Kimmins Indus. Service Corp. v. Reliance Ins. Co.

• Decision Date: 10 March 1994
• Docket Number: D,No. 455,455
• Citation: 19 F.3d 78
• Parties: KIMMINS INDUSTRIAL SERVICE CORPORATION, Plaintiff-Appellee, v. RELIANCE INSURANCE COMPANY, National Casualty Company, Defendants, Landmark Insurance Company, Defendant-Appellant. ocket 93-7481.
• Court: U.S. Court of Appeals — Second Circuit

Page 78

19 F.3d 78

KIMMINS INDUSTRIAL SERVICE CORPORATION, Plaintiff-Appellee, v. RELIANCE INSURANCE COMPANY, National Casualty Company, Defendants, Landmark Insurance Company, Defendant-Appellant.

No. 455, Docket 93-7481.

United States Court of Appeals,

Second Circuit.

Argued Oct. 14, 1993.

Decided March 10, 1994.

Thomas R. Smith, Buffalo, NY (George M. Gibson, Gibson, McAskill & Crosby, on the brief), for plaintiff-appellee.

Kevin S. Doyle, Buffalo, NY (J. Mark Gruber, Maloney, Gallup, Roach, Brown & McCarthy, on the brief), for defendant-appellant.

Before: NEWMAN, Chief Judge, KEARSE, Circuit Judge, and TENNEY, District Judge ^*.

KEARSE, Circuit Judge:

Defendant Landmark Insurance Company ("Landmark") appeals from so much of a judgment of the United States District Court for the Western District of New York, Edmund F. Maxwell, Magistrate Judge, entered pursuant to 28 U.S.C. Sec. 636(c) (1988), as declares that Landmark is required to indemnify its insured, plaintiff Kimmins Industrial Services Corporation ("Kimmins"), for losses Kimmins may incur in connection with certain claims relating to injuries of workers who were engaged in the removal of asbestos. The magistrate judge ruled that because the injuries were only incidentally related to the removal of the asbestos, the claims were not within the insurance policy's exclusion for claims arising out of the removal of that substance. Landmark challenges this ruling on appeal. For the reasons below, we disagree and affirm the decision of the district court.

I. BACKGROUND

The background of this litigation is not in dispute. Kimmins is engaged in the business of performing clean-ups of industrial sites. In February 1990, Kimmins was engaged by Bethlehem Steel Corporation ("Bethlehem") to dismantle certain equipment and structures at one of Bethlehem's New York plants. Their agreement provided that Kimmins would indemnify Bethlehem against all liability for any injuries suffered "by reason of any act or omission, whether negligent or otherwise, on the part of any of the Bethlehem Companies" during the work covered by the contract. Kimmins subcontracted the asbestos removal part of the project to Kimmins Abatement Corporation.

Working on the Bethlehem clean-up project in June 1990, Kimmins Abatement Corporation employees William Bailey and Steven Samson were at the top of a "quench tower," removing equipment and picking up loose asbestos that had previously been removed from the tower walls. A quench tower is a device used to cool railcar loads of hot coke, a coal derivative, by dousing the loads Bailey and Samson brought suits in New York state court against Bethlehem, alleging that Bethlehem's allowing the coke to be doused while work was in progress on the tower constituted actionable negligence. Bethlehem removed these suits to the United States District Court for the Western District of New York and served third-party complaints against Kimmins for indemnification and contribution.

with water as they pass beneath the tower; the process generates a large quantity of steam. While Bailey and Samson were working, a load of coke was doused inadvertently, and Bailey and Samson suffered serious burns from the rising cloud of hot steam. Attempting to escape the steam, they suffered additional injuries when they fell from the tower.

Kimmins had purchased three pertinent insurance policies covering periods that included June 1990: (1) a Commercial General Liability policy from defendant Reliance Insurance Company ("Reliance"), (2) an Umbrella Liability Policy from defendant National Casualty Company ("National"), and (3) an Excess Umbrella Liability policy from Landmark. The Landmark policy bore an endorsement that excluded coverage for certain asbestos-related injuries:

ASBESTOS EXCLUSION

In consideration of the premium paid and notwithstanding anything contained in this policy to the contrary, it is agreed as follows:

The coverage afforded by this policy does not apply to bodily injury, personal injury or property damage arising out of:

1) Inhaling, ingesting or prolonged physical exposure to asbestos or goods or products containing asbestos; or

2) The use of asbestos in constructing or manufacturing any good, product, or structure; or

3) The removal of asbestos from any good, product, or structure; or

4) The manufacture, transportation, storage or disposal of asbestos or goods or products containing asbestos.

(Emphasis added.) The National and Reliance policies contained virtually identical asbestos exclusions. Kimmins asked Reliance to defend Kimmins against Bethlehem's claims for indemnification and contribution and notified all three insurers that it would seek indemnification from them if it were held liable on the Bethlehem claims. Reliance declined to defend Kimmins, contending that the asbestos exclusion applied.

