Second Circuit Holds Pollution Exclusion Applicable to Sewage-Related Claims

In its recent decision in Cincinnati Inc. Co. v. Roy’s Plumbing, Inc., 2017 U.S. App. LEXIS 9729 (2d Cir. May 31, 2017), the United States Court of Appeals for the Second Circuit, applying New York law, had occasion to consider the application of a pollution exclusion to a case involving the release of sewage.

At issue in Roy’s Plumbing was coverage for a lawsuit alleging that the insured negligently performed inspection work and construction of a sewer refurbishment in the Love Canal area.  This allowed for pressure to build in the sewage system causing sewage and toxic “Love Canal materials” to be released from the sewers and onto the homes and properties of nearby residents.  On motion for summary judgment, the United States District Court for the Western District of New York held that the total pollution exclusion in Cincinnati’s general liability policies was unambiguous and applied to all aspects of the underlying claim, including the allegations of release of raw sewage.

The Second Circuit affirmed, holding that it had “no doubt that sewage is generally recognized in the industry or government to be harmful or toxic to persons,” and thus a pollutant for the purpose of the exclusion.  The court also rejected the insured’s argument that the allegations in the underlying suit relating to pressure fell outside of the exclusion, noting that the pressure described was merely the mechanism allowing for the pollutants to escape the sewer, and not a separate form of property damage in and of itself.

In addition to these arguments, the insured argued on appeal that if the pollution exclusion applied to sewage-related claims, then as a plumber, the coverage under its general liability policies essentially would be negated for most damages due to plumbing work.  The court rejected this assertion, noting that under New York law, the pollution exclusion only applies to traditional environmental harm, citing to Belt Painting Corp. v. TIG Ins. Co., 742 N.Y.S.2d 332 (2d Dep’t 2002), aff’d, 763 N.Y.S.2d 790 (2003).  The court concluded that this limitation on the exclusion “eliminates the overbreadth” complained of by the insured.