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AVONDALE INDUSTRIES v. TRAVELERS INDEM.
September 17, 1991
AVONDALE INDUSTRIES, INC. AND OGDEN CORPORATION, PLAINTIFFS,
THE TRAVELERS INDEMNITY COMPANY, DEFENDANT. THE TRAVELERS INDEMNITY COMPANY, THIRD-PARTY PLAINTIFF, V. COMMERCIAL UNION INSURANCE COMPANY, HIGHLANDS INSURANCE COMPANY, AMERICAN MOTORISTS INSURANCE COMPANY, AND NATIONAL UNION FIRE INSURANCE COMPANY, THIRD-PARTY DEFENDANTS.
The opinion of the court was delivered by: Conboy, District Judge:
This is an insurance coverage case. Avondale Industries, Inc.
and its former corporate parent, Ogden Corporation
(collectively "Avondale", except where noted), brought this
diversity action seeking a declaration that The Travelers
Indemnity Company ("Travelers") has a duty to defend and to
indemnify Avondale pursuant to several Comprehensive General
Liability policies written by Travelers. Avondale seeks
coverage for fourteen private actions and a State
administrative proceeding (collectively, the "underlying
actions") brought against Avondale as a result of the escape of
petroleum and chemical pollution from a waste oil dump and
reclamation facility in Louisiana to which Avondale shipped
waste oil containing various hazardous chemicals. Partial
summary judgment has been entered in this action previously,
declaring that Travelers has a duty to defend the underlying
actions. Avondale Industries, Inc. v. Travelers Indem. Co.,
697 F. Supp. 1314 (S.D.N.Y.), partial judgment entered, 123 F.R.D.
80 (1988), aff'd, 887 F.2d 1200 (2d Cir. 1989), reh'g denied,
894 F.2d 498 (2d Cir.), cert. denied, ___ U.S. ___, 110 S.Ct.
2588, 110 L.Ed.2d 269 (1990).
Travelers impleaded the four third-party defendants — other
insurers which wrote Comprehensive General Liability ("CGL")
policies for Avondale covering different time periods than
Travelers' policies — and now moves for partial summary
judgment against them, seeking a declaration that they must
share in the costs of Avondale's defense.*fn1 The four
third-party defendants — Commercial Union Insurance Company
("Commercial Union" or "CU"), Highlands Insurance Company
("Highlands"), American Motorists Insurance Company ("AMICO"),
and National Union Fire Insurance Company ("National Union" or
"NU") — have cross-moved for a declaration that they have no
obligation to defend or indemnify Avondale or to contribute to
Travelers' expenses in defending the underlying actions. For
the reasons discussed below, we grant in part and deny in part
Travelers' motion, grant the motions of Commercial Union,
Highlands, and National Union, and deny the motion of AMICO.
I. Factual Background*fn2
Meanwhile, from 1961 to 1977 Earl Dubose owned and operated
a waste oil dump and reclamation/recycling facility in Denham
Springs, Louisiana ("the Site"). (Levin Affid., Ex. D.) In
December 1977, Dubose sold the facility to Combustion, Inc.
(Sweet Affid., Ex. M) which continued to operate it until May
1982. Combustion also acquired Maysville Oil Company, which
thereupon brought to the Site for processing the waste oil it
The Site was the subject of several inspections by State and
Federal environmental regulatory authorities, in response to
complaints from the Site's neighbors. The Federal EPA conducted
"potential hazardous site" inspections in 1981 and 1984. (Sweet
Affid., Exs. C-E.)
On January 3, 1986, the Louisiana Attorney General, acting at
the request of the Louisiana Department of Environmental
Quality, sent to Avondale, among others, a "potentially
responsible party" letter, in connection with the clean-up of
the Site (the "LADEQ letter" or "PRP letter"). The letter
notified its recipients that the Secretary of the DEQ "has
determined that there is a discharge or disposal that has
occurred at [the Site] which presents an imminent and
substantial endangerment to health or the environment," and
that "[w]e have reason to believe that you are a potentially
responsible party under the provisions of Louisiana Revised
Statute 30:1149.41 through 1149.50." The letter demanded that
the PRP provide the DEQ with "all information on hazardous
substances disposed of or discharged . . . by you at this
site," including dates and manner of disposal, "submit a plan
for remedial action at the site . . . or pay . . . the full
costs of a remedial action" to be undertaken by DEQ, and attend
an upcoming meeting, all under the express threat of a lawsuit
and administrative fines. (Monteleone Affid., Ex. E.)
Thereafter, between July 1986 and June 1988, fourteen private
lawsuits, eventually consolidated, were commenced in Louisiana
State court.*fn4 The private actions, together encompassing
the claims of hundreds of plaintiffs (not including class
action plaintiffs) seeking over $17 billion in damages, each
name some 70 to 80 defendants, including Avondale, and assert
claims for damages for personal injury, wrongful death, and
injury to property under theories of negligence and strict
liability. (July 1990 Ribner Affid., Ex. B.) While there are
some minor differences among the complaints, all allege that
the Combustion, Inc. Site has been operating from the
mid-1960s,*fn5 and none attempt to differentiate among the
defendants in their allegations.*fn6 The vague and open-ended
allegations set out in the margin are typical of the language
used in the underlying private actions.*fn7
Avondale received a complaint in one of the private actions
no later than August 20, 1986. Five actions were filed between
July and September 1986, and nine others were
filed between December 1986 and June 1988. Avondale first
notified Travelers of a "potential claim" on March 20, 1986, in
response to the LADEQ letter. On October 17, 1986, Avondale
notified Travelers of the first five private actions,
forwarding copies of the complaints, and followed up with this
lawsuit, commenced in December 1986. Avondale did not, however,
notify Commercial Union, National Union, AMICO, or Highlands,
until March, 1987, at approximately the same time as the four
insurers were impleaded by Travelers in this action.
