Combustion Engineering, Inc. v. Travelers Indem. Co.

• Decision Date: 22 May 1980
• Citation: 428 N.Y.S.2d 235,75 A.D.2d 777
• Parties: COMBUSTION ENGINEERING, INC., Plaintiff-Respondent, v. The TRAVELERS INDEMNITY COMPANY et al., Defendants, The Aetna Casualty and Surety Company, Defendant-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 235

428 N.Y.S.2d 235

75 A.D.2d 777

COMBUSTION ENGINEERING, INC., Plaintiff-Respondent, v. The TRAVELERS INDEMNITY COMPANY et al., Defendants The Aetna Casualty and Surety Company, Defendant-Appellant.

Supreme Court, Appellate Division, First Department.

May 22, 1980.

L. R. Eno, New York City, for plaintiff-respondent.

H. M. Sklaver, New York City, for defendant-appellant.

Before ROSS, J. P., and LUPIANO, SILVERMAN, BLOOM and YESAWICH, JJ.

MEMORANDUM DECISION.

Order, Supreme Court, New York County, entered June 20, 1979, granting the motion of defendant Aetna Casualty and Surety Company to dismiss the complaint against it as to the first cause of action, and denying the motion as to the second cause of action, so far as appealed from by defendant Aetna, is reversed, on the law, with costs to defendant Aetna, and the motion of defendant Aetna to dismiss the second cause of action is granted.

Plaintiff Combustion is the insured under a number of liability policies issued by the various defendants. It furnished a nuclear steam supply system, related equipment, and nuclear fuel to Consumers Power Company, an electric utility in Michigan. Consumers Power contended that the nuclear system furnished by Combustion was defective, and that as a result it had sustained damages estimated between $300 million and $1 billion. Consumers Power sued Combustion in a United States District Court in Michigan. The action was ultimately settled for a package of cash, goods and services to be furnished in part in the future, which Combustion values at "in excess of $36 million." Combustion thereupon brought the present action against its various insurance companies. The complaint contains two causes of action, the first is for $36 million, the amount of the settlement. The second cause of action is for declaratory judgment, "(i)n the event that the Court shall not grant judgment to Combustion for said $36 million," declaring the defendants to be liable to Combustion for the amount of the settlement agreement, and that defendants should at the time of fulfillment of the settlement pay to Combustion any amounts of the settlement agreement that Combustion shall thereafter fulfill to Consumers Power. All the defendants-insurers primary as well as excess, are parties to both causes of action. Defendant Aetna's policy was an excess policy, under which Aetna was liable only for a portion of the liability in excess of a floor of $50 million. The first cause of action has been dismissed against Aetna and no appeal has been taken from that.

Special Term denied Aetna's motion to dismiss as to the second cause of action on the ground that it was possible that events might occur in the future to bring the liability over the $50 million floor, and that, in that event, the reasonableness of the settlement of Consumers Power might become relevant as against Aetna and that the issue should be determined only once. Accordingly, Special Term, in the exercise of its discretion, determined to entertain the action for a declaratory judgment and to permit that cause of action to be continued against Aetna as well as the other defendants.

In this respect we disagree with Special Term and think that, on the present state of the record, the court is without jurisdiction as a matter of law to entertain this declaratory judgment action as against Aetna.

A declaratory judgment may not be granted if it will only result in an advisory opinion. New York Public Interest Research Group,...