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,
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. (
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 Local Rule 56.1" (NGC 56.1) ¶ 1.) The Water Districts draw water exclusively from the sole source aquifer below Long Island. (
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." (
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." (
On June 14, 1989, Grumman advised Travelers, but not Century, of a claim by the BWD. (
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. (
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." (
In late 2000, NYSDEC issued a Proposed Remedial Action Plan ("PRAP") with respect to the contaminated groundwater plume originating at the Bethpage Facility. (
In November 2000, Grumman met with the SFWD to discuss the upcoming Record of Decision ("ROD") and the potential contamination of SFWD wells. (
In November 2000, Grumman also met with the AWD. (NGC 56.1 ¶ 91.) At that meeting, Grumman "knew that contamination emanating from its Bethpage facility . .. was expected to eventually contaminate the drinking water supplies of both" the AWD and the SFWD, (
On December 4, 2000, Grumman's consultants Carlo San Giovanni and Michael F. Wolfert of ARCADIS Geraghty & Miller, Inc. wrote to Leskovjan to summarize the results of meetings with the Water Districts. (Insurers' Reply to Grumman's Response to the Insurers'"Statement of Undisputed Material Facts Pursuant to Local Civil Rule 56.1" ("Insurers Reply 56.1") ¶ 2.) They wrote, "Funding for well head or other treatment for a public supply well(s) will be provided if . . . it appears reasonably certain that one or more public supply wells will be impacted by TVOCs attributable to the Northrop Grumman and NWIRP sites." (Hultman Reply Decl. Ex. 3, at NGINS001726946.)
At a December 13, 2000 NYSDEC meeting that Grumman attended, NYSDEC advised that, "[i]f it's determined .. . that treatment must be implemented at other supply wells to ensure that no groundwater contamination ever enters a water supply, then the department . . . will . . . institute a program by which Northrop Grumman and the Navy will supply those wells with treatment." (
In January 2001, Grumman held a series of meetings with the SFWD, the AWD, and the MWD. (NG 56.1 ¶ 78.) Leskovjan wrote in an email that the Water Districts were concerned about groundwater contamination "as a result of recently developed information that indicates [Grumman's] groundwater plume extends much farther than anticipated." (
On January 11, 2001, Loesch, the SFWD and AWD consultant, sent a letter to Steven M. Scharf of NYSDEC through which both the SFWD and the AWD submitted comments on the PRAP to NYSDEC. (NGC 56.1 ¶ 87.) Loesch stated that "it is likely that at some future date, the plume will most probably impact Well Sites 3 and 6 in SFWD." (Hultman Decl. Ex, 31, at NGINS000615007.) He then asked, "in order to provide [a] financial guarantee, why shouldn't NYSDEC require both PRPs, or at a minimum, Northrop Grumman, to provide a letter of credit that would be sufficient to cover all anticipated future costs?" (Hultman Decl. Ex. 31, at NGINS000615007.) Loesch testified that this letter "[a]bsolutely" "helped put Northrop Grumman on notice that South Farmingdale considered it to be a responsible party," and that it "similarly put Northrop Grumman on notice that Aqua believed Northrop Grumman to be a responsible party and thus financially liable for remediation costs." (Insurers Reply 56.1 ¶ 3; Hultman Reply Decl. Ex. 10, at 62:14-63:13.)
On January 17, 2001, the MWD wrote to NYSDEC with regard to the PRAP and stated that the downgradient spread of the plume could threaten the MWD. (NGC 56.1 ¶ 101.) The letter recommended that a committee "be establis[h]ed to work with NYSDEC, Northrop-Grumman and the Navy" "to investigate off-site groundwater contamination," to "define potential impacts to public water supply wells," to "evaluat[e] data resulting from this investigation," and "to formulate and evaluate alternatives to remediate groundwater and protect public water supply." (
On February 2, 2001, Grumman's consultants San Giovanni and Wolfert wrote in a letter to Scharf of NYSDEC, "The capital and annual operation and maintenance costs for well head treatment would be borne by Northrop Grumman/Navy for the time period that the treatment is required, whether this be more or less than 30 years." (NGC 56.1 ¶ 81; Insurers 56.1 ¶ 81; Hultman Decl. Ex. 35, at NGINS000179913.) Grumman argues that the letter was referring to a potential agency-imposed remedy. (NGC 56.1 ¶ 200.) The treatment to which this letter referred applied to any "well field that may be impacted by the groundwater plume," whether located at the AWD, the SFWD, or the MWD. (
Minutes from a February 21, 2002 Technical Advisory Committee meeting attended by Grumman and Water District representatives state, "Grumman and the Navy have agreed to provide treatment, promptly, for these wells should that become necessary." (Insurers Reply Decl. ¶ 4; Hultman Reply Decl. Ex. 4, at NGINS001311672.)
