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TIG INS. CO. v. TOWN OF CHEEKTOWAGA

September 29, 2000

TIG INSURANCE COMPANY, PLAINTIFF,
V.
TOWN OF CHEEKTOWAGA, DEFENDANT. TOWN OF CHEEKTOWAGA, DEFENDANT/THIRD PARTY PLAINTIFF, V. AETNA CASUALTY AND SURETY CO., CIGNA PROPERTY & CASUALTY INS. CO., MARYLAND CASUALTY CO., THE TRAVELERS INSURANCE COMPANY AND UNITED STATES FIDELITY & GUARANTY CO., THIRD PARTY DEFENDANTS.



The opinion of the court was delivered by: Arcara, District Judge.

    ORDER

This case was referred to Magistrate Judge Leslie G. Foschio, pursuant to 28 U.S.C. § 636(b)(1), on August 22, 1997. On March 11, 1998, third-party defendant Century Indemnity Company ("Century"), improperly designated as CIGNA Insurance, filed a motion for summary judgment. On July 16, 1999, third-party defendants Maryland Casualty Company ("Maryland") and The Travelers Insurance Company ("Travelers") filed motions for summary judgment, plaintiff TIG Insurance Company ("TIG") filed a motion for summary judgment against defendant Town of Cheektowaga, and third-party defendant United States Fidelity & Guaranty Company ("USF & G") filed a motion for summary judgment. On September 15, 1999, defendant Town of Cheektowaga filed a cross-motion for partial summary judgment. On March 10, 2000, Magistrate Judge Foschio filed a Report and Recommendation, recommending that third-party defendant Century's motion be granted, that third-party defendant Maryland's motion be granted, that third-party defendant Travelers' motion be granted, that plaintiff TIG's motion be denied, that third-party defendant USF & G's motion be granted, and that defendant Town of Cheektowaga's cross-motion be denied.

Objections to the Magistrate Judge's Report and Recommendation were filed by Cheektowage and plaintiff Town of Cheektowaga and plaintiff TIG. Oral argument on the objections was held on May 12, 2000. At that time, the Court asked for additional briefing on the issue of the applicability of New York Insurance Law § 3420(d). Such briefing was completed on June 9, 2000. On June 12, 2000, plaintiff TIG filed a motion to file supplemental papers.

Pursuant to 28 U.S.C. § 636(b)(1), this Court must make a de novo determination of those portions of the Report and Recommendation to which objections have been made. Upon a de novo review of the Report and Recommendation, and after reviewing the submissions and hearing argument from the parties, the Court adopts the proposed findings of the Report and Recommendation with one exception discussed below.

Defendant/third-party plaintiff Town of Cheektowaga ("Town") claims that certain of the third-party defendants in this case should be precluded from disclaiming coverage under the pollution exclusion clauses in their respective insurance policies because they failed to provide timely notice of such disclaimers pursuant to New York Insurance Law § 3420(d), which provides:

If under a liability policy delivered or issued for delivery in [New York], an insurer shall disclaim liability or deny coverage for death of bodily injury arising out of a motor vehicle accident or any other type of accident occurring within [New York], it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.*fn1

The Magistrate Judge, however, concluded that timely notice requirement in § 3420(d) does not apply to the pollution exclusion clauses at issue here. He reasoned that because the pollution exclusion clause expressly excluded the claimed incident from policy coverage, there was no contractual relationship with respect to that incident and that a failure to timely disclaim would not create coverage where none otherwise existed. See Report and Recommendation at 27 (citing Zappone v. Home Ins. Co., 55 N.Y.2d 131, 447 N.Y.S.2d 911, 432 N.E.2d 783 (1982)).

At oral argument on the Town's objections to the Report and Recommendation, the Court requested additional briefing on the issue of the applicability of § 3420(d) to the pollution exclusion clauses in this case. During the additional briefing period, the parties identified to the Court two recent New York Court of Appeals cases, Worcester Ins. Co. v. Bettenhauser, 95 N.Y.2d 185, 712 N.Y.S.2d 433, 734 N.E.2d 745 (2000) and Agoado Realty Corp. v. United Int'l Ins. Co., 95 N.Y.2d 141, 711 N.Y.S.2d 141, 733 N.E.2d 213 (2000). Those cases held that a timely disclaimer based on § 3420(d) is necessary when denial of insurance coverage is based on a policy exclusion without which the claim would be covered. That is the case here. Denial of coverage by the third-party defendants is based on the pollution exclusion clause, without which the Town's claims would be covered. Accordingly, it appears that Worcester and Agoado are directly contrary to the Magistrate Judge's reasoning that § 3420(d) does not apply to the pollution exclusion clauses in this case simply because they are exclusions to the policy.

