Tonoga, Inc. v. N.H. Ins. Co.

• Citation: 201 A.D.3d 1091,159 N.Y.S.3d 252
• Decision Date: 06 January 2022
• Docket Number: 532546
• Parties: TONOGA, INC., Doing Business as Taconic, Appellant, v. NEW HAMPSHIRE INSURANCE COMPANY et al., Respondents.
• Court: New York Supreme Court Appellate Division

201 A.D.3d 1091

159 N.Y.S.3d 252

TONOGA, INC., Doing Business as Taconic, Appellant,

v.NEW HAMPSHIRE INSURANCE COMPANY et al., Respondents.

532546

Supreme Court, Appellate Division, Third Department, New York.

Calendar Date: November 17, 2021

Decided and Entered: January 6, 2022

Whiteman Osterman & Hanna LLP, Albany (Jon E. Crain of counsel), for appellant.

Bates Carey LLP, Chicago, Illinois (Agelo L. Reppas of counsel) and Kennedys CMK LLP, New York City (William J. Brennan of counsel), for respondents.

Before: Egan Jr., J.P., Clark, Aarons, Reynolds Fitzgerald and Colangelo, JJ.

MEMORANDUM AND ORDER

Clark, J. Appeal from an order of the Supreme Court (Ceresia, J.), entered May 14, 2020 in Rensselaer County, which, among other things, granted defendants’ motion for summary judgment dismissing the second amended complaint.

Since 1961, plaintiff and/or its corporate predecessors have owned and operated a manufacturing facility located in the Town of Petersburg, Rensselaer County where they produce materials coated with polytetrafluoroethylene (hereinafter PTFE). The manufacturing process at the facility historically involved the use of perfluorooctanoic acid and its predecessor, ammonium perfluorooctanoate (hereinafter collectively referred to as PFOA), as well as perfluorooctanesulfonic acid and its predecessor, perfluorooctane sulfonate (hereinafter collectively referred to as PFOS). Beginning in 2006, the Environmental Protection Agency (hereinafter EPA) began studying the health effects of exposure to PFOA and PFOS, establishing standards for allowable levels of the chemical compounds in drinking water. Plaintiff discontinued its use of PFOA and PFOS as PTFE processing agents sometime in 2013, and, in January 2016, the Department of Environmental Conservation (hereinafter DEC) added PFOA to the list of regulated hazardous substances by emergency regulation (see 6 NYCRR 597.3 ). It was discovered soon thereafter that PFOA and/or PFOS concentrations in Petersburg's municipal water supply exceeded advisory levels, and other excessive concentrations of PFOA and/or PFOS were also later identified, including in leachates from a municipal landfill. In May 2016, DEC designated plaintiff's facility a state Superfund site and declared it to be a significant threat to public health (see ECL 27–1313 ). Plaintiff, without admitting to liability, fault or wrongdoing, entered into a consent agreement with DEC in November 2016 that, among other things, required plaintiff to assist in certain remedial measures.

Over the next few years, multiple lawsuits were brought against plaintiff, each generally alleging that it negligently allowed PFOA and/or PFOS to pollute local water supplies, air and soil, causing the plaintiffs in the underlying actions certain bodily injury and property damage. During portions of the period in which it is alleged to have been negligent, plaintiff had certain insurance,¹ including policies with defendant Granite State Insurance Company from July 12, 1979 through July 12, 1982 and defendant New Hampshire Insurance Company from July 12, 1986 through July 12, 1987. Each policy generally required the insurer to indemnify plaintiff for all damages stemming from claims of bodily injury and property damage caused by a covered occurrence and to defend it in any suit on account of same, even if the suit was "groundless, false or fraudulent." Both policies, however, excluded, among other occurrences, coverage for bodily injury and property damage caused by pollution, though the Granite State policy included an exception to its pollution exclusion if an occurrence was "sudden and accidental." Plaintiff informed defendants of the aforementioned lawsuits and its dealings with DEC, requesting defense and indemnification as to all suits and the administrative proceeding, but defendants disclaimed coverage due to the pollution exclusions in their respective policies.

Plaintiff commenced this action seeking, among other things, a declaration that defendants are obligated to defend it in the underlying suits. Following joinder of issue, plaintiff and defendants filed contemporaneous motions for summary judgment that, in pertinent part, sought a ruling on whether the pollution exclusions applied. Supreme Court concluded that the exclusions applied as a matter of law as PFOA and PFOS were unambiguously pollutants within the meaning of the policies and, as to the Granite State policy, the alleged discharge was neither sudden nor accidental; as such, neither defendant was obligated to defend plaintiff in the underlying suits. The court accordingly granted defendants’ motion, dismissing the second amended complaint, and plaintiff appeals.

