Indian Harbor Ins. Co. v. City of San Diego

Decision Date25 September 2013
Docket NumberNo. 12 Civ. 5787(JGK).,12 Civ. 5787(JGK).
Citation972 F.Supp.2d 634
PartiesINDIAN HARBOR INSURANCE COMPANY, Plaintiff, v. The CITY OF SAN DIEGO, Defendant. California State Association of Counties Excess Insurance Authority and Insurance Company of the State of Pennsylvania, Defendant–Intervenors.
CourtU.S. District Court — Southern District of New York

OPINION TEXT STARTS HERE

Jessica Arlauckas Bohl, Duane Morris, LLP, New York, NY, Sheila Raftery Wiggins, Duane Morris, LLP, Newark, NJ, Jessica E. La Londe, Max H. Stern, Duane Morris LLP, San Francisco, CA, for Plaintiff.

David Paul Bender, Jr., Caroline R. Hurtado, Kathleen F. Donovan, Michael John Stoner, Anderson Kill & Olick, P.C., New York, NY, Christine Marie Leone, City of San Diego City Attorney's Office, San Diego, CA, for Defendant.

OPINION AND ORDER

JOHN G. KOELTL, District Judge:

The plaintiff Indian Harbor Insurance Company (Indian Harbor) brought this action against the City of San Diego (“the City”) seeking a declaratory judgment pursuant to 28 U.S.C. §§ 2201 and 2202 that it has no duty to defend or indemnify the City for three pollution liability claims made against the City. Indian Harbor has moved for summary judgment pursuant to Federal Rule of Civil Procedure 56. The California State Association of Counties (CSAC) and the Insurance Company of the State of Pennsylvania, who are parties to related actions brought by Indian Harbor, have intervened in this action for the purpose of opposing the motion for summary judgment. The Court has subject matter jurisdiction based on diversity of citizenship pursuant to 28 U.S.C. § 1332.

This controversy arises out of a provision in a pollution and remediation legal liability insurance policy requiring the City to give notice of pollution liability claims to Indian Harbor “as soon as practicable.” The insurance policy contained a New York choice-of-law provision and insured risks in the State of California. The parties dispute whether, under New York common law, Indian Harbor must show that it was prejudiced by any unreasonable delays in notifying Indian Harbor of any claims under the policy. The parties also dispute whether New York law can constitutionally be applied to a dispute over pollution claims in California.

For the reasons explained below, Indian Harbor's motion for summary judgment is granted.

I.

The standard for granting summary judgment is well established. “The [C]ourt shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Gallo v. Prudential Residential Servs. L.P., 22 F.3d 1219, 1223 (2d Cir.1994). [T]he trial court's task at the summary judgment motion stage of the litigation is carefully limited to discerning whether there are genuine issues of material fact to be tried, not to deciding them. Its duty, in short, is confined at this point to issue-finding; it does not extend to issue-resolution.” Gallo, 22 F.3d at 1224.

The moving party bears the initial burden of “informing the district court of the basis for its motion” and identifying the matter that “it believes demonstrate[s] the absence of a genuine issue of material fact.” Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The substantive law governing the case will identify those facts that are material and [o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587–88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)); see also Gallo, 22 F.3d at 1223. Summary judgment is improper if there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party. See Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir.1994). If the moving party meets its burden, the nonmoving party must produce evidence in the record and “may not rely simply on conclusory statements or on contentions that the affidavits supporting the motion are not credible ....” Ying Jing Gan v. City of New York, 996 F.2d 522, 532 (2d Cir.1993); see also Scotto v. Almenas, 143 F.3d 105, 114–15 (2d Cir.1998) (collecting cases).

II.

Unless otherwise noted, the following facts are not in dispute. Indian Harbor is a North Dakota company with its principal place of business in Stamford, Connecticut. (Decl. of J. Robert McMahon in Supp. of Pl.'s Motion for Summ. J.1 (“McMahon Decl.”) ¶ 15.) Indian Harbor is a subsidiary of XL Specialty Insurance Company (“XL Specialty”), which is incorporated in New York. (McMahon Decl. ¶ 14.) XL Specialty is responsible for handling claims for pollution and remediation legal liability policies issued by Indian Harbor. (McMahon Decl. ¶ 14.) Indian Harbor conducts its insurance business from multiple locations in the United States, including a New York office where its CEO, General Counsel, and half of its corporate directors are located. (McMahon Decl. ¶¶ 15–18.) The City is a chartered municipal corporation organized and existing under the laws of California with its principal place of business in San Diego, California. (Am. Answer ¶ 3; Am. Compl. ¶ 3.)

