The U.S. Court of Appeals for the Second Circuit, reversing a decision by the U.S. District Court for the Southern District of New York, has ruled that an insurance company had no obligation to defend its insured under a commercial general liability insurance policy in an environmental lawsuit brought by the Commonwealth of Massachusetts where the complaint did not allege a “sudden and accidental” release of pollutants into the environment.
The Case
In 1987, the Commonwealth of Massachusetts sued the predecessor of The Narragansett Electric Company (the “NEC”) to recover cleanup costs the Commonwealth alleged that it had incurred while addressing environmental damage allegedly caused by the NEC's disposal of waste materials at a site in Attleboro, Massachusetts, over a period of about 50 years.
Century Indemnity Company refused the NEC's request that it defend the NEC in the litigation and the NEC defended itself in the action before settling the claims in 2006.
In November 2011, the NEC sued Century primarily under Massachusetts law for reimbursement of its defense costs.
The U.S. District Court for the Southern District of New York found that Century had a duty to defend the NEC, and Century appealed to the Second Circuit.
The Second Circuit's Decision
The Second Circuit reversed.
In its decision, the circuit court rejected the NEC's argument that the Commonwealth's complaint adequately described a “sudden and accidental” release of pollutants that might be covered by the policy. The circuit court was not persuaded by the complaint's allegation that, in 1984, “Maurice C. Brunelle uncovered blue sludge that was contaminated with chemical substances [from NEC's waste] . . . [and thereby] caused hazardous chemicals to be released to the environment.”
In the circuit court's opinion, the commonwealth's complaint could “not reasonably be read” to describe a “sudden and accidental” release of pollutants separate from the NEC's intentional release of pollutants into the environment over the course of decades.
The Second Circuit said that, reading the complaint as a whole, any property damage alleged in this case “plainly arose out of the NEC's intentional disposal of wastes” at the site.
Because the release of pollutants into the environment was not “sudden and accidental,” the Commonwealth's complaint did not trigger Century's duty to defend, the circuit court concluded.
The case is Narragansett Electric Co. v. Century Indem. Co., Nos. 151137cv(L), 151397cv(XAP) (2d Cir. June 23, 2016). Attorneys involved include: FOR PLAINTIFFAPPELLEECROSSAPPELLANT: JAY T. SMITH, Covington & Burling LLP, Washington, D.C.; FOR DEFENDANTAPPELLANTCROSSAPPELLEE: JONATHAN D. HACKER (Bradley N. Garcia, on the brief), OMelveny & Myers LLP, Washington, D.C.; David Chaffin, Thomas M. Going, White and Williams LLP, Boston, MA and Philadelphia, PA.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].