Niagara County v. Utica Mut. Ins. Co.

• Decision Date: 15 May 1981
• Citation: 80 A.D.2d 415,439 N.Y.S.2d 538
• Parties: NIAGARA COUNTY, Respondent-Appellant, v. UTICA MUTUAL INSURANCE COMPANY, Appellant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 538

439 N.Y.S.2d 538

80 A.D.2d 415

NIAGARA COUNTY, Respondent-Appellant, v. UTICA MUTUAL INSURANCE COMPANY, Appellant-Respondent.

Supreme Court, Appellate Division,

Fourth Department.

May 15, 1981.

Palmer, Heffernan, Wickser & Beyer, Buffalo, for appellant-respondent; John Heffernan, Buffalo, of counsel.

John V. Simon, Lewiston, for respondent-appellant; Sheldon Hurwitz, Buffalo, of counsel.

Before DILLON, P. J., and CARDAMONE, DOERR, DENMAN and MOULE, JJ.

DOERR, Justice.

Plaintiff Niagara County is one of several defendants in a series of lawsuits commenced by some 65 claimants in what has come to be known as the "Love Canal" litigation. The allegations contained in the several complaints are not substantially dissimilar. The defendants, collectively, are charged with recklessly dumping and abandoning chemicals, waste products and debris which were, or subsequently became, noxious, poisonous and inherently dangerous. The complaints also allege other theories of liability, including nuisance, violation of statutes and ordinances, wrongful conveyance of the allegedly contaminated properties to plaintiffs or their predecessors in title without notice of the complained of infirmities, strict liability and common law landowner's liability. The plaintiffs all claim damages and injuries caused by toxic wastes and chemicals which were dumped or abandoned at the Love Canal site where they resided.

At the time when the "Love Canal" litigation was commenced, and since January 1, 1975, there was in existence a special multi-peril liability policy issued by Utica Mutual Insurance Company, the defendant herein, to plaintiff Niagara County. As plaintiff received the various notices of claim and summonses and complaints in the underlying actions, it forwarded them to Utica Mutual pursuant to the multi-peril policy conditions. Utica Mutual disclaimed liability and refused to defend any of the actions. Niagara County thereupon commenced the present action for a declaratory judgment construing the insurance policy issued to it by defendant so as to, inter alia, require Utica Mutual to provide a defense to the County in the "Love Canal" litigation and to reimburse the County for expenses incurred to date in defending the said claims. ¹

In its answer Utica Mutual asserted, inter alia, that no coverage exists because of a pollution exclusionary clause contained in the policy it had issued.

Special Term granted partial summary judgment in favor of plaintiff declaring that Niagara County is entitled to a defense in the "Love Canal" litigation from Utica Mutual and that Utica Mutual reimburse the County for all reasonable expenses it has expended to date in defending the "Love Canal" claims, except for expenses incurred in bringing the action for declaratory judgment to determine coverage. 103 Misc.2d 814, 427 N.Y.S.2d 171.

The insurance policy in question states that coverage is provided to the insured for all sums, within the policy limits, which the insured shall become legally obligated to pay because of bodily injury or property damage to which the policy applies, caused by an occurrence, and that the insurance company has the right and duty to defend any suit against the insured seeking damages, even if any of the allegations or the suit are groundless, false or fraudulent. (It is not disputed that the underlying complaints allege an "occurrence" as referred to in this coverage provision.) This coverage provision is a basic ingredient of all liability policies. The exclusions contained in the policy which qualify the standard coverage provisions then become critical to the determination of whether coverage is provided.

The exclusionary clause which Special Term properly denominated as the "crux" of the proceedings provides as follows:

"This insurance does not apply:

* * *

* * *

"(f) to bodily 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, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental."

The origin of this exclusion is statutory (Insurance Law, § 46, subds. 13, 14) and is required in all policies issued to "commercial or industrial enterprises". Indeed, the pollution exclusion clause contained in the policy tracks the language contained in the statute. Clearly, the addition of subdivisions 13 and 14 to section 46 of the Insurance Law was calculated to buttress New York's strict environmental protection standards. These standards could be undermined if commercial enterprises were able to purchase insurance to protect themselves from liability arising from their pollution of the environment. "For example, a polluting corporation might continue to pollute the environment if it could buy protection from potential liability for only the small cost of an annual insurance premium, whereas, it might stop polluting, if it had to risk bearing itself the full penalty for violating the law." (N.Y. Legis.Ann., 1971, pp. 353-354) The conclusion thus becomes compelling that the pollution exclusion clause, mandated by statute, was intended to apply only to actual polluters. ² In further support of this conclusion Rowland H. Long has stated:

"Pollution : Exclusion (f) is new. It eliminates coverage for damages arising out of pollution or contamination, where such damages appear to be expected or intended on the part of the insured and hence are excluded by definition of 'occurrence.' Coverage is afforded for damages caused by pollution or contamination if the discharge, dispersal, release, or escape is sudden and accidental. (See N.Y. Ins. Law, Sec. 46 Subdiv. 13 and 14 as amended 1971)" (3 R. Long, The Law of Liability Insurance, App-58 (Emphasis added).

Utica Mutual urges that the statute does not apply since it only requires the exclusion in policies issued to commercial and industrial enterprises, and further that there is no language limiting the exclusion to acts by the insured, here, Niagara County.

For the reasons stated herein, we need not reach the broader question of whether the statute was intended to apply only to commercial or industrial enterprises or could also be applied to municipal corporations under the appropriate circumstances.

The fact that the statute, and in this case the exclusionary clause itself, fails to contain language which limits the exclusion to acts by the insured is of no moment, for to hold otherwise would require that we disregard the unqualified public policy intendment of the statute to prohibit pollutors from spreading the risk of...