Ogden Corp. v. Travelers Indem. Co.

• Decision Date: 22 September 1989
• Docket Number: No. 88 Civ. 4269 (RPP).,88 Civ. 4269 (RPP).
• Citation: 739 F. Supp. 796
• Parties: OGDEN CORPORATION, Avondale Industries, Inc. and Connell Limited Partnership, Plaintiffs, v. The TRAVELERS INDEMNITY COMPANY and American Motorists Insurance Company, Defendants. The TRAVELERS INDEMNITY COMPANY, Third-Party Plaintiff, v. EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company and National Union Fire Insurance Company, Third-Party Defendants.
• Court: U.S. District Court — Southern District of New York

739 F. Supp. 796

OGDEN CORPORATION, Avondale Industries, Inc. and Connell Limited Partnership, Plaintiffs, v. The TRAVELERS INDEMNITY COMPANY and American Motorists Insurance Company, Defendants.

The TRAVELERS INDEMNITY COMPANY, Third-Party Plaintiff, v. EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company and National Union Fire Insurance Company, Third-Party Defendants.

No. 88 Civ. 4269 (RPP).

United States District Court, S.D. New York.

September 22, 1989.

Fryer, Ross & Gowen, New York City by Hugh N. Fryer, for plaintiffs.

Simpson Thacher & Bartlett, New York City by Seth Ribner, for defendant Travelers Indem. Co.

Drinkle Biddle & Reath, Philadelphia, Pa. by James M. Sweet, for American Motors Ins. Co.

OPINION AND ORDER

ROBERT P. PATTERSON, Jr., District Judge.

Plaintiffs have brought this action seeking a declaratory judgment, pursuant to 28 U.S.C. § 2201 (1982), that the defendants, The Travelers Indemnity Company ("Travelers") and American Motorists Insurance Company ("AMICO") are obligated, under certain comprehensive general liability ("CGL") insurance policies, to defend and indemnify plaintiffs in connection with an action brought in the United States District Court for the Central District of California (the "California Action") by Bethlehem Steel Corporation ("Bethlehem") against plaintiffs.

Subject matter jurisdiction is based on diversity of citizenship. See 28 U.S.C. § 1332(a)(1). Plaintiffs are Ogden Corporation ("Ogden"), a Delaware Corporation, Avondale Industries, Inc. ("Avondale"), also a Delaware Corporation, and Connell Limited Partnership ("CLP"), a Delaware limited partnership. Defendants Travelers and AMICO are Connecticut and Illinois corporations, respectively.

This action is now before the court on plaintiffs' motion pursuant to Fed.R.Civ.P. 56(a) and 54(b), for partial summary judgment, with respect to the issue of defendants' duty to defend plaintiffs in the California Action.¹ Travelers and AMICO have cross-moved for summary judgment pursuant to Fed.R.Civ.P. 56(b). For the following reasons, plaintiffs' motion is denied, and both Travelers' and AMICO's cross-motions are granted.

I. FACTS

The amended complaint in the California Action (the "Bethlehem Complaint") alleges that Luria Brothers & Company ("Luria"), a former subsidiary of Ogden and a predecessor of Avondale and now owned by CLP, operated scrap metal processing, storage, and other industrial operations on certain real property in Vernon, California (the "Leased Property"). It further alleges that those operations "proximately caused hazardous substances to be released onto the Leased Property and contaminate the soil of the Leased Property ... and that said contamination occurred continuously during the years 1950 through 1983." Exhibit C to the Affidavit of Hugh N. Fryer at ¶ 9. The Bethlehem Complaint includes several counts, which separately allege that Luria either intentionally or negligently caused the contamination. The Bethlehem Complaint alleges that "in 1985, BETHLEHEM was required by the California Department of Health Services ... to undertake remedial and removal actions to clean up the hazardous substances contaminating the Leased Property." Id. at ¶ 11. The Bethlehem Complaint seeks recovery of, inter alia, past and future response costs and other compensatory damages.

Plaintiffs in this action claim coverage under a series of (1) four successive CGL policies issued by Travelers covering the period of July 5, 1975 through December 1, 1984 (the "Travelers Policy Period"), and (2) eight successive CGL policies issued by AMICO covering the period of July 5, 1967 through July 5, 1975. Each defendant disclaims coverage for several reasons as discussed below.

II. SUMMARY JUDGMENT

Summary judgment under Fed.R.Civ.P. 56(c) will be granted only if the movant shows that (1) there is no genuine issue as to any material fact, and (2) movant is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the "fundamental maxim" is that the court "`cannot try issues of fact; it can only determine whether there are issues to be tried.'" Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 58 (2d Cir.1987) (quoting Heyman v. Commerce & Industry Ins. Co., 524 F.2d 1317, 1319-20 (2d Cir.1975)). "Moreover, in determining whether a genuine issue has been raised, a court must resolve all ambiguities and draw all reasonable inferences against the moving party." Id. at 57.

