The Oregon Senate Business, Labor and Economic Development Committee has moved a bill designed to correct a controversial state Supreme Court ruling on pollution exclusions to the Senate floor with a “do pass” vote.
S.B. 440, known as the “Fleming fix,” is designed to correct a 1999 Oregon Supreme Court ruling (Fleming v. USAA) that held that a dwelling policy’s pollution exclusion provision did not bar claims caused by a tenant’s illegal drug lab due to a technical flaw in a state-approved policy form.
“This issue has been hanging over the heads of Oregon insurers since 1999, and the movement of this bill hopefully is an indication that the problem will soon be solved,” said Michael Harrold, Northwest regional manager of the National Association of Independent Insurers.
NAII and other industry groups collaborated on the bill, which essentially restores previous state practice regarding the requirements for exclusions in multi-peril policies. Since the Fleming ruling, insurers have compensated by adding exclusionary language to virtually every heading in all insurance policies. This cluttered up the readability of insurance policies and negated efforts the Division of Insurance had made over the years to make policies more readable and understandable for consumers.
“The Fleming case is especially flagrant because the ruling allowed a policyholder whose tenants were running an illegal methamphetamine lab on his property to collect for damage caused by the illicit drug operation under his homeowners’ policy,” Harrold said. USAA originally denied coverage because it considered damages to the property included smoke damage from the drug lab to be “pollution” losses that are excluded by the policy.
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