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Travelers Indem. Co. v. Northrop Grumman Corp.

United States District Court, S.D. New York

March 13, 2014

TRAVELERS INDEMNITY CO., et al., Plaintiffs,
v.
NORTHROP GRUMMAN CORP., et al., Defendants, and CENTURY INDEMNITY CO., eventual successor in interest to INSURANCE CO. OF NORTH AMERICA, Nominal Defendant

Page 600

March 13, 2014, Filed

For Travelers Indemnity Company of Connecticut, formerly known as Travelers Indemnity Company of Rhode Island, Plaintiff: Andrew Stuart Amer, Lynn Katherine Neuner, Mary Beth Forshaw, LEAD ATTORNEYS, Bryce Allan Pashler, Ian Ronald Dattner, Rae Caroline Adams, Simpson Thacher & Bartlett LLP (NY), New York, NY; Meghan E. Cannella, Rita Kathleen Maxwell, Simpson Thacher & Bartlett LLP, New York, NY.

For Northrop Grumman Corporation, Northrop Grumman Systems Corporation, Defendants: Edward H. Rippey, Shelli Li Calland, PRO HAC VICE, Covington & Burling, Washington, DC; Eric Christian Bosset, Georgia Kazakis, Jamar Kentrell Walker, Joshua David Asher, Kevin Robert Glandon, Laura Elizabeth Mellis, Thomas Leon Cubbage, III, William F. Greaney, PRO HAC VICE, Covington & Burling LLP, Washington, DC; James A. Goold, Richard Laird Hart, PRO HAC VICE, Timothy Dezso Greszler, Covington & Burling, L.L.P. (DC), Washington, DC.

For Century Indemnity Company, eventual successor in interest to Insurance Company of North America, Nominal Defendant: Seth Goodman Park, LEAD ATTORNEY, Siegal & Park, Mt. Laurel, NJ; Brian C. Vance, PRO HAC VICE, Havertown, PA; David Chaffin, White and Williams LLP, Boston, MA; Guy A. Cellucci, PRO HAC VICE, White and Williams LLP, Philadelphia, PA; Lynn Katherine Neuner, Mary Beth Forshaw, Simpson Thacher & Bartlett LLP (NY), New York, NY; Melvin R. Shuster, PRO HAC VICE, Siegal & Park, Mt. Laurel, NJ; Robert F. Walsh, Shane R. Heskin, White and Williams LLP(Philadelphia), Philadelphia, PA.

For United States Of America, Interested Party: Farzin Franklin Amanat, LEAD ATTORNEY, Us Attorney Edny, Brooklyn, NY.

For Northrop Grumman Corporation, Cross Claimant, Counter Claimant: Georgia Kazakis, Jamar Kentrell Walker, Joshua David Asher, Kevin Robert Glandon, Thomas Leon Cubbage, III, William F. Greaney, PRO HAC VICE, Covington & Burling LLP, Washington, DC; Shelli Li Calland, PRO HAC VICE, Covington & Burling, Washington, DC.

For Northrop Grumman Systems Corporation, Cross Claimant, Counter Claimant: Eric Christian Bosset, Georgia Kazakis, Jamar Kentrell Walker, Joshua David Asher, Kevin Robert Glandon, William F. Greaney, PRO HAC VICE, Covington & Burling LLP, Washington, DC; Shelli Li Calland, PRO HAC VICE, Covington & Burling, Washington, DC.

For Century Indemnity Company, eventual successor in interest to Insurance Company of North America, Cross Defendant: Seth Goodman Park, LEAD ATTORNEYS, Melvin R. Shuster, Siegal & Park, Mt. Laurel, NJ; Brian C. Vance, PRO HAC VICE, Havertown, PA; Lynn Katherine Neuner, Mary Beth Forshaw, Simpson Thacher & Bartlett LLP (NY), New York, NY.

For Travelers Indemnity Company of Connecticut, Counter Defendant: Andrew Stuart Amer, Lynn Katherine Neuner, Mary Beth Forshaw, LEAD ATTORNEYS, Bryce Allan Pashler, Simpson Thacher & Bartlett LLP (NY), New York, NY; Rita Kathleen Maxwell, Simpson Thacher & Bartlett LLP, New York, NY.

KATHERINE B. FORREST, United States District Judge.

OPINION

Page 601

OPINION & ORDER

KATHERINE B. FORREST, District Judge:

This is the Court's final summary judgment opinion in the first phase of this environmental insurance coverage action.

In April 2012, Travelers Indemnity Co. and various affiliated companies (together, " Travelers" ) commenced the underlying declaratory judgment action as to liability for environmental pollution against Northrop Grumman Corp. and Northrop Grumman Systems Corp. (together, " Northrop" or " Grumman" ) and Century Indemnity Co. (" Century" ), eventual successor in interest to Insurance Company of North America (" INA" ), as nominal defendant. Together, the Court refers to Travelers and Century as " the Insurers."

