Technicon Electronics Corp. v. American Home Assur. Co.

• Decision Date: 03 October 1988
• Citation: 533 N.Y.S.2d 91,141 A.D.2d 124
• Parties: TECHNICON ELECTRONICS CORP., Respondent, v. AMERICAN HOME ASSURANCE COMPANY, et al., Defendants, Atlantic Mutual Insurance Company, et al., Appellants.
• Court: New York Supreme Court — Appellate Division

Page 91

533 N.Y.S.2d 91

141 A.D.2d 124

TECHNICON ELECTRONICS CORP., Respondent, v. AMERICAN HOME ASSURANCE COMPANY, et al., Defendants Atlantic Mutual Insurance Company, et al., Appellants.

Supreme Court, Appellate Division Second Department.

Oct. 3, 1988.

Bower & Gardner, New York City (Barry G. Saretsky, Sidney Rosen, Marsha Weinstein and Eric Dranoff, of counsel), for appellants.

Anderson Russell Kill & Olick, P.C., New York City (Jerold Oshinsky, Nicholas J. Zoogman and Lynn A. Stansel, of counsel), for respondent.

Rivkin, Radler, Dunne & Bayh, Uniondale (William M. Savino, Stephen J. Smirti and Lawrence A. Levy, of counsel), for defendant Fireman's Fund Ins. Co.

Drinker Biddle & Reath, New York City (Timothy C. Russell and Patricia A. Gotschalk, of counsel), for defendant Lumberman's Mut. Cas. Co.

Covington & Burling, Washington, D.C. (John G. Buchanan, III, William F. Greaney, Frederick G. Herold and Michael E. Tankersley, of counsel), and Wormser, Kiely, Alessandroni, Hyde & McCann, New York City (Lawrence M. McKenna, of counsel), for Carter Day Industries, Inc., Chemical Mfrs. Ass'n, EX-CELL-O Corp., Intern. Business Machines Corp., SCM Corp., Stauffer Chemical Co. and Witco Chemical Corp., amici curiae.

Shea & Gould, New York City for amicus curiae American Ins. Ass'n, amicus curiae.

Before KUNZEMAN, J.P., and KOOPER, SPATT and SULLIVAN, JJ.

SPATT, Justice.

On this appeal, we are asked to determine whether the intentional discharge of waste materials into waterways over a course of years by a manufacturer in the regular course of its business was "sudden and accidental" so as to require the appellants to defend or indemnify the plaintiff pursuant to liability insurance policies issued to the plaintiff. For the reasons that follow, we find that the intentional discharge of waste materials into the environment involved in this case was not "sudden and accidental" and, therefore, was within the express terms of the "pollution exclusion" contained in the policies at issue.

BACKGROUND

The plaintiff, Technicon Electronics Corp. (hereinafter Technicon), is a Delaware corporation having its principal place of business in Tarrytown, New York. Technicon owns and operates a plant in Humacao, Puerto Rico, for the manufacture of machines to analyze blood samples. Technicon alleges in the action at bar that it has been named as a defendant in a personal injury action filed in the Superior Court of Puerto Rico, Humacao Part, entitled Carmen Vellon Maldonado, et al. v. Squibb Manufacturing Enterprises, Inc. (hereinafter the underlying personal injury action). The underlying personal injury action is based upon "bodily injury which allegedly occurred as a result of exposure to alleged toxic chemicals allegedly discharged from Technicon's [Puerto Rican] plant". Technicon further alleges at bar that it has "been informed by the United States Environmental Protection Agency (hereinafter EPA) that it may be a potentially responsible party with respect to clean-up and emergency response costs connected with the Frontera Creek in Humacao, Puerto Rico". These costs were allegedly incurred as a result of property damage caused by exposure to the same hazardous substances discharged from the Technicon plant.

The defendants are 15 named insurance companies. All of the defendants are alleged to have sold Technicon primary or excess comprehensive general liability policies covering various periods of time from July 20, 1971, through August 1, 1980. Both appellants, Centennial Insurance Company (hereinafter Centennial) and Atlantic Mutual Insurance Company (hereinafter Atlantic Mutual), are defendants who sold Technicon a primary comprehensive general liability policy.

