Travelers Indem. Co. v. Northrup Grumman Corp.

• Decision Date: 26 September 2019
• Docket Number: 16 Civ. 8778 (LGS)
• Citation: 416 F.Supp.3d 290
• Parties: The TRAVELERS INDEMNITY CO., et al., Plaintiffs, v. NORTHRUP GRUMMAN CORP., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

416 F.Supp.3d 290

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

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

16 Civ. 8778 (LGS)

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

Signed September 26, 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, Elliott Schulder, Daniel Russell, Jr., Kevin Barnett, Margaret H. Brennan, Richard Laird Hart, Timothy Dezso Greszler, Edward H. Rippey, Seth Adam Tucker, Covington & Burling LLP, Washington, DC, Peter Benjamin DeWitt Duke, Teresa T. Lewi, Covington & Burling LLP, New York, NY, for Defendants.

OPINION AND ORDER

LORNA G. SCHOFIELD, District Judge:

Defendant Century Indemnity Company ("Century") seeks a declaration on summary judgment that co-Defendant Northrup Grumman Corp. ("Grumman") is not entitled to coverage for a putative class action lawsuit, Romano et al. v. Northrop Grumman Corporation et al. , No. 16 Civ. 5760 (E.D.N.Y.) (the "Romano Lawsuit"), or any natural resource damages claim ("NRD Claim"), asserted against Grumman. Century argues that Grumman failed to provide timely notice of an occurrence, accident or claim, as required for coverage. For the reasons below, the motion is granted in part and denied in part.

I. BACKGROUND

Century joins Plaintiff Travelers Indemnity Company's ("Travelers") Motions for Summary Judgment. Familiarity with the prior opinions on these motions is assumed. See Travelers Indem. Co. v. Northrop Grumman Corp. , No. 16 Civ. 8778, 413 F.Supp.3d 263, 2019 WL 4572761 (S.D.N.Y. Sept. 20, 2019) (" Travelers Romano Opinion"); Travelers Indem. Co. v. Northrup Grumman Corp. , No. 16 Civ. 8778, 413 F.Supp.3d 224, 2019 WL 4643586 (S.D.N.Y. Sept. 24, 2019) (" Travelers NRD Opinion"). This background recounts only facts unique to Century's motion. To the extent facts are disputed, they are construed, as required, in favor of Grumman, the non-moving party. See Soto v. Gaudett , 862 F.3d 148, 157 (2d Cir. 2017).

A. The Century Policies

The Insurance Company of North America ("INA") issued to Grumman the insurance policies at issue, in effect from 1950 to 1968. Century is now responsible for these policies. The policies include both primary ("Century Primary Policies") and excess policies ("Century Excess Policies"). This summary describes examples of the policies provided by the parties.

1. Century Primary Policies

The Century Primary Policies, in effect from 1955 to 1962, contain a "Notice of Accident" provision. An endorsement to these policies states that, for payment of an additional premium, and only when these policies cover "Bodily Injury Liability" but "not otherwise," "wherever the word ‘accident’ appears," the "word ‘occurrence’ is substituted." The notice provision states: "When an accident [or occurrence] occurs 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."

The Century Primary Policies also have a notice of claim provision: "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 representative."

The policies do not define "occurrence," "accident" or "claim." Failure to comply with these notice provisions vitiates coverage.

2. Century Excess Policies

a. Excess Policies XPL 3500 and XPL 3506

Two excess policies, XPL 3500, in effect from November 27, 1950, to January 1, 1951, and XPL 3506, in effect from January 1, 1951, to January 1, 1963, have the following notice of occurrence provision:

"Upon the happening of an occurrence or accident that appears reasonably likely to involve liability on the part of the company 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." Both policies state, "The word ‘occurrence’ and the word ‘accident,’ as used in this policy shall respectively include a series of occurrences and a series of accidents arising out of one event." The policies do not define "occurrence" or "event."

The policies also have a notice of claim provision:

The insured shall give like notice, with full particulars, of any claim made on account of such occurrence or accident. If thereafter suit or other proceeding is instituted against the insured to enforce such claim, the insured shall, when requested by the company, forward to the company every demand, notice, summons or other process or true copies thereof, received by the insured or the insured's representatives, together with copies of reports or investigations made by the insured with respect to such claim, suit or proceeding.

b. Excess Policy XBC 1177

A later Excess Policy, XBC 1177, in effect from January 1, 1963, to January 1, 1968, has the following notice of occurrence provision: "Upon the happening of an occurrence reasonably likely to involve the company hereunder, written notice shall be given as soon as practicable to the company or any of its authorized agents." The policy does not define "occurrence" for personal injury liability coverage. For property damage coverage, "occurrence" means:

[E]ither an accident happening during the policy period or a continuous or repeated exposure to conditions which unintentionally causes injury to or destruction of property during the policy period. All damages arising out of such exposure to substantially the same general conditions shall be considered as arising out of one occurrence.

