Source: http://www.newyorklawjournal.com, September 2, 2016
By: Jason Grant
An insurance company does not have to indemnify Keyspan Gas East Corp.’s environmental cleanup losses connected to periods of time when the relevant insurance was not available in the marketplace, a New York appeals court has found.
In an issue of first impression in the state’s appellate courts, the Appellate Division, First Department reversed a lower court ruling Thursday and found that Century Indemnity Co., an insurer sued by Keyspan, was not responsible for compensating the gas company for time frames before 1953 and after 1969 when the relevant liability insurance “was otherwise unavailable.”
To grant the insured, Keyspan, an exception to its risk—when it was uninsured—because of the “unavailability” of insurance would be “inconsistent with policy language restricting coverage to the policy period,” the appeals panel wrote in a unanimous decision.
In 1995, the New York Department of Environmental Conservation sought to compel Keyspan, later acquired by National Grid, to pay for the investigation and cleanup at two manufactured gas plant sites where hazardous wastes, including tar, leached into groundwater and soil for decades, the panel wrote.
Keyspan, which was operating the Rockaway Park, Queens, and Hempstead, Long Island-based plants, ultimately spent millions of dollars in remediation costs, said the panel. Keyspan in turn sued Century to indemnify it for the losses, pointing to 16 successive years of Century general liability insurance policies it had bought from 1953 to 1969.
The ruling in Keyspan Gas East v. Munich Reinsurance America, 604715/97, written by Justice Judith Gische, pointed out that Keyspan’s claim included not only the 16 years of policies, but also periods before 1953 and after 1969 “when insurance covering this risk could not be purchased in the marketplace.”
The dispute, the court noted, “implicates responsibility for as many as 70 years’ worth of allocated risk.” Century had claimed, the panel also wrote, that contamination of the Long Island site took place between 1903 and 2001 and contamination of the Queens site began in 1905 and possibly ran to 2012.
A lower court had found, in part, that “liability for periods of time when insurance was unavailable … should be allocated to Century,” except between 1971 and 1982, a period when state insurance law prohibited any insurer from covering liability arising out of pollution or contamination.
Reversing that lower court ruling on Thursday, the appellate panel looked in large part to the language of the relevant insurance policies, while also noting that courts outside of New York State had “come to different conclusions, employing different rationales.”
Justices Angela Mazzarelli, David Friedman and Karla Moskowitz joined Gische in finding that “the policy language supports a conclusion that the unavailability exception to proration to the insured does not apply.”
“While none of the policies expressly address how to allocate liability in a situation where the underlying damage is long-term, continuous and indivisible, the fact that the policies require Century to indemnify Keyspan for occurrences, accidents, etc., ‘during the policy period’ is consistent with allocation for time on the risk,” Gische wrote. “There is no other or additional contractual language in the policy justifying this exception.”
Jonathan Hacker, a partner at O’Melveny & Myers, which represented Century, declined to comment Friday. Covington & Burling, which represented Keyspan, did not return a call seeking comment.