State of New York v. Ludlow's Sanitary Landfill

• Citation: 50 F.Supp.2d 135
• Decision Date: 26 May 1999
• Docket Number: No. 86-CV-0853.,86-CV-0853.
• Parties: STATE OF NEW YORK, Plaintiff, v. LUDLOW'S SANITARY LANDFILL, INC., G. Kevin Ludlow, James Ludlow, and Ludlow's Sand and Gravel Company, Inc., Defendants. Ludlow's Sanitary Landfill, Inc., G. Kevin Ludlow, James Ludlow, and Ludlow's Sand and Gravel Company, Inc., Third-Party Plaintiffs, v. United Auto Sales of Utica, Inc., Chesebrough-Ponds, Inc., Special Metals Corp., North Motor Equipment and Machinery Company, Inc., and Utica Cutlery, Inc., Third-Party Defendants. Special Metals Corporation, Fourth-Party Plaintiff, v. Lumbermens Mutual Casualty Company and Certain Other Underwriters at Lloyd's, Fourth-Party Defendants.
• Court: U.S. District Court — Northern District of New York

Page 135

50 F.Supp.2d 135

STATE OF NEW YORK, Plaintiff, v. LUDLOW'S SANITARY LANDFILL, INC., G. Kevin Ludlow, James Ludlow, and Ludlow's Sand and Gravel Company, Inc., Defendants.

Ludlow's Sanitary Landfill, Inc., G. Kevin Ludlow, James Ludlow, and Ludlow's Sand and Gravel Company, Inc., Third-Party Plaintiffs, v. United Auto Sales of Utica, Inc., Chesebrough-Ponds, Inc., Special Metals Corp., North Motor Equipment and Machinery Company, Inc., and Utica Cutlery, Inc., Third-Party Defendants.

Special Metals Corporation, Fourth-Party Plaintiff, v. Lumbermens Mutual Casualty Company and Certain Other Underwriters at Lloyd's, Fourth-Party Defendants.

No. 86-CV-0853.

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

May 26, 1999.

Battle Fowler Law Firm, New York City (William J. McSherry, Jr., of counsel), for Special Metals Corp.

Tressler Soderstrom Law Firm, Chiacgo, IL (Michael W. Morrison, of counsel), for Lumbermens Mutual Casualty Co.

MEMORANDUM — DECISION & ORDER

McAVOY, Chief Judge.

Presently before the Court are Fourth-Party Defendant Lumbermens Mutual Casualty Company's ("LMCC") motion pursuant to FED.R.CIV.P. 56 seeking dismissal of the fourth-party complaint against it and Fourth-Party Plaintiff Special Metals Corporation's ("SMC") cross-motion for summary judgment striking LMCC's fourth affirmative defense that SMC's claims are barred under the pollution exclusion clause.

I. BACKGROUND

SMC began operating a metal alloy production plan in New Hartford, New York in 1957. From the early 1960s until July 1979, SMC used Ludlow's Sand & Gravel Company ("Ludlow's") to dispose of various non-hazardous solid and liquid industrial waste materials from its vacuum melting, casting and finishing operations. Ludlow's hauled SMC's waste to a landfill that Ludlow's operated (the "site" or "landfill").

SMC used a fluid known as Aroclor 1254 ("Aroclor") in its diffusion and booster vacuum pumps. Aroclor contains polychlorinated biphenyls ("PCBs"), a hazardous substance. According to SMC, they had separate procedures to dispose of Aroclor, which was never knowingly sent to the site. In 1972, SMC stopped using Aroclor.

In 1983, the New York State (the "State") Department of Environmental Conservation ("DEC") investigated the Ludlow landfill. In February 1983, the DEC sent a letter to SMC inquiring about its use and disposal of PCBs.

As a result of the investigation of the site, a Remedial Action Master Plan ("RAMP") was prepared in October 1983 which SMC received in March 1984. The RAMP determined that SMC was a primary contributor of industrial wastes to the landfill. The report further stated that "[t]he primary hazardous component of the wastes on Ludlow landfill is PCBs. The origin of the PCBs is not known, but may have been the cooling oils known to be buried on the site." The RAMP also identified the presence of PCBs from Aroclor at the site.

On December 6, 1983, the State of New York sent SMC a letter identifying it as a potentially responsible party liable for the costs of response, removal and remediation and for damages to the natural resources at the landfill (the "PRP letter").¹ Upon receiving this letter, SMC forwarded it to the company's Manager of Facilities Engineering, John W. Haggerty ("Haggerty").²

Shortly thereafter, SMC hired legal counsel and an environmental consultant to investigate and respond to the PRP letter. In April 1984, SMC's environmental consultant was informed that the environmental authorities attributed the PCBs at the site to SMC.

In August 1984, SMC entered into a consent decree with the State of New York. Pursuant to the terms of the consent decree, SMC did not admit liability or responsibility for the landfill, but agreed to investigate the site. The consent decree did not affect any legal rights the State of New York had against SMC.

As a result of SMC's investigation, in November 1984, it learned that it was responsible for the PCBs at the site and that the PCBs came from the Aroclor. In fact, it was learned that Aroclor was disposed at the site during the entire time SMC used Aroclor, from 1967 to 1972.