The notice of claim provision states:

The insured shall give like notice of any claim made on account of such occurrence. If legal proceedings are begun, the insured, when requested by the company, shall forward to it each paper thereon, or a copy thereof, received by the insured or the insured's representatives, together with copies of reports of investigations made by the insured with respect to such claim proceedings.

B. Bethpage Area Events Prior to the 1970s

Familiarity with the events at the Bethpage facility (the "Facility") and Bethpage Community Park (the "Park") (collectively, the "Bethpage Area") from the 1970s onward is assumed. See Travelers Romano Opinion, 413 F.Supp.3d at 267–73, 2019 WL 4572761, at *1-5 ; Travelers NRD Opinion, 413 F.Supp.3d at 227–31, 2019 WL 4643586, at *1-4. The following summary recounts only events before the 1970s, when Century's, but not Travelers', policies were in effect.

The Facility began operating in the 1930s. Before the 1970s, in accordance with industry practice and regulatory guidance, Grumman disposed of manufacturing wastewater in "recharge basins" dug into the Facility ground. Grumman was not required to, and generally did not, treat wastewater until the 1950s.

In 1946, the State of New York began regulating the contaminant hexavalent chromium in drinking water. The New York State Department of Health ("NYSDOH") proposed to Grumman in 1947 that it treat its wastewater to prevent hexavalent chromium, potentially a byproduct of the Facility's manufacturing, from reaching the local drinking water supply. Grumman's treatment plant became operational in 1952 and treated all process water by 1955.

During the 1950s, Grumman buried sludge, generated from the wastewater treatment, in a remote parcel on the Facility, with NYSDOH's approval. Grumman also disposed of used oil and old rags in the parcel. Although against company policy, at least one Grumman employee periodically disposed of oil containing trichloroethylene ("TCE"), a contaminant at issue in the Romano Lawsuit, in the parcel.

In 1962, Grumman donated the parcel to the Town of Oyster Bay, which developed it into the Park. Grumman thereafter dried sludge in "drying beds" at the Facility and transported the sludge offsite for disposal. Grumman used drying beds until the 1980s.

C. Grumman's Notices to Century

On December 6, 1983, the New York State Department of Environmental Conservation ("NYSDEC") sent Grumman a letter (the "1983 Letter") regarding the company's potential liability under the Comprehensive Environmental Response, Compensation, and Liability Act. On January 30, 1984, Grumman forwarded the letter to Century's predecessor INA.

On August 7, 2015, Grumman forwarded to Century a June 29, 2015, solicitation letter from a law firm seeking plaintiffs, for a "property damage or potential personal injury claim," which eventually led to the Romano Lawsuit. Century disclaimed coverage for the prospective lawsuit on August 25, 2015, to the extent the claims would concern Bethpage Area contamination at issue in Travelers Indem. Co. v. Northrop Grumman Corp. , 12 Civ. 3040 (S.D.N.Y.) ("Grumman I "), for which Century had already disclaimed coverage.

On August 3, 2016, NYSDEC sent Grumman a letter regarding its intent to conduct a Natural Resource Damages Assessment ("NRDA") of Facility area groundwater. See Travelers NRD Opinion, 413 F.Supp.3d at 229–30, 2019 WL 4643586, at *3. The letter attributed the potential groundwater injury to the discharge of hazardous substances from the Facility. See id. Grumman forwarded this letter to Century on August 11, 2016.

On September 16, 2016, the Romano Lawsuit Complaint was filed. Grumman forwarded the Complaint to Century on September 28, 2016. Century disclaimed coverage on October 27, 2016. On May 18, 2018, Grumman forwarded the Romano Amended Complaint to Century. Century again disclaimed coverage on June 8, 2018.

Century stated in its December 30, 2016, Answer in this action that it disclaimed coverage for the Romano Lawsuit and any NRD Claim. On August 8, 2017, Century stated in a supplemental letter to Grumman that it disclaimed coverage for the latter claim because Grumman failed to provide Century or INA timely notice of the "accident" or "occurrence" precipitating the claim.

On May 28, 2019, Grumman filed a letter in this action, copying...