The South Carolina Court of Appeals has recently joined a growing number of states that have classified foul odors as pollutants and, therefore, excludable from insurance coverage. The case of South Carolina Ins. Reserve Fund v. East Richland County Public Service District, 2016 WL 1125810 was decided on March 23, 2016, and the court held that offensive odors emitting from a sewage air relief valve were “pollutants” within the meaning of the pollution exclusion in the liability policy issued to the county public service district, and that the exception to the pollution exclusion did not apply.

The East Richland case arose from a disgruntled property owner who had filed a complaint against the East Richland County Public Service District for inverse condemnation, trespass and negligence, alleging that the District installed a sewage force and air relief valve on his street that released offensive odors on his property multiple times a day. Id. at *1. The homeowner eventually bought another property and moved because the District’s attempts to remedy the odor problem were unsuccessful, but he was unable to sell his former property. Id. The District tendered the case to the South Carolina Insurance Reserve Fund, but the Fund denied coverage. The Fund sued the District, requesting that the court issue a declaratory judgment that the Fund had no duty to defend or indemnify the District in the case filed by the property owner. Id.

The circuit court held a non-jury trial resulting in a judgment finding that the inverse condemnation claim was not covered by the policy. With regard to the negligence and trespass claim, the court found the pollution exclusion’s reference to gases and fumes encompassed the sewage odors alleged in the underlying action. The judge also found that the Fund had no duty to defend or indemnify the District in the underlying case. Id. at *2.

When the case reached the Court of Appeals, the District argued that the pollution exclusion is inapplicable because it does not mention offensive odors or explain why such odors should be considered as pollution when they are not harmful or regulated. The Court disagreed, holding that “the pollution exclusion applies because the odors at issue in this case can be properly classified as ‘fumes’ or ‘gases,’ both of which are listed in the exclusion. … Although the District argues the odors must be harmful in some way to be considered pollutants, we decline to impose such a limitation on the plain language of the policy and believe the fact that the odors were comprised of irritating and offensive gases suffices to demonstrate the odors are encompassed within the ordinary meaning of the pollution exclusion’s terminology.” Id. at *7.

The Court also disagreed with the District’s argument that the exception to the pollution exclusion should apply because the circumstances surrounding the release of the odors was unique and unexpected, and the policy provided that the pollution exclusion does not apply “if such discharge, dispersal, release or escape is sudden and accidental.” The Court held that the release of the fumes was not sudden or accidental because “sudden” has been interpreted to mean “unexpected” and the release of the odors was neither accidental nor unexpected because the air release was essential to the operation of the sewer line (to prevent explosion). The Court concluded that “the District’s knowledge that the pumps would turn on occasionally is sufficient to demonstrate that the releasing of the odors was not only expected, it was a necessary function of the line’s normal operations.” Id. at *8.

In reaching its holding, the Court cited decisions from other jurisdictions that likewise held that foul odors fall within the pollution exclusion: Washington – City of Spokane v. United Nat. Ins. Co., 190 F.Supp.2d 1209, 1221 (E.D.Wash. 2002) (odors from compost facility); Alabama – Kruger Commodities, Inc. v. U.S. Fidelity and Guar., 923 F.Supp. 1474, 1479-80 (M.D.Ala. 1996) (odors from animal rendering plant); Minnesota – Wakefield Pork, Inc. v. Ram Mut. Ins. Co., 731 N.W.2d 154, 160 (Minn.Ct.App. 2007) (manure from pig farm); Colorado – Mountain States Mutual Casualty Co. v. Roinestad, 296 P.3d 1020 (Co. 2013) (cooking grease discharged into sewer system that created a five- to eight-foot clog, resulting in buildup of hydrogen sulfide gas); Wisconsin - Hirschhorn v. Auto-Owners Ins. Co., 338 Wis.2d 761 (bat guano buildup in walls of vacation home); Pennsylvania – Travelers Property Cas. Co. of America v. Chubb Custom Ins. Co., 864 F.Supp.2d 301 (E.D.Penn. 2012) (noxious odors produced by pig excrement).