(Article from Insurance Law Alert, May 2026)
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Holding
The Second Circuit affirmed a district court ruling that insurers owed a duty to defend a PFAS-related environmental contamination claim asserted against an airport operator, holding that the claim potentially fell within an exception to the policies’ pollution exclusion for contamination resulting from aircraft crashes or emergencies. The court further held the policies’ “Combined Claims” provision did not permit the insurer to subdivide a single regulatory environmental claim into covered and uncovered portions based on different alleged causes of contamination. Town of Harrietstown v. Westchester Fire Ins. Co., 2026 U.S. App. LEXIS 12834 (2d Cir. May 4, 2026).
Background
The Town of Harrietstown (the “Town”) owns and operates the Adirondack Regional Airport in upstate New York. The insurers issued a series of Airport Owners and Operators General Liability policies covering the period from 2000 through 2021. The policies contained a broad pollution exclusion barring coverage for “claims directly or indirectly occasioned by, happening through or in consequence of . . . pollution and contamination of any kind whatsoever,” unless the pollution was “caused by or resulting in a crash fire explosion or collision or a recorded in-flight emergency causing abnormal aircraft operation.” The policies also contained a “Combined Claims” provision, stating that the insurers would not be required to defend “a claim or claims covered by the policy when combined with any claims excluded” by the pollution exclusion, but would reimburse the covered portions of defense costs and damages allocable to covered claims.
The claim arose after the New York State Department of Environmental Conservation (“NYSDEC”) detected PFAS contamination at the airport. The PFAS contamination was allegedly linked to the airport’s use and storage of aqueous film-forming foam (“AFFF”), which had been used both in training exercises and in connection with aircraft crashes and emergency incidents. In November 2020, NYSDEC issued a potentially responsible party (“PRP”) letter asserting that the Town could be responsible for investigation and remediation costs associated with the contamination.
The insurers investigated the claim and sought information concerning the airport’s historical use of AFFF, including whether contamination arose from crash-related events or from excluded routine training and storage activities. The insurers initially agreed to defend under a reservation of rights. In 2024, however, they withdrew their defense, asserting that the NYSDEC matter involved pollution and contamination subject to the pollution exclusion. The insurers contended that, because the contamination allegedly resulted from both covered and uncovered causes, the matter constituted a “Combined Claim.” Under the insurers’ interpretation, they had no duty to defend the overall claim and were obligated only to reimburse those defense costs and remediation expenses ultimately proven to be attributable to covered crash-related contamination.
The Town filed suit seeking a declaration that the insurers owed a duty to defend. As we reported in our November 2025 PFAS Update, the district court granted summary judgment in the Town’s favor on the duty-to-defend issue. The insurers appealed.
Decision
The Second Circuit affirmed. The court focused on whether the policies’ “Combined Claims” provision permitted a single environmental claim to be allocated into covered and uncovered portions based on differing contamination sources.
The insurers argued that the provision implemented a reimbursement framework under which environmental cleanup demands involving both covered and uncovered pollution sources could be treated as “Combined Claims,” thereby limiting the insurers’ reimbursement obligations to covered amounts rather than a full defense obligation.
The court concluded that the policies’ language did not support that interpretation. Looking to dictionary definitions and the structure of the policies’ wording, the court held that “Combined Claims” referred to the joinder of distinct covered and uncovered claims—not a single claim allegedly arising from multiple alleged causes. According to the court, the NYSDEC PRP letter asserted a single claim seeking remediation of contamination at the airport, even if that contamination may have resulted from both covered emergency uses and uncovered routine uses of AFFF.
The court further held that the insurers owed a duty to defend because there was at least a reasonable possibility that some portion of the contamination resulted from crash-related or emergency uses of AFFF, which potentially fell within the exception to the pollution exclusion. The court therefore concluded that the insurers were obligated to defend the Town unless and until they could establish with certainty that the claim fell entirely outside of coverage.
Comments
The decision highlights a common issue in environmental coverage disputes: regulators often assert broad remediation demands involving multiple potential contamination sources, some covered and others uncovered, without allocating among them. The insurers sought to use the “Combined Claims” provision to allocate defense and remediation obligations between covered and uncovered sources of contamination. The Second Circuit rejected that approach based on specific policy wording, holding that the provision applied only to separate covered and uncovered “claims,” not to a single claim involving multiple alleged causes of contamination.