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November 20, 1986


The opinion of the court was delivered by: SWEET


Westchester Resco Company, L. P. ("Resco") has moved this court for summary judgment in its favor under Rule 56, Fed.R.Civ.P., on the first of its four causes of action against New England Reinsurance Corporation ("New England). New England has cross-moved for summary judgment on all four causes of action. The motions were fully submitted and argued September 19, 1986. For the reasons set forth below, Resco's motion is granted as to the first cause of action, mooting the final three claims, and New England's cross-motion is, therefore, granted as to those claims.


 The facts in this case are an object lesson in how not to make a contract. Although all the parties involved were apparently acting according to the general practice in the insurance industry, the rounds of letters, telegrams, binders and policy terms that were sent in various directions among the two parties and their brokers make it difficult indeed to determine whether or not minds ever met.

 Altogether, five entities were involved in the events leading up to the dispute. Westchester Resco Co., L.P. ("Resco"), began to build a solid waste disposal, resource recovery, and electric generation facility in Peekskill, New York in April, 1982, and sought to insure this venture under terms which will be described below in more detail. Resco employed Johnson & Higgins of Massachusetts, Inc. ("J&H") to procure the insurance. J&H turned to the London Agency Inc. ("London Agency") to act as a broker for the deal. J&H and the London Agency sought to buy the necessary insurance from New England Reinsurance Corp. ("New England"). Cameron & Colby Co. ("Cameron") acted as New England's agents during the negotiations.

 Resco sought an insurance policy which would provide umbrella coverage during the course of the facility's construction (which was not to exceed three years) and provide a more limited coverage, called "completed operations coverage," for liability arising out of the construction for a period three years after construction was completed. In pursuit of this coverage, London Agency, on March 30, 1982, sent a page and a half proposal outlining Resco's insurance needs to Cameron. The proposal explained that the insurance that Resco desired should "cover the term of the Job [construction of the facility] plus 3 yrs. Completed Ops." Over the next few days, two telexes were sent from the London Agency to J&H, both reflecting negotiations between the London Agency and Cameron, and both referring to a three year completed operations extension as being part of the deal. The latter of the two says that the London Agency has "bound" $15 million worth of this coverage with New England.

 On April 14, 1982, the London Agency sent another document to J&H. This document has the word "Binder" printed at the top, and lists as briefly as Resco's proposal had the terms of the coverage. It identifies the "Effective Date" as "4/15/82-4/5/85." It establishes when premiums are due, and how much they will be. In the section titled "Remarks," the Binder says "Policy to include 3 -year extension for completed operations" (emphasis in original). William Greene ("Greene"), the Vice-President of the London Agency, has submitted an affidavit in which he says that this Binder was issued only after the terms and the conditions of the coverage were offered to both the purchaser and the seller and accepted by both. Greene also explains that it is customary "in this industry in general and in [the London Agency's] dealings with Cameron & Colby in particular that if any term or condition included in the Binder is not acceptable, such term or condition is objected to immediately." The Binder indicates that the London Agency sent Cameron a blind carbon copy of it. Cameron did not object to any of the terms.

 Printed at the bottom of the Binder is this sentence: "Coverage bound herewith shall be subject to all terms and conditions of the policy to be issued which, when delivered, replaces this binder."

 Resco received the formal Policy in June, 1982. The Policy is silent on the question of completed operations coverage. In addition, Condition L of the Policy provides: "Notice to or knowledge possessed by any person shall not effect a waiver or change in any part of this policy . . . nor shall the terms of this policy be waived or changed except by endorsement issued to form a part hereof, signed by an authorized representative of the COMPANY."

 At the inception of the coverage, Resco's first premium of $66,400 was due, and was paid in a timely manner. On the first anniversary of the effective date of the insurance, April 5, 1983, Resco's second premium of $57,000 became due and was also paid in a timely manner. A year later on April 5, 1984, Resco's third and final payment of $61,600 became due. It too was timely paid.

 On May 3, 1984, Endorsement 13 was added to the Policy. It reads:


 In consideration of the 2nd anniversary advance premium of $61,600, for the period April 5, 1984 to April 5, 1985, it is further agreed the expiration date as respects completed operations is extended for two years after the completion date. However, in no event shall the expiration date, ...

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