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Narragansett Appeal Update—Second Circuit Rules Consistent with Established Precedent

July 15, 2016

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On June 23, 2016, the Second Circuit rejected a district court’s attempt to categorize a widespread and systematic pollution condition as “sudden and accidental.” In reversing the district court’s $9.1 million award in <a href="">Narragansett Elec. Co. v. Century Indem. Co.</a> In this coverage dispute, the Second Circuit adhered to well established precedent in New York and nationwide concerning the interpretation of pollution exclusions in commercial general liability policies.
The Second Circuit’s reversal of this decision is the final step of a case of industrial pollution that originated in 1930 and 1945, when Blackstone Valley Gas and Electric Company, the predecessor of the plaintiff-respondent Narragansett Electric Company, contracted to dispose of hazardous by-products by burying it in a local lot.
The district court reasoned that a duty to defend arose because the landowner’s discovery of the pollution condition constituted a “sudden and accidental” event. Embracing this line of reasoning, Narragansett Electric Co. argued that the Second Circuit’s reversal created a split with the First Circuit, which should control since the case was decided under Massachusetts law.
As we <a href=";submit=Search"><u>previously observed</u></a>, the Second Circuit has long recognized that the pollution exclusion in commercial general liability policies was created “to exclude coverage for entities which knowingly pollute the environment over a substantial period of time.”  In keeping with this policy, the Second Circuit rejected the district court’s ruling, holding instead that a complaint that alleges intentional acts of pollution “‘cannot reasonably be read’ to describe ‘sudden and accidental’ release of pollutants….”  Contrary to Narragansett’s objections, the Second Circuit properly distinguished between pollution that is simply discovered at a later date (the case at bar) and pollution conditions that are exacerbated by third party action (the First Circuit precedent at issue).
In the end, the Second Circuit ruled according to longstanding policy. As a result, and due to the fact that this decision was a summary order, this matter will have little precedential effect.  It may be of most use to litigants within the First Circuit that are looking for clarification on what qualifies as “sudden and accidental” with respect to a pollution condition.
Thanks to Chris Soverow for his contribution to this post.


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