This opinion relates to the Insurers' motion for summary judgment with respect to claims arising from four areas: the Bethpage (" BWD" ), Aqua New York (" AWD" ), South Farmingdale (" SFWD" ), and Massapequa (" MWD" ) Water Districts. (ECF No. 355.) The Court will not repeat the facts or the law set forth in detail in its prior opinions granting summary judgment to Travelers and Century with regard to the Bethpage Facility and Community Park. (ECF Nos. 552, 553, and 554.)

The Insurers argue that they owe no coverage for any claims arising from contamination to the BWD, AWD, SFWD, and MWD, because, inter alia, Grumman failed to provide notice timely notice of the Water Districts' claims, the pollution exclusions in the Travelers policies preclude coverage, and Grumman breached its obligations under the policies by agreeing to pay for remediation. The Court agrees. For the reasons set forth below, the Insurers' motion is GRANTED with respect to the AWD, SFWD, and MWD; it is DENIED with respect to remaining BWD claims.[1]

I. FACTS

The Court incorporates the " Facts" sections of its March 7, 2014 opinions regarding the environmental contamination at the Bethpage Facility and the Bethpage Community Park. (See ECF No. 552 at 2-28; ECF No. 553 at 2-10.)

The Water Districts are responsible for providing drinking water for residents who live near the Bethpage Facility in Nassau County, Long Island. (Northrop Grumman's Resp. to the Insurers' " Statement of Undisputed Material Facts Pursuant to

Page 602

Local Rule 56.1" (NGC 56.1) ¶ 1.) The Water Districts draw water exclusively from the sole source aquifer below Long Island. (Id. ¶ 2.) Portions of the service areas and certain supply wells of the SFWD, the former AWD,[2] and the MWD are generally downgradient from the Bethpage Facility and Community Park. (Id. ¶ 4.)

On November 22, 1977, the BWD wrote a letter to Grumman that stated, " Currently available evidence indicates that . . . contamination has arisen by virtue of discharge of waste products from your company into the ground water supply." (Id. ¶ ¶ 6, 7.) Grumman responded that it was not responsible for the contamination and requested anything suggesting otherwise, and counsel for the BWD later stated that they " did not have sufficient material to frame any pleadings." (Id. ¶ ¶ 242, 243.)

A 1986 study by the Nassau County Department of Health (" NCDOH" ) and the United States Geological Survey found that " [g]round water in some areas" of east-central Nassau County had " already been contaminated," and that a " groundwater plume was found to be sinking and moving south southeast." (Id. ¶ 12; Statement of Undisputed Material Facts Pursuant to Local Civil Rule 56.1 (" Insurers 56.1" ) ¶ 12.) In 1987, the BWD notified Grumman that the levels of trichloroethylene (" TCE" ) contamination in its water supply exceeded drinking water standards. (NGC 56.1 ¶ 13.)

On June 14, 1989, Grumman advised Travelers, but not Century, of a claim by the BWD. (Id. ¶ 15.)[3] On August 16, 1989, Grumman and Travelers met to discuss the BWD's claim. (Id. ¶ 16.) On October 24, 1989, Travelers wrote to Grumman, " Travelers will investigate the facts and circumstances of the [BWD] matter in order to determine the extent of its indemnity obligations, if any." (Id. ¶ 19.) Travelers also stated that it had " no obligation to reimburse or pay for any legal fees incurred or to be incurred by Grumman in these matters unless and until such a suit is initiated." (Id. ¶ 186; St. John Decl. Ex. 55, at NGINS000403699.)

On May 22, 1990, Grumman entered into a settlement with the BWD that obligated Grumman to contribute approximately $1.7 million for remedial measures at BWD well #6. (NGC 56.1 ¶ 21.) Travelers made numerous requests for information to Grumman regarding the BWD and stated that it had not received responses from Grumman on several occasions. (Id. ¶ 28-61.)

On October 30, 2000, Larry Leskovjan, an Environmental Manager at Grumman, wrote to other Grumman employees about a " recent discovery that the contaminant plume has progressed much more closely to the South Farmingdale Water District supply wells than expected." (Id. ¶ 74.) Leskovjan wrote that the data " strongly suggest that this plume originated from Northrop Grumman property," and that the worst-case cost would be $26 to $28 million. (Id.)

In late 2000, NYSDEC issued a Proposed Remedial Action Plan (" PRAP" ) with respect to the contaminated groundwater plume originating at the Bethpage Facility. (Id. ΒΆ 75.) The Water Districts told NYSDEC that they supported the agency's position ...


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