Grumman did not notify the Insurers of the SFWD's views regarding Grumman's responsibility for payment in 2000 or of Grumman's February 2, 2001 and February 21, 2002 commitments to pay for wellhead treatment. (NGC 56.1 ¶ 89; Insurers 56.1 ¶ 89.) Grumman's outside counsel, Jonathan Sokol, had no recollection of conveying information about the SFWD to Travelers. (NGC 56.1 ¶ 90; Insurers 56.1 ¶ 90.) Sokol also stated, "[A]t least from the best of my recollection, also of this date, I don't think there was really a claim by South Farmingdale Water District." (NGC 56.1 ¶ 188; Hultman Decl. Ex. 68, at 188:01-04.)
In March 2001, NYSDEC issued a ROD to select a remedy for the contaminated groundwater emanating from the Bethpage Facility. (NGC 56.1 ¶ 82.) The ROD, among other things, required the installation and operation of monitoring wells and implemented a "public water supply contingency plan."
In January 2003, the U.S. Navy issued its own ROD for the regional groundwater plume. (NGC 56.1 ¶ 214.) The Navy stated that it would,
On January 28, 2005, the MWD asked NYSDEC, in a letter copied to Grumman, to act promptly in installing monitoring wells upgradient from one of its well fields, "since there [were] no longer any unimpacted upgradient outpost monitoring wells between the eastern portion of the plume and [the MWD's] supply wells." (NGC 56.1 ¶ 103.)
In March 2005, the MWD, through its environmental consultant, wrote to NYSDEC and noted the expanding contaminated groundwater groundwater footprint; the MWD "again requested that the Navy and Northrop Grumman Corporation be required to investigate, delineate and remediate this contamination." (NGC 56.1 ¶ 104.) On April 28, 2005, NYSDEC sent this letter to Grumman and the Navy. (
In October 2006, the AWD discovered actual contaminants in its wells. (NGC 56.1 ¶ 94; Hultman Decl. Ex. 49, at NGINS001322427.) On March 5, 2007, Loesch wrote on behalf of the AWD to NYSDEC stating, "By copy of this letter, we are putting the Navy and Northrop Grumman on notice of our findings, and we request that DEC require prompt action by the Navy/Northrop Grumman to provide both a temporary and permanent remedy." (NGC 56.1 ¶ 94.)
The agenda for a March 30, 2007 AWD-Navy-Grumman meeting refers to discussion of "the immediate need for temporary emergency treatment" at a site and the Isitatus and time frame for the Navy/Northrop Grumman to provide capital and operation and maintenance funding to Aqua New York to implement emergency VOC funding." (
On April 23, 2009, Grumman's broker, Brad Bartholomew of Aon, forwarded correspondence to the Insurers relating to contamination at the AWD. (NGC 56.1 ¶ 96; Hultman Decl. Ex. 51, at TRAV027183.) Bartholomew wrote, "The attached will serve as an update on the status of the Bethpage Grumman environmental claim." (NGC 56.1 ¶ 96; Hultman Decl. Ex. 51, at TRAV02178.) The attachments to the April 2009 email were from January 2009; they did not refer to any earlier meetings or communications. (Hultman Decl. Ex. 51, at TRAV027178-84.) One of the attachments was a January 9, 2009 letter from the Navy to Grumman and the AWD. (NGC 56.1 ¶ 238; Hultman Decl. Ex. 51, at TRAV027182.) In that letter, the Navy stated that it intended to comply with the NYSDEC contingency plan and that funding would be "equitably shared among all the potentially responsible parties — which includes NGC, the Navy and perhaps others." (
On June 11, 2010. counsel for Grumman sent a letter "to put Travelers [and Century] on notice of certain recent developments involving claims relating to the Bethpage Facility." (NGC 56.1 ¶ 106; Hultman Decl. Ex. 55, at ARSW003589.) Under the heading "Massapequa Water District Claim," Grumman's counsel wrote, "Enclosed plea[se] find a letter from counsel for the [MWD] to NYSDEC, dated June 7, 2010, alleging that groundwater contamination is migrating from the Bethpage facility towards the public water supply wells operated by the MWD and requesting that the NYSDEC take further action against Northrop Grumman and the U.S. Navy." (
On February 1, 2012, Sokol, Grumman's outside counsel, wrote a letter to Gail Dalton and Brittany Lehr of Travelers. (Hultman Decl. Ex. 58, at NGINS000010315.) In the letter, Sokol disclosed to Travelers that Grumman had entered into agreements with the BIND "[i]n the 1990s," and demanded coverage for $5,417,785 for those settlements. (NGC 56.1 ¶ 69; Hultman Decl. Ex. 58, at NGINS000010319-20.) Sokol also discussed correspondence between the MWD and NYSDEC related to concerns about groundwater impacts as well as a "claim" made by the AWD and a "similar claim" asserted by the SFWD. (
