Borg-Warner Corp. v. Insurance Co. of North America, BORG-WARNER

• Citation: 577 N.Y.S.2d 953,174 A.D.2d 24
• Decision Date: 09 January 1992
• Docket Number: BORG-WARNER
• Parties: CORPORATION, Appellant, v. INSURANCE COMPANY OF NORTH AMERICA et al., Respondents, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

Page 953

577 N.Y.S.2d 953

174 A.D.2d 24

BORG-WARNER CORPORATION, Appellant, v. INSURANCE COMPANY OF NORTH AMERICA et al., Respondents, et al., Defendants.

Supreme Court, Appellate Division Third Department.

Jan. 9, 1992.

Anderson Kill Olick & Oshinsky (Jerold Oshinsky, of counsel), Washington, D.C., for appellant.

Wilson, Elser, Moskowitz, Edelman & Dicker (Carl J. Pernicone and Robert L. Joyce, of counsel), New York City, for Royal Indem. Co., respondent.

Carter, Conboy, Bardwell, Case, Blackmore & Napierski (John T. Maloney, of counsel), Albany, for Continental Ins. Co., respondent.

MacKenzie Smith Lewis Michel & Hughes (Stephen T. Helmer, of counsel), Syracuse, for Aetna Cas. and Sur. Co., respondent.

Mudge, Rose, Guthrie, Alexander & Ferdon (Paul R. Koepff, of counsel), New York City, for Ins. Co. of North America, respondent.

Ford, Marrin, Esposito & Witmeyer (Charles Booth, of counsel), New York City, for Continental Cas. Co. and another, respondents.

Newman & Bower, P.C. (Thomas R. Newman and Martin P. Lavelle, of counsel), New York City, and Wiley Rein & Fielding (Thomas W. Brunner and Lon A. Berk, of counsel), Washington, D.C., for Insurance Environmental Litigation Ass'n, amicus curiae.

Before WEISS, J.P., and MIKOLL, YESAWICH, LEVINE and MERCURE, JJ.

MERCURE, Justice.

Appeal from an order and judgment of the Supreme Court (Rose, J.), entered March 5, 1991 in Tompkins County, which, inter alia, granted various defendants' cross motions for summary judgment and declared that they were not required to defend plaintiff in certain pending actions or to indemnify plaintiff against any judgments arising therefrom.

Plaintiff commenced this action seeking a declaration that certain insurers are obligated under various comprehensive general liability (hereinafter CGL) insurance policies to defend and indemnify plaintiff against underlying claims arising out of its disposal of hazardous industrial waste at 19 sites across the country. Disposal of waste at these sites occurred over periods ranging from two years to four decades. In most instances, plaintiff arranged to have its industrial waste transported off its property to landfill sites. On the basis of this course of conduct, plaintiff has been named as a defendant in several civil actions which seek damages and cleanup costs associated with plaintiff's discharge of toxic waste. In one case involving the Morse Chain Development plant in Tompkins County, toxic chemicals leached into the soil and groundwater directly from the manufacturing facility owned and operated by plaintiff itself. After purchasing the Morse site and discovering the toxic chemicals, Emerson Electric Company commenced an action, Emerson Elec. Co. v. Borg-Warner Corp. (hereinafter Emerson I ), against plaintiff, claiming breach of contract and fraud. In addition, several governmental administrative actions pursuant to the Comprehensive Environmental Response Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq.) seek plaintiff's voluntary participation in cleanup activities and provide notice that, absent voluntary action, plaintiff may be required to reimburse the United States for the cost of cleaning up waste that it generated.

After issue was joined, plaintiff moved for an order granting partial summary judgment against the primary insurance carrier defendants, Continental Casualty Company (hereinafter CNA), Royal Indemnity Company (hereinafter Royal), Aetna Casualty & Surety Company (hereinafter Aetna), Continental Insurance Company (hereinafter Continental) and Insurance Company of North America (hereinafter INA). Defendants opposed the motion and cross-moved for summary judgment dismissing plaintiff's complaint and declaring that they had no duty to defend plaintiff. Plaintiff thereafter moved for an order allowing it to supplement its second amended complaint to add an action filed in March 1990, Emerson Power Transmission v. Borg-Warner Corp. (hereinafter Emerson II ).

Supreme Court, in a thorough and well-reasoned decision, denied plaintiff's motion for partial summary judgment in all respects except as to Royal, whom it ordered to defend plaintiff in the judicial action Newman v. Stringfellow, granted defendants' cross motions for summary judgment, except that part of Royal's cross motion pertaining to the Newman v. Stringfellow action and, except as otherwise provided, declared that defendants had no duty to defend or indemnify plaintiff and dismissed plaintiff's second amended complaint with prejudice. Plaintiff appeals.

