Insurer Prevails On Applicability Of Pollution Exclusion – Release Not Sudden or Accidental

This environmental coverage action arises out of the historic contamination of a parcel with various solvents and toxic waste disposed in unlined pits at the property.  Specifically, Northrop acknowledges using the property, which later became known as Bethpage Community Park (BCP), for the disposal of sludge from an on-site industrial wastewater treatment plant and from waste oils that contained residual amounts of TCE, other solvents and PCB’s since 1948. Later, in the 1960’s, the company donated the property to the Town of Oyster Bay and the Town undertook substantial excavation and building including the construction of an ice rink in 1986.  In 2002, Northrop provided correspondence to its broker from the NYSDEC requesting that it conduct corrective action at the site.  Travelers responded by denying coverage because the claims were not reported to Travelers during the policy period and because the property damage was precluded by the policy’s pollution exclusion. In the subsequent declaratory action, Travelers argued that Northrop’s claims for coverage at the site were barred for four reasons: 1) the policies from 1972-1983 contained a statutory pollution exclusion unless the discharges were “sudden and accidental”; (2) the policies for 1983 and 1985 contained exclusions for pollution that is “expected or intended”; (3) Northrop gave late notice to Travelers; and (4) coverage for claims by the NYSDEC is barred by the six-year statute of limitations for breach-of-contract claims. The court concluded that there was no issue of fact whether before 1962, Grumman intentionally disposed of contaminants on the site.  Its discharges of these contaminants were not “sudden” nor “accidental.”  Rather, it was clear that its disposal practices in that area of the site were planned and spanned a number of years.  Thus, the court concluded that under no circumstance could the releases be interpreted to be “sudden” or “accidental” nor were the releases unintentional or unexpected. Further, the court concluded that there is no provision in the New York insurance laws for concurrent causation by a third party that revives coverage that does not otherwise exist. Specifically, it noted that it was of no legal moment that in the 1970s and 1980s some amount of Freon may have been released onto the soil and contaminated the groundwater. That contamination, even if itself sudden and accidental, consisted of sudden and accidental events that occurred after Grumman had transferred the property to the third-party responsible for doing those acts, the Town.  Conversely, the issue before the Court was whether Grumman’s acts of discharge—its admitted disposal and discharge of contaminants onto what became the BCP site—were sudden and accidental. They clearly were not, thus the exclusion applied. The Court expressly discredited Grumman’s argument that it did not intend to pollute noting, “the law does not require that it ‘intend’ to cause property damage through contamination; the law requires that the act that eventuates in the property damage be sudden and that it be accidental.  To find otherwise would be to read a requirement of “intent to pollute” into the New York insurance law that does not exist.  The court held that it is responsibility, not state of mind, that the statutory exclusion addresses. For a copy of this decision, click here.  

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