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Narragansett Electric Co. v. American Home Assurance Co.

United States District Court, S.D. New York

February 18, 2014

THE NARRAGANSETT ELECTRIC COMPANY, Plaintiff,
v.
AMERICAN HOME ASSURANCE COMPANY, et al., Defendants.

OPINION & ORDER

LORNA G. SCHOFIELD, District Judge.

Plaintiff Narragansett Electric Company ("Narragansett") moves for Summary Judgment as to its Second Claim for relief, seeking damages for Defendant Century Indemnity Company's ("Century") breach of its duty to defend. Defendant Century cross-moves for Summary Judgment as to Plaintiff's First and Second Claims for relief. Plaintiff's and Century's respective motions to dismiss are granted in part and denied in part.

I. Background and Facts

What remains of this action is an effort by Narragansett to recoup its defense costs from Century under a primary general liability insurance policy for the period January 1, 1985 through January 1, 1986, issued by a predecessor of Defendant Century to a predecessor of Plaintiff Narragansett. The policy provided liability coverage for property damage. The policy contained a "duty to defend" provision and a "pollution exclusion" that are at the heart of this litigation. Although Century had a duty to defend under the policy, it declined to do so and did not participate in the defense of the underlying action. Narragansett incurred $5, 541, 705 in defense costs over the course of twenty years, which it now seeks to recover on this motion.

A. The Underlying Litigation

In 1987, the Commonwealth of Massachusetts filed a complaint against Narragansett's predecessor, the Blackstone Valley Electric Company ("Blackstone"), alleging that Blackstone was jointly and severally liable under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") for costs incurred by Massachusetts in its investigation and clean up of a hazardous waste site located in Attleboro, Massachusetts called the Mendon Road site.

In 1991, the District Court for the District of Massachusetts granted partial summary judgment for the state, finding that ferric ferrocyanide ("FFC") qualified as a hazardous substance under CERCLA. In 1994, that District Court granted judgment in favor of the state in the amount of $5, 875, 864.03, which Blackstone placed in escrow. Blackstone appealed the judgment to the United States Court of Appeals for the First Circuit. In 1995, the First Circuit vacated the District Court's judgment, and remanded with instructions to refer the matter to the Environmental Protection Agency ("EPA") for an administrative determination regarding FFC's status as a "hazardous substance" under CERCLA. (56.1 ΒΆ 6).

On January 18, 2001, the EPA issued its Preliminary Agency Decision, concluding that FFC is a hazardous substance. On September 13, 2001, Narragansett, as Blackstone's successor, filed suit against the EPA in the United States District Court for the District of Columbia seeking, pursuant to the Freedom of Information Act, documents relevant to Narragansett's defense that had been withheld in the litigation by the EPA. On September 27, 2003, the EPA issued its final decision concluding that FFC is a hazardous substance under CERCLA.

Narragansett then appealed the EPA's decision to the First Circuit, which held that it did not have jurisdiction, and transferred the matter back to the District Court. Finally, on October 12, 2006, the D.C. District Court entered a final consent decree. Pursuant to the consent decree, the escrow account, which had increased in value, was to be closed with sixty percent of the escrow funds distributed to the Commonwealth and forty percent of the funds distributed to Narragansett. In total, Massachusetts received $5, 013, 046. Narragansett received $3, 342, 031.

In 1994, parallel to the Massachusetts litigation, Blackstone filed a contribution action against Stone & Webster, seeking contribution for damages at the Mendon Road site. Stone & Webster were management consultants that directed waste disposal at the Mendon Road site for Valley Gas Company, which Blackstone alleged contributed to its liability in the Massachusetts action. The contribution action was stayed in 1995. In 2000, Stone & Webster filed for bankruptcy. Narragansett, as Blackstone's successor, filed a proof of claim in that action. Pursuant to bankruptcy law, Narragansett was required to make all claims it might potentially have against Stone & Webster or forfeit them. In 2004, Narragansett settled its claims with Stone & Webster with respect to eight environmental sites, one of which was the Mendon Road site.

