In Nationwide Mut. Ins. Co. v. The Overlook, LLC, No. 4:10cv69 (E.D. Va. May 13, 2011), homeowner Edmonds sued insured developer/general contractor Overlook seeking damages resulting from defective Chinese drywall installed in Edmonds’ home. Overlook’s CGL insurer Nationwide defended Overlook under a reservation of rights and filed a declaratory judgment action. The federal district trial court granted Nationwide’s motion for summary judgment. Applying Virginia law, the court held that the pollution exclusion eliminated any duty to defend. The court first determined that the alleged emission of sulfide gasses from the drywall satisfied the “discharge, dispersal, seepage, migration, release or escape” requirement of the exclusion. The court next determined that, where the policy defined “pollutant” in pertinent part as “any gaseous … irritant or contaminant,” the Edmonds complaint alleged that sulfide gas constituted a “pollutant,” Erie-guessing that the Supreme Court of Virginia would hold that the exclusion was unambiguously not limited to traditional environmental pollution.
In Builders Mutual Ins. Co. v. Parallel Design & Development LLC, No. 4:10cv68 (E.D. Va. May 13, 2011), homeowner Edmonds sued insured general contractor Parallel seeking damages resulting from defective Chinese drywall installed in Edmonds’ home. Parallel’s CGL insurer Builders Mutual defended Parallel under a reservation of rights and filed a declaratory judgment action. The federal district trial court denied Builders Mutual’s motion for summary judgment, declaring that Builders Mutual had a duty to defend Parallel against the Edmonds complaint. Applying Virginia law, the court held that the pollution exclusion did not eliminate Builders Mutual’s duty to defend. Specifically, the court determined that, where used undefined in the Builders Mutual policy, “pollutant” was ambiguous and thus applied narrowly to traditional environmental pollution and did not apply broadly to non-traditional indoor environmental pollution such as emission of sulfide gas from drywall installed in the interior of a house.