Pollution Exclusion Bars Coverage for Environmental Contamination Claim
May 31, 2013 |The New Hampshire Supreme Court has ruled that an excess insurer had no duty to defend the owners of a business that made photograph albums on property in Connecticut against a claim by the property’s purchaser that they had contaminated the property.
The Case
Sheldon and Melvin Holson operated a business that made photograph albums on property located in Connecticut. After they sold the property to K.V.L. Corporation, K.V.L. alleged that it discovered that the property was environmentally contaminated, and it sued the Holsons.
The Holsons’ primary insurers denied their request for representation, as did their excess carrier, The Home Insurance Company.
After a trial in the K.V.L. suit, a partial judgment was entered against the Holsons. They filed a claim with Home, and a trial court found that Home had no duty to defend them because of the policy’s pollution exclusion. The question of coverage reached the New Hampshire Supreme Court.
The New Hampshire Supreme Court’s Decision
In its decision, the court observed that the complaint against the Holsons alleged that:
(1) contamination existed in “areas surrounding several large underground concrete ‘vaults’ which are adjacent and connected to the building on the Wilton Site through a network of underground piping”;
(2) a consultant opined that the contamination was the result of disposal practices while the Holsons operated their commercial concern; and
(3) the contamination was the result of “release,” “disposal,” or “leakage.”
The court rejected the Holsons’ argument that these allegations did not rule out the possibility that the contamination might have been the result of a sudden event, explaining that that was not the test under applicable Connecticut law. Rather, the court explained, the relevant inquiry was whether the insured had demonstrated that a reasonable interpretation of the substance of the allegations potentially would bring the claims within the purview of the sudden and accidental discharge exception in the policies.
The court then concluded that the Holsons had not met their burden, and it affirmed the ruling in favor of Home.
The case is Matter of Rehabilitation of The Home Ins. Co., No. 2012-0080 (N.H. Apr. 23, 2013).
