Reynolds Metal Co. v. Aetna Cas. & Sur. Co.
| Decision Date | 21 October 1999 |
| Citation | 259 AD2d 195,696 N.Y.S.2d 563 |
| Parties | REYNOLDS METAL COMPANY, Appellant, v. AETNA CASUALTY & SURETY COMPANY et al., Respondents. |
| Court | New York Supreme Court — Appellate Division |
Proskauer Rose LLP (Stephen Rackow Kaye and John H. Gross of counsel), and Anderson, Kill & Olick P.C., New York City, for appellant.
Felt, Evans, Panzone, Bobrow & Hallak LLP (Bert W. Rein of Wiley, Rein & Fielding, Washington, D.C. of counsel) Clinton, for Aetna Casualty & Surety Company, respondent.
Cozen & O'Connor (Peter M. Papasavas of counsel), New York City, for American Home Assurance Company, respondent.
O'Connor, O'Connor, Mayberger & First P.C. (Dianne Bresee Mayberger of counsel), Albany, for Continental Insurance Company and another, respondents.
Zelle & Larson (William Gerald McElroy Jr. of counsel), Waltham, Massachusetts, for Employers Insurance of Wausau, respondent.
Saxer, Anderson, Wolinsky & Sunshine P.C. (Gordon C. Gebauer of counsel), Burlington, Vermont, for Federal Insurance Company, respondent.
Melito & Adolfsen P.C. (Louis G. Adolfsen of counsel), New York City, for Hartford Accident and Indemnity Company and another, respondents.
Hiscock & Barclay LLP (Alan R. Peterman of counsel), Syracuse, for Home Insurance Company, respondent.
O'Melveny & Myers (Rosemary E. Boller of counsel), New York City, for Insurance Company of North America, respondent.
Mendes & Mount (Mary Ann D'Amato of counsel), New York City, for Certain Underwriters at Lloyd's, London & London Market Insurance Companies, and another, respondents.
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo P.C. (Kim V. Marrkand of counsel), Boston, Massachusetts, and Fischer, Bessette & Muldowney, Malone, for Liberty Mutual Insurance Company, respondent.
Tressler, Soderstrom, Maloney & Priess (Albert C. Hilber of counsel), Newark, New Jersey, for Lumbermans' Mutual Casualty Company, respondent.
Before: CARDONA, P.J., MERCURE, PETERS, SPAIN and CARPINELLO, JJ.
Appeal from an order of the Supreme Court (Demarest, J.), entered August 24, 1998 in St. Lawrence County, which granted defendants' motions for summary judgment dismissing the complaint.
In May 1995, plaintiff, the operator of an aluminum reduction plant located in the Town of Massena, St. Lawrence County (hereinafter the Massena site), commenced this declaratory judgment action against defendants, the issuers of numerous primary and excess liability insurance contracts covering the period 1959 to 1986, seeking coverage for three "environmental actions" brought by the State Department of Environmental Conservation (hereinafter DEC), the Federal Environmental Protection Agency (hereinafter EPA) and the St. Regis Mohawk Tribe. The environmental actions involved contamination of groundwater, surface waters and soil at the Massena site (the DEC action), the sediments in the St. Lawrence River (the EPA action) and the natural resources owned by the St. Regis Tribe, New York State and the United States--the natural resources damages or "NRD" action. Plaintiff seeks indemnification for $150 million in costs expended or to be expended to clean up portions of the Massena site and the sediments in the St. Lawrence river adjacent to the Massena site. It also seeks a declaration that the issuers of primary liability insurance policies, defendants The Travelers Indemnity Company and Travelers Casualty and Surety Company (formerly known as The Aetna Casualty and Surety Company) (hereinafter collectively referred to as Travelers), the Insurance Company of North America (hereinafter INA) and Liberty Mutual Insurance Company, are obligated to pay defense costs.
Following discovery, defendants moved for summary judgment contending, inter alia, that plaintiff breached its contractual duties to its insurers by failing to provide timely notices of claims and occurrences. Supreme Court found that a December 6 1983 letter sent to plaintiff by DEC constituted a "notice of claim" under the terms of the insurance policies in effect requiring notice be given to defendants "forthwith". Additionally, the court found that plaintiff had knowledge of events occurring prior to December 1986 from which it should have reasonably concluded that it was likely to incur remediation costs within its insurance coverage requiring it to provide notice by that time. 1 Supreme Court granted summary judgment in favor of defendants dismissing the complaint resulting in this appeal.
Initially, plaintiff contends that the December 6, 1983 "Potentially Responsible Party" or "PRP" letter it received from DEC did not constitute a claim within its insurance coverage.