This Court entered an order on June 24, 2013, declaring that Century has no duty to defend or indemnify Grumman for the BWD claim, and entered an order on August 1, 2013, declaring that Grumman is not entitled to coverage from Travelers for monies paid or to be paid pursuant to the BWD settlement agreements. (
The Court incorporates the legal principles for summary judgment, pollution exclusions, and late notice that are set forth in its March 7, 2014 opinion regarding the Bethpage Facility. (
The Court incorporates the descriptions of the Travelers and Century primary and excess liability policies set forth in its March 7, 2014 opinions regarding Travelers' motion with respect to the Bethpage Facility and Century's motion with respect to the Bethpage Facility and Bethpage Community Park. (
Northrop first argues that the insurers' motion is non-justiciable. "The federal judicial power extends only to actual cases and controversies; federal courts are without jurisdiction to decide abstract or hypothetical questions of law."
The Insurers' motion is nonjusticiable with respect to the BWD because of this Court's orders of June 24, 2013 and August 1, 2013. These orders declare that Century has no duty to defend or indemnify Grumman for the BWD claim and that Grumman is not entitled to coverage from Travelers for the BWD settlement agreements. (NGC 56.1 ¶¶ 72, 73;
After the Insurers filed this motion, the BWD filed a lawsuit against Grumman alleging damage from radium and perchlorate emanating from the Bethpage Facility. (St. John Decl, Ex. 82.) In a footnote, the Insurers state that the newly filed BWD lawsuit is part of their motion, because the Insurers seek a declaration that Grumman is not entitled to coverage for past and future claims asserted by the BWD. (
For these reasons, there is no case or controversy to adjudicate with respect to the BWD.
However, the situation is different with respect to the other three water districts. In its answer, Northrop admits twice that a "ripe and justiciable controversy exists between Travelers and NGSC regarding their respective rights and obligations." (ECF No. ¶¶ 141, 148.) In its counterclaims, Northrop seeks a declaration that the Insurers are obligated to defend and indemnify it for claims involving the four Water Districts. (ECF No. ¶¶ 13, 21, 27.) Additionally, in February 2012, Grumman wrote to Travelers listing "claims" made by the AWD and SFWD in relation to groundwater impacts from the Bethpage regional groundwater plume and outlining correspondence with the MWD related to the same. (Hultman Decl. Ex. 58, at NGINS000010319.)
Furthermore, as previously outlined and as discussed further below, Grumman identified potential contamination affecting the Water Districts as early as 2000 and 2001, met with the Water Districts regarding that possibility, and committed to paying for remediation costs on several occasions in 2000-02. Even before the plume had affected the Water Districts, Grumman was aware of contamination and had committed to pay for remediation. Grumman had thus triggered the requirement to provide notice to the Insurers and created a justiciable case or controversy" within the meaning of Article III.
With respect to the AWD, MWD, and SFWD, this case therefore presents "a substantial controversy, between parties having adverse legal interests,
The policies at issue on this motion require Grumman to provide notice of "claims" and "suits." A "claim" is "a demand by a third party against the insured for money damages or other relief owed."
The policies require Grumman to notify the Insurers of a claim "immediately." (NGC 56.1 ¶ 119.) "Compliance with the notice requirements set forth in an insurance contract is a condition precedent to recovery under New York law, and failure by the insured to comply with such requirements relieves the insurer of liability."
Grumman owed notice to the Insurers with respect to the AWD and SFWD as early as November 2000, when Grumman met with both Water Districts. (
Grumman owed notice to the Insurers with respect to the MWD as early as January 2001, when it held a series of meetings with the AWD, the MWD, and the SFWD. (
Grumman's consultants stated to NYSDEC that Grumman would bear the "capital and annual operation and maintenance costs for well head treatment" for all Water Districts "for the time period that the treatment is required." (NGC 56.1 ¶ 81.) Grumman argues that the AWD, MWD, and FWD never asserted a "claim" against Grumman within the meaning of the policies. (NGC Opp. 16.) However, it is irrelevant that those three Water Districts have not filed common-law or statutory claims against Grumman. "A claim may he made without the institution of a formal proceeding. . . . [V]irtually any assertion of an exposure to liability within the risks covered by an insurance policy is a claim."
