Metal finishers who were tenants of a portion of a large building for more than five and one-half years generated industrial waste which was released into the dry wells and cesspool system on the premises. They ignored directives of the county health department and state environmental conservation department to remove the contaminated material and eventually abandoned the premises, leaving sludge on the walls and floors and large drums filled with it in addition to the subsurface contamination.

The property owner, when notified by the governmental agencies that he was potentially responsible for cleanup and remediation of the site, hired a pollution control firm to clean up the site at considerable expense on his part and to make recommendations for remedial action. One of his insurers, upon being presented a claim, moved for summary judgment asserting that the damages and losses sustained by the property owner were not covered under its general liability policy provisions.

The insured contended that the insurer was obligated to reimburse him for loss of rents and losses to building and contents sustained and to defend him with regard to environmental claims for damages "caused by the storage and release of toxic materials at and upon the premises." The insurer responded that the loss alleged by the insured was not property damage to which the insurance applied and that coverage was precluded by a pollution exclusion clause reading, in pertinent part, as follows:

"This insurance does not apply: (1) to. . . .property damage arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants. . . .at or from premises owned, rented or occupied by the named insured. . . .at or from any site or location used by or for the named insured or others for the handling, storage, disposal, processing or treatment of waste; (2) to any loss, cost or expense arising out of any governmental directions or request that the named insured test for, monitor, clean up, remove, contain, treat, detoxify or neutralize pollutants. . . ."

The court found that there was no record of the exclusion under review having been interpreted by a New York court, but that courts in others states had found no ambiguity in the identical exclusion. It noted that the original pollution exclusion in general liability policies had made an exception for sudden and accidental discharge or release but that the exception language was omitted from current forms, including the one used here. This indicated that "damage to property from all discharges or releases of pollutants is excluded."

The court concluded that it was irrelevant that the former tenant, rather than the insured property owner, was the active polluter. The pollution exclusion made clear that "this insurance does not apply to pollution damage to premises owned by the insured." It further noted that it is fundamental, under property damage liability insurance, that the insurer is obligated only with respect to property of others.

Summary judgment was granted to the insurance company. The damages and losses sustained by the insured were found not covered by the policy.

(BUDOFSKY ET UX., Plaintiffs v. HARTFORD INS. CO. ET AL., Defendants. NY Supreme Court, Suffolk County, Special Term. April 25, 1990. 556 N.Y.S. 2d 438. CCH 1991 Fire and Casualty Cases, Paragraph 2783.)