On October 15, 1984, SMC sent LMCC a letter "to fulfill the notice conditions contained in [its] general liability policy." SMC was covered under two insurance policies issued by LMCC. Both policies contained a "notice of claim" provision providing that:

If claim is made or suit is brought against the Insured, the Insured shall immediately forward to the Company every demand, notice, summons, or other process received by him or his representatives.

LMCC denied coverage claiming that SMC failed to give timely notice under the terms of the policies.

SMC filed a Fourth-Party Complaint against LMCC seeking coverage under the two policies. LMCC now moves pursuant to FED.R.CIV.P. 56 seeking dismissal of the Complaint on the ground that SMC failed to give timely notice under the terms of the policies. SMC cross-moves for summary judgment striking LMCC's fourth affirmative defense that SMC's claims for coverage are barred under the policies' pollution exclusion clauses.

II. DISCUSSION

A. Summary Judgment Standard

Pursuant to Rule 56 of the Federal Rules of Civil Procedure, judgment may be entered in favor of the moving party if "there is no genuine issue as to any material fact and [] the moving party is entitled to judgment as a matter of law." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). On a motion for summary judgment, all facts must be construed in favor of the nonmoving party. Id.; Buttry v. General Signal Corp., 68 F.3d 1488, 1492 (2d Cir.1995). Where the moving party has supported the motion by affidavits and/or documentary evidence, the non-movant "may not rest upon mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in [] rule [56], must set forth specific facts showing that there is a genuine issue [of material fact] for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party." FED.R.CIV.P. 56(e); see BellSouth Telecomms., Inc. v. W.R. Grace & Co., 77 F.3d 603, 615 (2d Cir.1996). With this standard in mind, the Court will now address the motions for summary judgment.

B. Whether SMC Provided Timely Notice of a Claim

LMCC moves for summary judgment claiming that SMC failed to provide it with timely notice of a claim as required under the terms of the insurance policies. LMCC asserts that the December 1983 PRP letter constituted a claim against SMC, but that SMC failed to provide notice of the claim until October 1984, ten months later.

SMC responds that the PRP letter did not constitute a claim because it had not yet been determined at that time that SMC was responsible for the PCBs at the site. SMC also argues that the PRP was not sufficiently specific to constitute a notice of claim. SMC claims that, based on conversations with the State Attorney General's office, it had a bona fide belief that it was not responsible for any hazardous waste at the site. SMC further asserts that it was not aware that it was responsible for the PCBs at the site until November 1984, one month after it gave notice of a potential claim to LMCC.

Because the underlying facts are not in dispute, this matter is appropriate for summary judgment. The determinative issues are: (1) when SMC became aware of a claim against it, and (2) whether it then provided LMCC with timely notice of such claim.

Under New York law, "compliance with the notice provisions of an insurance contract is a condition precedent to the insurer's liability." American Ins. Co. v. Fairchild Industries, 56 F.3d 435, 438 (2d Cir.1995); White v. City of New York, 81 N.Y.2d 955, 957, 598 N.Y.S.2d 759, 615 N.E.2d 216 (1993); Kaliandasani v. Otsego Mutual Fire Ins. Co., 681 N.Y.S.2d 323, 324 (2d Dep't 1998). "If an insured fails to provide timely notice as required by the particular policy, then, absent a valid reason for the delay, the insurer is under no obligation to defend or indemnify the insured." American Ins. Co., 56 F.3d at 438 (citing Allcity Ins. Co. and Jimenez, 78 N.Y.2d 1054, 1055, 576 N.Y.S.2d 87, 581 N.E.2d 1342 (1991)). "The burden is on the insured to show that a delay was reasonable under the circumstances." Id. (citing Security Mut. Ins. Co. v. Acker-Fitzsimons Corp., 31 N.Y.2d 436, 441, 340 N.Y.S.2d 902, 293 N.E.2d 76 (1972)).

The following excerpt from Fairchild is instructive:

[T]he term "claim" would not seem to be a fertile ground for disputes.... [A] claim is an assertion by a third party that in the opinion of that party the insured may be liable to it for damages within the risks covered by the policy. ... A claim may be made without the institution of formal proceedings. Indeed, the pertinent provisions of the policies at issue distinguish between "a claim" and "a suit." A third person's assertion of liability is a claim, moreover, whether or nor there is reason to believe that there actually is liability. Unless the assertion is made in circumstances so unusual that they negate the possibility of a formal proceeding involving defense costs as well as liability, virtually any assertion of an exposure to liability within the risks covered by an insurance company is a claim.... A notice of claim provision [as opposed to a notice of occurrence provision] focuses on the actions of third parties and may be triggered by an unreasonable — even sanctionable — assertion of liability. We have thus noted that one harm caused by vexatious litigants who bring baseless lawsuits against lawyers is the need of those lawyers to notify their insurance carriers. An assertion of possible liability, no matter how baseless, is therefore all that is needed to trigger a notice of claim provision.

Fairchild, 56 F.3d at 439 (internal citations omitted).

Using this reasoning, the Second Circuit has stated...