B. The Current Litigation

Plaintiff brought this action in November 2011, and filed its Amended Complaint in March 2012. Relevant here are Plaintiff's first three claims, all regarding Century's duty to defend. They seek respectively a declaratory judgment, damages for breach of contract, and damages for bad faith failure to perform. Plaintiff's remaining claims, which have since been settled, were against Century and the excess carriers regarding their indemnification obligations.

On February 1, 2013, in response to various pre-answer motions filed by the parties, Judge Castel held that Massachusetts law governs the Century policy, and that Century had a duty to defend Narragansett in the underlying action because the "pollution exclusion" does not apply. He granted Plaintiff's summary judgment motion on the declaratory judgment claim and denied Defendant's motions to dismiss and for summary judgment on Counts I through V. 921 F.Supp.2d 166 (S.D.N.Y. 2013). On April 1, 2013, Judge Castel denied Defendant's motion for reconsideration.

On February 15, 2013, after Judge Castel first held that Century had a duty to defend, Defendant answered the Amended Complaint asserting, inter alia, the affirmative defense that the statute of limitations had expired. The case was transferred to this Court on April 3, 2013.

Plaintiff now seeks to enforce Judge Castel's ruling and moves for partial summary judgment on Count II, its damages claim as to the duty to defend. Defendant cross moves for summary judgment on that claim, and renews its motion for summary judgment on Count I, the declaratory judgment claim, this time (i) raising its statute of limitations affirmative defense, (ii) urging a pro rata allocation of defense costs among the insurers, and (iii) arguing to limit the scope of its defense obligation.

II. Legal Standard

The standard for summary judgment is well established. Summary judgment is appropriate only where the record before the Court establishes that there is no "genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A genuine dispute as to a material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court must construe the evidence in the light most favorable to the nonmoving party and must draw all reasonable inferences in the nonmoving party's favor. See Id at 255.

III. Discussion

A. Procedural Bar to Raising Statute of Limitations Argument

Defendant Century raises a statute of limitations defense and argues that Counts I and II are time barred under Rhode Island's statute of limitations and New York's borrowing statute. Because an action for breach of the duty to defend does not accrue until final judgment in the underlying litigation pursuant to Rhode Island law, Plaintiff's claims are timely.

Plaintiff argues that Judge Castel's decision finding that Century had a duty to defend is law of the case and should not be reconsidered. The law of the case doctrine is not binding, but "counsels a court against revisiting its prior rulings in subsequent stages of the same case" unless it has "cogent and compelling reasons" to do so or reconsideration is necessary to "correct a clear error or prevent manifest injustice." Ali v. Mukasey, 529 F.3d 478, 490 (2d Cir. 2008) (internal quotation marks omitted).

Defendant cites, inter alia, Santos v. Dist. Council of New York City, to argue that it did not need to raise its statute of limitations defense on a pre-answer motion for summary judgment. 619 F.2d 963, 967 (2d Cir. 1980) ("The statute of limitations defense need not be raised in a preanswer motion. Rather, under Fed.R.Civ.P. 8(c), the statute of limitations constitutes an affirmative defense, to be asserted in a responsive pleading."); see also Strauss v. Douglas Aircraft Co., 404 F.2d 1152, 1155 (2d Cir. 1968) ("[T]he party wishing to raise the defense is obliged to plead the Statute of Limitations at the earliest possible moment.").

Defendant correctly notes that the statute of limitations defense need not be asserted in a pre-answer motion made by a defendant in order to be preserved. See Fed.R.Civ.P. 12(b) (specifying defenses that must be made before pleading if a responsive pleading is required). Neither the rule nor the existing case law is helpful in addressing whether the Defendant here was required to raise an affirmative defense in response to Plaintiff's pre-answer Motion for Summary Judgment.

Justice requires consideration of Defendant's statute of limitations defense. The Defendant does not appear to have been purposefully dilatory in asserting its defense. See Strauss, 404 F.2d at 1155-56 (analyzing whether leave should be given to amend an answer to assert the statute of limitations defense, and noting that if the "defense lurks in the case, vacillation can cause the other party irreparable injury"). The Defendant raised its statute of limitations defense in its Answer. There is no case law or rule mandating that the Defendant raise its affirmative defenses in response to Plaintiff's motion. Because Defendant raised the statute of limitations as soon as ...


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