A.

The Indian Harbor insurance policy that is the subject of this action was issued in July 2009. (Decl. of Max Stern in Supp. of Pl.'s Motion for Summ. J. (“Stern Decl.”), Ex. 1 (“Policy”) at 5.) 2 It names the CSAC as the first named insured to the policy and the City as an additional named insured. (Policy at 4, 24.) The policy was underwritten by XL Specialty in its Exton, Pennsylvania office, and delivered under XL Specialty letterhead to a broker in Newport Beach, California. (Decl. of Max Stern in Supp. of Pl.'s Resp. to Defs.' Opp. to Summ. J, Ex. 1 (“McMahon Dep.”) at 14–15, 47–49; Policy at 1.)

The policy sets forth Indian Harbor's liability as follows:

Coverage A—Pollution Legal Liability

The Company [ (Indian Harbor) ] will pay on behalf of the INSURED for LOSS and related LEGAL EXPENSE resulting from any POLLUTION CONDITION on, at, under or migrating from any COVERED LOCATION, which the INSURED has or will become legally obligated to pay as a result of a CLAIM first made against the INSURED during the POLICY PERIOD and reported to the Company, in writing, by the INSURED, during the POLICY PERIOD or, where applicable, the EXTENDED REPORTING PERIOD.

Coverage B—Remediation Legal Liability

The Company will pay on behalf of the INSURED for REMEDIATION EXPENSE and related LEGAL EXPENSE resulting from any POLLUTION CONDITION on, at, under or migrating from any COVERED LOCATION:

1. for a CLAIM first made against the INSURED during the POLICY PERIOD which the INSURED has or will become legally obligated to pay; or

2. that is first discovered during the POLICY PERIOD, provided that the INSURED reports such CLAIM or POLLUTION CONDITION to the Company, in writing, during the POLICY PERIOD or, where applicable, the EXTENDED REPORTING PERIOD.

(Policy at 6.)

“Pollution condition,” in turn, is defined as:

1. the discharge, dispersal, release, seepage, migration, or escape of POLLUTANTS into or upon land, or structures thereupon, the atmosphere, or any watercourse or body of water including groundwater;

2. the presence of any uncontrolled or uncontained POLLUTANTS into [sic] land, the atmosphere, or any watercourse or body of water including groundwater; or

3. the presence of MOLD MATTER on buildings or structures.

(Policy at 9.)

And “claim” is defined as:

any demand(s), notice(s) or assertion(s) of a legal right alleging liability or responsibility on the part of the INSURED and shall include but not be limited to lawsuit(s), petition(s), order(s) or government and/or regulatory action(s), filed against the INSURED.

(Policy at 7.)

The policy limits Indian Harbor's liability to $10,000,000 per pollution condition, with a $50,000,000 aggregate liability limit. (Policy at 4.) It also sets a self-insured retention amount of $500,000 per pollution condition. (Policy at 4.)

The policy is a “claims-made and reported” policy. (Policy at 4.) As such, it requires “that a claim be made against the insured during the policy period and reported to [Indian Harbor] during the policy period or, where applicable, the extended reporting period.” (Policy at 4.) The policy period is defined as running from July 1, 2009 to July 1, 2012. (Policy at 4.)

In a section entitled “reporting, defense, settlement and cooperation,” the policy states that

[ a ] s a condition precedent to coverage hereunder, in the event any CLAIM is made against the INSURED for LOSS or REMEDIATION EXPENSE, or any POLLUTION CONDITION is first discovered by the INSURED that results in a LOSS or REMEDIATION EXPENSE:

1. The INSURED shall forward to the Company or to any of its authorized agents every demand, notice, summons, order or other process received by the INSURED or the INSURED's representative as soon as practicable; and

2. The INSURED shall provide to the Company, whether orally or in writing, notice of the particulars with respect to the time, place and circumstances thereof, along with the names and addresses of the injured and of available witnesses. In the event of oral notice, the INSURED agrees to furnish the Company a written report as soon as practicable.

(Policy at 14 (emphasis added).)

Finally, in Clauses K and L of the conditions section, the parties agree 1) to submit to the jurisdiction of the New York state courts in controversies arising out of the policy, and 2) that the law of New York will...

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