Love Canal – the infamous neighborhood in Niagara Falls, New York where large quantities of chemical waste was dumped, and which became the catalyst for enactment of the federal Superfund program – is still generating legal opinions, nearly 40 years after President Jimmy Carter declared a federal health emergency and Love Canal became the first Superfund site. 

The case, The Cincinnati Insurance Co. v. Roy’s Plumbing, Inc., Dkt. No. 16-2511-cv (2d Cir., May 31, 2017), is an insurance coverage dispute for claims in an underlying personal injury and property damage litigation filed by three families residing near Love Canal against a local plumbing company, that the homeowners claim negligently performed various sewer line repairs that disturbed sediments from the Love Canal Superfund containment area, resulting in discharges of contamination onto their properties.  The homeowners also assert that the plumbing company’s alleged negligent actions included pressure washing local roadways and storm drains, which further dispersed the contamination.  The homeowners sought damages, including punitive damages, an injunction for remediation of the contamination, and medical monitoring.

The plumbing company filed a claim against its insurer for defense and indemnity of the homeowner lawsuit, and the insurer disclaimed coverage under a “pollution exclusion” in the plumbing company’s policy.  The pollution exclusion – a standard provision in general commercial liability insurance policies – excluded coverage for “bodily injury or property damages which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release, escape, or emission of pollutants at any time.”  After the plumbing company refused to withdraw its claims for coverage under the insurance policy, the insurance company filed a declaratory judgment action to affirm that it was not obligated to provide coverage for the homeowner lawsuit.  The plumbing company counterclaimed, arguing the policy did provide coverage, which placed the pollution exclusion issue squarely before the court. 

The United States District Court for the Western District of New York agreed with the insurance company and granted summary judgment – confirming that the insurer did not have a duty to defend or indemnify the plumbing company in the underlying homeowner lawsuit. 

In a recent summary order, the United States District Court for the Second Circuit agreed with the District Court, and affirmed the summary judgment ruling.  The Second Circuit noted that an insurer’s duty to defend is “exceedingly broad” under New York law, and an insurer bears a “heavy burden of demonstrating that the allegations of the complaint cast the pleadings wholly within the exclusion,” in order to deny coverage.  But, here, the homeowner lawsuit sought personal injury and property damages caused by the release of hazardous substances, which fell directly within the policy’s pollution exclusion.  Therefore, the insurance company had no duty to defend or indemnify the plumbing company in the lawsuit. 

While this case does not necessarily break new ground, it reaffirms that the pollution exclusion in commercial insurance policies is alive and well, and will be upheld when the facts fall within the language of the exclusion.