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The ISO and AAIS Forms

Summary: The first party property pollution exclusion found in the homeowners forms developed by Insurance Services Office (ISO) and by the American Association of Insurance Services (AAIS) has been broadened considerably in scope when contrasted with the original contamination exclusion found in marine, commercial property, and early homeowners forms. Depending upon individual insurance companies’ claims practices, coverage is being denied for losses traditionally covered under open perils versions of the homeowners—ISO’s special form HO 00 03 10 00 , 2000 edition; or AAIS’s form HO 0003 01 06 (2006). Whereas the original contamination clause was aimed at non fortuitous occurrences, the descendant of that provision, today’s pollution exclusion as contained in current homeowners policies, specifically excludes claims involving pollutants, unless the loss itself was caused by an insured coverage C peril (i.e., fire, lightning, windstorm, hail, and other listed perils). The following discussion reviews the evolution of the property and liability pollution exclusions, examines ordinance or law coverage, and reviews some current legal thinking. The discussion concludes with a look at ISO’s endorsement HO 05 80 10 00 , which provides some coverage for certain of these exposures.

Topics covered: Evolution of the homeowners pollution exclusion Expanding the exclusion The ISO 1991 homeowners pollution exclusion The ISO 2000 homeowners pollution exclusion The AAIS 1995 homeowners pollution exclusion The AAIS 2006 homeowners pollution exclusion Ordinance and law coverage and pollution What are “pollutants?” Homeowners cases—contamination and pollution exclusions Limited pollution coverage—ISO endorsement HO 05 80 ISO endorsement HO 05 72 AAIS liquid fuel remediation coverage Conclusion

Evolution of the Homeowners Pollution Exclusion

The evolution of the present pollution exclusion in the Insurance Services Office’s (ISO) special homeowners policy can be traced from the contamination exclusion in marine insurance forms. All risks, or, now, open perils coverage is rooted in marine insurance traditions. Contamination by seawater is the sort of eventuality that could be anticipated in conjunction with trans-ocean shipments, and, in that sense, “contamination” is an instance of property damage that, like wear and tear or marring and scratching, will happen. These policies generally grouped the excluded peril of contamination with several other non-fortuitous events, such as wear and tear, marring, wet or dry rot, deterioration, etc. These clauses were carried over from the marine tradition to property insurance, eventually finding their way into the first homeowners package policies.

An example of such a clause is taken from the 1977 edition of the ISO HO-3 policy: “We insure against all risks of physical loss to the property described in Coverages A and B except: …

7. wear and tear; marring; deterioration; inherent vice; latent defect; mechanical breakdown; rust; mold; wet or dry rot; contamination; smog; smoke from agricultural smudging or industrial operations; settling; cracking; shrinking, bulging, or expansion of pavements, patios, foundations, walls, floors, roofs or ceilings; birds, vermin, rodents, insects, or domestic animals…”

Given the context of the exclusion, it seems clear that the intent was to exclude from open perils coverage, (then referred to as all risks) events that did not depend upon accidental happening, but instead would occur, given time and the proper circumstances: physical property will wear out; it will become mildewed or rotten if subject to enough humidity over time; things mechanical will break down, etc. Webster’s Unabridged Dictionary supports this view under its explanation of a synonym for “contaminate,” i.e., “attaint.” Webster’s explains that “attaint” is now commonly used as a synonym for “taint,” although attaint “suggests the idea of infection or of inevitable corruption following from an original sullying contact.” Thus, contamination contains within it a sense of a process of deterioration, not loss from an immediate, abrupt event.

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