Barney Greengrass, Inc. v. Lumbermens Mut. Cas. Co.
(2nd Cir., US Ct. Apps., decided 11/4/2011)
Noisome odors emanating from an insured's delicatessen do not constitute "pollutants" within the meaning of the absolute pollution exclusion of a commercial general liability policy. Affirming the District Court's order, so holds the United States Court of Appeals for the Second Circuit in this decision.
Plaintiff operated a century-old delicatessen, famously known as The Sturgeon King, on the Upper West Side of Manhattan. A man who lived in an apartment upstairs from the restaurant sued the building owner, a co-op, which in turned impleaded the tenant that controlled the delicatessen, which in turn impleaded the deli, Lumbermens' insured. The upstairs tenant claimed that overpowering food odors that emanated from a commercial kitchen exhaust vent underneath one his windows permeated his living room and rendered it uninhabitable. Plaintiff tendered the fourth-party complaint to Lumbermens for defense and indemnification coverage, but Lumbermens denied coverage based on the policy's pollution exclusion, which negated coverage for
The policy 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."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.
Plaintiff commenced this declaratory judgment action for coverage and moved for summary judgment. In granting summary judgment to the insured plaintiff, the United States District Court for the Southern District of New York noted that "while the quality of plaintiff's restaurant smells may be in the nose of the beholder, defendant's 'pollution' argument -- as addressed to the odors here -- is malodorous to this Court." Lumbermens appealed that decision to the United States Second Circuit Court of Appeals.
In AFFIRMING the judgment appealed from, the Second Circuit rejected Lumbermens' argument that the District Court judge misapplied the “common speech” and “reasonable expectations” doctrines in construing the pollution exclusion against Lumbermens:
Lumbermens also argued that since under the New York City Administrative Code, restaurant odors in sufficiently detectable quantities could constitute “air contaminants” subject to regulation, such odors could also constitute a "pollutant" within the meaning of the policy's pollution exclusion. In rejecting that argument, the court ruled:As an initial matter, the complaint in the underlying action does not allege that the plaintiff, Theodore Bohn, was damaged by a “pollutant” or that the odors emitted from BG’s [Barney Greengrass'] exhaust vent constituted “pollution.” Instead, it alleges that Bohn “stopped using [his] living room because the odors permeating that room had become so overpowering as to make the room entirely unusable,” J.A. 135, and that he was damaged by the co-op board’s failure to address his complaints.
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The district court reasoned that “[t]o read ‘pollution’ as encompassing ‘restaurant odors,’ as defendant urges here, would contradict ‘common speech’ and the ‘reasonable expectations of a businessperson,’ who has come to understand standard pollution exclusions as addressing environmental-type harms.” Barney Greengrass, Inc. v. Lumbermens Mut. Cas. Co., No. 09 Civ. 7697 (NRB), 2010 WL 3069560, at *7 (S.D.N.Y. July 27, 2010). On appeal, Lumbermens contends 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.” Def. Br. 21. There is no dispute, however, that the term “odors” is not included in the policy’s definitions of “pollutants,” and the term “fumes” is undefined. Moreover, the definitional list of “pollutants” set forth in the policy particularizes “irritant or contaminant” by reference to “smoke, vapors, soot, fumes, acids, alkalis, chemicals and waste,” App. 95, terms that connote traditional forms of environmental or industrial pollutants or contaminants. Cf. W. Alliance Ins. Co. v. Gill, 426 Mass. 115, 118 (1997) (“The exclusion should not reflexively be applied to accidents arising during the course of normal business activities simply because they involve a ‘discharge, dispersal, release or escape’ of an ‘irritant or contaminant.’”).
The cases upon which Lumbermens relies are easily distinguishable because the “odors” there constitute traditional environmental pollution to which exclusion clauses typically apply. See, e.g., Town of Harrison v. Nat’l Union Fire Ins. Co. of Pittsburgh, 89 N.Y.2d 308, 314, 316 (1996) (pollution exclusion applied to odors from “dumping of waste materials, contaminants or pollutants”); Tri-Mun. Sewer Comm’n v. Cont’l Ins. Co., 636 N.Y.S.2d 856, 857 (2d Dep’t 1996) (pollution exclusion applied to odors from “sewage treatment plant”). In these circumstances, we conclude that Lumbermens cannot meet its burden of showing that the restaurant odors constitute “pollution” within the meaning of the exclusion, as any ambiguities must be construed against the insurer. See, e.g., Stoney Run Co. v. Prudential-LMI Commercial Ins. Co., 47 F.3d
34, 37 (2d Cir. 1995).
This is yet another example in which a court has ruled that the so-called absolute pollution exclusion of a commercial general liability policy applies only to traditional forms of environmental or industrial pollutants or contaminants and instances of traditional environmental pollution.The administrative regulations upon which Lumbermens relies, however, do not pertain in any way to insurance coverage disputes, much less pollution exclusion clauses. Nor does the parties’ dispute here concern administrative liability under the Code. Therefore, Lumbermens’s attempt to apply the principles underlying a New York administrative regulation to the insurance clause here at issue is unavailing.