State v. Flora

• Decision Date: 13 June 2019
• Docket Number: 526787
• Citation: 102 N.Y.S.3d 771,173 A.D.3d 1402
• Parties: STATE of New York, Plaintiff, v. Diana L. FLORA, Individually and Doing Business as Richmond Automotive Center, et al., Defendants, and Utica Mutual Insurance Company, Defendant and Third–Party Plaintiff–Appellant; American Automobile Insurance Company et al., Sued Herein As Fireman's Fund Insurance Company, et al., Third–Party Defendants–Respondents, et al., Third–Party Defendants. (And Two Other Third–Party Actions.)
• Court: New York Supreme Court — Appellate Division

173 A.D.3d 1402
102 N.Y.S.3d 771

STATE of New York, Plaintiff,
v.
Diana L. FLORA, Individually and Doing Business as Richmond Automotive Center, et al., Defendants,
and
Utica Mutual Insurance Company, Defendant and Third–Party Plaintiff–Appellant;

American Automobile Insurance Company et al., Sued Herein As Fireman's Fund Insurance Company, et al., Third–Party Defendants–Respondents, et al., Third–Party Defendants.

(And Two Other Third–Party Actions.)

526787

Supreme Court, Appellate Division, Third Department, New York.

Calendar Date: April 29, 2019
Decided and Entered: June 13, 2019

Hancock Estabrook, LLP, Syracuse (Alan J. Pierce of counsel), for defendant and third-party plaintiff-appellant.

Rivkin Radler, LLP, Uniondale (Michael A. Kotula of counsel), for American Automobile Insurance Company and another, third-party defendants-respondents.

Herrick, Feinstein LLP, New York City (Gabrielle C. Wilson of counsel), for Arch Insurance Company, third-party defendant-respondent.

Before: Egan Jr., J.P., Lynch, Clark, Mulvey and Pritzker, JJ.

Clark, J.

102 N.Y.S.3d 774

173 A.D.3d 1402

In 2013, plaintiff commenced this action pursuant to Navigation Law article 12 seeking to hold defendants strictly liable for $921,904.41 – the total cost of cleaning up and removing petroleum

173 A.D.3d 1403

product contamination of groundwater and soil allegedly caused by discharges from an underground petroleum product storage and dispensing system at defendant Richmond Automotive Center (hereinafter the spill site). According to the complaint, the petroleum discharges contaminated the soil and groundwater at both the spill site and at the Honeoye Municipal District Well number two in the Town of Richmond, Ontario County. Specifically, plaintiff sought to recoup the petroleum cleanup and removal costs from Richmond Automotive and its partners, as well as defendant Kirkwood Heating Oil, Inc. – a corporation that periodically supplied petroleum products to the underground petroleum storage and dispensing system – and Kirkwood's insurance company, defendant Utica Mutual Insurance Company.¹

Utica Mutual answered and thereafter commenced a third-party action for contribution and/or indemnification against Kirkwood's other insurers during the years in which the petroleum discharges and contamination allegedly occurred – as relevant here, third-party defendants American Automobile Insurance Company (hereinafter AAIC), National Surety Corporation (hereinafter NSC)² and Arch Insurance Company. After joining issue, AAIC and NSC moved for summary judgment dismissing the third-party complaint against them on the basis that, among other things, they did not receive timely notice of the alleged incident, as required by the insurance policies they issued to Kirkwood from August 1991 through August 1997. Arch also joined issue and moved for summary judgment dismissing the third-party complaint against it, arguing that its policies – spanning from August 2002 through August 2004 – contained an endorsement that excluded coverage for property damage arising out of the presence of methyl tertiary butyl ether (hereinafter MTBE), a gasoline additive. Supreme Court granted both motions for summary judgment and dismissed the third-party complaint insofar as asserted against AAIC, NSC and Arch. Utica Mutual appeals, and we affirm.

Utica Mutual argues that Supreme Court erroneously concluded that Arch was entitled to summary judgment dismissing the third-party claims for indemnification and/or contribution against it based upon the MTBE exclusion in its insurance policies. An insurance company's broad duty to

173 A.D.3d 1404

defend arises "whenever the allegations of the complaint ‘suggest ... a reasonable possibility of coverage’ " ( Automobile Ins. Co. of Hartford v. Cook, 7 N.Y.3d 131, 137, 818 N.Y.S.2d 176, 850 N.E.2d 1152 [2006], quoting Continental Cas. Co. v. Rapid–American Corp. , 80 N.Y.2d 640, 648, 593 N.Y.S.2d 966, 609 N.E.2d 506 [1993] ). "However, an insurer can be relieved of its duty to defend if it establishes as a matter of law that there is no possible factual or legal basis [up]on which it might eventually be obligated to indemnify its insured under any policy provision" ( Allstate Ins. Co. v. Zuk, 78 N.Y.2d 41, 45, 571 N.Y.S.2d 429, 574 N.E.2d 1035 [1991] [citations omitted]; see

102 N.Y.S.3d 775

Frontier Insulation Contrs. v. Merchants Mut. Ins. Co. , 91 N.Y.2d 169, 175, 667 N.Y.S.2d 982, 690 N.E.2d 866 [1997] ). Where, as here, an insurer seeks to disclaim coverage on the basis of an exclusion, it must "demonstrate that the allegations of the complaint cast that pleading solely and entirely within the policy exclusion[ ], and, further, that the allegations ... are subject to no other interpretation" ( 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] ; see Automobile Ins. Co. of Hartford v. Cook, 7 N.Y.3d at 137, 818 N.Y.S.2d 176, 850 N.E.2d 1152 ).

The policy exclusion at issue here – the MTBE exclusion³ – states that Arch's insurance coverage does not apply to " ‘property damage’ arising out of or contributed to or by or resulting from, directly or indirectly[,] ... ‘MTBE.’ "⁴ The exclusion further provides that coverage does not apply to "[a]ny loss, cost or expense arising out of any: (1) [r]equest, direction, demand or order that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, remedy or abate, or in any way respond to, or assess the effect of ‘MTBE’; or (2) [c]laim or suit by or on behalf of a governmental authority and arising out of, seeking or involving the testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing or in any way responding to, or assessing the effects of ‘MTBE.’ "

To demonstrate the applicability of the MTBE exclusion, Arch relied on deposition testimony from employees at the Department of Environmental Conservation that MTBE was one of the primary contaminants at the spill site and the Honeoye Municipal District Well, as well as a 2017 expert report stating that the contamination at the spill site and the consequential contamination at the Honeoye Municipal District Well arose directly out of the presence of MTBE. Arch also relied on admissions made by Utica Mutual in response to

173 A.D.3d 1405

certain interrogatories. Specifically, Utica Mutual acknowledged that an expert report prepared by Earthworks Environmental and investigatory reports from the Department of Environmental Conservation revealed that MTBE was one of the, if not the primary or sole,...