Belt Painting Corp. v. TIG Ins. Co.

• Citation: 763 N.Y.S.2d 790,100 N.Y.2d 377,795 N.E.2d 15
• Parties: BELT PAINTING CORP., Respondent, v. TIG INSURANCE COMPANY, Appellant.
• Decision Date: 01 July 2003
• Court: New York Court of Appeals

100 N.Y.2d 377

795 N.E.2d 15

763 N.Y.S.2d 790

BELT PAINTING CORP., Respondent, v. TIG INSURANCE COMPANY, Appellant.

Court of Appeals of the State of New York.

Argued June 4, 2003.

Decided July 1, 2003.

Luce, Forward, Hamilton & Scripps, LLP, New York City (Thomas R. Newman of counsel), and Morrison, Mahoney & Miller, LLP (Michael Aylward of counsel) for appellant.

Hagan Coury & Associates, Brooklyn (Paul Golden of counsel), for respondent. O'Melveny & Myers LLP, New York City (John Altieri and Brian V. Ellner of counsel), and Wiley Rein & Fielding LLP, Washington, D.C. (Laura A. Foggan, David H. Topol and Zedford D. Dancey of counsel), for Complex Insurance Claims Litigation Association, amicus curiae.

Dickstein Shapiro Morin & Oshinsky LLP, New York City (Jonathan M. Goodman of counsel), and Barry J. Fleishman, Washington, D.C., for National Paint & Coatings Association, Inc., amicus curiae.

Covington & Burling, Washington, D.C. (William F. Greaney, Elliott Schulder and Carlton F.W. Larson of counsel), and C. William Phillips, New York City, for National Association of Home Builders and others, amici curiae. Anderson Kill & Olick, P.C., New York City (Eugene R. Anderson, John N. Ellison and Richard P. Lewis of counsel), and Amy Bach, Mill Valley, California, for United Policyholders, amicus curiae.

Judges SMITH, CIPARICK, ROSENBLATT, GRAFFEO and READ concur.

OPINION OF THE COURT

Chief Judge KAYE.

Once again we address the applicability of a pollution exclusion endorsement in an insurance policy (see e.g. Westview Assoc. v Guaranty Natl. Ins. Co., 95 NY2d 334 [2000]; Northville Indus. Corp. v National Union Fire Ins. Co., 89 NY2d 621 [1997]). Because the exclusion at issue is ambiguous when applied to the personal injury claim underlying this case, we affirm the Appellate Division's grant of summary judgment to plaintiff insured.

I.

Plaintiff, a painting subcontractor, purchased a commercial general liability (CGL) policy from defendant TIG Insurance Company. The policy provides that TIG would defend and indemnify plaintiff for claims of bodily injury and property damage up to one million dollars. The policy contains a standard form "Total Pollution Exclusion Endorsement," which excludes coverage for "`Bodily 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 or escape of pollutants at any time." "Pollutants" are defined as "any solid, liquid, gaseous or thermal irritant or contaminant including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste."

In 1997, Joseph Cinquemani commenced an action against plaintiff and several others, alleging that he was injured as a result of inhaling paint or solvent fumes in an office building where plaintiff insured was performing stripping and painting work. Plaintiff submitted the lawsuit to its insurer, seeking defense and indemnification. TIG responded that it would not cover Cinquemani's claim, relying on the policy's pollution exclusion.

Plaintiff then commenced the present action seeking a declaratory judgment that its insurer is obligated to defend and indemnify it in the underlying personal injury action. Supreme Court granted TIG's motion for summary judgment and denied plaintiff's cross motion, concluding that the underlying claim falls within the unambiguous language of the pollution exclusion. The court rejected plaintiff's contention that the exclusion is inapplicable because the underlying injury was not caused by environmental or industrial pollution, stating "it has been held that indoor air contamination * * * can constitute environmental pollution."

The Appellate Division reversed and granted summary judgment to plaintiff. Relying on Westview Assoc. v Guaranty Natl. Ins. Co. (95 NY2d 334 [2000]), the Court rejected the insurer's literal reading of the pollution exclusion in favor of a common sense construction that the clause applies only where the damages alleged "are truly environmental in nature" or result from "pollution of the environment" (293 AD2d 206, 210-211 [2002]). We agree that the exclusion does not apply to the underlying personal injury action and therefore affirm.

II.

