The U.S. Court of Appeals for the Second Circuit has ruled that an insurance policy's pollution exclusion precluded coverage for claims brought against the policyholder in connection with chemical contamination at Love Canal, near Niagara Falls, New York.
The Case
After Roy's Plumbing, Inc., was sued in a state court in New York in connection with chemical contamination at Love Canal, it sought coverage from its insurance carrier, Cincinnati Insurance Company.
The U.S. District Court for the Western District of New York ruled that Cincinnati had no duty to defend or indemnify Roy's Plumbing, and it appealed to the Second Circuit.
The Cincinnati Policy
The Cincinnati policy excluded:
[b]odily injury or property damage which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release, escape or emission of pollutants at any time.
(Internal quotation marks omitted.)
The policy defined:
pollutant
as:
substances which are generally recognized in industry or government to be harmful or toxic to persons, property or the environment
and
any solid [or] liquid … irritant or contaminant, including … waste.The Second Circuit's Decision
The Second Circuit affirmed.
In its decision, the Second Circuit explained that the state court suit against Roy's Plumbing claimed damages related to personal injuries, as well as damages from contamination of property, caused by toxic chemicals. The circuit court conceded that the parties disputed whether the complained-of chemicals included sewage, but it rejected Roy's Plumbing's contention that sewage may not constitute a “pollutant.” The circuit court stated that it had “no doubt” that sewage was “generally recognized in industry or government to be harmful or toxic to persons.”
Similarly, the circuit court was not persuaded by Roy's Plumbing's contention that the pollution exclusion was overbroad and, therefore, created ambiguity, explaining that New York courts limited the reach of pollution exclusions to those cases where the damages alleged were “truly environmental in nature, or where the underlying complaint allege[d] damages resulting from what can accurately be described as the pollution of the environment.” This construction, the Second Circuit ruled, eliminated the overbreadth that Roy's Plumbing feared.
The Second Circuit concluded that because the allegations in the state court complaint fell within the pollution exclusion, Cincinnati had no duty to defend Roy's Plumbing against those allegations, or to indemnify Roy's Plumbing for damages caused by the particular acts alleged in the complaint.
The case is Cincinnati Ins. Co. v. Roy's Plumbing, Inc., No. 16-2511-cv (2d Cir. May 31, 2017). Attorneys involved include: Appearing for Appellant: Robert E. Knoer, Buffalo, NY. Appearing for Appellee: Daniel G. Litchfield (Vincent J. Velardo, on the brief), Litchfield Cavo, LLP, New York, NY.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].