23 N.Y.3d 583, 2014-04113, KeySpan Gas East Corp. v. Munich Reinsurance America, Inc.

Docket Nº:2014-04113
Citation:23 N.Y.3d 583, 15 N.E.3d 1194, 992 N.Y.S.2d 185
Opinion Judge:ABDUS-SALAAM, J.
Party Name:KeySpan Gas East Corporation, Respondent, v. Munich Reinsurance America, Inc. et al., Appellants No. 110
Attorney:Jonathan D. Hacker, for appellants. Jay T. Smith, for respondent. Environmental Energy Alliance of New York, LLC; Complex Insurance Claims Litigation Association, amici curiae.
Judge Panel:Opinion by Judge Abdus-Salaam. Judges Graffeo, Read, Smith and Pigott concur. Chief Judge Lippman and Judge Rivera took no part. Judges Graffeo, Read, Smith and Pigott concur. Chief Judge Lippman and Judge Rivera took no part.
Case Date:June 10, 2014
Court:New York Court of Appeals
 
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Page 583

23 N.Y.3d 583

15 N.E.3d 1194, 992 N.Y.S.2d 185

KeySpan Gas East Corporation, Respondent,

v.

Munich Reinsurance America, Inc. et al., Appellants

2014-04113

No. 110

Court of Appeals of New York

June 10, 2014

Page 584

[Copyrighted Material Omitted]

Page 585

[Copyrighted Material Omitted]

Page 586

Jonathan D. Hacker, for appellants.

Jay T. Smith, for respondent.

Environmental Energy Alliance of New York, LLC; Complex Insurance Claims Litigation Association, amici curiae.

Opinion by Judge Abdus-Salaam. Judges Graffeo, Read, Smith and Pigott concur. Chief Judge Lippman and Judge Rivera took no part.

OPINION

Page 587

[15 N.E.3d 1195] ABDUS-SALAAM, J.

In this insurance coverage dispute, plaintiff-respondent Keyspan Gas East Corporation seeks a declaration that defendants-appellants [15 N.E.3d 1196] Munich Reinsurance of America, Inc., Century Indemnity Company, and Northern Assurance Company of America have a duty to defend and indemnify Keyspan for liabilities associated with the investigation and remediation of environmental damage at manufactured gas plant (MGP) sites formerly owned or operated by plaintiff Long Island Lighting Company (LILCO). Defendants issued excess insurance policies to LILCO that required, as a threshold condition for coverage, LILCO to provide prompt notice of any occurrence that potentially implicated defendants' duty of indemnification.

In October and November 1994, LILCO notified defendants by letter about " environmental concern[s]" at retired MGP sites in Bay Shore and Hempstead, the only sites relevant to this appeal. LILCO stated that, although no regulatory agencies had commenced a lawsuit or formal investigation, LILCO expected agency action would be " forthcoming" and that the extent of its potential liability " if any" could not yet be determined. LILCO also notified defendants that a neighboring property owner had brought a property damage claim against the company for environmental contamination allegedly caused

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by the Bay Shore MGP. LILCO asked defendants to " acknowledge [their] duty to indemnify [LILCO] for any damages that it may incur within [the] policy limits."

Over the following year, defendants sent letters to LILCO in which they generally reserved all rights and coverage defenses, including the defense of late notice. Defendants also requested additional information about the MGPs and, noting that LILCO was self-insured at the primary level, sought documentation indicating that LILCO's coverage under the excess policies had been reached.

Between February 1995 and January 1996, LILCO provided supplemental disclosures to defendants about, among other things, LILCO's investigation of environmental damage at the MGP sites and its dealings with various regulatory agencies over the past 15 years. LILCO also notified defendants when, in August 1995, the New York State Department of Environmental Conservation (DEC) served a formal demand requesting that LILCO conduct site investigations and, if necessary, remediate the Bay Shore and Hempstead MGP sites1. Defendants did not respond to these disclosures.

LILCO thereafter commenced this declaratory judgment action in September 1997. In their answers, defendants asserted late notice as an affirmative defense warranting denial of coverage. Defendants later moved for summary judgment based on late notice. After protracted procedural history not relevant to this appeal, Supreme Court granted summary judgment on the Bay Shore...

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