Nevertheless, the Court finds that § 3420(d) is inapplicable in this case for a different reason. By its express terms, § 3420(d) applies only when the underlying bodily injury or death claim arises out of an "accident." See First Financial Ins. Co. v. Jetco Contracting Corp., 2000 WL 1013945 at *6 (S.D.N.Y. July 21, 2000). An intentional act cannot constitute an accident. Id. The claims of death and bodily injury in the underlying actions in this case arise not from an accident, but from the Town's long-term, intentional discharges of waste at the Pfohl Site. New York courts have repeatedly held that such purposeful discharges into a landfill cannot be deemed accidental, as a matter of law. See Technicon Elec. Corp. v. American Home Assurance Co., 74 N.Y.2d 66, 544 N.Y.S.2d 531, 532-33, 542 N.E.2d 1048 (1989); Powers Chemco, Inc. v. Federal Ins. Co., 144 A.D.2d 445, 533 N.Y.S.2d 1010, 1011-12 (N.Y.App.Div. 1988), aff'd, 74 N.Y.2d 910, 549 N.Y.S.2d 650, 548 N.E.2d 1301 (1989). Nor are such discharges unexpected or unintended. State of New York v. AMRO Realty Corp., 936 F.2d 1420, 1428 (2d Cir. 1991) (the long term and repeated release of hazardous waste upon land or into a watercourse cannot be considered accidental). Thus, because the injuries in the underlying cases did not arise from an "accident," § 3420(d)'s timely notice requirement does not apply.*fn2

Accordingly, for the reasons set forth in Magistrate Judge Foschio's Report and Recommendation and herein, the Court hereby grants third-party defendants' motions for summary judgment, denies plaintiff TIG's motion for summary judgment, and denies defendant Town's cross-motion for summary judgment. Plaintiff TIG's motion to file supplemental papers is hereby denied. The Court hereby refers the matter back to Magistrate Judge Foschio for a determination as to what additional proceedings, if any, are required in this case.

IT IS SO ORDERED.

REPORT AND RECOMMENDATION

JURISDICTION

This case was referred to the undersigned on August 22, 1997, by the Honorable Richard J. Arcara for report and recommendation on dispositive motions. The matter is currently before the court on motions for summary judgment filed on March 11, 1998, by Third Party Defendant Century Indemnity Company*fn1 (Docket Item No. 16), on July 16, 1999 by Third Party Defendants Maryland Casualty Company (Docket Item No. 46), The Travelers Indemnity Company and Travelers Casualty and Surety Company*fn2 (Docket Item No. 48), and United States Fidelity & Guaranty Company (Docket Item No. 53), and Plaintiff TIG Insurance Company (Docket Item No. 50), and on Defendant Town of Cheektowaga's cross-motion for partial summary judgment filed September 15, 1999 (Docket Item No. 57).

BACKGROUND

Plaintiff, TIG Insurance Company ("TIG"), commenced the above action on July 3, 1997, seeking declaratory relief that TIG is neither obligated to defend nor indemnify Defendant, Town of Cheektowaga ("the Town"), for costs expected and incurred with regard to the clean-up of hazardous waste contamination at the Pfohl Brothers Landfill site ("the Landfill") in Cheektowaga, New York and related personal injury actions filed by plaintiffs who lived, worked and recreated near the Landfill. TIG also seeks a judgment directing the Town to return monies TIG mistakenly advanced under insurance policies between it and the Town in effect at the time of the contamination. On August 11, 1997, the Town filed its answer, asserting affirmative defenses and counter-claims. TIG's answer to the Town's counterclaims was filed October 6, 1997.

