State of New York
Supreme Court, Appellate Division
Third Judicial Department
Decided and Entered: February 26, 2015 518993
________________________________
BROOME COUNTY,
Respondent-
Appellant,
v MEMORANDUM AND ORDER
THE TRAVELERS INDEMNITY
COMPANY et al.,
Appellants-
Respondents.
________________________________
Calendar Date: January 12, 2015
Before: McCarthy, J.P., Lynch, Devine and Clark, JJ.
__________
Robert G. Behnke, County Attorney, Binghamton, for
appellants-respondents.
Robinson & Cole, LLP, Hartford, Connecticut (Gregory P.
Varga of counsel), for respondent-appellant.
__________
McCarthy, J.P.
Cross appeals from an order of the Supreme Court (Schaewe,
J.), entered September 30, 2013 in Broome County, which, among
other things, denied defendants' motion for summary judgment
dismissing the complaint.
Defendants1 issued a first-party insurance policy to
1
Defendant The Travelers Indemnity Company actually issued
the policy, while defendant The Travelers Companies, Inc. is a
parent corporation. For purposes of this appeal, we will treat
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plaintiff covering certain of plaintiff's property, including a
building in a government complex containing real property owned
by plaintiff, the State and the City of Binghamton. During
construction on a parking garage underneath a building that
plaintiff owns, and during the policy's coverage period,
construction work caused silica dust to migrate up an elevator
shaft and disperse into all of the floors in plaintiff's
building. After defendants disclaimed coverage for this
incident, plaintiff initiated this action alleging that the
property damage resulting from the spread of silica dust was a
loss covered under the policy. Defendants moved for summary
judgment dismissing the complaint and plaintiff cross-moved for
summary judgment establishing coverage as a matter of law.
Supreme Court found that a pollution exclusion in the policy did
not bar coverage, but that there were issues of fact as to
whether a faulty workmanship exclusion barred coverage. Thus,
the court denied both parties' motions. Defendants appeal and
plaintiff cross-appeals.
"[A]n insurer seeking to invoke a policy exclusion 'must
establish that the exclusion is stated in clear and unmistakable
language, is subject to no other reasonable interpretation, and
applies in the particular case'" (Villanueva v Preferred Mut.
Ins. Co., 48 AD3d 1015, 1016 [2008], quoting Continental Cas. Co.
v Rapid-American Corp., 80 NY2d 640, 652 [1993]; accord Kramarik
v Travelers, 25 AD3d 960, 962 [2006]). To determine whether a
policy provision is ambiguous, courts are guided by "the
reasonable expectations of the average insured upon reading the
policy" (Matter of Mostow v State Farm Ins. Cos., 88 NY2d 321,
326-327 [1996]; accord Villanueva v Preferred Mut. Ins. Co., 48
AD3d at 1016). The meaning of any part of such a policy must be
determined upon consideration of the policy as a whole (see
Roebuck v State Farm Mut. Auto. Ins. Co., 80 AD3d 1126, 1128
[2011]). In addition, "[a]n insurance contract should not be
read so that some provisions are rendered meaningless" (County of
Columbia v Continental Ins. Co., 83 NY2d 618, 628 [1994]; see
generally Vectron Intl., Inc. v Corning Oak Holding, Inc., 106
AD3d 1164, 1167 [2013]). Upon applying these rules of
them as united in interest.
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construction, if "an insurance policy's meaning is not clear or
is subject to different reasonable interpretations," such an
ambiguity must be resolved in favor of the insured (Pepper v
Allstate Ins. Co., 20 AD3d 633, 635 [2005]; accord White v
Rhodes, 34 AD3d 951, 952 [2006]). Because we find that both
policy exclusions apply to bar coverage here, we grant
defendants' motion and dismiss the complaint.
Defendants were entitled to summary judgment based on the
pollution exclusion clause. Pursuant to that exclusion in the
policy, defendants will not cover loss resulting from the
"[d]ischarge, dispersal, seepage, migration, release or escape of
'pollutants.'" As defined in the policy, "'[p]ollutants' means
any solid, liquid, gaseous or thermal irritant or contaminant,
including smoke, vapor, soot, fumes, acids, alkalis, chemicals,
waste and any unhealthy or hazardous building materials
(including but not limited to asbestos and lead products or
materials containing lead)." The record contains unrebutted
evidence that silica dust can cause lung disease and respiratory
problems, placing such dust within the policy definition of a
pollutant as "unhealthy or hazardous building material[]," as
well as a "solid . . . irritant or contaminant" (see American
Heritage Realty Partnership v LaVoy, 209 AD2d 749, 750 [1994]).
