The opinion of the court was delivered by: POOLER
I. Allegations of the First-Party Complaint
In the first party action, Utica, which now owns the Primoshield site, alleges that GMI and Cocquyt were owners and operators of the site when a significant portion of the contamination occurred. Compl. PP 18-21. At the time of the GMI parties' involvement, Primoshield, Inc. ("Primoshield") owned part of the site and leased the balance. Compl. PP 45, 48. Utica alleges that Cocquyt incorporated Primoshield in 1987 and that GMI and Cocquyt together owned 50 percent of Primoshield's stock. Id. P 46. Utica also alleges that Wilmot and Kramer were operators of the site and that all of the GMI parties were involved in management of the site and controlled or had the authority to control the disposal of hazardous wastes. Id. PP 18-21.
Primoshield, Inc. operated an electroplating facility at the site. Id. P 45. Utica's complaint alleges that in May 1984, Primoshield chemicals were spilled at the site. Id. P 49. Further, on June 25, 1985, a Primoshield employee notified the New York State Department of Environmental Conservation ("DEC") that Primoshield had spilled a significant amount of material on the facility grounds and disposed of eight hundred to a thousand gallons of chemicals per week down drains leading to a storm sewer. Id. P 73. After investigating the allegations, the DEC petitioned the United States Environmental Protection Agency ("EPA"), to perform an emergency clean-up and removal action on March 12, 1986. Id. PP 74, 79. In a letter dated March 26, 1986, the EPA notified GMI that the EPA intended to commence an emergency response and considered GMI a potentially responsible party. Id. P 84.
On December 27, 1989, Utica entered into a consent order with the DEC for clean up of the site. Id. P 90. On March 28, 1990, the EPA sent GMI a request for information pursuant to 42 U.S.C. § 9604(e). Id. P 92. By letter dated November 1, 1994, Utica's attorneys and the DEC advised the GMI parties that Utica and the DEC considered each of the defendants liable for the release and for the costs of the resulting clean-up. Id. P 98.
Travelers issued GMI a special business policy including comprehensive general liability coverage with a $ 1 million aggregate and per occurrence limit effective from August 15, 1983 to August 15, 1986. Woodworth Aff. Ex. A ("Travelers' Policy"), Gen. 1-1 at 1, GL2-1. Travelers' policy covered GMI as well as its officers, directors and stockholders while acting within the scope of their duties. Id. at GL 5-1 at 2 (II(c)). North River issued GMI an excess policy - in effect from August 15, 1983 to August 15, 1984 - covering claims in excess of the coverage provided by other policies collectible by GMI or a self-insured retention of $ 10,000, whichever was greater. O'Shea Aff. Ex. A ("No. River Policy") at 1, 13(V).
North River's policy, which had a per occurrence/aggregate limit of $ 29 million, covered both GMI and its officers, employees, directors and stockholders while acting within the scope of their duties. Id. at 1, 12 (III(c)). The GMI parties also claim coverage under a policy issued to Primoshield by the Hartford Accident and Indemnity Company on the theory that Utica has sued the GMI parties as officers, directors, or shareholders of Primoshield. First Am. Third-Party Compl. PP 51-54.
III. GMI's Notice to Travelers and North River
Utica filed its first-party complaint on May 4, 1995. By letter dated May 18, 1995
, the GMI parties demanded defense and indemnification from Travelers. First Am. Third-Party Compl. P 28, Ex. C. The GMI parties claimed that time was of the essence because they were required to answer the complaint by June 30, 1995 and stated: "Any basis for disclaimer of coverage not raised explicitly with us on or before June 30 will be considered waived." Id. The GMI parties also enclosed the first-party complaint and a copy of the insurance policy, which Travelers alleges was incomplete. Id., Fritz Aff. P 2.
Travelers responded by letter dated June 14, 1995, and addressed to GMI's counsel.
