New York Court Holds Pollution Exclusion Applicable to Pollution Caused by Covered and Uncovered Causes

In its recent decision in Matter of Midland Ins. Co., 2017 N.Y. App. Div. LEXIS 5065 (N.Y. 1st Dep’t June 22, 2017), the Supreme Court of New York, Appellate Division, First Department, had occasion to consider the application of the absolute pollution exclusion to contamination resulting from different sources, only one of which was clearly excluded.

At issue in Midland was coverage for the insured’s liabilities under CERCLA for lead contamination of soils in a residential area in Omaha, Nebraska.  The lead was partially a result of the insured’s mining operations, but also a result of the chipping and flaking of lead based paint on the houses in the area.  While the insured did not paint the houses, or manufacture the paint used on the homes, it was jointly and severally liable for the soil contamination under CERCLA, and thus responsible for remediating the soils.

The insured argued that under New York law, chipping and flaking of lead paint is not necessarily excluded by the pollution exclusion.  Westview Assocs. v Guar. Nat’l Ins. Co., 717 N.Y.S.2d 75 (2000); Herald Sq. Loft Corp. v Merrimack Mut. Fire Ins. Co., 344 F Supp 2d 915 (S.D.N.Y. 2004).  As such, the insured argued that at the very least, the exclusion should not apply to the entirety of the cleanup costs and that the costs should be allocated between lead contamination resulting from its mining operations and lead contamination resulting from lead paint chipping and flaking.

The court agreed that under some circumstances, lead paint does not come within the exclusion.  It nevertheless concluded these cases inapplicable since “the combined effect of the lead emissions and the lead paint was soil contamination – of the same soil.”  As the court observed, any soil solely contaminated as a result of lead paint would not have come within the scope of CERCLA.  As such, the court agreed that the exclusion applied to preclude coverage for the entirety of the underlying remedial costs.