Incorporated Village of Cedarhurst v. Hanover Ins. Co., 1

• Decision Date: 06 April 1994
• Docket Number: No. 2,No. 1,1,2
• Citation: 160 Misc.2d 795,611 N.Y.S.2d 417
• Parties: INCORPORATED VILLAGE OF CEDARHURST, Plaintiff, v. HANOVER INSURANCE COMPANY, Defendant. (Action) INCORPORATED VILLAGE OF CEDARHURST, Plaintiff, v. HANOVER INSURANCE COMPANY, Defendant. (Action)
• Court: New York Supreme Court

Page 417

611 N.Y.S.2d 417

160 Misc.2d 795

INCORPORATED VILLAGE OF CEDARHURST, Plaintiff, v. HANOVER INSURANCE COMPANY, Defendant. (Action No. 1)

INCORPORATED VILLAGE OF CEDARHURST, Plaintiff, v. HANOVER INSURANCE COMPANY, Defendant. (Action No. 2)

Supreme Court, Nassau County.

April 6, 1994.

Joel B. Gewanter, Cedarhurst, for plaintiff.

Ted J. Tanenbaum, Mineola, for defendant.

ALLAN L. WINICK, Justice.

Defendant moves to consolidate two actions arising out of similar incidents. Defendant also moves to dismiss the complaint in each of the actions.

Plaintiff cross-moves for summary judgment in each of the actions. Plaintiff has no opposition to the joinder of the two actions.

Plaintiff, Incorporated Village of Cedarhurst, has commenced two separate declaratory judgment actions which arose by reason of the disclaimer of insurance coverage by defendant Hanover Insurance Company. The instant actions were commenced as a result of two separate negligence actions against the Village which are pending in this court (Longwood Assoc. v. Village of Cedarhurst, Index # 9927/93 and Don Yules, et al. v. The Incorporated Village of Cedarhurst, Index # 22390/92).

In the Longwood action, plaintiff contends that it suffered property damage as a result of an overflow of sewage from a sewer system owned and/or maintained by the Incorporated Village of Cedarhurst. In the Yules action, plaintiffs contend that they suffered both property damage and personal injury as a result of flooding caused by a break or leak in the sewer system owned, operated and controlled by the Incorporated Village of Cedarhurst.

The declaratory judgment actions turn upon the question of whether exclusionary language contained in the Hanover Insurance policy applies. Defendant argues that the language of its policy is such that it does not have to defend or indemnify the plaintiff for these incidents. The same policy is applicable in both cases. However, with respect to the Longwood action, an umbrella policy issued by Hanover is also in existence concerning which defendant raises the same argument.

The policy language in question is as follows (primary policy):

"2. exclusions this insurance does not apply to:

f. (1) 'Bodily injury' or 'property damage' arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:

(c) Which are or were at any time transported, handled, stored, treated, disposed of, or processed as waste by or for any insured or any person or organization for whom you may be legally responsible."

The umbrella policy has the following language:

"b. (1) 'Bodily injury', 'property damage' or 'personal injury' arising out of the actual, alleged or threatened discharge, dispersal, release or escape of 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 and reconditioned or reclaimed."

Defendant Hanover argues that items which travel through a municipal sewer system under any definition are "waste" and a pollutant is a waste material which contaminates air, soil or water.

Plaintiff argues that the two underlying actions sound in negligence, to wit: failure to maintain pipes and a sewer system. Such conduct, plaintiff contends, is clearly covered under the subject insurance policy. Plaintiff alleges that under any interpretation the word "pollutants" is distinguishable from "waste", i.e., that the insurance policy definition of pollutants was never intended to include human waste. Plaintiff argues, also, that in any event, the duty to defend is much broader than an insurance company duty to indemnify.

It is the rule in construing insurance policies that any ambiguity shall be construed against the company which wrote the policy. Miller v. Continental Ins. Co., 40 N.Y.2d 675, 678, 389 N.Y.S.2d 565, 358 N.E.2d 258. This is especially true with respect to exclusionary clauses. The excluded categories must be defined with careful particularity before a claimed exclusion will be given effect. That principal is akin to the proposition that if exclusion of liability is intended, which is not apparent from the language employed, it is the insurer's responsibility to make such intention clearly known. Sperling v. Great American Indemnity Co., 7 N.Y.2d 442, 447, 199 N.Y.S.2d 465, 166 N.E.2d 482.

"The tests to be applied in construing an insurance policy are common speech (Lewis v. Ocean Acc. & Guar. Corp., 224 NY 18, 21 and the reasonable expectation and purpose of the ordinary businessman (Bird v. St. Paul Fire & Mar. Ins. Co., 224 NY 47, 51. The ambiguities in an insurance policy are, moreover, to be construed against the insurer, particularly when found in an exclusionary clause (see Breed v. Insurance Co., 46 NY2d 351, 353[, 413 N.Y.S.2d 352, 385 N.E.2d 1280].)"