Kimmins commenced the present action against Reliance, National, and Landmark, seeking a judgment declaring that Reliance is required to defend the claims asserted by Bethlehem and that all three insurers are required to indemnify Kimmins for any judgment against it in those actions. All parties moved for summary judgment. In a Decision and Order dated March 19, 1993 ("Decision"), the magistrate judge, before whom the parties had consented to proceed, denied defendants' motions and granted that of Kimmins. The magistrate judge noted that, though both Bailey and Samson were removing asbestos at the time of their injuries,

[t]he source of the injuries suffered by both was the rail car operated by Bethlehem. The coke it contained, the water poured on it and the resulting steam were in no way connected to the asbestos removal, or to asbestos at all.

Decision at 4. Observing that "[t]he injury would have happened to anyone standing on the tower, whether or not they were involved in asbestos removal," id. at 5, the magistrate judge found that

the asbestos removal was incidental to the injury. While it is true that Mr. Samson and Mr. Bailey would not have been on that platform had they not been removing asbestos, the asbestos was not the proximate cause of their injury. The operation of the railroad car, having nothing to do with asbestos, was the cause.

Id. at 6. The magistrate judge concluded that the injuries therefore did not "aris[e] out of" the removal of asbestos, and the asbestos exclusion was inapplicable.

Accordingly, the magistrate judge ordered that judgment be entered declaring that Reliance is obligated to defend Kimmins against the Bethlehem claims and declaring that all Landmark has appealed, and the parties have agreed that the outcome of this appeal will also determine the obligations of National. Reliance has not appealed.

                three defendants are obligated to indemnify Kimmins "for all sums it may become obligated to pay as damages, costs and expenses as a result of the claims alleged in the lawsuits, as provided in the terms of their respective insurance policies."   Id. at 8
                

II. DISCUSSION

On appeal, Landmark argues principally that the exclusion for injury "arising out of" asbestos removal should be read to exclude from coverage any injury occurring while the injured person was engaged in removing asbestos. Under New York law, which the parties agree governs this diversity case, we disagree.

As a fundamental matter, the objective of contract interpretation is to give effect to the expressed intention of the parties. See, e.g., Hartford Accident & Indemnity Co. v. Wesolowski, 33 N.Y.2d 169, 171-72, 350 N.Y.S.2d 895, 898, 305 N.E.2d 907, 909 (1973); Morlee Sales Corp. v. Manufacturers Trust Co., 9 N.Y.2d 16, 19, 210 N.Y.S.2d 516, 518, 172 N.E.2d 280, 281 (1961); 4 S. Williston, Williston on Contracts Sec. 600, at 280 (3d ed. 1961). "[T]he basic principle that guides a Court in its interpretation of the terms contained in an insurance contract 'is the reasonable expectation and purpose of the ordinary business man when making an ordinary business contract....' " Album Realty Corp. v. American Home Assurance Co., 176 A.D.2d 513, 515, 574 N.Y.S.2d 704, 706 (1st Dep't 1991) (mem.) (quoting Bird v. St. Paul Fire & Marine Insurance Co., 224 N.Y. 47, 51, 120 N.E. 86 (1918)). Insurance contracts are normally construed strictly against the insurer. See, e.g., United States Fidelity & Guaranty Co. v. Annunziata, 67 N.Y.2d 229, 232, 501 N.Y.S.2d 790, 791, 492 N.E.2d 1206, 1207 (1986); Miller v. Continental Insurance Co., 40 N.Y.2d 675, 678, 389 N.Y.S.2d 565, 567, 358 N.E.2d 258, 259 (1976). Thus, "where the meaning of a policy of insurance is in doubt or is subject to more than one reasonable interpretation, all ambiguity must be resolved in favor of the policy holder and against the company which issued the policy." Little v. Blue Cross of Western New York, 72 A.D.2d 200, 203, 424 N.Y.S.2d 553, 555 (4th Dep't 1980); see Miller v. Continental Insurance Co., 40 N.Y.2d at 678, 389 N.Y.S.2d at 567, 358 N.E.2d at 259.

Exclusions from insurance policy coverage are given strict construction. See, e.g., Seaboard Surety Co. v. Gillette Co., 64 N.Y.2d 304, 311, 486 N.Y.S.2d 873, 876, 476 N.E.2d 272, 275 (1984); M.H. Lipiner & Son, Inc. v. Hanover Insurance Co., 869 F.2d 685, 687 (2d Cir.1989) (applying New York law) ("[e]xclusionary clauses are given the interpretation most beneficial to the insured"). In order to be enforced, "exclusions or exceptions from policy coverage must be specific and clear"; they "are not to be extended by interpretation or implication." Seaboard Surety Co. v. Gillette Co., 64 N.Y.2d at 311, 486 N.Y.S.2d at 876, 476 N.E.2d at 275; see also Miller v. Continental Insurance Co., 40 N.Y.2d at 678, 389 N.Y.S.2d at 567, 358 N.E.2d at 259; General Accident Insurance Co. v. United States Fidelity & Guarantee Insurance Co., 193 A.D.2d 135, 137, 602 N.Y.S.2d 948, 950 (3d Dep't 1993); Album Realty Co. v. American Home Assurance Co., 176 A.D.2d at 515, 574 N.Y.S.2d at 705. "[O]nce the insured shows that a loss...