State of New York
Supreme Court : County of Monroe

Plaintiff,

- against -

Index No. 2692/92

Defendants.

_______________________________

ANDREW V. SIRACUSE, J.

Plaintiff Rochester Midland Corporation was sued in a third-party contribution and indemnification action in a Superfund case. The complaint did not allege that Rochester Midland produced, transported or disposed of any toxic waste; the firm was sued because it contracted for trash removal, and its trash was transported to the site where toxic contamination was later discovered. Under these facts, the insurer wrongly declined coverage; because it did not negate the possibility that Rochester Midland's liability might be based on sudden and accidental releases of pollutants, it must defend its insured in the third-party action. Rochester Midland's cross-motion for partial summary judgment is therefore granted.

Rochester Midland's potential liability arises out of United States v Charles George Trucking Co., et al., a case brought in U.S. District Court for the District of Massachusetts on June 13, 1985, under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA, 42 USC § 9601 et seq.). The complaint alleged that the trucking company and others, not including Rochester Midland, were responsible for leakage of hazardous materials from a landfill site owned by the trucking company. A similar State action, Commonwealth of Massachusetts v Charles George Trucking et al. , was brought the next month and then consolidated with the Federal action.

The Commonwealth's second amended complaint, dated June 7, 1989, added 24 additional defendants. These defendants then brought a third-party action against other users of the dump site. Among the more than 30 third-party defendants was Rochester Germicide, the predecessor in interest to Rochester Midland.

The third-party complaint sought contribution and/or indemnification from the third-party defendants. Typical of the complaint is the following language:

If the allegations in the complaints by the United States and the Commonwealth against Third-Party Plaintiffs are proven to be true, then each of the Third-Party Defendants is also a person, as defined in CERCLA, who arranged for the disposal or treatment, or arranged for the transport for disposal or treatment, of hazardous substances owned or possessed by such person to the Site, who accepted hazardous substances for transport to the Site, or who is a successor to such persons or is otherwise liable for the acts alleged herein. As such, each of the Third-Party Defendants is jointly and severally liable for the relief which the United States and The Commonwealth seek against Third-Party Plaintiffs * * *.the acts alleged herein. As such, each of the Third-Party Defendants is jointly and severally liable for the relief which the United States and The Commonwealth seek against Third-Party Plaintiffs * * *.

Rochester Germicide's answer contained specific denials and eleven affirmative defenses, including the failure of the complaint to state a claim. In March, 1991, Rochester Midland, Rochester Germicide's successor, moved for summary judgment. Proof submitted with the motion showed that Rochester Germicide had operated a warehouse in Wakefield, Massachusetts, from the late 1960s to the early 1980s, and that Christopher George Trucking was engaged to dispose of its office trash. The only product manufactured in Wakefield was a nontoxic disinfectant, and the only potentially toxic substance that might have been present in the trash was hydrochloric acid that could have leaked into cardboard containers -- a substance which allegedly evaporates within hours. The company contended that there was no evidence that it had contributed to the toxic dumping at the site.

Opponents to the motion claimed that some latex paint cans were thrown in the trash (though not necessarily by Rochester Germicide employees) and that burnt-out fluorescent light bulbs from the warehouse were also placed in the dumpsters; both contain toxic chemicals. These facts alone, they alleged, precluded summary judgment.

As of this writing the summary judgment motion remains undecided.

Upon receiving the third-party complaint Rochester Germicide made demands upon its insurance carriers for defense and indemnification. Both denied coverage. In July, 1991, Rochester Midland brought this declaratory judgment action, seeking a declaration that its insurers must defend and indemnify it for any losses incurred in the lawsuit as well as ancillary relief. The case against Utica Mutual has been discontinued. Hartford has moved for summary judgment, relying on the "pollution exclusion clause" in its policy:

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 onto 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.¹

An insurer's duty to defend is broader than its duty to indemnify, and the insurer bears a heavy burden in seeking to avoid that duty:

The duty to defend arises whenever the allegations in a complaint against the insured fall within the scope of the risks undertaken by the insurer, regardless of how false or groundless those allegations might be (Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 310).

if it establishes as a matter of law that there is no possible factual or legal basis on which it might eventually be held to be obligated to indemnify its insured under any policy provision (Allstate Ins. Co. v Zuk, 78 NY2d 41, 45; accord, Servidone Const. Corp. v Security Ins. Co. of Hartford, 64 NY2d 419, 424).

[T]o the extent defendant sought to avoid its duty to defend by relying on the pollution exclusion clause in the insurance policy, it bore the burden of establishing as a matter of law that the allegations in the complaint * * * were "'solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation'" (Rochester Smelting & Refining Co., Inc., v Merchants Mutual Insurance Co., 188 AD2d 1055, citations omitted).