The letter provides, in pertinent part, as follows:
Re: Reynolds Metals, Massena
Sites: # 645009A--Black Mud Lagoon
# 645009B Reynolds Metals Landfill
Dear Sir or Madam:
In accordance with the provisions of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. § 9601 et, seq., the Department of Environmental Conservation has determined that you may be responsible for the release or threatened release of hazardous substances at the above-referenced site. As a potentially responsible party, you may be liable for the present and future costs of response, removal and remediation and for damages to the natural resources of the State of New York at and around the referenced site.
In view of the foregoing, this letter constitutes a claim by the State of New York pursuant to 42 U.S.C. § 9612(a) for all costs, damages and claims recoverable now and in the future under federal and state law, including CERCLA. Unless, in a timely fashion, all investigative, removal and remedial work necessary at the site and its environs is performed and unless the State is reimbursed for all damages to its natural resources and for all past, present and future response, removal and remediation costs, this claim will not have been satisfied. In such event, the State of New York may hold you liable and subject to New York's claims under federal and state law through legal action.
Noting that its insurance policies excluded coverage for damages to its own property, plaintiff argues that the December 1983 letter referred only to contamination of the six-acre lagoon and 11.5-acre landfill on its 1,600-acre Massena site and made no reference to damage to the St. Lawrence River or property of third parties. Therefore, it contends that the letter did not trigger its obligation under the policies to provide notice.
On the other hand, defendants point to language in the letter which they argue shows that it not only covered the landfill and the lagoon at the Massena site but also the St. Lawrence River by reference to "its environs" including "the natural resources of the State of New York at and around the referenced site". Defendants also contend that the language used asserted a claim by a third party, namely, the State: "this letter constitutes a claim * * * for all costs, damages and claims recoverable now and in the future under federal and state law" and "unless the State is reimbursed for all damages to its natural resources and for all past, present and future response, removal and remediation costs * * * the State of New York may hold you liable * * * through legal action".
Under New York law, compliance with the notice provisions of a liability insurance policy is a condition precedent to coverage (see, American Home Assur. Co. v. International Ins. Co., 90 N.Y.2d 433, 442-443, 661 N.Y.S.2d 584, 684 N.E.2d 14; Security Mut. Ins. Co. of N.Y. v. Acker-Fitzsimons Corp., 31 N.Y.2d 436, 440, 340 N.Y.S.2d 902, 293 N.E.2d 76). Thus, " '[a]bsent a valid excuse, a failure to satisfy the notice requirement vitiates the policy * * * and the insurer need not show prejudice before it can assert the defense of noncompliance' " (American Home Assur. Co. v. International Ins. Co., supra, at 440, 661 N.Y.S.2d 584, 684 N.E.2d 14, quoting Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., supra, at 440, 340 N.Y.S.2d 902, 293 N.E.2d 76). However, "an insured's good-faith belief in nonliability, when reasonable under the circumstances, may excuse a delay in notifying an insurer of an occurrence or potential claim" (Marinello v. Dryden Mut. Ins. Co., 237 A.D.2d 795, 796, 655 N.Y.S.2d 156; see, D'Aloia v. Travelers Ins. Co., 85 N.Y.2d 825, 826, 623 N.Y.S.2d 837, 647 N.E.2d 1345; Empire City Subway Co. v. Greater N.Y. Mut. Ins. Co., 35 N.Y.2d 8, 13, 358 N.Y.S.2d 691, 315 N.E.2d 755; Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., supra, at 441, 340 N.Y.S.2d 902, 293 N.E.2d 76; Vradenburg v. Prudential Prop. & Cas. Ins. Co., 212 A.D.2d 913, 622 N.Y.S.2d 623). The same holds true for a reasonably held belief of noncoverage (see, Deso v. London & Lancashire Indem. Co. of Am., 3 N.Y.2d 127, 130-131, 164 N.Y.S.2d 689, 143 N.E.2d 889 [discussing Gluck v. London Lancashire Indem. Co. of Am., 2 A.D.2d 751, 153 N.Y.S.2d 518, affd. 2 N.Y.2d 953, 162 N.Y.S.2d 357, 142 N.E.2d 423]; Sparacino v. Pawtucket Mut. Ins. Co., 50 F.3d 141, 143; cf., Empire City Subway Co. v Greater N.Y. Mut. Ins. Co., supra, at 13-14, 358 N.Y.S.2d 691, 315 N.E.2d 755).
Addressing noncoverage first, we note that in his deposition testimony, plaintiff's risk management manager, Bill Murphy, maintained that based upon his reading of the "owned property" exclusions 2 contained in plaintiff's insurance policies, he did not believe there was any insurance coverage for clean-up of any plant sites owned by plaintiff. The claims manual of Travelers and also the deposition testimony of their claims handlers lend support to that belief. Under this view, any potential damage to the State's natural resources, e.g., groundwater (see, Navigation Law § 172, ), at and around the two waste disposal sites located at the Massena site and referenced in the December 1983 letter would not have been covered.
As for the good-faith belief in nonliability, the December 1983...
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