AK Supreme Asked Whether Pollution Exclusion Applies to Carbon Monoxide Death

A federal appellate court is asking the Alaska Supreme Court to decide whether the pollution exclusion in a homeowner’s insurance policy bars recovery for the death of a 17-year-old boy who was poisoned by carbon monoxide emitted by an improperly installed propane water heater.

A panel of the 9th Circuit Court of Appeals on Wednesday asked the state’s high court to reply to a certified question about whether the pollution exclusion bars coverage for carbon monoxide exposure. The panel said in its order that the state court systems are divided on whether carbon monoxide is a pollutant and no clear case law exists in Alaska.

“If the exclusion applies only to active industrial polluters or traditional environmental pollution, then there would be coverage in this case,” the panel said. “In contrast, if the plain language unambiguously encompasses carbon monoxide exhaust from a residential water heater, coverage might be precluded unless that result contravenes the reasonable expectations of the insured.”

Josiah Wheeler rented a cabin owned by Deborah Overly and Terry Summers in Tok, Alaska, a small community about 300 miles northeast of Anchorage. He was found dead in the cabin’s bathtub in January 2019. An autopsy showed that he was killed by acute carbon monoxide poisoning.

A deputy fire marshal investigated and determined that Summers had installed a water heater in the cabin’s bathroom but failed to connect its flue to a venting system.

Wheeler’s parents, Keith and Rhetta Wheeler, filed a wrongful death suit against Overly and Summers. The homeowners admitted that their negligence caused Wheeler’s death and signed an agreement, called a confession of judgment, admitting liability for $1.68 million in damages. The homeowners then filed a claim with Garrison Property and Casualty Insurance Co., a USAA subsidiary.

The insurer denied the claim, pointing to a provision of the policy that excluded coverage for injuries caused by the “discharge, dispersal, release, escape, seepage or migration of ‘pollutants’ however caused and whenever occurring.”

The Wheelers filed a lawsuit seeking a declaratory judgment that coverage was owed. US District Judge Sharon Gleason in Anchorage ruled in favor of the insurer.

Kenneth Covell

The Wheelers’ attorney, Kenneth L. Covell in Fairbanks, said Josiah Wheeler was a “bright young man” who graduated high school early and moved to Alaska from his home in Montana to pursue a dream of teaching mathematics to indigenous people.

Covell said the insurer’s argument leads to an absurd result. To accept such a hard-line interpretation of the exclusion, he said, one would have to accept that an injury caused by slipping in a puddle of bleach would not be covered by the Garrison policy.

“The exclusion swallows the policy,” he said.

Covell said most homeowners would expect that an injury or death caused by the faulty installation of an appliance would be covered by their insurance policies. He said the Insurance Service Office has even published guidance that caution insurers to consider making an exception to any pollution exclusion so that damage or injuries caused by faulty water heaters are covered.

Alaska case law is sparse. The panel’s order says that opinions from state courts around the country can be roughly divided into two camps: Some courts have held that carbon monoxide is a pollutant that can be excluded, while others have held that such an interpretation would conflict with “the reasonable expectation of the insured.”

Rather than guess at the correct interpretation under Alaska law, the 9th Circuit panel decided to ask the Alaska Supreme Court to decide whether the exclusion applies.