See Ace Wire v. Aetna Casualty & Surety, 60 N.Y.2d 390, 398, 469 N.Y.S.2d 655, 457 N.E.2d 761.

"Where an insurance policy includes the insurer's promise to defend the insured against specified claims as well as to indemnify for actual liability, the insurer's duty to furnish a defense is broader than its obligation to indemnify. (International Paper Co. v Continental Cas. Co., 35 NY2d 322, 326[, 361 N.Y.S.2d 873, 320 N.E.2d 619;] Lionel Freedman, Inc. v Glens Falls Ins. Co., 27 NY2d 364, 368[, 318 N.Y.S.2d 303, 267 N.E.2d 93.] The duty to defend arises whenever the allegations in a complaint against the insured fall within the scope of the risks undertaken by the insurer, regardless of how false or groundless those allegations might be. (Goldberg v Lumber Mut. Cas. Ins. Co., 297 NY 148, 154 The duty is not contingent on the insurer's ultimate duty to indemnify should the insured be found liable, nor is it material that the complaint against the insured asserts additional claims which fall outside the policy's general coverage or within its exclusory provisions. Rather, the duty of the insurer to defend the insured rests solely on whether the complaint alleges any facts or grounds which bring the action within the protection purchased. (Ruder & Finn v Seaboard Sur. Co., 52 NY2d 663, 669-670[, 439 N.Y.S.2d 858, 422 N.E.2d 518;] Schwamb v Fireman's Ins. Co., 41 NY2d 947, 949[, 394 N.Y.S.2d 632, 363 N.E.2d 356;] Utica Mut. Ins. Co. v. Cherry, 38 NY2d 735, 737[, 381 N.Y.S.2d 40, 343 N.E.2d 758;] Prashker v United States Guar. Co., 1 NY2d 584, 590, 592[, 154 N.Y.S.2d 910, 136 N.E.2d 871.] Though policy coverage is often denominated as "liability insurance", where the insurer has made promises to defend "it is clear that [the coverage] is, in fact, 'litigation insurance' as well." (International Paper Co. v Continental Cas. Co., supra, [35 N.Y.2d,] at p 326[, 361 N.Y.S.2d 873, 320 N.E.2d 619.] As such, "[s]o long as the claims [asserted against the insured] may rationally be said to fall within policy coverage, whatever may later prove to be the limits of the insurer's responsibility to pay, there is no doubt that it is obligated to defend." (Schwamb v Fireman's Ins. Co., supra, [41 N.Y.2d,] at p 949[, 394 N.Y.S.2d 632, 363 N.E.2d 356.]

Moreover, whenever an insurer wishes to exclude certain coverage from its policy obligations, it must do so "in clear and unmistakable" language. (Kratzenstein v Western Assur. Co., 116 NY 54, 59 see, also, Hartol Prods. Corp. v Prudential Ins. Co., 290 NY 44, 49-50 Any such exclusions or exceptions from policy coverage must be specific and clear in order to be enforced. They are not to be extended by interpretation or implication, but are to be accorded a strict and narrow construction. (Taylor v United States Cas. Co., 269 NY 360, 363 Griffey v New York Cent. Ins. Co., 100 NY 417, 421 Rann v Home Ins. Co., 59 NY 387, 389; see, also, Wagman v American Fid. & Cas. Co., 304 NY 490 Indeed, before an insurance company is permitted to avoid policy coverage, it must satisfy the burden which it bears of establishing that the exclusions or exemptions apply in the particular case (Neuwirth v Blue Cross & Blue Shield, 62 NY2d 718[, 476 N.Y.S.2d 814, 465 N.E.2d 353;] Prashker v United States Guar. Co., 1 NY2d 584, 592[, 154 N.Y.S.2d 910, 136 N.E.2d 871,] supra; Slocovich v Orient Mut. Ins. Co., 108 NY 56, 66,) and that they are subject to no other reasonable interpretation (cf. International Paper Co. v Continental Cas. Co., supra, [35 N.Y.2d,] at p 325[, 361 N.Y.S.2d 873, 320 N.E.2d 619;] Hoffman v. Aetna Fire Ins. Co., 32 NY 405, 413-415.)

See Seaboard Surety Co. v. Gillette Co., 64 N.Y.2d 304, 310-311, 486 N.Y.S.2d 873, 476 N.E.2d 272.

Moreover, when an exclusionary clause is relied on to deny coverage, the insurer has the burden of demonstrating that...