In March 2007, a disgruntled nurse set fire to a six-story atrium office building in Houston, Texas. The building suffered extensive damage, and three people died from smoke inhalation.
The primary insurance company with a $1 million policy on the building has accepted liability. However, there is another insurance company involved.
Great American Insurance Company has Excess coverage on this building over and above the underlying $1 million policy up to a limit of $25 million. They have appeared in the courtroom of US District Judge Lee Rosenthal and argued that the deaths were caused by “pollution,” which in their view, is the smoke generated by the fire.
Most all policies have a coverage exclusion for Pollution, which is meant to exclude coverage for seepage or discharges of pollutants that cause damages. But the Pollution Exclusion also mentions smoke, fumes and soot.
And that is where Great American is hanging its hat.
Great American is arguing that coverage for the property damage and deaths should be denied because the smoke from the fire qualifies as “pollution,” and as such the claim should be denied.
In my opinion, this argument violates the intent and clear words of the Pollution Exclusion.
I hope that you are as outraged as I am over this travesty unfolding in a Houston courtroom. But, stop for a moment and consider how smoking mad the families of the three victims of the fire must be. There’s no question how these people died. Smoke inhalation is one of the most common causes of death in fires, much more common than injuries from flame. And the reason is that the building materials of today create deadly toxic fumes when they ignite. Many times, it only takes one breath of these fumes to kill a person.
I pray that the judge will use common sense and rule against Great American. It’s too bad that the judge cannot punish them for violating Unfair Claims Practices regulations here. But, proffering a bogus motion in court is likely not enough to qualify as bad faith.
But, wouldn’t you agree that this effort by Great American is as close to Bad Faith as possible?
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