The court distinguished the Belt Painting case, which held that a bodily injury liability claim resulting from inhalation of paint fumes did not arise out of the discharge of pollutants

The Third Department of the Appellate Division held that both a pollution exclusion and a faulty workmanship exclusion applied to exclude coverage on a first-party policy that included coverage for a building in a government complex. During construction work on a parking garage beneath the building, silica dust migrated up an elevator shaft and dispersed into all floors of the building. The insurer denied coverage, and coverage litigation resulted. On cross motions for summary judgment, the trial court had ruled that the pollution exclusion did not apply and issues of fact existed regarding application of the faulty workmanship exclusion. The Appellate Division reversed and modified, holding that both exclusions applied as a matter of law.

The most significant part of the court’s reasoning is that it distinguished Belt Painting v. TIG Ins. Co., 100 N.Y.2d 377 (2003), which held that a bodily injury liability claim resulting from inhalation of paint fumes that had drifted a short distance from a work area did not arise out of a “discharge, dispersal, seepage, migration, release or escape” of pollutants. The court held Belt Painting to be distinguishable because the case before it arose under a first-party policy, not a liability policy. The court’s reasoning was influenced by the policy’s definition of “pollutant,” which included “unhealthy or hazardous building materials,” language that was not present in Belt Painting and is not present in the standard form that applies to this claim. Nevertheless, the court’s opinion makes it more likely that a pollution exclusion will be held to apply to indoor pollution in a first-party case in New York.

With regard to the faulty workmanship exclusion, the court rejected the argument that the exclusion is ambiguous because it could apply to either a faulty process or a faulty product. The court held that the exclusion applies to both and that the ensuing loss exception did not apply because the loss directly related to the original excluded risk.

_{Case Law Alerts, 3rd Quarter, July 2015}

_{Case Law Alerts is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2015 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.}