On April 27, 2018, Justice Marcy Friedman of the New York County Commercial Division issued a decision in National Union Fire Ins. Co. of Pittsburgh, PA v. Burling Ins. Co., 2018 NY Slip Op 30741(U), holding that a Total Pollution Exclusion did not excuse an excess liability carrier’s duty to defend personal injury lawsuits brought by clean-up workers at the World Trade Center site, who alleged that they suffered respiratory and other injuries from exposure to toxins dispersed in the area after September 11.
The exclusion at issue in National Union applied to any claim for “‘[b]odily injury’ . . . which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.” Under New York law, such exclusions are limited to “‘traditional’ or ‘classic’ environmental pollution.” Thus, for example, the New York Court of Appeals has ruled that a similarly-worded exclusion did not apply to a claim arising from the inhalation of paint fumes in an office, as this did not constitute “pollution of the environment.” Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d 377 (2003). Justice Friedman noted that Court of Appeals has not “articulate[d] comprehensive criteria for determining whether pollution qualifies as classic or traditional environmental pollution for purposes of insurance policy exclusions.” She declined to resolve the issue in this case, concluding instead that “even if the dispersal [of toxins following 9/11] did constitute classic or traditional environmental pollution, the claimants in the Underlying Actions asserted independent claims that do not fall within the exclusion, thus triggering Burlington’s duty to defend.”
The insurer argued that the “but for” language of the exclusion was satisfied, since the plaintiffs in the underlying lawsuits would not have suffered their injuries “but for the polluted environment.” Justice Friedman rejected this argument and instead adopted the reasoning of a pair of Southern District decisions holding that pollution exclusions did not bar coverage for similar personal injury claims brought by workers at or around the World Trade Center site. See WTC Captive Ins. Co., Inc. v. Liberty Mutual Fire Ins. Co., 549 F. Supp. 2d 555 (S.D.N.Y. 2008) (Hellerstein, J.); and 120 Greenwich Development Associates, LLC v. Admiral Indemnity Co., Case No. 08-cv-6491 (S.D.N.Y. Sept. 25, 2013) (Preska, J.). Justice Friedman held that the pollution exclusion did not apply because the underlying lawsuits did not assert claims against the insured for causing (or failing to abate) the pollution. Rather, the lawsuits asserted claims under the New York Labor Law and common law negligence for the insured’s failure “to provide the Plaintiffs with a safe place to work,” including “proper and appropriate respiratory protection and protection from exposure to toxins during the time that the Plaintiffs participated in the clean-up.” Justice Friedman noted that the insurer “failed to cite any New York authority” holding “that a pollution exclusion . . . applies to defeat an insurer’s obligation to defend workplace safety claims stemming from exposure to pollution,” and there was “at least some New York authority to the contrary.”
This decision illustrates both the breadth of an insurer’s duty to defend, and the heavy burden an insurer faces in seeking to invoke a policy exclusion. Justice Friedman also observed that an insurance policy must be interpreted in light of “the reasonable expectations of a businessperson.” In this regard, she found it relevant that “the policy was issued after 9/11” when “the clean-up in areas surrounding the World Trade Center would have been expected to occur. . . . If this sophisticated insurer sought to exclude liability for injuries sustained by workers performing clean-up activities, it could readily have adopted specific language to that effect.”