NY’s Second Dept. Finds Asbestos and Pollution Exclusions Ambiguous.

In the case of Great American Restoration v. Scottsdale Insurance, NY’s Second Department was faced with the question of whether a CGL policy’s asbestos and pollution exclusions barred coverage in a situation in which Great American’s clean-up of a flood caused asbestos to be dispersed around the building it was hired to clean — http://www.loislaw.com/advsrny/flwhitview.htp?lwhitid=9986753. The asbestos exclusion provided that coverage did not apply to “bodily injury” or “property damage” arising out of the “inhal[ation]” or “prolonged physical exposure to” asbestos, the “use” of asbestos in construction, the “removal” of asbestos from products or structures, or the “manufacture, sale, transportation, storage, or disposal” of asbestos or products containing asbestos. The pollution exclusion stated that coverage does not apply to “[b]odily injury’ or property damage’ arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants.'” “Pollutants” were defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” In respect of the asbestos exclusion, the Second Department held that the exclusion did not apply because the exclusion did not make clear that coverage would not attach for accidental release or dispersal of asbestos. In respect of the pollution exclusion, the Second Department held that since asbestos was not enumerated as a pollutant, and in light of the specific asbestos exclusion, asbestos was not a pollutant for purposes of the policy. Scottsdale was thus mandated to defend and indemnify Great American.

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