Several guests at a hotel in Oklahoma claimed they were injured due to carbon monoxide poisoning from an indoor-swimming-pool heater that had recently been serviced. The hotel had an insurance policy, but the insurance carrier said the policy did not cover these claims. In Siloam Springs Hotel v. Century Surety, the U.S. Court of Appeals for the Tenth Circuit resolved the dispute in favor of the hotel, holding the policy covered these claims.
Indoor Air Exclusion
The policy had an Indoor Air Exclusion; it did not cover claims “arising out of, caused by, or alleging to be contributed to in any way by any toxic, hazardous, noxious, irritating, pathogenic or allergen qualities or characteristics of indoor air regardless of cause.”
In demanding coverage, the hotel argued the exclusion did not apply to an isolated carbon monoxide leak. The hotel argued the Indoor Air Exclusion applies only to continuously present substances that render the air harmful, and the policy allows recovery for an unexpected condition that temporarily affects the air quality inside a building.
The carrier focused on the words “regardless of cause” and argued the Indoor Air Exclusion excludes coverage even for a one-time sudden infiltration of carbon monoxide.
Two Reasonable but Different Interpretations
The 10th Circuit ruled both interpretations were reasonable. When a contract has more than one reasonable but different interpretation, it is ambiguous. In most contract cases, it requires a jury trial to determine the parties’ intent as to ambiguous contract terms.
Rules for Ambiguous Insurance Policies Are Different
Insurance policies are different. Most states, including Oklahoma, interpret insurance policies to encourage coverage. Therefore, if a reasonable interpretation can result in coverage of a claim, the court finds coverage, even if an interpretation excluding coverage is also reasonable. Following this approach, the 10th Circuit ruled the Indoor Air Exclusion did not preclude coverage of these claims.
For a copy of the 10th Circuit’s decision https://www.ca10.uscourts.gov/opinions/17/17-6208.pdf