Edo Corp. v. Newark Ins. Co.

• Decision Date: 22 August 1995
• Docket Number: Civ. No. H-90-951(AHN).
• Citation: 898 F. Supp. 952
• Court: U.S. District Court — District of Connecticut
• Parties: EDO CORPORATION v. NEWARK INS. CO., et al.

898 F. Supp. 952

EDO CORPORATION v. NEWARK INS. CO., et al.

Civ. No. H-90-951(AHN).

United States District Court, D. Connecticut.

August 22, 1995.

John B. Berringer, Steven J. Dolmanisth, Anderson, Kill, Olick & Oshinsky, PC, New York City, John Colleran, Colleran & Carboni, PC, New Haven, CT, for plaintiff.

Louis B. Blumenfeld, Cooney, Scully & Dowling, Hartford, CT, Robert L. Joyce, Wilson, Elser, Moskowit, Edelman & Dicker, New York City, Bruce M. Engel, Blatt, Hammesfahr & Eaton, Daniel G. Joran, Caron & Fitzgerald, Chicago, IL, John S. Papa, Howard, Kohn, Sprague & Fitzgerald, Hartford, CT, for defendants.

RULING ON DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT

NEVAS, District Judge.

Plaintiff EDO Corporation ("EDO") commenced this declaratory judgment action against its primary insurers, Newark Insurance Co. ("Newark") and Aetna Insurance Company ("Aetna"), and against excess insurers, Burnhope and Companies ("Burnhope") and American Insurance Company ("American") (collectively, "the insurers"), seeking a declaration that it is entitled to insurance coverage for expenditures it incurred in connection with environmental contamination.

Familiarity with the court's previous ruling interpreting and applying the insurance policies' pollution exclusion clauses is presumed. See EDO Corp. v. Newark Ins. Co., 878 F.Supp. 366 (D.Conn.1995). Currently before the court are four motions for summary judgment. Each insurer seeks a determination that its policies' pollution exclusion clauses absolve it of its duty to defend and/or indemnify EDO for the clean-up costs EDO incurred.¹

For the reasons that follow, the court finds that Newark and Aetna breached their respective duties to defend EDO but that none of the insurers breached its duty to indemnify EDO. Accordingly, Newark's motion for summary judgment doc. # 202 is GRANTED as to the duty to indemnify, but DENIED as to the duty to defend. Aetna's motion for summary judgment doc. # 204 is GRANTED as to the duty to indemnify, and DENIED as to the duty to defend, except as to the 1986 policy containing the absolute pollution exclusion clause, with respect to which Aetna's motion is GRANTED. American's motion for summary judgment doc. # 225 and Burnhope's motion for summary judgment doc. # 226, both of which implicate only the duty to indemnify, are GRANTED.

STANDARD

In a motion for summary judgment, the burden is on the moving party to establish that there are no genuine issues of material fact in dispute and that it is entitled to judgment as a matter of law. Rule 56(c), Fed.R.Civ.P.; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986). A court must grant summary judgment "`if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact.'" Miner v. City of Glens Falls, 999 F.2d 655, 661 (2d Cir.1993) (citation omitted). "A dispute regarding a material fact is genuine `if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Aldrich v. Randolph Cent. Sch. Dist., 963 F.2d 520, 523 (2d Cir.) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. at 2510), cert. denied, ___ U.S. ___, 113 S.Ct. 440, 121 L.Ed.2d 359 (1992). After discovery, if the nonmoving party "has failed to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof," then summary judgment is appropriate. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The court resolves "all ambiguities and draws all inferences in favor of the nonmoving party in order to determine how a reasonable jury would decide." Aldrich, 963 F.2d at 523. Thus, "only when reasonable minds could not differ as to the import of the evidence is summary judgment proper." Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir.), cert. denied, 502 U.S. 849, 112 S.Ct. 152, 116 L.Ed.2d 117 (1991). See also Suburban Propane v. Proctor Gas, Inc., 953 F.2d 780, 788 (2d Cir.1992).

FINDINGS OF FACT

The court finds the following facts to be undisputed.²

Newark issued ten successive primary Comprehensive General Liability ("CGL") policies to EDO, which together cover the period from December 31, 1972 through December 31, 1982. (See Andrako Aff. ¶ 3 doc. # 231.) These policies provide insurance coverage for "all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence." (Id. ¶ 11.) In addition, the Newark policies provide that "the company shall have the right and duty to defend any suit against the insured ... and may make such investigation and settlement of any claim or suit as it deems expedient." (Id. ¶ 9.)