The Town's motion for leave to file third party complaints, filed on December 11, 1997, was granted on December 31, 1997. Accordingly, on January 5, 1998, the Town filed a third-party complaint against Third Part Defendants Aetna Casualty & Surety Company ("Aetna"), CIGNA Property & Casualty Inc. Co. ("Century"), Maryland Casualty Co. ("Maryland Casualty"), The Travelers Insurance Company ("Travelers"), and United States Fidelity & Guaranty Co. ("USF & G"), seeking declaratory relief as to Third Party Defendant's obligations to defend and indemnify the Town in pending litigation involving the Landfill. Answers to the Third Party Complaint were filed by Travelers on March 23, 1998, Maryland Casualty on April 6, 1998, and USF & G on May 11, 1998.*fn3

On March 11, 1998, Third Party Defendant Century Indemnity ("Century"), successor in interest to CCI, as successor in interest to Insurance Company of North America, incorrectly designated as CIGNA Insurance, filed a motion for summary judgment (Docket Item No. 16), supported by the Affidavit of Alice Ann Previte, Esq. (Docket Item No. 17) ("Previte Affidavit"), and a Statement of Undisputed Facts and Memorandum of Law (Docket Item No. 18) ("Century's Memorandum"). Consideration of the motion was deferred pending discovery limited to the issues of late notice and pollution exclusion clauses which was then conducted. At a pretrial conference held on May 17, 1999, the parties reported that such discovery was complete.

In further support of summary judgment, on May 14, 1999, Century filed a Supplemental Memorandum of Law in letter form (Docket Item No. 42) ("Century's Supplemental Memorandum"), and the Supplemental Declaration of Alice Previte (Docket Item No. 43) ("Previte Declaration"). Additional motions for summary judgment were filed on July 16, 1999 by the remaining Third Party Defendants and Plaintiff including (1) Maryland Casualty (Docket Item No. 46), supported by a Memorandum of Law (Docket Item No. 47) ("Maryland Casualty Memorandum"), and a volume of exhibits; (2) Travelers (Docket Item No. 48), supported by a Memorandum of Law (Docket Item No. 49) ("Travelers Memorandum"), and three volumes of exhibits; (3) TIG (Docket Item No. 50), supported by a Memorandum of Law (Docket Item No. 51) ("TIG Memorandum"), a statement of undisputed facts (Docket Item No. 52), and a volume of exhibits; and (4) USF & G (Docket Item No. 53), supported by a Memorandum of Law (Docket Item No. 54) ("USF & G Memorandum"), the Affidavit of Patrick M. Tomovic, Esq. ("Tomovic Affidavit") and the Affidavit of Douglas Rallis ("Rallis Affidavit") with attached exhibits.*fn4

On September 15, 1999, the Town filed a cross-motion for partial summary judgment (Docket Item No. 57), accompanied by a Memorandum of Law (Docket Item No. 58) ("Town Memorandum"), a statement of facts (Docket Item No. 59), and exhibits. Additional papers filed in support of these motions on October 15, 1999 include Travelers Supplemental Memorandum (Docket Item No. 61) and Local Rule 56 Statement of Facts (Docket Item No. 62), an Affidavit by Carolyn Henry, Esq. in further support of TIG's motion for summary judgment (Docket Item No. 63) ("Henry Affidavit"), TIG Supplemental Memorandum (Docket Item No. 64), Maryland Casualty Supplemental Memorandum (Docket Item No. 65), Century Supplemental Memorandum (Docket Item No. 66), and Response to the Town's statement of undisputed facts (Docket Item No. 67), and USF & G Supplemental Memorandum (Docket Item No. 68). Oral argument was deemed unnecessary.

