Northville Industries Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa.

• Decision Date: 25 March 1997
• Citation: 657 N.Y.S.2d 564,89 N.Y.2d 621,679 N.E.2d 1044
• Parties: , 679 N.E.2d 1044, 44 ERC 1471 NORTHVILLE INDUSTRIES CORPORATION, Appellant, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., et al., Respondents, et al., Defendants.
• Court: New York Court of Appeals Court of Appeals

Page 564

657 N.Y.S.2d 564

89 N.Y.2d 621, 679 N.E.2d 1044, 44 ERC 1471

NORTHVILLE INDUSTRIES CORPORATION, Appellant, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., et al., Respondents, et al., Defendants.

Court of Appeals of New York.

March 25, 1997.

Paul, Weiss, Rifkind, Wharton & Garrison, New York City, (Martin London, Maria T. Vullo and Michael P. Bowen, of counsel), for appellant.

Simpson Thacher & Bartlett, New York City (Barry R. Ostrager and David Woll, of counsel), and Cozen and O'Connor (Sheldon Karasik and Peter M. Papasavas, of counsel), for National Union Fire Insurance Company of Pittsburgh, Pa., respondent.

Melito & Adolfsen, P.C., New York City (Ignatius John Melito and John Volpe, of counsel), for Hartford Accident and Indemnity Company, respondent.

Wilson, Elser, Moskowitz, Edelman & Dicker, New York City (Richard S. Oelsner and Sari B. Axelrod, of counsel), for Continental Insurance Company and another, respondents.

Mendes & Mount, L.L.P., New York City (Mary Ann D'Amato and George L. Maniatis, of counsel), and Phelps, Dunbar, L.L.P. (Richard N. Dicharry and Stephen P. Hall, of the Louisiana Bar, admitted pro hac vice, of counsel), for London Market Insurers respondent.

Kirkpatrick & Lockhart, L.L.P., New York City (John Sullivan; Peter J. Kalis and Kerrin M. McCormick, of the Pennsylvania Bar, admitted pro hac vice, of counsel) and Covington & Burling (William F. Greaney, of the District of Columbia Bar, admitted pro hac vice, of counsel) for Aluminum Company of America and others, amici curiae.

Dennis C. Vacco, Attorney-General, Albany (Barbara G. Billet, Peter H. Schiff and Peter G. Crary, of counsel), for State of New York, amicus curiae.

O'Melveny & Myers, L.L.P., New York City (John L. Altieri, Jr., and Thomas J. DiResta, of counsel), and Wiley, Rein & Fielding (Laura A. Foggan, Daniel E. Troy

and Treg A. Julander, of the District of Columbia Bar, admitted pro hac vice, of counsel), for Insurance Environmental Litigation Association, amici curiae

OPINION OF THE COURT

LEVINE, Judge.

Plaintiff is a Long Island-based corporation engaged in the bulk storage, distribution and sale of gasoline and other petroleum products. During the pertinent period, it owned and operated petroleum storage and distribution facilities in Holtsville and East Setauket, New York. Both terminals contained aboveground and belowground storage tanks, and networks of underground pipelines and pumps for transferral of liquid petroleum products. During the period in question plaintiff carried primary comprehensive general liability insurance policies with either defendants National Union Fire Insurance Co. of Pittsburgh, Pa., or Hartford Accident and Indemnity Company, and excess general liability policies with defendants Continental Insurance Company or Pacific Insurance Company (collectively referred to as the defendant insurers).

All of the foregoing liability insurance policies provided coverage for liability stemming from an "occurrence," 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" (emphasis supplied). Each policy also contained a pollution exclusion clause barring coverage for bodily injury or property damage "arising out of the discharge, dispersal, release or escape of * * * toxic chemicals, liquids * * * or other * * * pollutants into or upon land * * * but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental" (emphasis supplied).

