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Johnstown, City of v. Bankers Standard Ins. Co.

Citation: 19 ELR 21132
No. No. 88-9051, 877 F.2d 1146/29 ERC 2011/(2d Cir., 06/22/1989)

The court holds that insurers have a duty to defend a city in a Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) cost recovery action brought by the state for contamination at the city's landfill, even though the city knew of the contamination. The court first holds that the insurance policies' exclusions for expected or intended damages by the insured are not applicable. New York courts generally interpret the expected or intended provisions to exclude only losses or damages that are not accidental, and, the court holds, the insurers have failed to show that the environmental damages alleged in the underlying CERCLA action are not accidental. There is no evidence that the city intended the environmental contamination or that the city knew that environmental damage would be a direct and immediate result of its actions permitting hazardous waste disposal at its landfill. That the city was informed by the Environmental Protection Agency and the New York Department of Environmental Conservation of groundwater contamination near the landfill is insufficient to show, as a matter of law, that the damages ultimately incurred were expected or intended. The court also holds that the city's knowledge of the risk of contamination does not preclude coverage under the policies as a "known risk." There are no charges that the city engaged in fraudulent misrepresentation or concealment of material facts. There is no support in New York law for the proposition that a risk, once known, is uninsurable, and no basis for concluding that New York courts would embrace such a theory.

[The district court's decision on the merits is published at 19 ELR 20578.]

Counsel for Plaintiff-Appellant
James B. Tuttle
Dreyer, Kinsella, Boyajian & Tuttle
75 Columbia St., Albany NY 12210
(518) 463-7784

Counsel for Defendant-Appellee
Paul R. Koepff
Mudge, Rose, Guthrie, Alexander & Ferdon
180 Maiden Ln., New York NY 10038
(212) 510-7000

Pierce (before Feinberg and Motley, JJ.):