Based on the following, TIG's motion (Docket item No. 50) should, upon the ground of late notice, be DENIED as that ground was waived or, alternatively, based on untimely notice, DENIED as to the personal injury actions, but GRANTED as to the CERCLA action; in either event, TIG's request for reimbursement of legal fees advanced should be DENIED. Century's motion (Docket Item No. 16) should, based on the pollution exclusion, be GRANTED or, alternatively, based on untimely notice, DENIED as to the personal injury actions and GRANTED as to the CERCLA action. Maryland Casualty's motion (Docket Item No. 46) should, based on the pollution exclusion, be GRANTED or, alternatively, based on untimely notice as to the CERCLA, Freier, Batt, Astor and Davies actions, GRANTED, and DENIED as to the Fiels and Anthony actions. Travelers' motion (Docket Item No. 48) should, based on the pollution exclusion and independent contractors clause, be GRANTED or, alternatively, based on untimely notice, DENIED as to the personal injury actions and GRANTED as to the CERCLA action. USF & G's motion (Docket Item No. 53), should, under the pollution exclusion, be GRANTED or, alternatively, based on untimely notice, GRANTED as to all underlying actions. Town of Cheektowaga's cross-motion (Docket Item No. 57), should be DENIED.

FACTS

Plaintiff TIG and Third Party Defendants Century, Maryland Casualty, Travelers and USF & G ("the insurers") are insurance companies which issued primary and excess comprehensive general liability insurance policies to the Town between March 30, 1961 and March 30, 1986. The Complaint and Third Party Complaints seek determination of the insurers' obligations to defend and indemnify the Town with respect to claims pending in this court arising out of the Town's alleged responsibility as a generator and transporter of hazardous waste to the Landfill.

The Underlying Claims

The underlying actions in this case arise from the contamination of the 120 acre Pfohl Brothers Landfill, located in the northeastern corner of the Town of Cheektowaga, New York, a suburban area adjacent to the City of Buffalo. The Landfill is listed on the New York State Registry of Inactive Hazardous Waste Disposal Sites, indicating the state considers the Landfill to be a public health threat. Many hazardous wastes were deposited into the Landfill between 1932 and 1972. Between 1950 and 1953, approximately 20% of the Town's municipal garbage collections were deposited into the Landfill. The Town also disposed of waste materials into the Landfill from the early 1950s through the 1960s.

By letter dated May 13, 1986, the New York State Department of Environmental Conservation ("the DEC"), informed the Town that, in connection with the DEC's designation of the Landfill as an inactive hazardous waste disposal site, the Town had been identified as a generator or transporter of hazardous wastes to the Landfill ("the 1986 DEC letter"). The 1986 DEC letter specifically advised the Town that

The Division of Environmental Enforcement of the New York State Department of Environmental Conservation is evaluating certain inactive hazardous waste disposal sites within the State which have been identified and listed in the registry of such sites prepared by the Division by the Department. Among the sites assigned to this Division is the Pfohl Brothers Landfill; Site # 915043 located off Aero Drive in the Town of Cheektowaga, Erie County. Existing information establishes that this site was used for the disposal of wastes of many types during the period of years of approximately from 1950 to 1970. Existing information also establishes that you utilized this site. Your use of this site may have been either as a generator or wastes, or as a transporter of wastes, or both. Records reflect direct contemporaneous communications between you and the site operators.

1986 DEC letter, p. 1, Town Exhibit F.*fn5

The DEC also requested the Town provide information concerning its activities relevant to the Landfill. Id.

The Town responded to the DEC on November 21, 1986, acknowledging its disposal of wastes at the Landfill until June 20, 1953. On December 16, 1989, the DEC advised the Town that it was in possession of business records indicating the Town was a heavy user of the Landfill until at least mid-1962 and that by September 1956 there was a substantial increase in the amount of waste materials the Town deposited into the Landfill. Further information was requested including information pertaining to business for whom the Town provided waste collection services as indicated in commercial and industrial account records. In December 1991, the DEC published its plans for cleaning up the Landfill. Copies of these plans were posted in the Town.

By letter dated April 2, 1992, the DEC advised that the Town was considered a potentially responsible party ("PRP") with regard to the hazardous waste contamination at the Landfill ("the 1992 DEC letter"). The Town was invited to voluntarily conduct or finance on-site remedial design and action for the Landfill; otherwise, the DEC could remediate the Landfill and seek recovery of the remediation costs through litigation.

By letter dated May 2, 1992, R. Williams Stephens, Esq., advised the Town of the remediation costs for which, as a PRP for the Landfill hazardous waste contamination, it could reasonably expect to be held responsible. Mr. Stephens further cautioned that in the event of related litigation, the Town would likely either be named as a defendant in the original action, or be brought in later as a third party defendant.