We disagree with plaintiff's argument that Belt Painting
Corp. v TIG Ins. Co. (100 NY2d 377 [2003]) requires the opposite
result. In that case, the Court of Appeals interpreted the
provisions in a commercial general liability policy – third-party
insurance – and found that injury caused by "'discharge,
dispersal, seepage, migration, release or escape'" did not
unambiguously apply "to ordinary paint or solvent fumes that
drifted a short distance from the area of the insured's intended
use and allegedly caused inhalation injuries to a bystander" (id.
at 387-388). The Court there relied on the fact that words such
as discharge and dispersal – the policy's terms describing the
method of pollution – were "terms of art in environmental law"
referring to damage "caused by disposal or containment of
hazardous waste" (id. at 387 [internal quotation marks and
citation omitted]). Here, however, if the words "[d]ischarge,
dispersal, seepage, migration, release or escape" are read as not
intended to describe short migratory events where the relevant
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contaminant remains on the plaintiff's property and does damage
to it, then the exclusion has no significance at all in this
first-party policy, especially to the portion of the definition
of pollutants (not found in the policy at issue in Belt Painting
Corp.) addressing "building materials" including asbestos and
lead paint. Applying the only reasonable reading that gives the
pollution exclusion here a meaning under a first-party insurance
policy, that exclusion precludes coverage for the loss at issue
(see Space v Farm Family Mut. Ins. Co., 235 AD2d 797, 798-799
[1997]; American Heritage Realty Partnership v LaVoy, 209 AD2d at
750). Thus, defendants were entitled to summary judgment
dismissing the complaint on the basis of that exclusion.
Defendants are also entitled to summary judgment dismissing
the complaint based on the faulty workmanship clause. The policy
exclusion for faulty workmanship states that defendants "will not
pay for loss or damage caused by or resulting from . . .
[f]aulty, inadequate or defective . . . (2) . . . workmanship,
repair, construction, renovation [or] remodeling." Plaintiff
conceded, in its response to interrogatories, that the loss here
resulted from the absence of adequate protective barriers to
prevent construction dust from infiltrating the elevator shaft
and the building. The unrebutted record evidence establishes
that a flawed process on the part of the contractors led to the
loss at issue. Despite this proof, plaintiff argues that this
exclusion is ambiguous, and must therefore be construed in
plaintiff's favor to permit coverage, because faulty workmanship
can relate to "the flawed quality of a finished product" or to a
"flawed process" in the construction work.
While dictionaries include these two possible definitions
of "workmanship" (see e.g. Random House Webster's Unabridged
Dictionary 2189 [2d ed 1998]), plaintiff's argument considers the
term workmanship out of context to create an ambiguity.
Considering that term in context leads to the reasonable
conclusion that the relevant clause unambiguously excludes losses
resulting from faulty workmanship under both definitions.
Subdivision (2) of the exclusion clause, quoted above, is
sandwiched between subdivisions that preclude coverage for
"[f]aulty, inadequate or defective (1) [p]lanning, zoning,
development, surveying, siting . . . [or] (3) [m]aterials used in
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repair, construction, renovation or remodeling; or (4)
[m]aintenance." Subdivision (1) clearly relates to the process,
as there is no finished product created on real property merely
through planning, zoning or the other listed activities.
Similarly, subdivision (4) relates to process because there is
generally no cognizable finished product as the result of
maintenance. On the other hand, subdivision (3), dealing with
materials, relates to the resulting finished product rather than
the process. Reading all of these subdivisions together and
considering the clause as a whole, including its use of the
disjunctive "or," the average insured would reasonably expect the
exclusion to apply to faulty workmanship whether it was caused by
a flawed process or measured by the flawed quality of the
finished product (see Wider v Heritage Maintenance, Inc., 14 Misc
3d 963, 974-975 [2007]; Schultz v Erie Ins. Group, 754 NE2d 971,
976-977 [Ind Ct App 2001]; see also Village of Potsdam v Home
Indem. Co., 52 AD2d 278, 280 [1976]; compare Maxwell v State Farm
Mut. Auto. Ins. Co., 92 AD2d 1049, 1050 [1983]; but see Allstate
Ins. Co. v Smith, 929 F2d 447, 449-450 [9th Cir 1991]). Contrary
to plaintiff's argument that the clause is ambiguous because a
term within it can be read in two different ways, an ambiguity is
not created if the policy is written to exclude coverage under
both definitions.
Even if we accept plaintiff's legal argument that this
exclusion should only apply where the contractors performing the
construction work – and who were therefore responsible for the
faulty workmanship that resulted in the asserted loss – were
agents of the insured, we disagree with plaintiff's factual
assertion that the workers here were not its agents. Plaintiff
entered into a written agreement making the State its agent for
purposes of contracting out the construction work on the parking
garage, and the State hired the construction contractors pursuant
to that agreement. Hence, the workers were plaintiff's agents.
Additionally, the ensuing loss exception does not apply
here. "Where a property insurance policy contains an exclusion
with an exception for ensuing loss, courts have sought to assure
that the exception does not supersede the exclusion by
disallowing coverage for ensuing loss directly related to the
original excluded risk" (Narob Dev. Corp. v Insurance Co. of N.
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Am., 219 AD2d 454, 454 [1995], lv denied 87 NY2d 804 [1995]
[citations omitted]). The faulty workmanship here was the
failure to erect adequate dust barriers, and the resulting loss
came from the spread of dust. Thus, the loss was directly
related to the original excluded risk (see id.). Inasmuch as no
ambiguity exists in the faulty workmanship exclusion, plaintiff
has conceded that the loss was caused by a flawed construction
process and no exception applies, the faulty workmanship clause
precludes coverage for the loss at issue. Hence, defendants are
entitled to dismissal of the complaint.
Lynch, Devine and Clark, JJ., concur.
ORDERED that the order is modified, on the law, with costs
to defendants, by reversing so much thereof as denied defendants'
motion; motion granted, summary judgment awarded to defendants
and complaint dismissed; and, as so modified, affirmed.
ENTER:
Robert D. Mayberger
Clerk of the Court