Our New York readers may be interested in the Appellate Division’s ruling today on late notice disclaimers. New York’s Appellate Division ruled in AIU Ins. Co. v. Veras, ___ A.D.3d ___, Slip Op. at 136 (1st Dept. Apr. 24, 2012), that an insurer’s late notice disclaimer was untimely under N.Y. Ins. L. 3420(d) because the insurer had waited 15 days to send out a disclaimer after completing its late notice investigation. Notably, the insurer’s investigation had been brief, lasting less than two weeks after the insurer received notice of a car accident that had occurred nearly four years before. Nonetheless, the Appellate Division held that the trial court properly applied Section 3420(d) in ruling that the disclaimer was untimely.
Archive for April, 2012
What’s All the Stink About? Pennsylvania Federal Court Holds That Pollution Exclusion Applies to Pig Farm OdorsTuesday, April 17th, 2012
By Stevi Raab
In Travelers Prop. Cas. Co. of America v. Chubb Custom Ins. Co., 2012 U.S. Dist. LEXIS 44756 (E.D. Pa. Mar. 30, 2012), the U.S. District Court for the Eastern District of Pennsylvania, applying Pennsylvania law, considered whether noxious odors emanating from a pig farm were pollutants as defined by the general liability policies’ pollution exclusions. The court held that the policies’ pollution exclusions precluded coverage where the insureds sought a defense for an action alleging physical harm and property damage caused by hazardous substances and foul-smelling odors emanating from the insureds’ pig farm.
The Clemens Family Corp. and its subsidiary Country View Family Farms LLC (collectively, the Clemens) owned a commercial pig farm in Indiana. The facility collected pig excrement into a large cement pit that drained through a dragline, which deposited the waste onto nearby fields for use as fertilizer. Several neighbors sued the Clemens alleging that the pig farm produced “harmful and ill-smelling odors, hazardous substances and contaminated wastewater” that escaped onto neighboring properties. The complaint alleged that the “offensive and noxious odors” impaired the plaintiffs’ use and enjoyment of their properties and caused nausea, vomiting, headaches, respiratory problems, irritation, and aggravation of existing medical conditions.
Travelers Property Casualty Company of America and Zurich American Insurance Co., which issued primary general liability policies to the Clemens, denied coverage based on their policies’ respective pollution exclusions, which precluded coverage for damages by the insured’s “actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants.’” Both policies defined “pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”
Addressing the issue of whether the manure odors fell within the policies’ definition of pollutants, the court cited Pennsylvania cases applying standard dictionary definitions to the term “pollutant.” The court also looked to Pennsylvania cases holding that fumes are pollutants for the purposes of pollution exclusions. Relying on these cases, the court held that:
[N]oxious odors produced by pig excrement (or waste) that cause bodily injury and property damage
appear to fit squarely within the definition of pollutant under the policies. The fact that pig waste
is spread over fields as fertilizer is of no moment, as “waste” includes materials left over from a
production operation, and the policies’ definition of pollutant expressly includes waste that is to
In reaching its holding, the court considered the Clemens’ argument that “because odors can be unpleasant or sweet, harmful or innocuous, the allegation of foul odors is too ambiguous to be construed as a pollutant barring coverage.” The court, however, rejected such a bright line rule and instead held that the nature of the alleged odors, in relation to the alleged harm, determines whether it is a pollutant. Thus, the court explained that the noxious odors unambiguously fell within the definition of pollutant because the pig farm created pollution resulting in physical harm. The court also rejected the Clemens’ argument that farm odors cannot be pollutants in a rural area, noting that a pollutant does not cease being a pollutant simply because it is common to an area.
In Farmers Auto. Ins. Ass’n v. Burton, et. al, 2012 WL 982881 (Ill. App. Ct., Mar. 1, 2012), the Illinois Fourth District Appellate Court held that a policyholder, who waited 11 months after being arrested to notify its insurer of an accident, failed to provide reasonable notice under the policy.
In May 2008, Timothy Buckley was killed in a hit-and-run automobile accident. More than a year later, in August 2009, Rodney Burton was arrested in connection with that hit and run. He was charged a few days later and, in June 2010, found guilty of leaving the scene of an accident and failing to report it. Around June 2, 2010, Burton was served with a copy of a civil lawsuit, filed by Buckley’s estate. Burton notified his automobile liability insurer, Farmers Automobile Insurance Association, of the lawsuit on July 8, 2010. Subsequently, Farmers filed a declaratory judgment action, contending that it did not have a duty to defend Burton in the civil action because he failed to promptly notify Farmers of the accident. The trial court agreed and granted Farmers’ summary judgment motion.
On appeal, Burton argued that he was innocent; his conviction was a manifest injustice; and he was not obligated to notify Farmers of the accident until he was served with the civil lawsuit. The appellate court, however, disagreed. It stated that the fear of criminal prosecution does not excuse one’s obligation to notify its insurer of a crime. Further, under Illinois law, notice provisions in policies are conditions precedent to an insurer’s contractual duties. The court stated that when Burton was arrested for the hit and run, he should have known that he could be found legally responsible for Buckley’s death. As such, Burton had to promptly notify Farmers of the accident after he was arrested for the hit and run. Because he failed to do so, the appellate court affirmed the trial court’s order granting Farmers’ summary judgment motion.