine’s (Baylor Med.) policies through XL Insurance American, Inc. and ACE American Insurance Co. had contained a Pollution and Contamination Exclusion (the Exclusion) that excluded coverage for “damage caused by. . . escape or dispersal of Contaminants or Pollutants” and contained a “ninety-eight-word sentence defining ‘Contaminants or Pollutants.’”
While the Court indicated the policies’ definition of “Contaminants or Pollutants” may have lacked clarity, it held that did not create an ambiguity because one could only interpret the sentence’s structure such that the definition included the term “virus.” The Court noted further that “virus” is not in and of itself a type of damage but is instead something that can cause damage to human health, and therefore the manner in which the insurers included it in the policies’ definition of “Contaminants or Pollutants” indicated an intent to list it as a type of contaminant or pollutant that was excluded from coverage.
Notably, Baylor Med’s claims proceeded to a jury trial against several other defendant insurers whose policies had not contained a virus exclusion. The jury issued a verdict in favor of Baylor Med on its claims for COVID-19 related losses against those insurers. Those insurers’ appeal of the jury verdict currently remains pending before the Fourteenth Court of Appeals, with oral arguments anticipated to be set soon.
The case is Baylor Col. of Med. v. XL Ins. Am., Inc. and ACE Am. Ins. Co., No. 14-22-00145-CV (Tex. App.—Houston [14th Dist.] February 6, 2024).