Each of Newark's policies also contains a pollution exclusion clause that excludes coverage for "bodily injury or property damage arising out of the discharge, dispersal, release or escape ... of pollutants" unless such "discharge, dispersal, release or escape is sudden and accidental." (Id. ¶ 10.)

Aetna issued CGL and/or excess policies to EDO for the policy years of December 31, 1980-1981; December 31, 1982-December 31, 1983; December 31, 1983-December 31, 1984; and December 31, 1984-December 31, 1985. (See Velez Aff. Exs. A-E, G-I doc. # 196.) These Aetna policies contain indemnification language similar to that of Newark's policies, as well as the identical pollution exclusion clause with the exception for "sudden and accidental" discharges. (See id.) Aetna's CGL policies also contain the duty to defend. (See id. Exs. G-J.)

For the policy year of December 31, 1985-December 31, 1986, however, Aetna issued to EDO excess and CGL policies containing absolute pollution exclusion clauses. (See id. Exs. F, J ("the 1986 policies").) The 1986 policies exclude coverage for "bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, release, escape or contamination by pollutants." (Id.)

American issued to EDO three excess policies providing EDO with coverage from January 1, 1978 through January 1, 1980. (Jordan Aff.Exs. A-C doc. # 208.) Burnhope issued excess policies to EDO between 1974 and 1980. (Whiting Aff.Exs. 1, 2 doc. # 206.) These excess policies confer upon the insurers the duty to indemnify EDO, (see, e.g., Jordan Aff. ¶ 3), but exclude coverage for personal injury or property damage "caused by seepage, pollution or contamination" unless "such seepage, pollution or contamination is caused by a sudden, unintended and unexpected happening during the period of this Insurance." (See, e.g., Jordan Aff. ¶ 7.)

In July of 1986, the Environmental Protection Agency ("EPA"), issued a letter to EDO, naming EDO a "potentially responsible party" for the contamination at the Kellogg-Deering Well Field ("KDWF") in Norwalk, Connecticut. (See Berringer Aff.Ex.L. doc. # 185 ("PRP letter" or "the Letter").)

In May of 1990, EDO received a Special Notice letter from the EPA demanding that EDO conduct the remediation of the Superfund Site, and reimburse the EPA for the costs associated with the investigation of that Site. (See id. Aff.Ex. O ("Special Notice letter").)

On February 12, 1991, the EPA filed a complaint against EDO and others seeking to recover costs incurred in responding to the releases of hazardous substances detected at the KDWF. (See id. Ex. Q.) On the same day, EDO and the EPA lodged a proposed Consent Decree, or settlement.³ The court approved the settlement and Consent Decree on November 25, 1992. (See id. Ex. P.)

DISCUSSION

The CGL policies issued by Aetna and Newark obligate them "to defend any suit" brought against EDO. Each of these policies also requires Aetna and Newark to indemnify EDO for any liability incurred, as long as the underlying claims fall within the scope of the policies' coverage. The American and Burnhope excess policies, by contrast, impose upon the insurers the duty to indemnify only.

The duty to defend and the duty to indemnify are governed by different standards and will be discussed separately below. Before turning to that discussion, however, the court notes that there is an outstanding choice of law question: the insurers argue for the application of New York law while EDO argues for the application of Connecticut law. The court finds that it may again defer decision on the choice of law, as the disposition of each of the issues presented would be the same under either state's law.

I. Aetna's and Newark's Duty to Defend

Aetna's and Newark's CGL policies provide: "The company shall have the right and duty to defend any suit against the insured ... and may make such investigation and settlement of any claim or suit as it deems expedient." (Andrako Aff. ¶ 9; Velez Aff. Exs. G-J.) Accordingly, to trigger the duty to defend, the EPA's claim against EDO must constitute a "suit." In addition, for the duty to defend to be triggered, the allegations made in the underlying claim must fall within the coverage provided by the policies. See, e.g., Alderman v. Hanover Ins. Group, 169 Conn. 603, 610, 363 A.2d 1102 (1975) (quoting Lee v. Aetna Cas. & Sur. Co., 178 F.2d 750, 751 (2d Cir.1949)) ("The duty to defend means `that the insurer will defend the suit, if the injured party states a claim, which, qua claim, is for an injury `covered' by the policy; it is the claim which determines the insurer's duty to defend.'"). For the duty to defend to be triggered in this case, the allegations of the underlying claim must fall outside of the policies' pollution exclusion clauses.

The parties dispute whether these two preconditions to the triggering of the duty to defend occurred. That is, the parties dispute (1) whether the EPA brought a "suit" against EDO within the meaning of the policies, and (2) whether, if there was a "suit," the allegations of the claim contained in the "suit"...