Continental Cas. Co. v. Rapid-American Corp.

• Decision Date: 25 February 1992
• Docket Number: RAPID-AMERICAN
• Citation: 177 A.D.2d 61,581 N.Y.S.2d 669
• Parties: CONTINENTAL CASUALTY COMPANY and Transportation Insurance Company, Plaintiffs-Respondents v.CORPORATION, Defendant-Appellant and National Union Fire Ins. Co. of Pittsburgh, Pa., Defendant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 669

581 N.Y.S.2d 669

177 A.D.2d 61

CONTINENTAL CASUALTY COMPANY and Transportation Insurance Company, Plaintiffs-Respondents v. RAPID-AMERICAN CORPORATION, Defendant-Appellant and National Union Fire Ins. Co. of Pittsburgh, Pa., Defendant-Respondent.

Supreme Court, Appellate Division,

First Department.

Feb. 25, 1992.

Charles A. Booth, of counsel (Victor G. Gleser and Mona Jha, with him on the brief, Ford Marrin Esposito & Witmeyer, attorneys), for plaintiffs-respondents.

Martin J. Schwartz, of counsel (Stephen A. Marshall, with him on the brief, Rubin Baum Levin Constant & Friedman, attorneys), for defendant-appellant.

Jerold Oshinsky, Randy Paar, David L. Elkind, Robert L. Carter, of counsel (Anderson Kill Olick & Oshinsky, P.C., attorneys) on behalf of W.R. Grace & Company, Pfizer Inc. and Keene Corp. as amici curiae.

Before CARRO, J.P., and ROSENBERGER, WALLACH, ROSS and ASCH, JJ.

WALLACH, Justice.

This appeal requires us to scrutinize the insurance coverage and exclusion provisions of the standard form comprehensive general liability ("CGL") policy in the course of determining whether the insurance carrier must defend claims against the policyholder arising from asbestos-induced respiratory injury. Although the meaning and effect of these insurance clauses has been extensively litigated in asbestos-related cases around the country, with conflicting results, the issue--whether a CGL insurer can invoke its policy exclusion for environmental pollution in disclaiming its duty to defend asbestos-related personal injury actions commenced against its insured--has thus far remained unanswered at the appellate level in New York. Under our construction of the CGL policy, we conclude that the environmental exclusion clause does not absolve the carrier of its duty to defend.

Plaintiff Continental Casualty Co. ("Continental") issued to defendant Rapid-American Corp. ("Rapid") and its predecessor, Glen Alden Corp., two CGL insurance policies, one covering the periods January 1, 1971 to January 1, 1974, and a second from the latter date to January 1, 1977; additionally, Continental and plaintiff Transportation Insurance Co. (collectively "CNA") sold similar coverage to Rapid for the period January 1, 1977 to January 1, 1980.

(1) The Insurance Coverage.

These four CGL policies issued by CNA, for which Rapid paid $21.6 million in premiums, require CNA, among other things,

To pay on behalf of the Insured [Rapid] all sums which the Insured shall become legally obligated to pay as damages ..., direct or consequential, because of:

A) Bodily Injury, or

B) Property Damage, or

C) Personal Injury, or

D) Employer's Malpractice Liability

Caused by or arising out of an occurrence happening during the policy period anywhere in the world, and the [insurance] Company shall have the right and the duty to defend any suit against the Insured seeking damages payable under the terms of this Policy, even if any of the allegations of the suit are groundless, false or fraudulent ...

These insurance policies define "Bodily Injury" to mean

bodily injury, mental injury, mental anguish, shock, sickness, disease or disability including death resulting therefrom sustained by any person.

"Occurrence" is defined to mean

an accident or a happening or event or a continued or repeated exposure to conditions which unexpectedly and unintentionally results during the policy period in Bodily Injury, or Property Damage or Personal Injury, or Employer's Malpractice Liability. [Emphasis added.]

From early October 1990 to the time Rapid served its motion for partial summary judgment on November 20, 1990, Rapid timely notified CNA of 14 asbestos-related bodily injury actions which had recently been commenced against Rapid, and requested that CNA defend and indemnify Rapid. Instead of undertaking the defense of these actions, clearly involving "continued and repeated exposure" to asbestos, CNA disclaimed coverage and commenced this action for declaratory judgment relieving CNA of any further liability under the policies.

The complaints in the underlying personal injury actions based upon asbestos exposure, which Rapid requested CNA to defend, assert a familiar combination of product liability theories (e.g., negligence, breach of warranty, strict product liability). The claimants in those cases alleged bodily injury as a result of exposure to asbestos dust and fibers throughout the periods covered by CNA's CGL policies, in most cases extending from the 1950's to the 1980's, thus encompassing the coverage period of January 1, 1971 to January 1, 1980.

