Keyspan Gas East Corporation, Appellant,v.Munich Reinsurance America, Inc., Defendant, Century Indemnity Company et al., Respondents.BriefN.Y.February 6, 2018To be Argued by: ROBERT F. WALSH (Time Requested: 30 Minutes) APL-2016-00236 New York County Clerk’s Index No. 604715/97 Court of Appeals of the State of New York KEYSPAN GAS EAST CORPORATION, Plaintiff-Appellant, – against – MUNICH REINSURANCE AMERICA, INC., Defendant, – and – NORTHERN ASSURANCE COMPANY OF AMERICA and CENTURY INDEMNITY COMPANY, Defendants-Respondents. BRIEF FOR DEFENDANT-RESPONDENT NORTHERN ASSURANCE COMPANY OF AMERICA ROBERT F. WALSH WHITE AND WILLIAMS LLP Attorneys for Defendant-Respondent Northern Assurance Company of America Seven Times Square, Suite 2900 New York, New York 10036 Tel.: (212) 244-9500 Fax: (212) 244-6200 April 19, 2017 RULE 500.1(f) CORPORATE DISCLOSURE STATEMENT Effective August 1, 2013, Northern Assurance Company of America was merged into OneBeacon America Insurance Company (“OneBeacon”). Effective December 23, 2014, OneBeacon was sold to Armour Group Holdings, Limited, a Bermuda Company (“Armour”), and subsequently changed its name to Lamorak Insurance Company (“Lamorak”). Lamorak is a wholly owned subsidiary of Bedivere Insurance Company (“Bedivere”), which in turn is a wholly owned subsidiary of Trebuchet US Holdings, Inc., a Delaware Corporation, which in turn is a wholly owned subsidiary of Trebuchet Investments, Limited, a Bermuda Company, which in turn is a wholly owned subsidiary of Armour. Armour is controlled by voting share ownership by Brad Huntington and John Williams. No publicly held corporation owns more than 10% of Lamorak. In addition to Bedivere, the affiliates of Lamorak are The Employers’ Fire Insurance Company and Potomac Insurance Company. TABLE OF CONTENTS Page QUESTIONS PRESENTED ...................................................................................... 1 PRELIMINARY STATEMENT ............................................................................... 1 STATEMENT OF JURISDICTION.......................................................................... 3 STATEMENT OF THE CASE .................................................................................. 3 ARGUMENT ............................................................................................................. 4 CONCLUSION .......................................................................................................... 6 TABLE OF AUTHORITIES Page(s) Consolidated Edison Co. of New York, Inc. v. Allstate Ins. Co., 98 N.Y.2d 208 (2002) ................................................................................... 2, 4, 5 Long Is. Lighting Co. v. Allianz Underwriters Ins. Co., 2012 N.Y. Misc. LEXIS 471 (Sup. Ct. Feb. 2, 2012) .......................................... 3 Matter of Viking Pump, Inc., 27 N.Y.3d 244 (2016) ........................................................................................... 5 Roman Catholic Diocese of Brooklyn v. National Union Fire Ins. Co. of Pittsburgh, Pa., 21 N.Y.3d 139 (2013) ....................................................................................... 4, 5 Defendant-Respondent Lamorak Insurance Company (“Lamorak”), currently named in this action as Northern Assurance Company of America (“NOAC”), submits this Brief in opposition to the appeal of Plaintiff-Appellant, KeySpan Gas East Corporation (“KeySpan”), from the Decision and Order of the Appellate Division, First Department, dated September 1, 2016. QUESTIONS PRESENTED Lamorak joins in and incorporates herein the statement of questions presented contained in the Brief of Defendant-Respondent Century Indemnity Company (“Century”). PRELIMINARY STATEMENT In this case, KeySpan seeks a declaration that Century and Lamorak have a duty under excess liability insurance policies issued to KeySpan’s alleged predecessor, Long Island Lighting Company (“LILCO”), to indemnify KeySpan for liabilities associated with the investigation and remediation of environmental damage at manufactured gas plant (“MGP”) sites that LILCO owned or operated. The parties do not dispute that the damage occurred continuously over long timeframes that were not confined to the policy periods at issue. A-640. These timeframes include years when liability insurance for such damage was purportedly “unavailable” in the marketplace. Id. 2 Lamorak’s predecessor, NOAC, issued four upper-level excess policies to LILCO that follow form to underlying policies issued by Century. The Century policies – and, therefore, the NOAC policies – expressly limit coverage to property damage occurring “during the policy period.” For the reasons set forth in Century’s Brief, the Appellate Division correctly interpreted this language in accordance with this Court’s decision in Consolidated Edison Co. of New York, Inc. v. Allstate Insurance Co., 98 N.Y.2d 208 (2002) (“Con Ed”), to limit coverage to damage happening during the applicable policy period and not to cover damage happening in other years merely because insurance was purportedly “unavailable” in those years. In addition, KeySpan’s argument that “all sums” allocation, rather than pro-rata allocation, applies should be rejected, because the argument was repeatedly waived and, in any event, is meritless. As a result of prior rulings, Lamorak’s involvement in this case is limited to a single site, Bay Shore. The Appellate Division rendered its September 1, 2016 decision in the context of two other sites, Rockaway Park and Hempstead. A-641- 42. Nevertheless, the issues presented are equally pertinent to Bay Shore because the damage at that site also occurred, in part, during periods when insurance was supposedly “unavailable.” Consequently, Lamorak has an interest in the resolution of these issues on appeal. 