The issue presented on appeal concerns defendants’ duty to defend plaintiff in the underlying suits under their respective insurance policies, not their duty to indemnify plaintiff. An insurer's duty to defend is "exceedingly broad" ( Continental Cas. Co. v. Rapid–American Corp. , 80 N.Y.2d 640, 648, 593 N.Y.S.2d 966, 609 N.E.2d 506 [1993] [internal quotation marks and citation omitted]), broader than its duty to indemnify, and an insurer will be found to have a duty to defend if the allegations against the insured "state a cause of action that gives rise to the reasonable possibility of recovery under the policy" ( Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d 377, 383, 763 N.Y.S.2d 790, 795 N.E.2d 15 [2003] ; see Technicon Elecs. Corp. v. American Home Assur. Co., 74 N.Y.2d 66, 73, 544 N.Y.S.2d 531, 542 N.E.2d 1048 [1989] ; International Paper Co. v. Continental Cas. Co. , 35 N.Y.2d 322, 326–327, 361 N.Y.S.2d 873, 320 N.E.2d 619 [1974] ). In other words, an insurer must be relieved of its duty to defend a suit if it can be "concluded as a matter of law that there is no possible factual or legal basis on which the insurer might eventually be held to be obligated to indemnify the insured under any provision of the insurance policy" ( Erdman v. Eagle Ins. Co. , 239 A.D.2d 847, 849, 658 N.Y.S.2d 463 [1997] [internal quotation marks, brackets, emphasis and citations omitted], appeal dismissed and lv. denied 90 N.Y.2d 926, 664 N.Y.S.2d 259, 686 N.E.2d 1354 [1997] ; see Northville Indus. Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 89 N.Y.2d 621, 631, 657 N.Y.S.2d 564, 679 N.E.2d 1044 [1997] ; Borg–Warner Corp. v. Insurance Co. of N. Am., 174 A.D.2d 24, 36, 577 N.Y.S.2d 953 [1992], lv denied 80 N.Y.2d 753, 587 N.Y.S.2d 905, 600 N.E.2d 632 [1992] ).

To establish that an insurance policy exclusion applies as a matter of law, so as to exclude coverage for otherwise insured occurrences, it is the insurer's burden to "establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation[ ] and applies in the particular case" ( Broome County v. Travelers Indem. Co., 125 A.D.3d 1241, 1241–1242, 6 N.Y.S.3d 300 [2015] [internal quotation marks and citations omitted], lv denied 25 N.Y.3d 908, 2015 WL 3555378 [2015] ; see Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d at 383, 763 N.Y.S.2d 790, 795 N.E.2d 15 ; Westview Assoc. v. Guaranty Natl. Ins. Co., 95 N.Y.2d 334, 340, 717 N.Y.S.2d 75, 740 N.E.2d 220 [2000] ; Continental Cas. Co. v. Rapid–American Corp., 80 N.Y.2d at 652, 593 N.Y.S.2d 966, 609 N.E.2d 506 ). "As with the construction of contracts generally, unambiguous provisions of an insurance [policy] must be given their plain and ordinary meaning, and the interpretation of such provisions is a question of law for the court" ( Universal Am. Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 25 N.Y.3d 675, 680, 16 N.Y.S.3d 21, 37 N.E.3d 78 [2015] [internal quotation marks and citations omitted]; see J.P. Morgan Sec. Inc. v. Vigilant Ins. Co., 37 N.Y.3d 552, 574, 162 N.Y.S.3d 851, 183 N.E.3d 443 [2021] ; White v. Continental Cas. Co., 9 N.Y.3d 264, 267, 848 N.Y.S.2d 603, 878 N.E.2d 1019 [2007] ). In determining whether a provision is ambiguous, the insurance policy must be read "in light of common speech" as well as "the reasonable expectations of a businessperson" upon reading the policy ( Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d at 383, 763 N.Y.S.2d 790, 795 N.E.2d 15 [internal quotation marks and citation omitted]; see Northville Indus. Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 89 N.Y.2d at 633, 657 N.Y.S.2d 564, 679 N.E.2d 1044 ; Broome County v. Travelers Indem. Co., 125 A.D.3d at 1242, 6 N.Y.S.3d 300 ). "[I]f an insurance policy's meaning is not clear or is subject to different reasonable interpretations, such an ambiguity must be resolved in favor of the insured" ( Broome County v. Travelers Indem. Co. , 125 A.D.3d at 1242, 6 N.Y.S.3d 300 [internal quotation marks and citation omitted]; see Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d at 383, 763 N.Y.S.2d 790, 795 N.E.2d 15 ; Westview Assoc. v. Guaranty Natl. Ins. Co., 95 N.Y.2d at 340, 717 N.Y.S.2d 75, 740 N.E.2d 220 ).

The Granite State policy employs the standard "qualified pollution exclusion" clause that appeared in many policies issued between the early 1970s and 1985 (see generally Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d at 385, 763 N.Y.S.2d 790, 795 N.E.2d 15 ). The clause broadly excludes from coverage damages "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 excepts "sudden and accidental" discharge, dispersal, release or escape. The New Hampshire policy, as amended, contains an "absolute" or "total" pollution exclusion clause, excluding from coverage damages "arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants: (a) at or from premises owned, rented or occupied by the named insured; (b) at or from any site or location used by or for the named...