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VILLAGE OF ENDICOTT v. INSURANCE CO. OF NORTH AMER

December 1, 1995

THE VILLAGE OF ENDICOTT, NEW YORK, Plaintiff,
v.
INSURANCE COMPANY OF NORTH AMERICA, AND THE AETNA CASUALTY AND SURETY COMPANY, Defendants.



The opinion of the court was delivered by: SCULLIN

 This case involves insurance coverage disputes arising from a lawsuit brought by the Environmental Protection Agency ("EPA") against the Village of Endicott ("Village") and the Town of Union ("Town") pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"). See U.S. v. Village of Endicott, N.Y. and Town of Union, N.Y., 88-CV-1067 (N.D.N.Y.). The underlying CERCLA action alleged contamination resulting from the presence of hazardous substances in a landfill at the Wellfield Site ("Site") in Endicott, New York. The complaint alleges that the Village owned a portion of the Site at a time when hazardous substances were disposed of on that portion. It also alleges that both the Town and the Village operated that portion of the Site at a time when hazardous substances were disposed of on it. The EPA action sought a declaratory judgment of liability for response costs to be incurred by the United States in connection with the pollution at the Wellfield Site. On January 10, 1989, a Consent Decree was filed with the Court whereby the Village and the Town agreed to finance and implement certain investigative and remedial action at the Wellfield Site.

 Prior to the filing of the EPA complaint, the Village notified the defendants, the Village's insurance carriers, of its potential liability in this matter and requested defense and indemnification pursuant to the terms of its insurance policies. Defendants subsequently disclaimed coverage, thereby denying the Village's requests, and this action ensued. Presently before the Court are defendants' motions for summary judgment, as well as plaintiff's motion for partial summary judgment.

 Defendant Aetna Casualty and Surety Company ("Aetna") seeks summary judgment on the grounds that, (1) no "occurrence" took place which would have triggered coverage; (2) plaintiff failed to provide timely notice of a covered "occurrence"; and (3) plaintiff's claim is barred by the "pollution exclusion" contained in its insurance policies. Defendant Insurance Company of North America ("INA") has moved for summary judgment on the grounds that, (1) plaintiff violated the requirements of its insurance policy by failing to give timely notice of an occurrence, and (2) plaintiff's claim is partially-barred by the "pollution exclusion" contained in some of its policies.

 The Village, meanwhile, has cross-moved for partial summary judgment seeking declaratory relief. More specifically, plaintiff seeks (1) a declaration adjudging that the defendants have a duty to defend it in the underlying action and that they are obligated to reimburse the Village for all costs associated with such a defense; (2) a declaration that the defendants have breached their policy obligations to the Village; (3) a declaration that, as a result of that breach, the burden of proof shifts to the defendants to prove that they are not obligated to indemnify the Village; and (4) a declaration that the Village is entitled to counsel of its own choice in defending the CERCLA action.

 FACTS

 In 1981, the EPA discovered that groundwater being drawn from the Well contained vinyl chloride and other hazardous substances. Similarly, in 1982 the New York Department of Health ("DOH") notified the Village that water levels from the Well contained "volatile organic chemicals," including vinyl chloride, and recommended that it take certain steps to address these "potential problems." Carruthers Aff. Ex. 9. Throughout 1983 and 1984 the New York State Department of Environmental Conservation ("DEC") continued to monitor the Site and issue reports regarding the Village's progress in addressing the situation.

 In June 1984, the DEC notified the Village that it had nominated the Wellfield Site for inclusion on the EPA's National Priorities List of hazardous waste disposal sites. Id. Ex. 16. This letter also suggested that the Village contact the DEC if it had any questions regarding its "responsibilities at this site." Id. In 1986, the EPA began a remedial investigation of the Site, under CERCLA, which concluded in July 1987 with a finding that the landfill was the probable source of the contamination of the Well. Id. Ex. 3 at 76.

 Thereafter, in November 1987, the EPA made a request for information from the Village regarding the situation at the Site pursuant to CERCLA. Following the Village's responses to this request, the EPA issued a letter on February 1, 1988, which notified the Village that it might be a potentially responsible party ("PRP") under CERCLA for the contamination at the Wellfield Site. This letter also notified the Village that if it were found to be a PRP, it "may be held liable for monies expended by the federal government in responding to the release or threatened release of hazardous substances . . . ." Gerbini Aff. Ex. A. On March 10, 1988, the Village notified defendant INA of the contamination problem and requested that INA defend and indemnify the Village with respect to any potential liability. Carruthers Aff. Ex. 40. On March 11, 1988, the Village notified defendant Aetna of the contamination and requested that Aetna also defend and indemnify it in the CERCLA action. Helmer Aff. Ex. 5. Thereafter, on October 14, 1988, the EPA brought an action against the Village of Endicott and the Town of Union seeking remediation of the Wellfield Site. Gerbini Aff. Ex. B.

 The EPA complaint against the Village and the Town asserts that the United States seeks injunctive and declaratory relief against the Town and Village in regard to the contamination of the Ranney Well. Gerbini Aff. Ex. B. The specific allegations in the complaint allege, in pertinent part, that

 
8. The Village of Endicott owned and operated a portion of the Wellfield Site at a time when hazardous substances were disposed of on that portion.
 
9. The Town of Union operated a portion of the Wellfield Site at a time when hazardous substances were disposed of on that portion.
 
10. Releases of hazardous substances . . . have occurred at the Wellfield Site.
 
. . .
 
18. The President, through EPA, has determined that the releases of hazardous substances at the Wellfield Site, by contaminating, inter alia, the Ranney Well, may constitute an imminent and substantial endangerment to the public health or welfare of the environment. . . .

 Gerbini Aff. Ex. B.

 RELEVANT POLICIES

 Aetna Policies

 In addition, each Aetna policy contained notice requirements which stated:

 Insured's Duties in the Event of Occurrence, Claim or Suit

 
In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable.
 
If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.

 Helmer Aff. Ex. 15.

 Each of these policies also included a "pollution exclusion," which stated ...


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