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N.Y. Appellate Division Rules That “Pollution” Exclusion in First-Party Insurance Policy Bars Coverage for Damage Caused by Migration of Silica Dust

Blogs, Insurance Coverage

In February 2015, a New York Appellate Division panel held that silica dust created by construction work on an insured’s property constitutes an “unhealthy or hazardous building material” within the meaning of a pollution exclusion contained in a first-party insurance policy and, thus, the exclusion bars coverage for alleged property damage resulting from the migration of the silica dust into the building through its elevator shaft. Broome County v. Travelers Indemnity Co., 2015 N.Y. Slip Op. 01697 (N.Y. App. Div. Feb. 26, 2015).

The plaintiff, Broome County, obtained a first-party insurance policy from the defendant insurers, providing coverage for certain real property, including a building located in a Broome County government complex. During construction of a parking garage underneath the covered building, contractors caused silica dust to migrate up an elevator shaft and disperse onto all floors. After the insurers disclaimed coverage under the policy, the plaintiff filed suit. In deciding the parties’ competing motions for summary judgment, the trial court found that the pollution exclusion contained in the policy did not bar coverage, but issues of fact as to whether coverage was barred by a faulty workmanship exclusion precluded summary judgment in favor of the plaintiff. Accordingly, it denied both motions. 

On appeal, the Appellate Division, Third Department, affirmed the denial of the plaintiff’s motion for summary judgment, but reversed with respect to the defendants’ motion, finding that the defendants were entitled to summary judgment because both policy exclusions barred coverage. With respect to the pollution exclusion, the Court determined the silica dust was an “unhealthy or hazardous building material” and, therefore, fell within the provision of the policy barring coverage for losses resulting from the “discharge, dispersal, seepage, migration, release or escape of ‘pollutants.’” The Court rejected plaintiff’s argument that Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d 377 (2003), required the opposite result. More specifically, the Court distinguished Belt Paintingbecause the language at issue in that case was found in a third-party commercial general liability policy, which used “terms of art in environmental law” in describing the methods of pollution. In this case, however, “if the words ‘discharge, dispersal, seepage, migration, release or escape’ are read as not intended to describe short migratory events where the relevant contaminant remains on the plaintiff’s property and does damage to it, then the exclusion has no significance at all in this first-party policy, especially to the portion of the definition of pollutants . . . addressing ‘building materials’ including asbestos and lead paint.” Thus, the Court applied the “only reasonable reading that gives the pollution exclusion here a meaning under a first-party insurance policy,” concluded that the exclusion barred coverage for the loss at issue, and granted the defendants’ motion for summary judgment. 

The Court similarly found that the defendant insurers were entitled to summary judgment based on the exclusion barring coverage for loss or damage resulting from “faulty, inadequate or defective . . . workmanship, repair, construction, renovation [or] remodeling,” as the plaintiff conceded that the loss, in this case, resulted from the contractor’s failure to provide adequate protective barriers to prevent construction dust from infiltrating the elevator shaft and the building.