The U.S. Court of Appeals for the Second Circuit has decided in favor of an insured over its work installing a mercury-removal system in a wastewater plant that caught fire twice. The case is Suez Treatment Sols., Inc. v. ACE Am. Ins. Co., 2022 U.S. Dist. LEXIS 59044.
Suez Treatment Solutions (Suez) had insurance coverage under two separate insurance policies, a "Contractors Pollution Liability and Errors & Omission Insurance Policy" provided by Chubb subsidiary ACE American Insurance Company (Chubb), and a Commercial General Liability policy provided by Liberty Mutual Fire Insurance Company (Liberty).
Suez performed work for High Point, North Carolina to upgrade the facilities at its wastewater treatment plant. After installation, a serious leak was discovered in the system, forcing the system to shut down for weeks-long repairs. According to the underlying complaint, Suez failed to instruct High Point on how the system should be monitored during the shutdown and two separate fires occurred at the facility.
The underlying action by the State of North Carolina sought damages from Suez, including breach of contract, negligence and fraud. Suez sought a declaratory judgment that Chubb and Liberty are each obligated to defend and indemnify Suez in the case, maintaining that it purchased the policies to protect itself from both professional liability-related claims and products liability-related claims such as those alleged in the Underlying Complaint. The insurers filed motions for the court to decide that they did not have a duty to defend.
Suez argued that coverage applied because "the Underlying Complaint includes allegations of wrongful acts arising from 'covered professional services,'" and "the Underlying Complaint alleges a loss arising from a pollution condition caused by the performance of Suez's covered professional services."
Chubb argued that its policy excluded coverage, and therefore it has no duty to defend, and Liberty argued that there was no occurrence and if there was, that the Your Work and Your Product exclusions relieved their duty to defend.
The court, citing New York law since the Chubb Policy elected New York law, found that the insurers each had a duty to defend and indemnify Suez in the underlying action because the underlying complaint includes allegations of wrongful acts arising from "covered professional services".
This decision is of particular importance because it reaffirmed the broad duty to defend in New York and recognized that in some cases, more than one carrier can have a duty to defend.
Ken Frenchman, partner at Cohen Ziffer Frenchman & McKenna provided the following statement. "We are very pleased with Judge Vyskocil's decision which recognized the broad duty to defend in New York."