New Mexico Supreme Court finds “sudden and accidental” exception to pollution exclusion allows coverage of gradual but unexpected and unintended releases

Source: http://www.lexology.com, October 4, 2012
By: Orrick Herrington & Sutcliff LLP

In United Nuclear Corp. v. Allstate Ins. Co., Docket No. 32,939 (N.M. S. Ct., Aug. 23, 2012), New Mexico’s highest court concluded that the “sudden and accidental” exception to the qualified pollution exclusion provides coverage for “unexpected and unintended” releases of pollutants, and does not require that the releases be temporally abrupt. General and excess liability policies issued from the early 1970s through the mid-1980s usually contained this exclusion. The case involved alleged releases of contaminants at tailings impoundments at several uranium mines. Allstate asserted that coverage of the releases was excluded because they were not temporally abrupt. Reversing an intermediate appellate court decision, the court found the term “sudden” ambiguous, in that it could include either abrupt or unexpected releases. The court cited multiple dictionary definitions and the divergence of opinions among other courts as a basis for its opinion that the term was ambiguous. Then the court considered the drafting history of the exclusion as a basis for assessing insurance industry intent. The court concluded that “sudden” should be given the non-temporal interpretation favoring coverage.

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