As Stephens predicted, the Town has been sued in litigation related to the hazardous waste it deposited into the Landfill. The litigation to which the instant action is directed includes an action for recovery of costs, contribution and declaratory relief under §§ 107 and 113 of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9607 and 9613, and six personal injury actions, all filed in this court.*fn6

The Town has also been sued as a Third Party Defendant in six personal injury actions ("the personal injury actions") brought by plaintiffs who allegedly suffered bodily injury and death as a result of exposure to contaminants that migrated from the Landfill into the ambient air, ground water and soil. Those actions include Freier v. Westinghouse, No. 95-CV-20A(F) ("Freier"), Batt v. Westinghouse, 95-CV-107A(F) ("Batt"), Astor v. Westinghouse, 95-CV-247A(F) ("Astor"), Davies v. Westinghouse, 95-CV-444(A)(F) ("Davies"), Fiels v. Westinghouse, 96-CV-395A(F) ("Fiels"), and Anthony v. Westinghouse, 97-CV-19A(F) ("Anthony"). Third Party Complaints against the Town were filed in Freier and Batt on April 27, 1995, in Astor on June 9, 1995, in Davies on August 10, 1995, in Fiels on August 23, 1996 and in Anthony on March 6, 1997.*fn7 It is evident from the Third Party Complaints that the underlying claims on which they are premised seek to recover for personal injuries and death allegedly caused by exposure to hazardous substances deposited into the Landfill by the Town and others. The Third Party Complaints allege three causes of action against the Town with regard to the personal injury actions including (1) negligent disposal of hazardous waste which the Town knew or should have known could migrate into the surrounding environment, (2) strict liability based on the release, disposal and maintenance of ultra-hazardous and abnormally dangerous materials at the Landfill, and (3) gross negligence. The third party complaints do not specify on what dates the Town allegedly released, disposed of or maintained the hazardous substances at the Landfill.

The Insurance Policies

The parties do not dispute that they issued insurance policies covering the Town as alleged in the Complaint and Third Party Complaint, although there was some difficulty in locating some of the policies.*fn8 TIG issued the Town eight primary general liability policies effective March 30, 1961 through March 30, 1971. Century issued the Town a primary insurance policy effective April 1, 1981 to April 1, 1982. A primary insurance policy was issued to the Town by Maryland Casualty, effective March 30, 1982 through March 30, 1984. A multi-peril policy issued to the Town by Aetna provided insurance coverage for the period March 30, 1977 to March 30, 1980.*fn9 Travelers issued the Town an indemnity insurance policy effective March 22, 1966 to March 22, 1967. A comprehensive general liability insurance policy was issued by USF & G to the Town, effective March 30, 1984 through March 30, 1985.

The Town does not dispute that the insurance policies issued by Century, Maryland Casualty, Aetna and USF & G all contain a "pollution exclusion" which provides that insurance coverage does not apply to

personal injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

Although the quoted pollution exclusion is from the policy issued by Century, Century Exhibit J,*fn10 the pollution exclusions contained in the other insurance policies are substantially similar and except from such exclusion any discharge, dispersal, release or escape of a contaminant that is "sudden and accidental." See Maryland Casualty Exhibit 3,*fn11 Traveler's Exhibit 10,*fn12 and USF & G Exhibit F and G.*fn13 The policies issued by TIG and Travelers do not contain the pollution exclusion; however, the Travelers policy covers only the conduct of independent contractors. Travelers Exhibit 11.

All the policies at issue, including those issued by TIG and Travelers, require that the Town timely notify the insurer when seeking defense or indemnification under the policies. Specifically, the TIG, Century, Maryland Casualty, Aetna and USF & G policies require written notification of an occurrence "as soon as practicable," and, if a claim or suit is commenced against the insurer, that every demand, notice, summons or other process be forwarded to the insurer "immediately." See TIG Exhibits D-J,*fn14 Exhibit Q to Henry Affidavit; Century Exhibit J; Maryland Casualty Exhibit 3; Travelers Exhibit 10 (Aetna policy), and USF & G Exhibits F & G. Travelers' policy requires notification of any accident "as soon as practicable." Travelers Exhibit 11.

DISCUSSION

1. Summary ...


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