We note at the outset that CNA's duty to defend Rapid under these CGL policies is "exceedingly broad" (Colon v. Aetna Life and Casualty Ins. Co., 66 N.Y.2d 6, 8, 494 N.Y.S.2d 688, 484 N.E.2d 1040), and indeed far broader than any ultimate liability to indemnify (Spoor-Lasher Co. v. Aetna Cas. & Sur. Co., 39 N.Y.2d 875, 876-877, 386 N.Y.S.2d 221, 352 N.E.2d 139; Fitzpatrick v. American Honda Motor Co., 78 N.Y.2d 61, 65, 571 N.Y.S.2d 672, 575 N.E.2d 90). The test to be applied, which we find wholly satisfied here, is whether within the four corners of the complaints in the underlying actions brought against Rapid, those pleadings "permit proof" of facts establishing coverage. (See American Home Products Corp. v. Liberty Mutual Ins. Co., 565 F.Supp. 1485, 1500, aff'd as modified 748 F.2d 760 [applying New York law]. In Abex Corp. v. Maryland Casualty Co., 790 F.2d 119, the D.C. Circuit noted (at pp. 128-129):

Under well-settled principles of New York law, [the insured] is entitled to defense by the insurance companies if the underlying tort complaints "permit proof" of the facts establishing coverage, or if the complaints do not exclude the possibility that injury-in-fact occurred during the policy period.

* * *

* * *

Because it is possible for asbestos-induced injuries to occur at any time following initial exposure, the tort complaints ... "permit proof" that the injury-in-fact occurred during the policy periods of all three insurers. We hold, therefore, that the insurers must immediately fulfill their duty to defend [the insured]. [Emphasis added.]

We hold that the same duty on the part of the insurers has arisen here, inasmuch as liability may be fixed upon injury-in-fact rather than actual manifestation of asbestosis or related diagnosable disease. Furthermore, since we find the coverage provisions on this aspect of the controversy unambiguous, we need not reach plaintiffs' contention that any "practical construction" by the alleged conduct of the parties has altered the plain meaning of these coverage provisions (Slatt v. Slatt, 64 N.Y.2d 966, 488 N.Y.S.2d 645, 477 N.E.2d 1099; Nau v. Vulcan Rail & Construction Co., 286 N.Y. 188, 198-99, 36 N.E.2d 106).

We also reject CNA's argument that because the complaints in the underlying asbestos lawsuits include allegations of willful and wanton disregard of known scientific and medical data by some or all of the named defendants, CNA therefore cannot be liable under their policies, because an "occurrence" is limited to an event which "unexpectedly and unintentionally" results in injury. Those allegations, if established at trial, could provide the basis for an award of punitive damages. The fact that punitive damage awards have been recovered against Celotex Corporation, with whom Rapid was briefly associated in a series of several complex corporate mergers prior to 1972, does not operate to preclude or collaterally estop Rapid from litigating the knowledge issue, since it is clear that Rapid was not a party to the Celotex litigations, and as a corporation entirely distinct from Celotex with no common ownership, had no privity with or control over the conduct of those actions (Gramatan Home Investors Corp. v. Lopez, 46 N.Y.2d 481, 414 N.Y.S.2d 308, 386 N.E.2d 1328; Schwartz v. Public Administrator of Bronx County, 24 N.Y.2d 65, 298 N.Y.S.2d 955, 246 N.E.2d 725).

(2) The Pollution Exclusion-to-Coverage Provision.

In relieving CNA of any further obligations under these policies, the IAS court did not address any of the foregoing issues, but simply found that the pollution exclusion clause contained in the policies eliminated all coverage as a matter of law. We disagree.

The exclusion clause provides that coverage does not apply

To personal injury or property damage arising out of the discharge, dispersal release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental ... ¹

As might be expected, both sides have subjected this exclusion provision to microscopic examination in an effort to conjure forth a favorable construction. Thus, CNA urge that asbestos falls entirely within the class of "irritants, contaminants or pollutants". Rapid, to the contrary, finds comfort in the total absence of the word "asbestos". A similar clash occurs over the term "atmosphere", as to whether, as urged by Rapid, it refers to "the whole mass of air or the gaseous envelope surrounding the earth" (citing two dictionaries), or as argued by CNA, it is more properly descriptive of the air "in any given place" or "locality" (citing two other dictionaries). In our view, the resolution of this case is not to be found in this kind of lexical tomography.

CNA cite the recent Court of Appeals decision in Technicon Electronics Corp. v. American Home Assurance Co., 74 N.Y.2d 66, 544 N.Y.S.2d 531, 542 N.E.2d 1048 for, among other things, the general proposition that the highest court of this state is disposed to take a no-nonsense view in favor of enforcing an environmental pollution exclusion clause as written. The IAS court went further in describing Technicon as "a case nearly identical to...