In 1986 and 1987, plaintiff discovered that there had been a fortuitous release of gasoline from plaintiff's Holtsville and East Setauket facilities into the groundwater, which had then migrated underneath neighboring properties. Plaintiff's investigation disclosed that approximately 750,000 gallons of gasoline had been lost at the Holtsville terminal and 1.2 million gallons at East Setauket.

Owners of the affected neighboring properties brought suit against plaintiff. Defendant insurers disclaimed coverage under the pollution exclusion clauses in their respective policies. Plaintiff then brought this declaratory judgment action to establish the insurers' obligation to defend and indemnify with regard to those lawsuits. On cross motions for summary judgment, Supreme Court ruled that, because it could not be determined initially whether the gasoline leakages occurred suddenly, defendants National Union Fire Insurance Company and Hartford Accident and Indemnity Company were required to defend and bear the investigation costs of the underlying actions. Based on the pleadings in the underlying complaints and the facts subsequently admitted by plaintiff, however, Supreme Court further held that the "sudden and accidental" exception to the exclusion of pollution coverage did not apply as to the East Setauket terminal discharge; hence defendant insurers had no duty to indemnify. The court held, however, that as to the claims arising from the Holtsville gasoline release, the facts were inconclusive as to whether at least at its outset the discharge was sudden; thus, the court denied summary judgment to defendant insurers on the issue of their duty to indemnify plaintiff for liability on the underlying claims.

The Appellate Division modified by ruling that the defendant insurers had no obligation to defend or indemnify because the sudden and accidental discharge exception in the pollution exclusion clauses of the policies did not apply, as a matter of law, to either the Holtsville or East Setauket discharges (218 A.D.2d 19, 636 N.Y.S.2d 359). We granted plaintiff leave to appeal, and now affirm.

In Technicon Elecs. Corp. v. American Home Assur. Co., 74 N.Y.2d 66, 544 N.Y.S.2d 531, 542 N.E.2d 1048, rearg dismissed 74 N.Y.2d 843, 546 N.Y.S.2d 560, 545 N.E.2d 874, rearg denied 74 N.Y.2d 893, 547 N.Y.S.2d 851, 547 N.E.2d 105, we held that the identical language as in the pollution exclusion clauses of the policies issued to plaintiff here was unambiguous and that, for the sudden and accidental discharge exception to the exclusion of pollution coverage to apply, both contingencies included in the exception had to be satisfied. "Stated conversely, discharges that are either nonsudden or nonaccidental block the exception from nullifying the pollution exclusion" (id., at 75, 544 N.Y.S.2d 531, 542 N.E.2d 1048). We further held that, as a matter of law, the term "accidental" excludes any intentional discharge of a pollutant from qualifying for the exception. Because the complaint in the underlying action in Technicon alleged a knowing discharge, and the insured's answer to that complaint admitted intentionally discharging waste, we ruled in that case that there was no accidental discharge. Therefore, we held that the exception to the pollution exclusion from coverage did not apply and the insurer had no duty to defend or indemnify against liability claims in the underlying suit (id.).

In the instant case, there is no allegation in the underlying complaints against plaintiff, nor evidence submitted by the defendant insurers, that the gasoline discharges at plaintiff's Holtsville and East Setauket terminals were anything but unintentional and unknown to plaintiff before they were discovered in 1986 and 1987. Defendant insurers, thus, do not dispute that the discharges from both facilities were accidental, thereby satisfying one of the two elements of the exception to the exclusion of pollution coverage. The parties agree, therefore, that the dispositive issue before this Court is whether the discharges in question were also "sudden" within the meaning of that term in the pollution exclusion clauses of defendant insurers' policies.

Plaintiff argues that, at least in the context of an inadvertent underground discharge of pollutants, the word "sudden" is ambiguous, which under familiar insurance law doctrine requires resolution of this issue against the insurers and in favor of plaintiff insured, construing the sudden and accidental discharge exception to apply. Plaintiff relies heavily on one common definition of sudden as "happening * * * unexpectedly" (Webster's 9th New Collegiate Dictionary 1178 [1990] [emphasis supplied] ). Plaintiff concedes that the meaning of sudden may also...