Budofsky v. Hartford Ins. Co.

• Decision Date: 25 April 1990
• Citation: 556 N.Y.S.2d 438,147 Misc.2d 691
• Court: New York Supreme Court
• Parties: Norman BUDOFSKY & Arlene Budofsky, Plaintiffs, v. The HARTFORD INSURANCE COMPANY, Aetna Casualty & Surety Company, Excelsior Insurance Company, Continental Insurance Company and Jefferson Insurance Company, Defendants.

Page 438

556 N.Y.S.2d 438

147 Misc.2d 691

Norman BUDOFSKY & Arlene Budofsky, Plaintiffs, v. The HARTFORD INSURANCE COMPANY, Aetna Casualty & Surety Company, Excelsior Insurance Company, Continental Insurance Company and Jefferson Insurance Company, Defendants.

Supreme Court, Suffolk County Special Term.

April 25, 1990.

Farrell, Fritz, Caemmerer, Cleary, Barnosky & Armentano, P.C., Uniondale, for plaintiffs.

J. Russell Klune, Harrison, for Aetna.

Sheft & Sweeney, New York City, for Jefferson.

Wilson, Elser, Moskowitz, Edelman & Dicker, New York City, for Continental.

Devitt & Spellman, Smithtown, for Hartford.

Furey & Furey, Hempstead, for Excelsior.

HARRY RICHARD BROWN, Justice.

This is a declaratory judgment action in which the plaintiffs seek a declaration that damage to their property caused by the storage and release of toxic substances is covered under their policies with the five insurance carriers named as defendants, and that the insurance companies are obligated to defend and indemnify plaintiffs with respect to claims for damages pertaining to the cleanup and remediation of the premises. Defendant Continental Insurance Company ("Continental") has moved for summary judgment asserting that the damages and losses sustained by plaintiffs are not covered under the terms of its policy. In opposition, plaintiffs argue that Continental is not entitled to summary judgment.

Plaintiffs are the owners of a parcel of land in Deer Park, New York, upon which a building is located (the "premises"). In 1979, plaintiffs leased a part of their building to T & S Metals Finishing, Inc. ("T & S"), which later was taken over by Circle Technology, Inc. ("CTI"). CTI and plaintiff Norman Budofsky were the named insureds under a policy of comprehensive general liability insurance issued by Continental, which was in effect from August 15, 1986 to December 23, 1986.

T & S and CTI were in the business of electroplating metal products. Between May 1, 1982 and November 13, 1987, the operations of plaintiffs' tenants generated industrial waste which was released into the dry wells and cesspool system on the premises. In 1983 and again in 1985, the Suffolk County Department of Health Services ("SCDHS") sampled the dry wells and cesspool system and found liquids and sludges contaminated with heavy metals and other hazardous substances. During this time and continuing through 1987, plaintiffs' tenants ignored the directive of SCDHS and orders from the New York State Department of Environmental Conservation ("DEC") to remove the contaminated material from the premises. In November of 1987, the tenants abandoned the premises, leaving sludge and drippings on the walls and floors of the building and 35 fifty-five gallon drums filled with contaminated sludge.

In February, 1988, the DEC notified plaintiff, Norman Budofsky, that his property had been placed on the State Registry of Hazardous Waste Sites and advised plaintiff that he was a potentially responsible party in connection with the cleanup and remediation of the site. Thereafter, plaintiffs engaged the firm of Chemical Pollution Control, Inc. to clean up the site and to determine what remedial action might be necessary. Cleanup of the surface has been completed at plaintiffs' expense but remediation of the subsurface remains to be accomplished.

Defendant Continental received a notice of claim by way of a letter from plaintiffs' counsel dated July 12, 1988. In response, Continental advised plaintiffs that it was reserving its right to deny coverage pending an investigation of the coverage afforded under its policy. On December 30, 1988, plaintiffs began this action, seeking a declaratory judgment that, with respect to defendant Continental, the loss of rents and losses to buildings and contents sustained by plaintiffs are covered by its insurance policy and, therefore, defendant is legally obligated to reimburse plaintiffs for such losses and that defendant must defend plaintiff Norman Budofsky with regard to environmental claims for damages caused by the storage and release of toxic materials at and upon the premises.

In its answer to the complaint and in its moving papers for summary judgment, Continental asserts that the losses alleged by plaintiffs do not constitute property damage within the meaning of its policy, and that coverage is precluded by the pollution exclusion clause.

Plaintiffs' policy with Continental is for comprehensive general liability insurance, by which the company agrees to "pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage, to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, ..." (emphasis added). An occurrence is defined as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." Property damage is defined as "(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period."

The policy includes an endorsement containing a pollution exclusion, which provides, in pertinent part that this insurance does not apply:

"(1) to ...property damage arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants;

(a) at or from premises owned, rented or occupied by the named insured;

(b) at or from any site or location used by or for the named insured or others for the handling, storage, disposal, processing or treatment of waste;

(2) To any loss, cost or expense arising out of any governmental directions or request that the named insured test for, monitor, clean up, remove, contain, treat, detoxify or neutralize pollutants.

Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed."

The principal issues raised in the moving papers are (1) whether the...