Fritz Aff. P 6, Ex. 3. Travelers questioned whether the policy GMI had enclosed was intended to provide coverage for spills resulting from an electroplating operation because that policy "provided coverage for risks arising out of Genesee's business as 'Real Estate Management Corp'." Id. Ex. 3 at 1. Travelers invited the GMI parties to "explain why you believe that this contract should respond to this situation," and asked the GMI parties to supply any other policies that Travelers may have issued to GMI. Id. at 1-2. The insurance company noted that "once those contracts and any other information which you believe The Travelers should consider has been received and reviewed, The Travelers will be in a better position to determine whether it has any obligation to your clients or whether it requires additional information in order to do so." Id. at 2. Travelers closed its letter with the following language:
Finally, all policies issued by The Travelers policies (sic) incorporate a conditions section. The complaint clearly indicates that certain conditions have not been met. Therefore, should it be shown that this or any other contract issued by The Travelers is potentially applicable to this situation, The Travelers specifically reserves its right to disclaim coverage on that basis.
The Travelers also fully reserves all of its other rights in this matter, and neither this acknowledgment nor any future communication or investigation shall be deemed or construed as a waiver of any of the rights and defenses available to The Travelers, including those rights and defenses provided under its contract(s) of insurance.
The GMI parties made no response to the Travelers' letter prior to filing its third-party action.
The GMI parties also sent a demand letter to North River on May 18, 1995. First Am. Third-Party Compl. P 42, Ex. F. The letter to North River demanded a response by June 30, 1995, and stated that any basis for disclaimer of coverage not raised explicitly on or before June 30 would be considered waived. Id. at 2. North River responded with a letter from a claims management service. Am. Third-Party Compl. Ex. G. This letter, which was dated June 30, 1995, rejected any present obligation to defend or indemnify absent the exhaustion of the underlying policies and reserved North River's right to deny or limit coverage to the GMI parties on several bases not specifically including failure to give notice. Id. at 2-6. However, the letter also stated:
The delineation of specific policy provisions shall not be deemed as a waiver of any other right and defense No. River may have under the subject policy. No. River reserves fully and completely the right to rely upon any policy provisions and grounds to deny or limit coverage for this claim, including policy provisions or grounds not specifically referenced in this letter.
No actions taken by No. River in the investigation of this claim shall be construed as a waiver of the rights available to them under the subject policy, including the right to deny coverage.
IV. History of the Third-Party Action
The GMI Parties filed this third-party action against Travelers and North River on July 12, 1995. The Travelers answered on August 15, 1995, and asserted twenty-seven affirmative defenses. On August 30, 1995, North River answered and asserted thirty-one affirmative defenses.
On November 13, 1995, the GMI parties filed a motion for partial summary judgment declaring that Travelers or, in the alternative, North River was obligated to defend the GMI parties and had breached that obligation.
The GMI parties also sought other relief -- such as counsel of their own choice -- ancillary to a declaration of the duty to defend. Both insurers opposed the GMI motion, and Travelers cross-moved for summary judgment dismissing the complaint as against Travelers. I heard oral argument on December 4, 1995, and reserved decision.
The GMI parties contend that (1) the first party complaint contains allegations that fall within the scope of coverage of both the Travelers and North River policies and (2) the two insurance companies have waived all other defenses by disclaiming without explicitly raising the other defenses. Travelers responds that when GMI sought coverage, the company did not disclose that it operated an electroplating facility. Travelers also argues that it did not disclaim coverage but rather requested more information for the purpose of making a coverage decision. In support of its cross-motion for summary judgment, Travelers urges (1) its policy should be limited or rescinded entirely based on GMI's failure to disclose its operation of an electroplating facility and the attendant risks and (2) GMI's late notice of occurrence and claim were not waived and bar coverage. North River opposes summary judgment based on its claims that (1) North River has no obligation to defend and indemnify until the Travelers' policy and any other applicable policies are either exhausted or found inapplicable; (2) if the Travelers' policy does not apply, GMI has breached its warranty concerning the underlying coverage; (3) GMI's failure to give timely notice bars coverage; (4) a pollution exclusion clause in the North River policy bars coverage; and (5) North River has not waived any of its defenses. Although the arguments concerning both insurers have common themes, significant differences in their positions require me to consider each insurer separately after a brief discussion of applicable general principles.