Great American Restoration Services, Inc. v. Scottsdale Ins.
78 A.D.3d 773, 911 N.Y.S.2d 142
N.Y.A.D. 2 Dept.,2010.
This coverage case demonstrates that one must never underestimate the courts’ tendency to interpret insurance policies in favor of the insured. Here, the Court found that an asbestos exclusion did not apply because because of the purported ambiguity as to whether it applied to the accidental dispersal of asbestos. It must have been a surprise to the carrier that this ubiquitous exclusion only applied to insureds who intentionally disturbed asbestos.
The Court also did not find that asbestos was a “pollutant” excluded by the pollution exclusion, even though the Court of Appeals has found otherwise Continental Cas. Co. v. Rapid-American Corp., 80 N.Y.2d 640, 609 N.E.2d 506 N.Y.,1993 (“Asbestos could certainly be an irritant, contaminant or pollutant of the type encompassed by the [pollution exclusion] clause).
Here, plaintiff was retained to perform “emergency water damage service” at a commercial premise. After plaintiff’s work allegedly caused asbestos to be “dispersed throughout the building and premises” the building owner’s insurance carrier brought a subrogation action against plaintiff for property damage. The complaint alleged that plaintiff held itself out as “possessing staff” trained in water damage cleaning and asbestos removal. Plaintiff denied ever holding itself out as a company that performs asbestos removal or disposal and contended that it immediately ceased all work at the facility when it was informed that asbestos had been found in the past.
Plaintiff’s carrier Scottsdale Insurance Company (hereinafter Scottsdale), disclaimed coverage based upon the asbestos exclusion clause in the policy or based on the policy's pollution exclusion clause.
The asbestos exclusion provides inter alia that coverage does not apply to “bodily injury” or “property damage” arising out of the “removal” of asbestos from products or structures, or the “...disposal” of asbestos or products containing asbestos. The pollution exclusion states that coverage does not apply to “'property damage’ arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants.’ ” “Pollutants” are defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”
The Supreme Court denied Scottsdale's motion for summary judgment and the Second Department affirmed finding that “neither of the particular exclusory provisions relied upon by Scottsdale negates its duty to defend under the facts in this case.” The Second Department went further and granted the plaintiff’s cross motion declaring that Scottsdale was obligated to defend it in the underlying action.
The Court stated “[a]lthough the asbestos exclusion clause states that no coverage is provided for property damage arising out of the “removal,” “disposal,” or “use” of asbestos, the subject clause includes no terms indicating that coverage will not be provided for damages arising out of the unknowing or accidental release or dispersal of asbestos.” Here, the Court clearly seems to be over-reaching as there appears nothing ambiguous about the exclusion. Indeed, it seems clear that the Court is improperly reading ambiguity into the exclusion. Exclusions frequently exclude for events, such as nuclear war or fire, flood or smoke. Whether such conditions were accidental or intentional would not otherwise appear relevant to the construction of the exclusion. Nor does the Court cite to any authority in support of its contention.