We begin with fundamentals. We read an insurance policy in light of "common speech" and the reasonable expectations of a businessperson (Ace Wire & Cable Co. v Aetna Cas. & Sur. Co., 60 NY2d 390, 398 [1983]; Northville Indus. Corp., 89 NY2d at 633). As we have repeatedly held, an insurer has a duty to defend if the allegations state a cause of action that gives rise to the reasonable possibility of recovery under the policy (Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 65 [1991]). Moreover, to "negate coverage by virtue of an exclusion, an insurer must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case" (Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 652 [1993]). It follows that policy exclusions are given a strict and narrow construction, with any ambiguity resolved against the insurer (Thomas J. Lipton, Inc. v Liberty Mut. Ins. Co., 34 NY2d 356, 361 [1974]).

This is not the first time this Court has construed a pollution exclusion in the context of a personal injury claim. Indeed, two of our decisions have particular relevance to the issue now before us.

In Continental Casualty, the Court held that the pollution exclusion at issue was ambiguous as applied to the underlying asbestos exposure injuries and therefore found in favor of the insured.¹ We reasoned that, although asbestos may be an irritant, contaminant or pollutant under the exclusion, the clause was ambiguous with regard to whether the asbestos fibers that caused the injuries were discharged into the atmosphere as contemplated by the exclusion (80 NY2d at 653). This conclusion was based on both an ambiguity in the term "atmosphere," and our recognition that the purpose of the exclusion was to deal with broadly dispersed environmental pollution.

Similarly, in Westview we rejected the insurer's argument that a pollution exclusion negated coverage for claims based on lead paint poisoning, concluding that, among other things, the insurer failed to meet its heavy burden of showing that lead paint is unambiguously included within the exclusion's definition of "pollutant" (95 NY2d at 340).²

In the present matter, TIG contends that the endorsement at issue clearly and unambiguously applies to exclude coverage. The insurer argues that, unlike Westview, the injury-causing element here—paint or solvent fumes—is well within the defined pollutants, which specifically include "fumes." Further, TIG argues that, unlike Continental Casualty, the clause at issue in this case does not include the language "into or upon land, the atmosphere or any water course or body of water." That omission, the insurer contends, unambiguously renders the exclusion applicable. We disagree.

III.

Since their genesis approximately 30 years ago, pollution exclusion clauses in their various incarnations have engendered litigation, and divergent results.

Pollution exclusions actually originated in insurers' efforts to avoid potentially open-ended liability for the type of long-term, gradual discharge of hazardous waste and byproducts exemplified by the Times Beach and Love Canal disasters (see American States Ins. Co. v Koloms, 177 Ill 2d 473, 490, 687 NE2d 72, 80 [1997]). The insurance industry explicitly began excluding pollution damage in the early 1970s as a consequence of then-new state and federal legislation mandating that polluters stand responsible for cleanup costs (see 9 Couch on Insurance 3d § 127:3).

In New York, the pollution exclusion was required in all commercial and industrial liability policies from 1971 to 1982 to "assure that corporate polluters bear the full burden of their own actions spoiling the environment" (Governor's Mem approving L 1971, ch 765-766, 1971 McKinney's Session Laws of NY, at 2633). When the law was amended to allow insurers to provide coverage for pollution, it was part of a "comprehensive effort to encourage industry responsibly to handle its hazardous wastes" and "safeguard the public from the adverse consequences of hazardous waste handlers which become financially disabled" (Governor's Mem approving L 1982, ch 855-856, 1982 McKinney's Session Laws of NY, at 2629).

The first pollution exclusion clause—the "qualified pollution exclusion"—appeared in most CGL policies issued between the early 1970s and 1985. It broadly excluded coverage for damages "arising out of the discharge, dispersal, release or escape of smoke, vapors, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste material or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water." The exclusion typically provided that it would not apply where the polluting discharge or release is "sudden and accidental." Courts nationwide split on the interpretation of that clause, most pointedly diverging on the application of the terms "sudden and accidental" to instances of gradual pollution (compare e.g. Northville Indus. Corp., 89 NY2d 621 [1997] ["sudden" connotes abrupt] with Blackhawk-Central City Sanitation Dist. v American Guar. & Liab. Ins. Co., 214 F3d 1183

[10th Cir 2000] ["sudden" means unexpected or abrupt]).

The next generation of pollution exclusions began about 1985, when insurers replaced the qualified pollution exclusion with the "absolute" or "total" pollution exclusion, which contains no exception for sudden and accidental incidents (see 9 Couch on Insurance 3d § 127:14; 2 Stempel, Insurance Contract Disputes § 14.11 [a] [2d ed]). While ending the debate surrounding "sudden and accidental," the absolute or total pollution exclusion sparked new controversy.³ Many courts have pronounced the...