Gradual pollution covered; `Sudden, accidental' exclusion ambiguous: Court.

PROVIDENCE, R.I. -- The Rhode Island Supreme Court's ruling on the sudden and accidental pollution exclusion gives more ammunition to general liability insurance policyholders embroiled in pollution coverage battles with their insurers.

Citing the number of divergent opinions by other courts on the exclusion's meaning, as well as insurers' apparent original coverage intentions, Rhode Island's high court last week unanimously ruled that the exclusion is ambiguous and therefore does not bar coverage for losses caused by gradual, unintentional pollution.

The ruling also marks the third time a state supreme court has found that insurers misled regulators during their 1970 examinations of the then-new exclusion.

As did the West Virginia Supreme Court in 1992 and the far more caustic New Jersey high court a year later, the Rhode Island court found that insurers 30 years ago won regulatory approval of the exclusion by intimating that it would not bar coverage for unintended gradual pollution losses.

The ruling applies to both the U.S. and London market's sudden and accidental exclusions, which the industry introduced in the early 1970s and used until it turned to the absolute pollution exclusion in 1986.

Policyholder attorneys said the ruling could influence courts nationwide, including state high courts that already have ruled in favor of insurers on the

exclusion's meaning.