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OLIN CORP. v. INSURANCE CO. OF NORTH AM.

July 30, 1991

OLIN CORPORATION, PLAINTIFF,
v.
INSURANCE COMPANY OF NORTH AMERICA, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Sand, District Judge.

OPINION

This case comes before the Court on four motions by the defendant-insurers. The facts underlying these motions are set forth at length in two prior Opinions of this Court, familiarity with which is assumed. See Olin v. Insurance Co. of N. Am. (INA), 762 F. Supp. 548, 550-55 (S.D.N.Y. 1991) (hereinafter "Olin II") (Huntsville claims); Olin v. INA, 743 F. Supp. 1044, 1046-48 (S.D.N.Y. 1990) (hereinafter "Olin I") (Saltville claims), aff'd, 929 F.2d 62 (2d Cir. 1991).

Defendants Falcon Insurance Company and Commercial Union Insurance Company ("Falcon/Commercial Union") move for partial summary judgment on the ground that the Olin Corporation ("Olin") gave late notice of the Huntsville occurrence*fn1 and thereby forfeited the coverage of the Falcon/Commercial Union policies. Defendant Employers Insurance of Wausau ("Wausau") moves for partial summary judgment on the ground that Olin provided it with late notice of the Saltville occurrence. Wausau also moves for the entry of a final judgment under Fed.R.Civ.P. 54(b) with regard to certain portions of this Court's April 23, 1991 Opinion, as does defendant Hanover Insurance Company ("Hanover").

  1.  Falcon/Commercial Union's Motion for Partial Summary
      Judgment

Falcon/Commercial Union moves for summary judgment dismissing Olin's claims for indemnity arising out of the Huntsville occurrence, on the ground that Olin's notice to Falcon/Commercial Union was unreasonably late as a matter of law. The Falcon/Commercial Union policies are excess policies which provided coverage for liabilities in excess of certain amounts. Those amounts varied from year to year, the lowest trigger amount being $300,000 and the highest $30,300,000. See Affidavit of Kathryn Underhill (6/4/91) ("Underhill Aff."), ¶ 38.

The parties agree that New York law governs the late notice issue with regard to Falcon/Commercial Union. Under New York law, an insured has a duty to give notice to an excess insurer when the circumstances known to the insured "would have suggested a reasonable possibility of a claim that would trigger the excess insurer's coverage." Olin I, 743 F. Supp. at 1054. This Court has held previously that Olin's duty to give notice of the Huntsville occurrence to its primary insurer accrued, at the latest, on July 9, 1979, when the first of the underlying DDT lawsuits was filed. Olin II, 762 F. Supp. at 566. That class action suit advanced ten theories of liability and sought $50,000,000 in damages on each claim. See Underhill Aff. at ¶¶ 24-25.

The damages sought in the first DDT lawsuit were well in excess of even the highest trigger amount of the Falcon/Commercial Union policies. Moreover, Olin had been on notice since at least the mid-1960s that large amounts of DDT-laden effluent were being discharged from the Huntsville plant and that DDT was potentially toxic to wildlife and humans. See Olin II, 762 F. Supp. at 552-54. Based upon these circumstances, this Court concludes that the filing of the first lawsuit should have suggested to Olin that there was a reasonable possibility that the Falcon/Commercial Union policies would be triggered. Accordingly, we hold that Olin's duty to give notice to Falcon/Commercial Union accrued, at the latest, on July 9, 1979.

Olin did not provide notice to Falcon/Commercial Union until mid-August, 1980. Under New York law, even relatively short periods of delay in notification are unreasonable unless a valid excuse is given. See, e.g., Utica Mut. Ins. Co. v. Fireman's Fund Ins. Cos., 748 F.2d 118, 121 (2d Cir. 1984) (six months); Power Auth. of New York v. Westinghouse Elec. Corp., 117 A.D.2d 336, 343, 502 N.Y.S.2d 420, 423 (1986) (fifty-three days). Olin argues that it failed to give earlier notice because it believed that the underlying DDT claims were meritless, and because it did not believe that its liability would reach the levels necessary to invoke the Falcon/Commercial Union policies. Given the long history of knowing DDT pollution at Huntsville and Olin's awareness of the potentially harmful effects of DDT, this Court finds the proffered excuse to be unpersuasive. Accordingly, we hold that as a matter of law Olin provided unreasonably late notice to Falcon/Commercial Union. As a result, Falcon/Commercial Union is absolved of any duty to indemnify Olin with respect to the Huntsville occurrence.

2.  Wausau's Motion for Partial Summary Judgment

Wausau moves for partial summary judgment, seeking a declaration that it has no duty to defend or indemnify Olin with respect to the Saltville occurrence on the ground of late notice. The Wausau policies at issue covered the period January, 1974 to March, 1977.

This Court previously has held that Olin's duty to notify its primary and excess insurers regarding the Saltville occurrence accrued, at the latest, in early 1982, and that Olin's failure to notify its insurers until April, 1983 was unreasonable as a matter of law. Olin I, 743 F. Supp. at 1054. It is undisputed that Olin gave notice to Wausau in April, 1983, at the same time that it notified its other insurers. Therefore, it is already settled that Olin provided unreasonably late notice to Wausau; the only question is whether Olin's coverage under the Wausau policies is forfeited as a result.

Wausau argues that New York law applies, and that because New York law provides that unreasonably late notice absolves an insurer of any duty to defend or indemnify the insured, its motion for partial summary judgment should be granted. Olin contends that Connecticut law applies, and that under Connecticut law the giving of late notice does not absolve an insurer of liability unless the insurer is prejudiced by the delay. See Aetna Casualty & Sur. Co. v. Murphy, 206 Conn. 409, 538 A.2d 219 (1988).

Federal courts sitting in diversity jurisdiction must apply the choice of law rules of the forum state. Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). New York law requires courts to apply the law of the jurisdiction "which has the most significant contacts with the matter in dispute." Auten v. Auten, 308 N.Y. 155, 160, 124 N.E.2d 99 (1954).

Applying the New York choice of law rule in Olin I, this Court determined that all of the insurance policies at issue were governed by New York law. See Olin I, 743 F. Supp. at 1048-49. Some of the policies examined in Olin I were indistinguishable, from a choice of law perspective, from the Wausau policies at issue here. ...


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