Avondale purchased a series of primary comprehensive general
liability insurance policies from the five insurers involved in
this action. There is no dispute that the coverage periods ran
Commercial Union: January 1, 1960 to January 1,
1970, and January 21, 1971 to July 5, 1972.
Highlands: January 1, 1970 to January 21, 1971.
AMICO: July 5, 1972 to July 5, 1975. Travelers:
July 5, 1975 to December 1, 1984.
National Union: December 1, 1984 to August 5,
It is not clear from the record before us whether Avondale at
any time has made a demand for coverage from any of the
Travelers now seeks contribution from the third-party
defendants pursuant to the equitable rule that where "several
insurers bind themselves to the same risk and one insurer pays
the whole loss, the one so paying has a right of action against
his coinsurers for a ratable proportion of the amount paid by
him. . . ." Zurich-American Ins. Co. v. Atlantic Mutual Ins.
Co., 139 A.D.2d 379, 387, 531 N.Y.S.2d 911, 916 (1st Dep't
1988), aff'd, 74 N.Y.2d 621, 541 N.Y.S.2d 970, 539 N.E.2d 1098
(1989). Travelers also relies on its contractual rights as
subrogee to Avondale's claims against the third-party
defendants. Travelers Reply Mem. at 2 n. 1.*fn8
In our earlier decision, we held that New York law applies to
the Travelers policies under consideration in this action, but
reserved judgment on any other policies that might come to be
in issue. Avondale Industries, Inc. v. Travelers Indem. Co.,
697 F. Supp. at 1316 and n. 2. Commercial Union and Highlands
now contend that their contracts should be governed by
Louisiana law. AMICO contends that New York law applies to its
policies. AMICO Memo. at 5 n. 6. National Union does not
expressly address the issue, but seems to assume that New York
law applies to its policies. No party contests the choice of
law selection advocated by any other party as applicable to its
Sitting in diversity, we apply the choice of law rules of the
forum state, New York. In insurance coverage actions, "New York
generally gives controlling effect to the law of the
jurisdiction which has the greatest interest in the matter.
Important factors in making this determination are, for
example, location of the insured risk, residence of the
parties, and where the contract was issued and negotiated."
Munzer v. St. Paul Fire & Marine Ins. Co., 145 A.D.2d 193,
200-01, 538 N.Y.S.2d 633, 637 (3d Dep't 1989) (citations
omitted); see also, e.g., Ethicon, Inc. v. Aetna Cas. and Sur.
Co., 688 F. Supp. 119, 123-24 (S.D.N.Y. 1988).
We agree that as to Commercial Union and Highlands, Louisiana
law is appropriately applied. The policies of both insurers
were signed in Louisiana, were brokered by Louisiana brokers,
and issued to a Louisiana corporation (Avondale Shipyards,
Inc.) with its principal place of business and its insured
interest located in Louisiana. The underlying actions involve
a Louisiana site and were brought by Louisiana public agencies
We also agree that as to AMICO and National Union, New York
law applies. These policies were signed in New York, were
brokered by New York brokers, and covered Delaware Corporations
(Ogden Corp. and Avondale Industries, Inc.) with their
principal place of business in New York, and with operations
and insured interests located in a wide geographic range.*fn9
No other party has objected to AMICO's express and NU's
implicit choice of New York law, and "there are enough contacts
with New York to warrant honoring" the parties' selection.
Uniroyal, Inc. v. Home Ins. Co., 707 F. Supp. 1368, 1372
Commercial Union and Highlands contend that because Travelers
has brought this action as a third-party plaintiff seeking
reimbursement, it may only recover from the third-party
defendants to the extent that they are liable to Travelers "for
all or part of [Avondale's] claim against [Travelers]."
Fed.R.Civ.P. 14(a). CU and Highlands contend that because
Avondale's complaint in this action alleges that it shipped oil
waste between December 1975 and October 1979 (Complaint ¶ 8
(Monteleone Affid., Ex. Q)), this action is limited to a
resolution of the dispute concerning insurance coverage for
liability arising out of shipments during that period only.
Therefore, they contend, Travelers faces no liability in this
action for coverage not arising out of those shipments, and
accordingly cannot seek here to implead the other carriers,
whose policies were not in effect during that time.
This contention is meritless. Avondale seeks in this action
a declaration that "Travelers is obligated to defend and
indemnify Avondale with respect to" the underlying actions.
(Complaint at 8 ¶ 2.) The dates of shipment are irrelevant to
Avondale's liability in the underlying actions. The cost of
defending the underlying actions, which Travelers is obligated
to pay, cannot meaningfully be separated between pre- and
post-December 1975 shipments. Thus, though Avondale's
allegations in the complaint refer to shipments from 1975-1979,
in actuality Avondale is necessarily seeking in this action a
complete defense of the underlying actions regardless of any