Niagara County v. Utica Mut. Ins. Co.

Decision Date14 April 1980
Citation103 Misc.2d 814,427 N.Y.S.2d 171
PartiesNIAGARA COUNTY, Plaintiff, v. UTICA MUTUAL INSURANCE COMPANY, Defendant.
CourtNew York Supreme Court
MEMORANDUM

JOSEPH P. KUSZYNSKI, Justice.

Plaintiff, the County of Niagara ("County") moves pursuant to CPLR 3212 for summary judgment in its declaratory judgment action brought to determine defendant's Utica Mutual Insurance Company's ("Utica Mutual") obligation to defend it in the series of actions commonly known as the "Love Canal" litigation.

While the County's declaratory judgment action seeks determination as to both Utica Mutual's duty to indemnify as well as to defend, the parties stipulated on oral argument that for purposes of this motion, the issue be limited to the duty to defend. Defendant Utica Mutual cross-moves for summary judgment dismissing the action.

The crux of the motion concerns an exclusion clause contained in the special multi-peril liability insurance policy issued by Utica Mutual to the County. It was first included in a policy effective January 1, 1975 through January 1, 1978 and in a later policy covering the period from January 1, 1978 until January 1, 1980.

The clause reads:

"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."

(Special multi-peril policy, Section II, Liability coverage, Form MLB-200)

As specified in plaintiff's complaint and the amended complaint, some 65 individual claimants represented by five different law firms have commenced actions in Niagara County, Supreme Court, during October and November, 1979 seeking to recover for personal injuries and property damage as well as punitive damages allegedly resulting from the dumping of toxic chemical wastes at the "Love Canal" site in the City of Niagara Falls, New York. These actions were brought against several defendants including the County.

Upon oral argument, counsel for defendant Utica Mutual maintained that every allegation of every complaint is premised on the basic factual statement that the dumping of toxic chemical wastes and their eventual migration into the Love Canal environment caused the claimed injuries and damages. Utica Mutual also maintains that the toxic substances were released and caused injury over a long period of time and cannot therefore be considered to have happened in a "sudden or accidental" manner. It submits that the pollution exclusion in its policy, exempts it from its duty to defend the County in the Love Canal actions.

The County first contends that the language and legislative intent of Insurance Law, Section 46(13) and (14), commonly referred to as the "pollution exclusion", precludes the use of the exclusion clause in insurance policies issued to municipalities, as opposed to "commercial or industrial" enterprises.

Insurance Law, Section 46(13), (14), provides that:

"Policies . . . issued to commercial or industrial enterprises providing insurance against legal liabilities specified in this subdivision shall expressly exclude therefrom liability arising out of pollution or contamination caused by the discharge, dispersal, release or escape of any pollutants, irritants, or contaminants into or upon land, the atmosphere or any water course or body of water unless such discharge, dispersal, release or escape is sudden and accidental." (Emphasis supplied)

Plaintiff argues that the above language indicates a legislative intent to limit the use of the exclusion clause to policies issued to commercial and industrial enterprises and therefore bars this Court from expanding its use to municipalities even if they are polluters. Plaintiff cites Insurance Law, Section 143(1) in support of its conclusion:

". . . any contract or policy of insurance . . . delivered . . . in this state in violation of any of the provisions of this chapter shall be valid and binding upon the insurer making or issuing the same, but in all respects in which its provisions are in violation of the requirements or prohibitions of this chapter it shall be enforceable as if it conformed with such requirements or prohibitions."

Reliance is mainly placed by the County on the interpretation of Section 143(1) in Durant v. MVAIC, 20 A.D.2d 242, 246 N.Y.S.2d 548, wherein the Court stated:

"But assuming that the endorsement has received (the Superintendent of Insurance's) express approval, as perhaps we must . . . nevertheless the endorsement cannot be enforced if it runs counter to the legislative intent or if it violates existing law."

The cited Durant decision, however, was modified by the Court of Appeals at 15 N.Y.2d 408, 260 N.Y.S.2d 1, 207 N.E.2d 600, so as to approve the endorsement involved.

There is substance in the reasoning of Utica Mutual that nothing in the pollution exclusion demonstrates the intent of the Legislature to exclude the application of the clause to other insureds. A general liability insurance policy, unlike the standard New York State Fire Insurance Policy, is not a creature of statute. Very few provisions of a general liability insurance policy are mandated by statute. It would thus appear that the pollution exclusion legislation approved by the State Legislature in 1970, while mandating its inclusion in the liability policies of commercial and industrial concerns, in no way limits an insurer from writing it into other policies. The bulk of liability policy terms are subject to the ordinary rules of contract to be agreed upon or rejected by the contracting parties, subject to insurance department approval. Michigan Millers Mutual Insurance Co. v. Christopher, 66 A.D.2d 148, 413 N.Y.S.2d 264 (4th Dept., 1979).

In defendant's answer to the complaint and amended complaint, portions of the complaints in the actions filed by the Love Canal claimants against the County are set forth, to demonstrate that they fall within the language of the pollution exclusion clause.

It should be underscored that in 4 of the 5 sets of the complaints so brought to this Court's attention by Utica Mutual, no accusation is made, that the County itself actually buried toxic chemicals in the Love Canal site. The "Boniello" complaints only mention that Hooker dumped toxic chemical wastes into the Love Canal which is located in Niagara County. (Answer to amended complaint, P 11.) The "Miles" complaints state the County "had actual and/or constructive notice that said chemicals and other toxic substances had been buried and disposed in the Love Canal area" by Hooker from "at least 1942 to 1953." (Answer to amended complaint, P 12.)

The "Bartolomei" complaints again only refer to the fact that between 1930 and 1953, Hooker buried toxic wastes in the Love Canal area located in the City of Niagara Falls. (Answer to amended complaint, P 13.) The "Cohen" complaints state "The County of Niagara did negligently and wrongfully acquiesce in and agree to the creation and maintenance of a known and deadly health hazard, to wit, the chemical storage area known as the Love Canal . . . As a direct and approximate of the action and failure to act by the County of Niagara, plaintiff has suffered serious injury. . . ." (Answer to amended complaint, P 14.)

Only the "Julian" complaints, on behalf of the Snyder's et al., broadly state that all "defendants", a grouping in which the County is included, "did dump and abandon chemical waste products, debris and other substances in the 'Love Canal' site." (Answer P 11.)

The language of the Circuit Court in Molton, Allen and Williams, Inc. v. St. Paul Fire & Marine Ins. Co., Ala., 347 So.2d 95 (1977), the first Court to interpret a pollution exclusion clause, is very illuminating in determining the application of the provision in situations such as before this Court:

"It is believed that the intent of the 'pollution exclusion' clause was to eliminate coverage for damages arising out of pollution or contamination by industry-related activities . . . We judicially know that during the last decade, much emphasis has been placed upon protecting the environment. The pollution exclusion was no doubt designed to decrease the risk where an insured was putting . . . toxic chemicals . . . into the environment." (Emphasis added)

To hold that a municipality should be deprived of a defense by an insurance company in an action premised on pollution wrongdoing, where the strongest allegations only state that the industrial chemical waste dumping took place within the municipality, or that the municipality acquiesced to the dumping, or had notice of the dumping, would lead to the conclusion that no municipality could expect a defense, if named in a suit involving industrial pollution of an area within the municipality.

This Court cannot perceive how the pollution exclusion can be applied to deprive a public corporation of coverage where it has been at most, accused in a complaint of nonfeasance, as opposed to misfeasance of the type here alleged. The legislative history of Insurance Law,...

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