3 STATEMENT OF JURISDICTION Lamorak joins in and incorporates herein the statement of jurisdiction contained in Century’s Brief. STATEMENT OF THE CASE Lamorak joins in and incorporates herein the statement of the case contained in Century’s Brief. In addition, Lamorak provides the following factual background specific to Lamorak. The NOAC policies at issue were effective 1960 to 1962 and 1964 to 1966. Long Is. Lighting Co. v. Allianz Underwriters Ins. Co., 2012 N.Y. Misc. LEXIS 471, at *42 (Sup. Ct. Feb. 2, 2012). They provide upper-level excess coverage and follow form to one of two underlying policies issued by Century. Id. at *42-*43. As a result of prior rulings, the NOAC policies are implicated with respect to only one of the sites at issue, Bay Shore. Id. at *43. Bay Shore, like the Rockaway Park and Hempstead sites, is an MGP site with a long history. Id. at *2-*3. The Century policies in question, nos. XCP-1200 (effective 1957-61) and XBC-1097 (effective 1961-66), apply “only to occurrences . . . during the policy period . . . .” A-250, A-277. Policy no. XCP-1200 defines an “occurrence” as “either an accident or a continuous or repeated exposure to conditions which result during the policy period in injury to or destruction of property . . . .” A-252 (emphasis added). Policy no. XBC -1097 defines an “occurrence” as “either an 4 accident happening during the policy period or a continuous or repeated exposure to conditions which . . . causes injury to or destruction of property during the policy period.” A-280 (emphasis added). Thus, the Century policies – and, by extension, the NOAC policies – limit coverage to occurrences that result in damage “during the policy period.” A-654-55. ARGUMENT Lamorak joins in and incorporates herein the arguments contained in Century’s Brief. As Century’s Brief demonstrates, in applying pro-rata allocation to the Century policies, the Appellate Division correctly interpreted the policy language to limit coverage to damage occurring during the policy period and not to cover damage happening in other time periods merely because insurance was purportedly “unavailable” to the policyholder in those years. The Appellate Division’s interpretation is wholly consistent with, if not compelled by, this Court’s construction of substantially similar policy language in Con Ed. The Appellate Division’s interpretation is also in keeping with this Court’s subsequent decision in Roman Catholic Diocese of Brooklyn v. National Union Fire Ins. Co. of Pittsburgh, Pa., 21 N.Y.3d 139 (2013), in which the Court upheld the application of pro-rata allocation to a policy covering bodily injury that “occurs during the policy period.” Id. at 818. In Roman Catholic Diocese, the Court recognized: “Plainly, the 5 policy’s coverage is limited only to injury that occurs within the finite one-year coverage period of the policy.” Id. (emphasis added). As Century’s Brief explains in detail, the plain language of the policies, as interpreted in Con Ed and Roman Catholic Diocese, precludes the adoption of any so-called “unavailability exception” to pro-rata allocation. Adopting such an exception would provide the policyholder with “free insurance coverage,” A-652, in contravention of the policy language and would dramatically expand the scope of the risk insured without corresponding payment of premium to the insurer. KeySpan’s reliance on supposed public policy reasons supporting an “unavailability exception” do not justify departing from the plain language of the policies. Further, the Court should reject KeySpan’s argument that “all sums” allocation, not pro-rata allocation, applies. As Century’s Brief recounts, KeySpan repeatedly waived this argument over the course of nearly a decade of litigation. Moreover, this argument lacks merit, chiefly because it is premised on an “other insurance” clause contained in the Century policies that is materially different in both meaning and effect from the non-cumulation provision this Court held required “all sums” allocation in Matter of Viking Pump, Inc., 27 N.Y.3d 244 (2016). CONCLUSION The certified question should be answered in the affirmative, and the Appellate Division's decision affirmed. Dated: April19, 2017 Respectfully submitted, Robert F. Walsh WHITE AND WILLIAMS LLP Seven Times Square Suite 2900 New York, NY 10036 (212) 244-9500 Attorneys for Defendant-Respondent Northern Assurance Company of America (now known as Lamorak Insurance Company) 6 CERTIFICATION I certify, pursuant to 22 N.Y.C.R.R. § 500.13(c)(1), that the total word count for all printed text in the body of the brief, exclusive of the corporate disclosure statement, the table of contents, the table of cases and authorities, and the statement of questions presented required by subsection (a) of this section, is 957 words. Dated: April 19, 20 1 7 Robert F. Walsh WHITE AND WILLIAMS LLP Seven Times Square Suite 2900 New York, NY 10036 (212) 244-9500 Attorneys for Defendant-Respondent Northern Assurance Company of America (now known as Lamorak Insurance Company)