A Primer on the Pollution Exclusion in New York and the Duty to Defend

In June and July of this year, the New York Court of Appeals and the Second Circuit each rendered a new decision on the proper scope and application of the pollution exclusion under New York law with respect to the duty to defend. In <i>Belt Painting Corp. v. TIG Insurance Co.</i>, 100 N.Y.2d 377 (N.Y. 2003), the New York Court of Appeals held that an absolute pollution exclusion did not unambiguously exclude coverage for a personal injury claim asserting injury based on paint fumes inside an office building. In <i>W.R. Grace &amp; Co. v. Continental Casualty Co.</i>, 332 F.3d 145 (2d Cir. 2003), the Second Circuit held that New York's historical statutory proscription against the insurance of nonsudden, nonaccidental pollution vitiated a policy provision granting coverage for "gradual pollution." The Second Circuit also confirmed in an important choice-of-law ruling that New York courts will not apply the law of various "site states" to a general liability policy; rather, New York courts will apply the single law of the state with the greatest contacts to the dispute. These cases provide further guidance to practitioners regarding (a) the limited scope of the pollution exclusion under New York law to nonenvironmental type claims, (b) the priority given to New York Insurance Law '46(13)-(14) in the face of conflicting policy provisions, and (c) the growing certainty that New York courts will apply the law of a single state to interpret a policy covering multiple risks in various locations.