Travelers Indem. Co. v. Northrop Grumman Corp.

• Decision Date: 20 September 2019
• Docket Number: 16 Civ. 8778 (LGS)
• Citation: 413 F.Supp.3d 263
• Parties: The TRAVELERS INDEMNITY CO., et al., Plaintiffs, v. NORTHROP GRUMMAN CORP., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

413 F.Supp.3d 263

The TRAVELERS INDEMNITY CO., et al., Plaintiffs,

v.NORTHROP GRUMMAN CORP., et al., Defendants.

16 Civ. 8778 (LGS)

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

Signed September 20, 2019

Lynn Katherine Neuner, Robert Harrison Arnay, Summer Craig, Mary Beth Forshaw, Simpson Thacher & Bartlett LLP, New York, NY, Michael David Kibler, Simpson Thacher & Bartlett LLP, Los Angeles, CA, for Plaintiffs.

Georgia Kazakis, Cyril Djoukeng, Daniel Russell, Jr., Edward H. Rippey, Elliott Schulder, Kevin Barnett, Margaret H. Brennan, Richard Laird Hart, Seth Adam Tucker, Timothy Dezso Greszler, Covington & Burling LLP, Washington, DC, Peter Benjamin DeWitt Duke, Teresa T. Lewi, Covington & Burling LLP, New York, NY, Shane R. Heskin, Adam Berardi, Robert F. Walsh, Sara Tilitz, White & Williams, LLP, Philadelphia, PA, for Defendants.

OPINION AND ORDER

LORNA G. SCHOFIELD, District Judge:

Plaintiff Travelers Insurance Indemnity Company ("Travelers") seeks a declaration on summary judgment that it is not obligated to provide liability insurance coverage for a lawsuit pending against Defendant Northrop Grumman Corporation ("Grumman"), Romano et al. v. Northrop Grumman Corporation et al. , No. 16 Civ. 5760 (E.D.N.Y.) ("the Romano Lawsuit"). Travelers argues that Grumman did not give timely notice of the events or "occurrences" precipitating the lawsuit, a condition precedent to any coverage. For the reasons below, the motion is granted in part and denied in part.

I. BACKGROUND

This background summary construes disputed facts, as required, in favor of Grumman, the non-moving party. See Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; accord Soto v. Gaudett , 862 F.3d 148, 157 (2d Cir. 2017).

A. The Romano Lawsuit

The Romano Lawsuit is a putative mass tort class action brought by residents and property owners near a former Grumman manufacturing facility, the Bethpage facility (the "Facility"), on Long Island, New York. The Second Amended Complaint, which is the operative Romano Complaint, alleges that industrial waste from the Facility contaminated groundwater and soil in the nearby community, causing bodily injury and property damage.

B. The Insurance Policies

Three categories of insurance policies, which Travelers issued to Grumman between January 1, 1968, and January 1, 1985, potentially give rise to the coverage obligations: (1) the Majority Primary Policies, (2) the Minority Primary Policies and (3) the Umbrella Policies, as defined below.

1. Majority Primary Policies

The "Majority Primary Policies" refer to all primary coverage policies except two. These policies contain similar notice of "occurrence" provisions. Noncompliance with the provisions vitiates coverage. There are minor wording differences in the policies issued between 1968 and 1974 and those issued between 1975 and 1985.

a. Majority Primary Policies in Effect from 1968-1974

The 1968-1974 Majority Primary Policies provide:

In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company [Travelers] or any of its authorized agents as soon as practicable.

These policies define "occurrence" as "an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured." The "limit of liability" provision states that, where "all bodily injury and property damage aris[e] out of continuous or repeated exposure to substantially the same general conditions[, they] shall be considered as arising out of one occurrence."

b. Majority Primary Policies in Effect from 1975-1985

The 1975-1985 Majority Primary Policies provide:

In the event of an occurrence resulting in bodily injury or property damage ... written notice containing the particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured, and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable.

