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NYC Seeks Coverage for Underlying Asbestos Claim, Creating Opportunity for Court to Analyze Scope of “Pollution” Exclusion (NY)

January 22, 2021

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<p style="text-align: justify;">The City of New York filed <a href="https://www.wcmlaw.com/wp-content/uploads/2021/01/suit.pdf">suit</a> in New York County Supreme Court against an insurer seeking coverage for two underlying lawsuits in which the plaintiffs alleged injuries resulting from exposure to asbestos. This case may thus present the opportunity for another New York court to weigh in on the application of a liability policy’s “pollution” exclusion to a claim for asbestos injury, an issue on which there is a surprising dearth of case law.</p>
<p style="text-align: justify;">In 2012, the City retained contractor Precise Management, Inc. to perform various construction work at Kings County Supreme Court located at 360 Adams Street in Brooklyn. Pursuant to that contract, the City was to be named an additional insured under Precise Management’s insurance policy. In 2015, the City was sued in two separate lawsuits in which the Plaintiffs (and their spouses) alleged that they were exposed to asbestos as a result of the construction work at the courthouse. Notably, the Plaintiffs were not construction workers; rather, one served as the “Confidential Secretary” to Judge Mark A. Partnow and the other worked in Judge Partnow’s chambers during the renovation. The City’s complaint alleges that it tendered its defense in these lawsuits to the insurer, which disclaimed coverage. The complaint thus seeks declaratory relief that the insurer owes a duty to defend the City in both actions.</p>
<p style="text-align: justify;">While the Complaint is silent as to the specific language of the insurance policy and does not specify the reason for the denial of coverage, insurers have previously rejected asbestos claims based on the standard “pollution” exclusion, which bars coverage for “bodily injury” “arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants.’” Standard policies generally define “pollutants” to mean “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”</p>
<p style="text-align: justify;">Thus, the court will first be tasked with determining whether the asbestos disturbance as alleged in the underlying complaint is a “discharge, dispersal, release or escape” sufficient to implicate the exclusion. While chipping of lead paint has been held not to rise to this level, one New York court held that the spreading of hazardous silica dust to the rest of the building during a construction project on a parking garage, silica dust was “discharge, dispersal, release or escape” within the scope of the exclusion.  <em>Broome County v. Travelers Indem. Co</em>., 125 A.D.3d 1241, 1242 (3d Dep’t 2016).</p>
<p style="text-align: justify;">The next issue would be whether asbestos qualifies as a “pollutant.” Interestingly, this issue has not been directly presented before the Appellate Division First Department, whose authority would be binding on the Trial Court in this case. In addition, there appears to be a split between within the Second Department, with that court reaching a different outcome on the issue. <em>See American Heritage Realty Partnership v. LaVoy</em>, 209 A.D.2d 749 (2d Dep’t 1994); <em>Village Mall at Hillcrest Condominium v. Merrimack Mut. Fire Ins. Co</em>., 309 A.D.2d 857 (2d Dep’t 2003).</p>
<p style="text-align: justify;">It is notable, however, that the majority of other jurisdictions are in favor of treating asbestos as a pollutant for purposes of the exclusion. Thus, the case will potentially allow a court within the First Department to weigh in on whether claims for asbestos injuries sustained while inside a building are barred from coverage under a widely-used “pollution” exclusion. We will continue to keep you updated as events unfold.</p>
<p style="text-align: justify;">Thanks to Doug Giombarrese for his contribution to this post. If you have any questions or comments, please contact <a href="mailto:chayes@wcmlaw.com">Colleen Hayes</a>.</p>

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