News & Insights

General Liability Insurer Has Duty To Defend Odor Claim

A New York Appellate Court has ruled a hazardous materials exclusion did not relieve an insurer of its obligation to defend a recycling plant operator from claims the Plant is spreading a foul odor.  Hillcrest Coatings, Inc. v. Colony Ins. Co., 2017 NY App. Div. LEXIS 4519 (NY 4th Dept. June 9, 2017).  The five-judge panel partially upheld the lower court decision finding the insurer had a duty to defend because the source of the odor behind the underlying suit against Hillcrest Coatings is not necessarily hazardous materials. 

Hillcrest operated a glass and paper recycling facility in New York.  Nearby residents filed suit against Hillcrest complaining it operated its facility in a negligent fashion by allowing hazardous materials and other substances to be discharged into areas where plaintiffs worked and resided.  Plaintiffs also alleged the operation of the Hillcrest facility created a pervasive foul odor. 

Hillcrest sought coverage under its general liability policy.  The policy contained a hazardous materials exclusion, which barred coverage for bodily injury or property damage occurring as a result of the release or escape of “hazardous materials.”  Under the policy, “hazardous materials” were defined as pollutants which, in turn, were defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.  Waste includes materials to be recycled, reconditioned or recleaned.”

The insurer maintained at summary judgment that its policy’s hazardous materials exclusion barred coverage for the claims related to foul odors.  The trial court denied the motion and the New York Appellate Court affirmed, stating the insurer failed to prove the hazardous material exception precludes coverage.  The Appellate Court noted foul odors are not always caused by the discharge of hazardous waste.  Because a reasonable possibility of coverage existed, the Court held the insurer’s motion for summary judgment was properly denied.

The Appellate Court did not state whether the insurer had a duty to indemnify for the odor claims Plaintiffs alleged were cause by the discharge of hazardous waste.  Rather, the Appellate Court’s decision reaffirmed that in New York, the duty to defend is “exceedingly broad” and exists where there is a “reasonable possibility of coverage.”