Maska U.S., Inc. v. Kansa Gen. Ins. Co.
Citation: 30 ELR 20242
No. Nos. 98-9385(L), -9387(C), 198 F.3d 74/49 ERC 1717/(2d Cir., 11/30/1999)
The court reverses a district court decision and holds that, under Vermont law, an insurance policy's pollution exclusion precludes the insurer's duty to indemnify a clothing manufacturer for liability and defense costs incurred in response to claims arising from contamination at the manufacturer's facility. The court first holds that the manufacturer waived its claim that the insurer's failure to file its policy forms with the state insurance agency invalidates the policy. The manufacturer specifically informed the district court in its summary judgment papers that it was not contending that the insurer should have submitted its policy forms to the state insurance agency for approval. The court next holds that the policy's pollution exclusion is enforceable and does not violate Vermont public policy. Although the state insurance agency regularly disapproved of similar pollution exclusions in policies filed for approval, there is no explicit statutory or common-law directive against the exclusions. The Vermont Administrative Procedure Act (APA) provides that an agency statement of general applicability that implements, interprets, or prescribes law or policy has no legal effect unless the agency follows the procedures for adoption of a rule. Because the state insurance agency did not follow APA rulemaking procedures, its policy of disfavoring pollution exclusions cannot be treated as a rule and has no legal effect on the insurance policy. The court further holds that the manufacturer's excess insurance policy does not provide coverage for the claims. The excess insurance policy covers environmental liability claims, but only if the claims are first made against the insured and reported to the insurer during the policy period. Here, the contamination was not discovered until three years after the policy had expired.
The full text of this opinion is available from ELR (20 pp., ELR Order No. L-148).
Counsel for Plaintiff
John E. Failla
Morgan, Lewis & Bockius
101 Park Ave., New York NY 10178
Counsel for Defendants
William H. Quinn
Pierson, Wadhams, Quinn & Yates
253 S. Union St., Burlington VT 05401