Source: http://www.newyorklawjournal.com, January 21, 2015
By: Amaris Elliott-Engel
An insurance company no longer is required to cover an upstate New York utility company for the cleanup of hazardous waste at seven plants that provided gas lamps during the 1800s and early 1900s, an appellate court has ruled.
The Appellate Division, First Department, found earlier this month that Travelers Indemnity Company does not have to provide coverage to Orange and Rockland Utilities because the insured, as required under its policy, failed to give timely notice of possible pollution at the now-shuttered gas plants.
The panel of Justices John Sweeny Jr. (See Profile), Richard Andrias (See Profile), Rosalyn Richter (See Profile) and Darcel Clark (See Profile) decided Travelers Indemnity Company v. Orange and Rockland Utilities, 60360102. In doing so, it upheld Manhattan Justice Eileen Bransten’s (See Profile) decision to grant summary judgment in favor of Travelers.
“Defendant’s argument that it never had actual notice of any pollution was insufficient,” the panel said in a brief, unanimous opinion. “The record abounds with documents demonstrating that pollution likely existed at each of the sites. … These documents, along with repeated interactions with both state and federal regulators, were sufficient to place defendant on notice.”
The manufactured gas plants were operated from 1852 to 1965 in Middletown, Port Jervis, Suffern, Haverstraw and Nyack.
The dates of the policies under which Orange and Rockland or its predecessors were issued coverage range between 1955 and 1978. Travelers argued that the utility was required to give notice 14 years before it did so in 1995.
According to Bransten’s ruling, there were several instances showing the utility’s knowledge about pollution issues. For example, the utility notified the Environmental Protection Agency in 1981 that there was “possible residual” from manufacturing gas at three plants; the utility investigated coal tar that leaked from a cistern at another site in 1985; and a site inspector retained by the EPA found there was concern that pollution leaching into groundwater would pollute a “glacial … aquifer” near a site in Middletown.
The utility argued that it was not required to provide notice to Travelers until it entered a final consent order with the state Department of Environmental Conservation in 1995 requiring the investigation of pollution at its gas plants and remediation of sites found to be contaminated.
The appellate court also rejected Orange and Rockland’s argument that it was unaware of the pollution because it had an “apparent strategy of waiting to be directed by the appropriate regulatory agencies to investigate the sites and remediate pollution” when there was strong evidence of the contamination problem.
Bransten noted the utility said in a 2008 case that it did not investigate any of the gas plant sites. “Now, ORU makes contradictory representations, stating that it in fact conducted investigations at [manufactured gas plant] sites, and that these investigations were sufficient to cause it to maintain a good faith belief that the policies would be implicated, notwithstanding internal reports and regulatory interactions to the contrary,” Bransten said in a July 2013 opinion.
The utility was aware of a reasonable possibility that its insurance policies would be implicated, which is the standard the First Department set out in its 2010 decision in Travelers Indemnity Company v. Orange & Rockland Utilities, Bransten said.
John Failla, a partner with Proskauer Rose, represented Travelers on appeal. Roger E. Warin, a partner with Steptoe & Johnson’s Washington D.C. office, represented the utility on appeal.