| Travelers Indem. Co. v Orange & Rockland Utils., Inc. |
| 2010 NY Slip Op 04254 [73 AD3d 576] |
| May 20, 2010 |
| Appellate Division, First Department |
| The Travelers Indemnity Company, Respondent, v Orangeand Rockland Utilities, Inc., Appellant, et al., Defendants. The Travelers Indemnity Company,Appellant, v Orange and Rockland Utilities, Inc., Respondent, et al.,Defendants. |
—[*1] Steptoe & Johnson LLP, Washington, D.C., (Roger E. Warin of the bar of the District ofColumbia, admitted pro hac vice) and Clyde & Co US LLP, New York (Daren S. McNally ofcounsel), for The Travelers Indemnity Company, respondent/appellant.
Order, Supreme Court, New York County (Eileen Bransten, J.), entered August 19, 2009,which granted defendant insured's motion for partial summary judgment on the issue of latenotice and denied plaintiff insurer's motion for partial summary judgment, unanimously reversed,on the law, without costs, defendant's motion denied, and plaintiff's motion granted to declaredenial of coverage on the basis of untimely notice. Order (same court, Justice and entry date),which granted plaintiff's motion for partial summary judgment to exclude certain coverage basedon the pollution exclusion in the policy, unanimously modified, on the law, the motion denied asto the 1970 policy and sites other than Nyack, and otherwise affirmed, without costs.
Defendant did not give timely notice under the policy, which is a requirement for coverage(Paramount Ins. Co. v Rosedale Gardens, 293 AD2d 235, 239-240 [2002]). Defendant'songoing contacts with environmental regulators about the Nyack site dated back to [*2]1981, and there was even a site inspection by the EnvironmentalProtection Agency in 1985, yet defendant never provided any notice to its insurer of thesecontacts or the questions they raised until 1995. Defendant's argument that it never had actualnotice of any pollution was insufficient. The many reports, including internal reports of alikelihood of contamination at the subject site, as well as inquiries from regulators, placed it onnotice. Its willful failure to investigate negates any lack of awareness of an occurrence ofpollution (see Technicon Elecs. Corp. v American Home Assur. Co., 74 NY2d 66, 75[1989]). The court mistakenly held defendant to the much more lenient standard for the timing ofnotice applicable in excess insurance cases. The standard with regard to a primary liabilitypolicy, such as involved here, is simply awareness of a reasonable possibility that the policy willbe implicated (Paramount, 293 AD2d at 239-240).
Similarly, the court erred in holding that plaintiff waived its right to disclaim for late noticesimply as a result of the passage of time. Contrary to the court's assumption, Insurance Law§ 3420 applies only to claims for death and bodily injury (Fairmont Funding v UticaMut. Ins. Co., 264 AD2d 581, 582 [1999]), and not to pollution insurance.
Between 1971 and 1982, a provision of the Insurance Law then in effect (former InsuranceLaw § 46) excluded liability coverage for pollution other than claims based on "suddenand accidental" discharges. The court properly applied that exclusion for all policies issuedduring that period (see Maryland Cas. Co. v Continental Cas. Co., 332 F3d 145, 159-160[2d Cir 2003]). We do not find persuasive defendant's argument that plaintiff waived the"benefit" of the statute by issuing policies in contravention of its terms. Section 46 did not conferany benefit or right on insurers, but rather was intended to impose a penalty on polluters like theinsured herein. The court correctly concluded that defendant failed to meet its burden ofestablishing that the pollution complained of was caused by "sudden and accidental" discharges(Borg-Warner Corp. v Insurance Co. of N. Am., 174 AD2d 24, 30 [1992], lvdenied 80 NY2d 753 [1992]). While its longtime employee testified that there were manyaccidental spills during routine operations, this was not sufficiently definite as to quantity, natureor effect of these spills to prove they fell outside the exclusion.
However, the court erred in applying the section 46 exclusion to the policy issued in 1970,prior to enactment of the short-lived statute, since a contract generally incorporates the state ofthe law in existence at the time of its formation (see People ex rel. Platt v Wemple, 117NY 136, 148-149 [1889], appeal dismissed 140 US 694 [1890]). It also erred in grantingplaintiff summary declaratory relief as to other sites,[FN*]in light of plaintiff's concession that the court's ruling on the issue of the statutory pollutionexclusion be limited to the Nyack site. Concur—Gonzalez, P.J., Friedman, DeGrasse,Manzanet-Daniels and RomÁn, JJ. [Prior Case History: 2009 NY Slip Op31862(U).]
Footnote *: Seven are enumerated in thecourt's order and plaintiff's show cause order, although only six of them are listed in thecomplaint.