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UNITED STATES v. AMRO REALTY CORP.

November 10, 1992

UNITED STATES OF AMERICA, Plaintiff,
v.
AMRO REALTY CORP., HARRY MOSKOWITZ, and DAVID MOSKOWITZ, Defendants and Third-Party Plaintiffs, v. ATLANTIC MUTUAL INSURANCE COMPANY; UNIGARD SECURITY INSURANCE COMPANY; LUMBERMENS MUTUAL CASUALTY COMPANY; GRAPHIC ARTS MUTUAL INSURANCE COMPANY; FEDERAL INSURANCE COMPANY; FIRST STATE INSURANCE COMPANY and HOME INSURANCE COMPANY, Third-Party Defendants.



The opinion of the court was delivered by: NEAL P. MCCURN

 MEMORANDUM-DECISION AND ORDER

 This litigation arises from the discovery in 1981 of environmental contamination on a site in South Cairo, New York. During all of the relevant time periods, the site on which the alleged damage occurred was owned by defendant/third-party plaintiff Amro Realty Corporation ("Amro") and was leased to American Thermostat Corporation ("AT"). Defendants/third-party plaintiffs David and Harry Moskowitz were officers, directors, and part-owners of AT; Harry Moskowitz was also an officer, director, and shareholder of Amro. In November, 1985, an involuntary bankruptcy petition was filed against AT pursuant to Chapter 7 of the Bankruptcy Code, 11 U.S.C. § 101 (1982).

 The United States commenced this suit in 1987 pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. §§ 9604, 9607 (1988 & West Supp. 1992), against David and Harry Moskowitz and Amro, seeking recovery of costs incurred in correcting the harm caused by the contamination. For ease of discussion, this suit will be referred to as the "federal action." This clarification is necessary because on February 2, 1988, this court ordered that the suit be consolidated with New York v. Amro Realty Corp., et al., No. 86-CV-1318, a case which will be referred to as the "State action." In the State action, commenced in this court in 1986, the State of New York seeks remediation against these same defendants pursuant to CERCLA for their alleged contamination of the South Cairo site. As will become apparent below, the distinction between the federal action and the State action is critical to a proper analysis of the motion before the court.

 Presently before the court is a motion by certain third-party defendants for summary judgment pursuant to Fed. R. Civ. P. 56(b). The court heard oral argument on this motion on September 22, 1991, after which it granted defendants' motion in its entirety and announced that this memorandum, explaining the rationale behind its decision, would be forthcoming. This ruling, of course, does not affect the actions against the non-moving third-party defendants.

 I. BACKGROUND1

 This federal action represents at least the third lawsuit arising out of the alleged contamination of the South Cairo site. In 1981, shortly after discovering the contamination, New York State commenced the first suit against Amro and AT in New York State Supreme Court pursuant to state statutory and common law. The State essentially alleged that Amro and AT had engaged in pollution from the 1950s through 1981 by improperly disposing of various hazardous substances into a drainage ditch, the groundwater, and the ground. Several residential neighbors of the site filed similar suits in state court against Amro and AT. In 1983, Amro and AT entered into an interim consent order with the State which obligated them to undertake various remedial measures. These remedial measures included supplying bottled or filtered water to households affected by the contamination and investigating the extent of the damage.

 When AT entered bankruptcy in 1985, it discontinued compliance with the consent order. The State consequently commenced an action-- the aforementioned State action-- in this court in December, 1986 against David and Harry Moskowitz and Amro pursuant to CERCLA and state common law, alleging that the defendants were each liable as "owners" or "operators" within the meaning of CERCLA § 107, 42 U.S.C. § 9607. The State actually gave the Moskowitzes notice of its intent to bring suit against them on March 19, 1986, nine months before commencing the suit, by sending them a "Potentially Responsible Party" letter. On April 10, 1986, within one month of receiving the State's letter, the Moskowitzes informed one of their insurance carriers, third-party defendant Unigard Security Insurance Co. ("Unigard"), of the State's intent and requested that Unigard indemnify them and pay for their defense. *fn2" Unigard responded on May 30, 1986, by declining to provide coverage, asserting that the Moskowitzes's failure to report the contamination in a timely manner precluded them from receiving coverage.

 In July, 1987, the Moskowitzes and Amro (collectively, the "insureds") filed a third-party complaint in the State action against Unigard, Lumbermens, Atlantic Mutual Insurance Co., Federal Insurance Co., Home Insurance Co., Zurich Insurance Co., and First State Insurance Co. Each of these third-party defendants is an insurance carrier that provided either the Moskowitzes or Amro (or both) with coverage during the times that the contamination allegedly occurred. *fn3" The third-party actions sought defense and indemnification as well as a declaration that the insureds are entitled to counsel of their choice. Relying upon the existence of "pollution existence clauses" contained in the respective policies, the court granted summary judgment to all of the carriers except Lumbermens and Zurich. *fn4" See generally Amro Realty Corp., 745 F. Supp. 832; Amro Realty Corp., 697 F. Supp. 99. Last year, the Court of Appeals for the Second Circuit affirmed the summary judgment based upon application of the pollution exclusion clauses. New York v. Amro Realty Corp., 936 F.2d 1420 (2d Cir. 1991).

 While the State action was pending, the United States commenced the current suit, the federal action, on October 30, 1987, against the insureds in this court. By the insureds' own admission, "in several respects the United States complaint resembles the New York State complaint." Third-Party Pl. Mem. (9/4/92) at 10. Specifically, both are brought pursuant to CERCLA and seek recovery for the environmental contamination that allegedly occurred between the 1950s and 1981 on the site in South Cairo. On December 31, 1991, the insureds impleaded the same carriers that they impleaded in the State action, again seeking defense costs and indemnity. *fn5"

 II. DISCUSSION

 Third-party defendants Atlantic Mutual, Unigard, Home, Federal, and First State (hereinafter collectively referred to as the "carriers") move for summary judgment on grounds that the pollution exclusion clauses contained in their policies preclude the insureds from recovering in this suit. The carriers submit that their current motion is the same as their summary judgment motion in the State action, in that the alleged contamination, the governing policies, the parties at issue, and the stated basis for relief are the same as those that the court considered in the State action. As in the State action, Unigard also moves for summary judgment on grounds that the insureds did not file a timely request for coverage. The carriers urge that, given the parallelism of issues between the two cases, the court should dispose of this case in the identical manner that it disposed of the third-party claims in the State action, i.e. by summary judgment pursuant to the pollution exclusion clauses.

 A. The State action

 Since the carriers place such heavy reliance upon the rulings in the State action, the court necessarily begins this discussion with a brief review of those rulings. More particularly, this initial discussion is a necessary predicate to the analysis of the extent to which the State action rulings apply to this case.

 As previewed above, the carriers moved for summary judgment in the State action based upon the presence of a pollution exclusion clause in the policies. Each of the policies' pollution exclusion clauses essentially provides, with little variation (and no substantive variation):

 This policy shall not apply . . . to any liability of any insured arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic materials, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of ...


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