Appellate Division Holds Policy Pollution And Faulty Workmanship Exclusions Preclude Coverage For Silica Dust Claim
The Appellate Division, Third Department, recently considered a claim by Broome County for damage to its building arising from construction work which caused silica dust to migrate up an elevator shaft and disperse into all the upper floors of the building. Broome County v Travelers Indemnity Company, et al., 2015 NY Slip Op 01697 (3rd Dep’t Feb. 26, 2015).
Plaintiff conceded that the loss resulted from the absence of adequate protective barriers to prevent construction dust from infiltrating the elevator shaft and building. Travelers disclaimed coverage based upon the pollution exclusion and faulty workmanship exclusion in its policy. Plaintiff commenced suit and defendant moved for summary judgment dismissing the complaint. Plaintiff cross-moved for summary judgment.
Supreme Court found that the pollution exclusion was not applicable, and that there were issues of fact as to whether the policy’s faulty workmanship exclusion barred coverage. Both parties appealed. The Appellate Division found that both policy exclusions applied to preclude coverage, and granted Travelers’ motion to dismiss the complaint.
The pollution exclusion provided that there was no coverage for 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, alkalies, chemicals, waste and any unhealthy or hazardous building materials (including, but not limited to, asbestos and lead products or materials containing lead).
The Court found that the unrebutted evidence established that silica dust can cause disease and respiratory problems, and qualified as an irritant or contaminant within the policy definition.
The Court also addressed the faulty workmanship exclusion. The policy provided that Travelers “will not pay for loss or damage caused by or resulting from…[f]aulty, inadequate or defective…(2)…workmanship, repair, construction, renovation [or] remodeling.”
The Court rejected plaintiff’s argument that this exclusion was ambiguous because faulty workmanship could relate to a flawed quality of a finished product, or to a flawed process in the construction work. The Court noted:
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***. 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.
Finally, the Court rejected plaintiff’s assertion that an ensuing loss exception to the faulty workmanship exclusion applied.
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***. 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***.
The Court’s decision is a good example of the application of the pollution and faulty workmanship exclusions to a loss where there is no ensuing covered loss.
Should you have questions regarding the information presented in this alert, please contact Anthony J. Piazza, Chair of the firm’s Insurance Coverage & Regulation Practice Area, at (585) 295-4420 or firstname.lastname@example.org.