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TOWN OF UNION v. TRAVELERS INDEM. CO.

December 1, 1995

THE TOWN OF UNION, NEW YORK, Plaintiff,
v.
THE TRAVELERS INDEMNITY COMPANY, AETNA CASUALTY AND SURETY COMPANY, STANDARD FIRE INSURANCE COMPANY, ROYAL INSURANCE COMPANY OF AMERICA AND SAFEGUARD INSURANCE COMPANY, Defendants.



The opinion of the court was delivered by: SCULLIN

 INTRODUCTION

 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"). The underlying EPA action alleged contamination resulting from the presence of hazardous substances 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 this 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 Town and the Village agreed to finance and implement certain investigative and remedial action at the Wellfield Site.

 Prior to the filing of the EPA complaint, the Town notified the defendants, its 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 Town'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 Travelers Indemnity Company ("Travelers") bases its motion on the following grounds: (1) that coverage is precluded by the pollution exclusion contained in its policies; (2) that coverage is precluded because the Town failed to comply with state sanitary codes; and (3) that coverage is precluded because there was no "occurrence." Defendants Aetna Casualty and Surety Company and Standard Fire Insurance Company (hereinafter referred to collectively as "Aetna") base their motion on the grounds that: (1) coverage is precluded by the pollution exclusion; and (2) coverage is precluded because there was no "occurrence."

 Defendants Royal Insurance Company and Safeguard. Insurance Company (hereinafter referred to collectively as "Royal") also assert the pollution exclusion defense and the "occurrence" defense as the basis for their motion for summary judgment. Additionally, the Town has cross-moved for partial summary judgment seeking a declaration that the defendants, the Town's insurance carriers, have a duty to defend the Town in the underlying CERCLA action.

 FACTS

 In 1957 the Village of Endicott began operating a landfill at the Wellfield Site, in Endicott, New York. The Site includes the Ranney Well (the "Well"), a municipal water supply which is a major source of water for the Village of Endicott Municipal Water System. Gerbini Aff. Ex. B. In March 1969, the Town of Union entered into a contract with the Village to co-operate the landfill. This agreement continued until March 1978 when the landfill was closed.

 In 1981, the EPA discovered that groundwater being drawn from the Well contained vinyl chloride and other hazardous substances. In June 1984, the New York State Department of Environmental Conservation ("DEC") notified the Town and the Village that it had nominated the Wellfield Site for inclusion on the EPA's National Priorities List of hazardous waste disposal sites. Carruthers Aff. Ex. 16. 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. *fn1" Kerr Aff. Ex. 8 at 73-76. 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 states that

 
The United States seeks injunctive relief to abate an imminent and substantial endangerment to public health or welfare or the environment and a declaratory judgment of liability for certain response costs to be incurred by the United States in connection with the Endicott Village Wellfield Site . . . .

 Gerbini Aff. Ex. B. The specific allegations in the complaint state, in pertinent part,

 
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.

 Following the filing of the EPA action against the Town and Village, the Town notified all of the defendants of its potential responsibility for the contamination and requested that they each defend and indemnify it in the EPA action. The Town based its requests for defense and indemnification on the provisions contained in the insurance policies it had purchased from each of the defendants. While most of these policies contain similar provisions, they are not all identical, therefore the Court will briefly outline the pertinent parts of each defendant's policies.

 a. Traveler's Policies

 The Town is seeking coverage from defendant Travelers under three separate comprehensive liability policies issued between December 6, 1973 and December 6, 1976. Kerr Aff. P 15. These policies each state that:

 
The Travelers shall have the right and duty to defend any suit against the Insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the ...

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