A federal court in New York has held that uncovering buried hazardous substances during excavation constitutes a “sudden and accidental” release thus triggering insurance coverage. Narragansett Elec. Co. v. Am. Home Assurance Co., No. 11-CV-8299, (S.D.N.Y. 4/1/13). At issue was a Massachusetts gravel pit at which hazardous substances had been deposited at some time between 1930 and 1945 by a corporate predecessor of plaintiff Narragansett Electric Co. (Narragansett). Excavation conducted in 1984 uncovered the buried hazardous substances and, according to Massachusetts, “caused hazardous chemicals to be released to the environment.”
The state sued Narragansett, asserting that the company was liable for remediation of the contamination. Narragansett sought insurance coverage for its defense of the state’s lawsuit, but the insurer asserted that under the policy’s pollution exclusion, it had no duty either to cover losses or pay defense costs. Narragansett asserted that an exception to the pollution exclusion, which provided coverage in the event of pollution arising from a “sudden and accidental” occurrence, meant that the insurer had a duty to defend.
Ruling in Narragansett’s favor, the court found that the excavation which disturbed the deposited substances was an intervening event that was temporally sudden and was accidental “in the sense that it was an unexpected and unintentional consequence of excavation occurring outside the insured’s regular business activities and the Site’s function as a sand and gravel pit.” The court determined that the insurer owed its insured the costs of defense under these circumstances.