Summary
recognizing the "well-settled rule that an insurer's assertion of certain defenses to coverage is deemed conclusive evidence of the insurer's intent to waive other unasserted grounds"
Summary of this case from Hunt Constr. Grp. v. Berkley Assurance Co.Opinion
No. 84 CV 1968 (TPG).
March 1, 2006
OPINION
In the portion of this action now on trial, plaintiff seeks to hold defendants, certain Underwriters at Lloyds of London and certain London Market Insurance Companies (collectively the "London Underwriters"), liable for certain costs of environmental remediation it undertook at the site of its McIntosh, Alabama chemical manufacturing facility.
Plaintiff has moved to have the court grant partial summary judgment, holding that the London Underwriters have waived the late notice defense.
The motion is granted.
FACTS
The facts surrounding the present motion are undisputed. Each of the London Underwriters' policies at issue required the insured to provide notice of a covered "occurrence" or "accident" to its insurer as soon as practicable after it received information from which it could reasonably conclude that such an event had occurred.
On February 15, 1984, plaintiff, through its broker Johnson Higgins, notified defendants of certain environmental damage and corresponding liabilities that plaintiff incurred at its McIntosh site. The letter stated, in pertinent part:
In December of 1980, Olin Corporation's Environmental Affairs Department (EAD) initiated a groundwater sampling program to evaluate the quality of the groundwater at its McIntosh, Alabama chlor/alkali facility. Specifically, the study sought to determine whether any present or past plant activities had affected the quality of the underlying groundwater aquifers. Throughout 1981 and early 1982, Olin took several samples of groundwater from approximately 75 wells on Olin's property. The Alabama Division of Solid and Hazardous Waste was informed of the study in early 1981 and, on occasion, split samples with EAD. Recent groundwater sampling results indicate the presence of the following contaminants: benzene, chloroform, and monochlorobenzene (MCB).
It is believed that the groundwater contamination resulted from the deposit of wastes associated with manufacturing certain chemical intermediates in the 1950s and 1960s. At one time, when manufacturing monochlorobenzene (MCB) and other chemical intermediates, liquid wastes were placed in a pit. The pit was filled in and, subsequently, landfilling operations were performed on top of the pit. The landfill is now classified as "inactive," having been closed in 1977.
. . .
After meeting with the State, Olin submitted a work plan to Alabama on September 19, 1983 to remediate the site. The plan calls for low permeability clay caps for the inactive landfill and CPC plant areas to virtually eliminate any downward movement of water into the upper aquifer. On November 2, 1983, Alabama approved the plan and USEPA was provided with the opportunity to comment on the plan. It is anticipated that remediation will commence in the Spring of 1984.
Currently, USEPA has proposed adding the site to the National Priorities List which currently consists of 406 sites.
The February 15, 1984 notice also stated that plaintiff had already incurred $50,000 in remediation costs at the McIntosh site, and estimated that the total clean-up cost at McIntosh would be $1,300,000.
The London Underwriters responded to plaintiff's letter via telex on March 26, 1984. The telex stated: "Underwriters reserve their right re coverage and punitive damages." The telex did not assert any reservation of rights with respect to a late notice defense.
Nor did the London Underwriters follow up with a broader or more detailed letter reserving their rights or disclaiming coverage based upon plaintiff's alleged late notice. Indeed, the London Underwriters did not assert late notice as a defense until November 1993, when they included it as an affirmative defense in their answer to plaintiff's second amended complaint in this action.
DISCUSSION
Summary judgment should be granted when "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986).It is a well settled principle of New York law that once an insurer specifies the particular grounds upon which it disclaims coverage, the insurer waives its right to subsequently disclaim based on other unspecified grounds, provided the insurer possessed sufficient knowledge of the circumstances regarding the unasserted ground. State v. Amro Realty Corp., 936 F.2d 1420, 1432 (2d Cir. 1991); General Accident Insurance Group v. Cirucci, 46 N.Y.2d 862, 864 (1979).
In Amro, the plaintiff did not give notice to the defendant, its insurer, of the plaintiff's potential environmental liabilities until four years after the first lawsuit was filed against the plaintiff. In response to this notice, the insurer sent several letters to the plaintiff disclaiming coverage on various grounds, not including late notice. Later, the insurer sought to invoke a defense of late notice.
Reversing the district court's grant of summary judgment in favor of the insurer based on the insured's untimely notice, the Second Circuit held that the act by an insurer of disclaiming on certain grounds but not others is deemed conclusive evidence of an insurer's intent to waive the unasserted grounds. Id. at 1432.
TIG Ins. Co. v. Town of Cheektowaga, 142 F. Supp. 2d 343 (W.D.N.Y. 2000), is directly on point. The town sought coverage from a number of its insurers, including TIG and Century, for environmental remediation liabilities it incurred under CERCLA. After the town had belatedly notified TIG of an occurrence, TIG replied by "reserving . . . the right to disclaim coverage entirely in the event that this claim is ultimately determined to be outside the scope of the alleged policy coverage." Id. at 365. The court held that TIG's reservation of rights, which specified as a defense only the scope of coverage, and not the condition precedent of timely notice, constituted a waiver of its right to subsequently disclaim on the ground of late notice.Id. at 366. Century, on the other hand, sent the town a reservation of rights letter, which broadly reserved "all rights under the alleged policies." Id. at 370. The court held that, because Century did not, in its reservation of rights letter, specify any particular potential disclaimer ground, Century did not waive its right to disclaim based on the Town's untimely notification of an occurrence. Id.