Thus, Hartford bears the burden of proving, as a matter of law, that the allegations in the complaint cannot be interpreted to allege "sudden and accidental" discharges. It is not enough to assert that the complaint does not allege conduct within the exception to the exclusion; Hartford must establish that the conduct alleged could not fall within that exception under any interpretation.

It is clear, under the peculiar facts of this case, that Hartford has not met this burden. The cases cited by Hartford concerned insured firms which knowingly produced toxic wastes and/or arranged for their disposal -- acts specifically alleged in the complaints. The polluter in Ogden Corp. v Travelers Indem. Co. (924 F2d 39 [2d Cir]), for example, operated a scrapyard over a period of years. The defense put forth by the polluter in Technicon Elecs. Corp v American Home Assur. Co. (74 NY2d 66) was that its discharges, while intentional, were lawful; the Court of Appeals held that, whatever the proprieties of the company's conduct, its discharges could hardly be considered accidental. In Powers Chemco, Inc. v Federal Ins. Co. (74 NY2d 910) the firm owned the site, and in Rochester Smelting and Refining Co. v Merchants Mutual Ins. Co. (Supreme Court, Monroe County, Galloway, J., decided June 13, 1991, affd 188 AD2d 1055, supra, for reasons stated below ), the firm generated and sold toxic waste and sought to lay responsibility on the purchasers. In all of these cases the insurer was held to have no duty to defend.

Rochester Midland, on the other hand, is being sued simply because it dumped its trash in a site later discovered to be polluted by toxic products it may or may not have generated. The complaint is mere boilerplate, and can be reduced to the assertion that Rochester Midland violated CERCLA. It alleges no specific acts of pollution. Liability under CERCLA is strict -- there is no scienter required under 42 USC 9607 (a), for example -- there are only limited exceptions for acts of God, of war and of third parties (42 USC 9607 [b]), and there is no de minimis defense (see, United States v Alcan Aluminum Co., 755 F Supp 531 [NDNY]). Thus, a defendant could potentially be liable under CERCLA for a sudden and accidental release; for example, a firm disposing of a single item unaware that it was toxic or could produce toxins might well find itself sharing in cleanup costs.

In several cases in which the complaint was merely conclusory and sudden and accidental discharges might fall within the conduct alleged, the insurer has been held to its duty to defend. The Second Circuit rejected the insurer's argument in Avondale Industries v Travelers Indem. Co., observing:

[T]here are no specific claims as to how the waste allegedly was discharged or escaped * * * or that Avondale * * * intentionally or knowingly polluted the waste site (887 F2d 1200, 1202, cert denied 496 US 906, emphasis in original ).

Without an admission -- nor even an allegation of intentional conduct -- we concluded in Avondale that the possibility that the pollution damage was both sudden and accidental had not been "clearly negate[d]" (894 F2d 498, 500, cert denied 496 US 906; see also, Colonial Tanning Corp. v Home Indemnity Co., 780 F Supp 906, 921 - 922, supra ).

The insurer's duty is based on the contract of insurance and the pleadings (Servidone Const. Corp. v Security Ins. Co. of Hartford, 64 NY2d 419, 424, supra ; Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 310, supra ), and it is not strictly necessary for this court to consider the facts developed in Rochester Midland's motion for summary judgment in the third-party action. Nonetheless, these facts, available to the insurer, further support Rochester Midland's claim. The opponents to that motion asserted that Rochester Midland may be liable for pollution from ballast in fluorescent light bulbs, heavy metals from latex paint or hydrochloric acid spills from occasional broken bottles. All of these discharges are both sudden and accidental, satisfying the strict two-prong test recently favored (see Technicon Elecs. Corp. v American Assur. Co., 74 NY2d 66, 75, supra ; Ogden Corp. v Travelers Indem. Co., 924 F2d 39, 42, supra ); they would have been unexpected and unintended (accidental) and would have occurred over a short period of time (sudden).

Nor is there a policy reason for interpreting the exclusion clause to apply to such discharges (see, e.g., Niagara County v Utica Mutual Ins. Co., 80 AD2d 415, lv dismissed 54 NY2d 831 [4th Dept]; Autotronics Systems v Aetna Life and Casualty, 89 AD2d 401, 403 [3d Dept]; but see, Powers Chemco v Federal Ins. Co., 144 AD2d 445 [2d Dept], affd 74 NY2d 910, supra [supposed public policy cannot overrule plain language of contract]). As Hartford has not satisfied its burden of establishing "as a matter of law that the allegations in the complaint * * * were '"solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation"'" (Rochester Smelting & Refining Co., Inc., v Merchants Mutual Insurance Co., 188 AD2d 1055, supra ), it must defend Rochester Midland in the third-party action and reimburse it for expenses incurred so far in its defense, as well as the costs incurred in the present action.

February 2, 1993

Andrew V. Siracuse, J.S.C.

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