## Facts

- Regional Bank of Colorado, N.A. owned an apartment unit insured under a comprehensive general liability policy issued by St. Paul Fire and Marine Insurance Company.
- A tenant, Debra Seibert, rented the apartment for herself and her minor son while pregnant with a daughter.
- After sleeping in the apartment, Seibert and her son were hospitalized for carbon monoxide inhalation allegedly emitted from a faulty wall heater.
- Seibert sued Regional Bank in Colorado state court seeking damages for bodily injuries to herself, her son, and her unborn child.
- Regional Bank sought a declaratory judgment that St. Paul owed defense and indemnity.
- The policy contained a “pollution” exclusion barring coverage for bodily injury resulting from “pollution” at or from the insured’s premises; “pollution” was defined to include the discharge or release of “irritants or contaminants,” including “fumes” and “vapors.”
- On stipulated facts, the district court granted summary judgment for Regional Bank, ruling the exclusion did not bar coverage; St. Paul appealed.

## Issues

1. Whether, under Colorado law, the policy’s pollution exclusion unambiguously bars coverage and the duty to defend for injuries allegedly caused by indoor carbon monoxide emitted from a residential wall heater.

## Decision

- The Tenth Circuit affirmed summary judgment for Regional Bank.
- The court held the pollution exclusion did not clearly and unambiguously apply to an accidental, indoor, isolated carbon monoxide incident arising from a faulty residential heater.
- Because the exclusion was at least ambiguous as applied, Colorado law required construing it in favor of the insured.
- St. Paul therefore owed Regional Bank a duty to defend and provide coverage for the underlying tort action.

## Legal Principles

- Under Colorado law, insurance policies are interpreted using ordinary contract principles; exclusions are strictly construed against the insurer.
- A policy term is ambiguous if it is reasonably susceptible to more than one meaning when applied to the facts.
- Courts assess ambiguity in context; a broadly worded pollution exclusion aimed at environmental pollution may be ambiguous when applied to ordinary premises-liability hazards such as indoor carbon monoxide from a residential heater.
- When an exclusion is ambiguous, it is construed against the insurer and in favor of coverage.
- The duty to defend is triggered if the underlying allegations potentially fall within coverage and are not clearly barred by an exclusion.

## Conclusion

The Tenth Circuit held that the pollution exclusion, though facially broad, was ambiguous as applied to an accidental indoor carbon monoxide release from a residential heater, so the insurer was required to defend and provide coverage for the landlord in the underlying injury suit.


Regional Bank of Colo., N.A. v. St. Paul Fire & Marine Ins. Co., 35 F.3d 494 (10th Cir. 1994)