Pollution Exclusion – New York
St. Paul Fire and Marine Ins. Co. v. Getty Props.
Corp.
-- N.Y.S.3d --; Case No. 2021-09202 (N.Y.S. June 26, 2024)
The New York Supreme Court, Appellate Division, reversed the trial
court's decision denying the plaintiff insurers' motion for
summary judgment on the applicability of pollution exclusions in
their policies. The appellate court concluded that the insurers did
not have a duty to defend or indemnify the insured, defendant Getty
Properties Corporation (Getty), because the pollution exclusions in
the policies unambiguously precluded coverage.
In 2007, the New Jersey Department of Environmental Protection
commenced an action against Getty related to contamination of
surface and ground waters with Methyl Tertiary Butyl Ether (MTBE),
which is a fuel additive that was incorporated into gasoline. The
action was removed to a Multidistrict Litigation (MDL) action in
New York. Between 2007 and 2017, two additional actions in
Pennsylvania and Maryland were filed and then removed to the New
York MDL. In April 2018, Getty sought coverage for defense and
indemnity costs from its insurers for the New York MDL. In December
2018, the insurers filed a declaratory judgment action in the New
York Supreme Court, asserting they were not obligated to defend or
indemnify Getty for the New York MDL. Additional insurers
intervened, and the parties filed motions for summary judgment,
including on the issue of whether the pollution exclusions in the
insurers' policies precluded coverage.
The first issue addressed by the appellate court was whether MTBE
is a pollutant. The appellate court concluded that MTBE was a
pollutant despite the fact that the U.S. Environmental Protection
Agency required Getty to use the fuel additive. The second issue
the appellate court addressed was whether the sudden and accidental
exception to certain pollution exclusions applied. If it did, then
there would be coverage under those policies for the contamination.
The appellate court explained that "sudden" and
"accidental" each had separate meanings, both of which
had to be established for the exception to nullify the pollution
exclusion. "Sudden" has a temporal quality, which is only
met if the discharge occurred "abruptly or within a short
timespan." The appellate court concluded that the alleged
pollution occurred undetected over many years and was not
"sudden" within the meaning of the applicable law. For
that reason, it concluded that the pollution exclusion in the
policies precluded coverage for the underlying MDL actions, and the
exception to the exclusion did not apply.
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