In some jurisdictions, an environmental claim under a liability policy with a “sudden and accidental” pollution exclusion has the same prospect of success as a due process claim under the strict scrutiny standard — strict in theory, fatal in practice. In Massachusetts, however, sudden and accidental pollution exclusions have sometimes been less fatal, as evidenced by the recent decision in Narragansett Electric Company v. American Home Assurance Company. In that case, a New York court found Massachusetts law to require an insurer to defend an environmental claim even though the policy contained a sudden and accidental pollution exclusion. The claim had been brought by the Commonwealth of Massachusetts in 1987 when hazardous wastes were discovered during excavation of a property for residential development. The Commonwealth brought the claim against a utility company that was the successor to a manufactured gas operation that had purposely disposed of waste at the site over many decades. Upon being sued by the Commonwealth, the successor company sought coverage under its then current liability policy, which contained a sudden and accidental pollution exclusion.
The insurer denied coverage on the ground that the Commonwealth’s claims involved quintessentially non-sudden and non-accidental pollution. The court, however, concluded otherwise, adverting to Massachusetts cases that had found there could be coverage even where there had been intentionally deposited hazardous substances, provided that the release resulted from sudden and accidental events outside the ordinary business operations at the site. Closely examining the allegations in the underlying complaint, the court found that “the residential excavation did not occur as part of the site’s ordinary operations or [the manufactured gas company's] routine business practices.” Of special significance, the court noted that the underlying complaint alleged that when one of the waste products, ferric ferrocyanide, “comes into contact with air, sunlight and/or and acidic environment, toxic hydrogen cyanide gases are formed.” In light of the allegation that excavation at the site had suddenly and accidentally dislodged the long buried manufactured gas waste and caused a chemical reaction that released a newly formed hazardous substance, the court concluded the pollution exclusion did not extinguish the insurer’s duty to defend.
As the Narragansett case indicates,the specific allegations in the underlying complaint matter and may be sufficient to establish a duty to defend even in the face of a sudden and accidental pollution exclusion.