I

Initially, we reject plaintiff's argument that we should apply Illinois law to the substantive issues of this insurance coverage dispute. A number of facts, including (1) the presence of 7 of the 19 contaminated landfill sites in New York, with the balance of the sites being scattered throughout the country, (2) New York's unique policy-based interest in the pollution exclusion clause (see, Insurance Law former § 46[13], [14]; Technicon Elecs. Corp. v. American Home Assur. Co., 141 A.D.2d 124, 141-143, 533 N.Y.S.2d 91, affd. 74 N.Y.2d 66, 544 N.Y.S.2d 531, 542 N.E.2d 1048), a significant issue in the matter at bar, and (3) plaintiff's choice of New York as the forum for this action, amply demonstrate New York's paramount interest in the litigation (see, Intercontinental Planning v. Daystrom Inc., 24 N.Y.2d 372, 382, 300 N.Y.S.2d 817, 248 N.E.2d 576; Auten v. Auten, 308 N.Y. 155, 160-161, 124 N.E.2d 99; Colonial Penn Ins. Co. v. Minkoff, 40 A.D.2d 819, 338 N.Y.S.2d 444, affd. 33 N.Y.2d 542, 347 N.Y.S.2d 437, 301 N.E.2d 424; Restatement [Second] of Conflict of Laws §§ 6, 188[1]. It is also worth noting that plaintiff relies primarily on New York authority to support its coverage arguments. Add to the foregoing the fact that the Illinois courts are divided as to the proper construction and application of the pollution exclusion clause (compare International Minerals & Chem. Corp. v. Liberty Mut. Ins. Co., 168 Ill.App.3d 361, 119 Ill.Dec. 96, 522 N.E.2d 758, lv. denied 122 Ill.2d 576, 125 Ill.Dec. 218, 530 N.E.2d 246, with United States Fid. & Guar. Co. v. Specialty Coatings Co., 180 Ill.App.3d 378, 129 Ill.Dec. 306, 535 N.E.2d 1071, lv. denied 127 Ill.2d 643, 136 Ill.Dec. 609, 545 N.E.2d 133), requiring "New York courts * * * as a matter of substantive interpretation [to] presume that the unsettled common law of [Illinois] would resemble New York's" (Rogers v. Grimaldi, 875 F.2d 994, 1003 [2d Cir.], and it is apparent that New York's substantive law should govern.

II

The policies of Aetna and CNA with plaintiff contain a pollution exclusion which excludes, with minor variations:

* * * 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 * * * into or upon land, the atmosphere or any watercourse or body of water, but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental (emphasis supplied).

Aetna and CNA argue that plaintiff's alleged conduct in each of the underlying actions is analogous to that held to come within an essentially identical pollution exclusion by the Court of Appeals in Technicon Elecs. Corp. v. American Home Assur Co., 74 N.Y.2d 66, 544 N.Y.S.2d 531, 542 N.E.2d 1048. Plaintiff argues, relying upon a line of cases from this court (see, e.g., State of New York v. Aetna Cas. & Sur. Co., 155 A.D.2d 740, 547 N.Y.S.2d 452; Colonie Motors v. Hartford Acc. & Indem. Co., 145 A.D.2d 180, 538 N.Y.S.2d 630), that the mere act of sending waste to a landfill intended to accept it is not an undisputed knowing and intentional discharge of pollutants into the environment and, thus, the partial pollution exclusion does not preclude a defense as a matter of law.

We hold that the liability arising out of the long-term, intentional disposal of plaintiff's industrial waste was not covered under the "sudden and accidental" exception to the pollution exclusion. Because the exception is expressed in the conjunctive, it is now unmistakably clear that its application consists of two distinct inquiries, each of which must be satisfied independently as a prerequisite to coverage (Technicon Elecs. Corp. v. American Home Assur. Co., supra, 74 N.Y.2d at 75, 544 N.Y.S.2d 531, 542 N.E.2d 1048; see, Powers Chemco v. Federal Ins. Co., 74 N.Y.2d 910, 911, 549 N.Y.S.2d 650, 548 N.E.2d 1301). Thus, "discharges that are either nonsudden or nonaccidental block the exception from nullifying the pollution exclusion" (Technicon Elecs. Corp. v. American Home Assur. Co., supra, 74 N.Y.2d at 75, 544 N.Y.S.2d 531, 542 N.E.2d 1048 [emphasis supplied]. Further, although an insurer generally must prove the applicability of an exclusion, it is the insured's burden to establish the existence of coverage (see, e.g., Munzer v. St. Paul Fire & Mar. Ins. Co., 145 A.D.2d 193, 199, 538 N.Y.S.2d 633). Here, because the existence of coverage depends entirely on the applicability of the exception to the exclusion, the insured has the duty of demonstrating that it has been satisfied (see, Northern Ins. Co. of N.Y. v. Aardvark Assocs., 942 F.2d 189, 195 [3d Cir.]; FL Aerospace v. Aetna Cas. & Sur. Co., 897 F.2d 214, 219 [6th Cir.], cert. denied --- U.S. ----, 111 S.Ct. 284, 112 L.Ed.2d 238).

While the Court of Appeals has never expressly addressed the meaning of "sudden", its analysis in both Technicon Elecs. Corp. and Powers Chemco leads to the inescapable conclusion that the inquiry focuses upon the temporal nature of the activity. By acknowledging that "sudden" and "accidental" are independent requirements, the court necessarily rejected the argument urged by plaintiff here that "sudden" simply means "unexpected" and is therefore synonymous with "accidental." Only by allowing "sudden" to retain its temporal aspect does the term attain independent...