Xia v. Probuilders Specialty Ins. Co. (Majority, Dissent and Concurrence/Dissent)Annotate this Case
At issue in this case was the applicability of a broad, absolute insurance pollution exclusion clause to a claim based on negligent installation of a hot water heater that led to the release of toxic levels of carbon monoxide in a residential home. Zhaoyun "Julia" Xia purchased a new home constructed by Issaquah Highlands 48 LLC. Issaquah Highlands carried a policy of commercial general liability insurance through ProBuilders. Soon after moving into her home, Xia began to feel ill. A service technician from Puget Sound Energy investigated Xia's home and discovered that an exhaust vent attached to the hot water heater had not been installed correctly and was discharging carbon monoxide directly into the confines of the basement room. The claims administrator for ProBuilders, NationsBuilders Insurance Services Inc. (NBIS), mailed a letter to Xia indicating that coverage was not available under the Issaquah Highlands policy. As a basis for its declination of coverage, NBIS rested on two exclusions under the policy: a pollution exclusion and a townhouse exclusion. NBIS refused to either defend or indemnify Issaquah Highlands for Xia's loss. When a nonpolluting event that was a covered occurrence causes toxic pollution to be released, resulting in damages, the Washington Supreme Court believed the only principled way for determining whether the damages are covered or not was to undertake an efficient proximate cause analysis. Under the facts presented here, the Court found ProBuilders Specialty Insurance Co. correctly identified the existence of an excluded polluting occurrence under the unambiguous language of its policy. However, it ignored the existence of a covered occurrence negligent installation-that was the efficient proximate cause of the claimed loss. Accordingly, coverage for this loss existed under the policy, and ProBuilders's refusal to defend its insured was in bad faith.