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Tuesday, April 24, 2012

Certified Insurance Law Question to the Nevada Supreme Court

9th CircuitWhile staying at the Casino West Motel, four people died from acute carbon monoxide poisoning when fumes from the motel’s pool heater leaked into their rooms.  Their estates’ subsequent wrongful death suit against the motel and its insurer, Century Surety Co. (Century), has raised questions of Nevada law of first impression, prompting the Ninth Circuit to certify two questions to the Nevada Supreme Court. 

In Century Surety Co. v. Casino West, the Ninth Circuit has asked the Nevada Supremes to interpret two pollution-related exclusions in the motel’s comprehensive general liability insurance policy, which Century has invoked in order to escape its obligation to either cover or defend against the estates’ suit.

After Century received the autopsy report indicating carbon monoxide poisoning as the cause of death, Century cited two exclusions in the policy, a pollution exclusion and an indoor air quality exclusion, and informed the motel that the policy did not cover the incidents at issue.  Century next sought a declaratory judgment in a federal district court stating that it has no duty to indemnify or defend the motel in the wrongful death actions.  The motel filled counterclaims for breach of contract, bad faith, and insurance unfair trade practices. 

In denying Century’s motion for summary judgment, the district court found that the exclusions were ambiguous and, therefore, did not prevent coverage.  The Ninth Circuit granted the parties’ joint request for an interlocutory appeal to review the district court’s denial of summary judgment.  In attempting to determine how courts have interpreted pollution exclusion clauses, the Ninth Circuit found that, although the issue has been heavily litigated, there are conflicting decisions throughout the country. 

Responding to Casino’s argument that the myriad outcomes reached by courts on the issue establishes the exclusion as ambiguous, the court noted that it could not find any Nevada case finding a pollution exclusion ambiguous.   In contrast, the court determined that indoor air quality exclusions have not been heavily litigated and could not find any published Nevada cases on point. 

The questions of law to be answered are:

(1) Does the pollution exclusion in Century's insurance policy exclude coverage of claims arising from carbon monoxide exposure?

(2) Does the indoor air quality exclusion in Century's insurance policy exclude coverage of claims arising from carbon monoxide exposure?

The Ninth Circuit has stayed further proceedings pending receipt of the answers to the certified questions. 

[JT and Justin Berggren]

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