III. THE INTERPRETATION OF INSURANCE CONTRACTS

As stated recently by the New York Court of Appeals in a similar case, under New York law,²

The duty to defend insureds—long recognized as broader than to indemnify—is derived from the allegations of the complaint and the terms of the policy. If the complaint contains any facts or allegations which bring the claim even potentially within the protection purchased, the insurer is obligated to defend citation omitted. Moreover, when an exclusion clause is relied upon to deny coverage, the insurer has the burden of demonstrating that the `allegations of the complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation.'

Technicon Electronics Corp. v. American Home Assurance Co., 74 N.Y.2d 66, 71, 544 N.Y.S.2d 531, 542 N.E.2d 1048 (1989) (quoting International Paper Co. v. Continental Cas. Co., 35 N.Y.2d 322, 325, 361 N.Y.S.2d 873, 320 N.E.2d 619 (1974)). "Any doubt as to whether the allegations state a claim covered by the policy must be resolved in favor of the insured as against the insurer." George Muhlstock & Co. v. American Home Assurance Co., 117 A.D.2d 117, 122, 502 N.Y.S.2d 174, 178 (1st Dep't 1986).

With these principles in mind, the summary judgment motions will be separately considered with respect to each defendant.

IV. TRAVELERS

Each CGL policy that Travelers issued to plaintiffs excluded coverage for "bodily injury or property damage arising out of the discharge, dispersal, release or escape ... of contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water," except if "such discharge, dispersal, release or escape ... is sudden and accidental" (the "Pollution Exclusion").

In accordance with the Technicon decision, this Court finds that the allegations in the Bethlehem Complaint—that Luria intentionally operated a scrap processing facility that continuously contaminated the Leased Property over a thirty-three year period—constitutes a pleading of non-accidental and non-sudden discharge. The Pollution Exclusion, then, is properly invoked by Travelers.

The Pollution Exclusion, virtually the same as those considered by other courts in similar cases, derives from New York Insurance Law former § 46. The policy behind § 46, which was in effect during much of the time the policies at issue here were in effect, was to encourage a clean environment by eliminating "subsidized pollution." Allstate Insurance Co. v. Klock Oil Co., 73 A.D.2d 486, 426 N.Y.S.2d 603 (4th Dep't 1980).

In Technicon, the New York Court of Appeals affirmed the decision of the Appellate Division, Second Department, that the "sudden and accidental" exception to the Pollution Exclusion is unambiguous as a matter of law. Further, the court made clear that the discharge must be both sudden and accidental for the exception to apply.

The court rejected the insured's argument that intentional acts resulting in discharge of contaminants are "accidental" if it did not intend to cause environmental harm or the specific injuries alleged. The Court of Appeals held "that argument fails because the pollution exclusion clause, by its own terms, does not distinguish between intended or unintended consequences of intentional discharges; rather, it excludes from coverage liability based on all intentional discharges of waste whether consequential damages were intended or unintended." The Court of Appeals went on to state "to accept the insured's interpretation of the pollution exclusion clause would otherwise render that clause meaningless in context." 74 N.Y.2d at 74, 544 N.Y.S.2d 531, 542 N.E.2d 1048.³ Thus, plaintiffs' argument that the "sudden and accidental" exception applies because they did not intend to pollute must be rejected.

Here, unlike Technicon, the underlying complaint does not allege specifically that Luria intentionally made discharges. However, the Bethlehem complaint cannot reasonably be read as claiming that the discharges from Luria's facility were accidental. The Bethlehem Complaint alleges that Luria conducted its operations from 1950 to 1983 and that these "operations ... caused the substances to be released," resulting in contamination that "occurred continuously during the years 1950 through 1983." Continuous discharges caused by intentional operations over a thirty-three year period cannot be construed to be accidental.

Because the Court of Appeals held that the discharge in Technicon was not accidental as a matter of law, it did not "rule on the conjunctive prerequisite bringing the exception into play—suddenness—because it would be superfluous here." Id. at 77, 544 N.Y.S.2d 531, 542 N.E.2d 1048. Nevertheless, this Court finds that the Pollution Exclusion clause is also properly invoked here by Travelers on the grounds that the allegations in the Bethlehem Complaint do not relate to a sudden discharge. In doing so, this Court first considers Appellate Division determinations.⁴

The Appellate Division, Second Department, in its Technicon opinion, stated that the sudden and accidental exception applies to an event "which is unexpected, unintended and occurs over a short period of time." Technicon, 141 A.D.2d 124, 137, 533 N.Y. S.2d 91, 99 (2d Dep't 1988). Subsequently, in Powers Chemco Corp. v. Federal Insurance Co., 144 A.D.2d 445, 533 N.Y.S.2d 1010, 1011-12 (2d Dep't 1988), the Appellate Division, Second Department, unequivocally confirmed...