The amended complaint in the underlying personal injury action, which is dated February 27, 1985, alleges the following:

"1. During several years and up to the present [the defendan Technicon Electronics Corporation [has] been discharging toxic waste materials * * * into the Frontera Creek and other bodies of water which flow through the Humacao Industrial Park * * * as well as to the nearby land and overall environment

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"3. The discharge of toxic materials * * * by the defendants referred to above, has been made knowingly in violation to [sic] Federal and local dispositions [sic]

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"7. The proximate cause of the damages suffered by each of the plaintiffs would be the concurrent negligence of the defendant Technicon Electronics Corporation; Reedco, Inc. and Squibb Manufacturing Inc. * * * as they contaminated with toxic wastes not only the bodies of water, but the land to which plaintiffs had access and also the surrounding air" (emphasis supplied).

The plaintiffs in the underlying personal injury action are residents of the "Civdad Cristiana Urbanization", which is adjacent to the Technicon plant. The plaintiffs allege that the long-term discharge of toxic waste by the Technicon plant caused the contamination of the "Civdad Cristiana Urbanization", which resulted in serious personal injuries to the plaintiffs.

Significantly, in its certified answer in the underlying personal injury action dated June 6, 1985, Technicon conceded that, before 1979, it had intentionally discharged industrial wastes into a creek which flowed into Frontera Creek; that between 1979 and 1981 it had "transported its industrial wastes to the Prasa facilities in Puerto Nuevo"; and from 1981 to 1985, it had intentionally discharged its industrial waste into the Prasa System, a total period of approximately six years. The specific concession of intentional discharge set forth in Technicon's answer is as follows:

"During the period between 1979-1981, Technicon transported its industrial wastes to the PRASA facilities in Puerto Nuevo; since 1981, Technicon has been discharging directly into the PRASA System in accordance to [sic] applicable permits and regulations. Additionally, it is hereby noted that any and all discharges by Technicon prior to 1979, into an unnamed creek which in turn, flows into Frontera Creek, were made pursuant to applicable permit applications".

Technicon demanded that both of the appellants undertake its defense in the underlying personal injury action. After the appellants refused to do so, Technicon brought the instant declaratory judgment action against them and the other insurance companies. The complaint in this action avers that "the claims asserted against Technicon in the Puerto Rico action and the EPA proceeding are within the coverage of the insurance policies which defendants sold to Technicon and are not excepted or excluded therefrom". Therefore, Technicon asserts, the defendants are obligated to defend and indemnify it from any liability incurred in the underlying personal injury action. In addition, Technicon contends that the defendants are obligated to pay for the defense of the EPA matter and indemnify it with respect to any liability for costs incurred in that proceeding.

In their answers, the appellants interposed a number of affirmative defenses. The third affirmative defense asserted by each of the appellants alleges that their respective policies exclude from coverage any loss resulting from the discharge or dispersal of the toxic chemicals or pollutants unless such discharge is "sudden and accidental".

Technicon moved for partial summary judgment only as to the first and third causes of action, and only insofar as those causes of action were asserted against the appellants. These causes of action alleged, inter alia, that the appellants must defend Technicon in the underlying personal injury action and the EPA matter. The appellants cross-moved for summary judgment for a declaration that they have neither a duty to defend nor a duty to indemnify Technicon with respect to either the underlying personal injury action or the EPA matter. The appellants asserted that no duty was owed because (1) any liability for pollution has been excluded from coverage pursuant to the "pollution exclusion" clause contained in the policies; (2) Technicon breached a condition in the policies which required it to immediately give notice to its insurers; and (3) the EPA matter was not a lawsuit in which covered "damages" were being sought.

In a decision dated February 18, 1986, which was later embodied in an order and judgment (one paper) dated March 11, 1986, the Supreme Court, Westchester County (Dachenhausen, J.), granted Technicon's motion for partial summary judgment, and the appellants were directed to defend Technicon in the underlying personal injury action and the EPA matter. The court held that there were issues of fact present with respect to each of the defenses raised by the appellants "and, thus, until those issues of fact are resolved, [the appellants] must provide Technicon with a defense."

We now reverse the order and judgment and declare that neither Atlantic Mutual nor Centennial owes any obligation to Technicon in connection with either the underlying personal injury action or the EPA matter emanating from the alleged intentional pollution of Frontera Creek and its environs.

THE "POLLUTION EXCLUSION" CLAUSE

Both of the insurance policies relied on by Technicon in seeking to impose upon the appellants an obligation to defend the underlying personal injury action contain the following standard provision, which is known as a "pollution exclusion":

"This insurance does not apply * * * 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" (emphasis supplied).

The two-pronged argument advanced by the appellants with respect to this clause...