Like TIG's reservation of rights letter, the London Underwriters, in their March 26, 1984 telex, reserved their rights specifically with respect to issues of coverage and punitive damages. By reserving their rights on these specific grounds while omitting any mention of a defense based upon the failure of plaintiff to provide timely notice, the London Underwriters waived their right to disclaim coverage based upon plaintiff's alleged untimely notification.
The London Underwriters argue that the waiver doctrine applies only where an insurer actually disclaims on certain grounds to the exclusion of others, but not where an insurer merely reserves its rights with respect to particular defenses. The London Underwriters point to no case law that would support such a distinction.
U.S. Underwriters Ins. Co. v. A D Maja Constr., Inc., 160 F. Supp. 2d 565 (S.D.N.Y. 2001), cited by the London Underwriters, is distinguishable because it involved an entirely different theory of waiver. In U.S. Underwriters, the insured asserted that its insurer had waived its late notice defense, not by failing to include that defense among other specific grounds in a disclaimer or reservation of rights, but rather because it failed to disclaim in a timely manner. The court held that the insurer's reservation of rights letter was insufficient to satisfy the insurer's obligation to disclaim coverage in a timely manner. Id. at 569-70. However, where, as here, an insurer actually asserts certain policy defenses, whether by disclaimer or reservation of rights, the insurer is deemed to have waived any other unasserted grounds for refusing coverage.
Moreover, TIG itself involved an insurer's reservation of rights letter, not a disclaimer, and held that the insurer had waived its late notice defense by reserving its rights as to coverage but not late notice.
The London Underwriters also argue that plaintiff's February 15, 1984 letter failed to provide sufficient information of the circumstances giving rise to the late notice defense. Amro, 936 F.2d at 1432; Crucible Materials Corp. v. Aetna Cas. Sur. Co., 228 F. Supp. 2d 182, 195-96 (N.D.N.Y. 2001).
The London Underwriters assert that certain memoranda prepared by plaintiff in 1982 show that plaintiff was already aware, at that time, of extensive environmental damage and corresponding remediation liabilities at McIntosh. The London Underwriters argue that they cannot be deemed to have waived their late notice defense, because those memoranda, which allegedly show that plaintiff knew of the occurrences as early as 1982, were not provided by plaintiff in its February 15, 1984 notice.
In Luria Bros. Co. v. Alliance Assurance Co., 780 F.2d 1082 (2d Cir. 1986), the court held that even if an insurer does not have actual knowledge of all the pertinent facts about a defense when it declines liability on other grounds, if it has sufficient information to put it on notice of the defense, the insurer has constructive knowledge, which is sufficient for waiver. Id. at 1091. It is therefore not necessary that an insurer have actual knowledge of every fact bearing upon a defense in order to waive it. Atlantic Mut. Ins. Co. v. Balfour MacLaine Int'l, 873 F. Supp. 862, 871 (S.D.N.Y. 1995).
Plaintiff's February 15, 1984 notice letter gave the London Underwriters sufficient information to put them on notice of a potential late notice defense. Plaintiff's letter stated that plaintiff had been conducting testing at the McIntosh site since 1980; that the Alabama Division of Solid and Hazardous Waste was informed of the study in early 1981 and, on occasion, split samples with plaintiff; that plaintiff had submitted a plan to Alabama to remediate the McIntosh site in September 1983; and that in November 1983, Alabama approved the plan and the USEPA was provided with a copy of the plan. Plaintiff's letter also indicated that the total estimated clean up cost under the plan submitted to Alabama in September 1983 was $1,300,000.
This information was sufficient to place the London Underwriters on at least constructive notice of a potential late notice defense. The fact that evidence later emerged that may have lent additional support for that defense does not affect the London Underwriters' waiver.
Finally, the London Underwriters argue that they did not unreasonably delay in issuing a disclaimer based upon late notice, because the parties initially agreed to forego litigation in an attempt to settle plaintiff's claims. The London Underwriters also argue that plaintiff has failed to demonstrate that it was prejudiced in any way by the London Underwriters' belated disclaimer on the grounds of late notice.
These arguments are not relevant. Plaintiff is not asserting that the London Underwriters have waived their late notice defense because of a delay in disclaiming on that ground. Rather, plaintiff is relying upon the well settled rule that an insurer's assertion of certain defenses to coverage is deemed conclusive evidence of the insurer's intent to waive other unasserted grounds. Amro, 936 F.2d at 1432.
The course of conduct evidence regarding the parties' attempts at settlement occurred only after the London Underwriters sent their March 1984 telex, which, the court holds, constituted a waiver of the late notice defense. That evidence is therefore irrelevant.
Furthermore, as the London Underwriters concede, a showing of prejudice in unnecessary except where waiver is based upon a theory of untimely disclaimer, sometimes known as estoppel. In this case, where the London Underwriters waived the late notice defense by failing to assert it among other possible grounds for denying coverage in its March 26, 1984 telex, prejudice need not be shown.
SO ORDERED.