The "limit of liability" provision states, "For [the] purpose[ ] of determining the limit of the company's liability, all [bodily injury and property] damage[ ] arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence." The policies do not otherwise define "occurrence." Notice is deemed timely "if given within thirty days after the Insurance Manager of the named insured becomes aware of such occurrence or offense."

2. The Minority Primary Policies

Two policies, TR-NSL-162T582-2-78 issued in 1978 and TR-NSL-181T215-4-80 issued in 1980 (together, the "Minority Primary Policies"), have a unique notice provision:

Insured's Duties in the Event of Occurrence, Claim or Suit: a. In the event of bodily injury, property damage, malpractice injury, personal injury, or advertising injury, notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable. Notice shall be deemed given as soon as practicable, as respects the named insured, if given within thirty days after the Director of Insurance of the named insured becomes aware of such injury or damage.

These policies define "occurrence" as:

[A]n event, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured .... "For the purpose of determining the limit of the company's liability, all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence."

3. Umbrella Policies

The "Umbrella Policies" are excess insurance policies triggered when the primary policies do not apply. They contain the following notice provision:

Written notice shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable whenever (a) bodily injury or property damage take place, or (b) an act or omission takes place resulting in other injury or damage, which appears reasonably likely to involve this policy.

The limitation of liability provision states, "For [the] purpose[ ] of determining the limit of the company's liability, all [bodily injury and property] damage[ ] arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence." The Umbrella Policies do not define "occurrence."

C. Events at the Bethpage Facility

From the 1930s through 1990s, Grumman manufactured airplanes at the Facility, which encompassed 600 acres. The Facility had fourteen wells, from which Grumman drew groundwater for drinking, manufacturing and air conditioning. "Recharge basins" excavated in the ground held some of the Facility's industrial waste. The Facility was adjacent to the Hooker Chemical Company ("Hooker"), which disposed of industrial waste in its own lagoons.

1. Groundwater Contamination¹

Around the 1970s, local regulators began investigating the Facility's groundwater, after Grumman noticed that the wells were emitting odors. In 1973, the Nassau County Department of Health ("NCDOH") tested and found a "rapid increase" of nitrate and ammonia in some wells. Grumman previously had abandoned two wells due to odor, and in January 1974, shut down two more wells.

From 1974 through 1976, NCDOH issued findings about the groundwater. A May 1974, memorandum, copying Grumman, states that samples from both Grumman's recharge basins and a Hooker lagoon contained organic compounds, which could "be the cause of the taste and odor problems" in public supply wells.

NCDOH's May 1975, preliminary report (the "Preliminary Report") finds that the water quality at Grumman "has continued to decline to the extent that the most serious and severe instance of ... contamination in Nassau County is now evident." Water in four wells had nitrate, ammonia and other organic compound levels approaching or exceeding allowed limits. The report further states that industrial wastes "probabl[y] contamin[ated]" the groundwater: the "discharge of sanitary and industrial wastes at and in the vicinity of the Grumman Corporation is considered responsible for the degradation in quality of Grumman Corporation wells." The report is not conclusive regarding the "nature of organic contamination and the significance of nearby sources of contamination [besides Grumman] affecting groundwater quality."

A November 5, 1975, report (the "NCDOH Report") confirms the presence of organic contaminants, like vinyl chloride and trichloroethylene ("TCE"), in Grumman's wells. It reiterates the Preliminary Report's finding that "discharge of sanitary wastes in the vicinity of the Grumman Corporation and the discharge of industrial wastes, particularly those previously discharged by the Hooker Chemical Corporation, is considered responsible for the degradation in quality of Grumman Corporation wells." In the mid-1970s, Grumman replaced a tank at the Facility leaking TCE. Grumman later found TCE in four Grumman wells and a recharge basin in April 1976.

In January 1976, NCDOH told Grumman that it had asked the federal Environmental Protection Agency ("EPA") and the New York state health department what the "public health significance of the detected contaminants" was...