Barney Greengrass, Inc. v. Lumbermens Mut. Cas. Co. (United States Court of Appeals, Second Circuit, November 4, 2011)
The issue in this coverage dispute was whether the policy’s pollution exclusion applied to cover alleged losses stemming from a restaurant’s exhaust fan that allegedly caused property damage and prohibited the use of an adjoining resident’s condominium. Specifically, the policyholder restaurant brought an action against its insurer for a declaration that it must defend and indemnify it in connection with an underlying action seeking to recover for damages allegedly cause by smoke, exhaust, and odors emitted by the restaurant’s exhaust vent.
On appeal, the insurer argued that it was not required to defend the restaurant in the underlying action on the ground that the pollution exclusion excluded coverage for damages caused by any waste, including odors, emitted into the atmosphere from a commercial exhaust vent. It further contended that the district court erred in construing the clause according to the "common speech" and "reasonable expectations" doctrines and that the odors constitute "pollution" under the New York City Administrative Code.
In assessing the validity of the exclusion, the court of appeals noted that the underlying complaint did not allege that the plaintiff was damaged by a "pollutant" or that the odors emitted from the restaurant’s exhaust vent constituted "pollution." Instead, it alleged that plaintiff "stopped using [his] living room because the odors permeating that room had become so overpowering as to make the room entirely unusable," and that he was damaged by the co-op board's failure to address his complaints. The insurer maintained that it was not required to defend the restaurant on the ground that plaintiff’s allegations fell within the pollution exclusion, which excluded coverage for "'property damage' . . . arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time . . . [a]t or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured." The policy, in turn, defined "Pollutants" as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapors, soot, fumes, acids, alkalis, chemicals and waste," with "[w]aste includ[ing] materials to be recycled, reconditioned or reclaimed."
The insurer further contended that that district court misapplied the "common speech" and "reasonable expectations" doctrines on the ground that "the term 'fumes' contained in the Policy's definition of 'Pollutant' is commonly defined as odorous." The court of appeals, however, noted that there is no dispute that the term "odors" was not included in the policy's definitions of "pollutants," and the term "fumes" was undefined. Moreover, the definitional list of "pollutants" set forth in the policy particularized "irritant or contaminant" by reference to "smoke, vapors, soot, fumes, acids, alkalis, chemicals and waste," terms that connote traditional forms of environmental or industrial pollutants or contaminants. Lastly, the court discounted the insurer’s argument that the New York City Administrative Code’s definition of air contaminant was applicable in this setting or was controlling in the interpretation of pollution exclusion clauses. As such, the court affirmed the district court ruling holding that the insurer did not meet its burden showing the odors constituted “pollution.”
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