Despite having notice obligations to Insurers as early as 2000 and 2001, Grumman did not provide notice to the Insurers until a decade later. On April 23, 2009, Grumman's broker forwarded correspondence to the Insurers relating to contamination at the AWD. (NGC 56.1 ¶ 96.) On June 11, 2010, Grumman's counsel wrote to the Insurers regarding the MWD claim. (Hultman Decl. Ex. 55, at ARSW003590.) Finally, on February 1, 2012, Grumman's outside counsel wrote to Travelers regarding the SFWD claim. (Hultman Decl. Ex. 58, at NGINS000010319.)
In addition to arguing that it wasnot obliged to inform Travelers of any "claim" that occurred, Grumman also reiterates several arguments that it previously made in opposition to Travelers' and Century's prior motions regarding the Bethpage Facility and Bethpage Community Park. The Court has already analyzed and rejected each of these arguments.
First, Grumman claims that it "provided the insurers with timely notice of the NYSDEC Administrative Action in January 1984" through a December 6, 1983 NYSDEC letter that named Grumman a potentially responsible party, and the insurers did nothing to assist Grumman for over two decades." (NGC Opp. 16 (citing NGC 56.1 ¶¶ 158, 166-74).) However, as the Court has explained in its opinion related to the Bethpage Facility, Grumman indisputably forwarded the 1983 NYSDEC letter to the wrong address for Travelers in 1984, and no Travelers witness recalls ever seeing it. (
Grumman also asserts that "a reasonable jury could find that the insurers waived their late-notice defenses to coverage for the NYSDEC Administrative Action and any indirect demands that the AWD, MWD, and SFWD supposedly made on Grumman in connection with that proceeding." (NGC Opp. 17-18.) However, the policies state that their terms may not be waived or changed except by written endorsement.. (NGC 56.1 ¶ 120; Insurers 56.1 ¶ 120; Maxwell Decl. Ex. 1, at TRAV000443.) There was no such waiver by written endorsement here. Nor does the record as a whole support an inference of waiver, which is not lightly to be presumed; waiver is the "intentional relinquishment of a known right."
Finally, Grumman argues that notice would have been futile, because "Century had effectively disclaimed coverage for Grumman environmental claims by repeatedly telling Grumman that Century would not defend or indemnify the company against
For these reasons, the Insurers are entitled to a declaration barring coverage for claims at the Water Districts because Grumman provided late notice of those claims.
For the same reasons as those set forth in the Court's prior opinions, the pollution exclusions in the Travelers policies preclude coverage for contamination at the Water Districts arising from the Bethpage Facility and the Bethpage Community Park. The Travelers policies in effect from January 1, 1972 to January 1, 1983, with the exception of Policy No. TREE-SLG-107T519-8-82, "exclude .. liability arising out of pollution or contamination caused by the discharge, dispersal, release or escape of any pollutants, irritants or contaminants . .. unless such discharge, dispersal, release or escape is
As the Court outlined in its prior opinions, Grumman intentionally undertook acts that discharged contaminants. (
The practices causing contamination at the Bethpage Facility and Community Park and thereby affecting the Water Districts were not "sudden and accidental" events within the meaning of the pollution exclusion. Grumman's practices involved TCE on the ground, sprayed by wands, discharged into basins, and kept in drums; all of these practices involved normal protocol and housekeeping matters, not "accidental" contamination. (
For these reasons, the insurers are entitled to a declaration barring coverage for claims at the Water Districts under the Travelers policies containing pollution exclusions.
The Insurers' policies state, `The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for first aid to others at the time of accident." (NGC 56.1 ¶ 125; Insurers 56.1 ¶ 125; Maxwell Decl. Ex. 1, at TRAV000442.) An insurer may deny coverage where the insured assumes financial obligations without the insurer's participation or consent.
Here, Grumman breached the policies when it agreed in 2001, without notice to or consent from the Insurers, to pay remediation costs at each of the Water Districts that the plume might affect. In a February 2, 2001 letter to NYSDEC, Grumman's consultants stated that Grumman would bear the "capital and annual operation and maintenance costs for well head treatment" for all Water Districts "for the time period that the treatment is required." (NGC 56.1 ¶ 81.) Grumman argues that the letter "merely provid[es] comments on what NYSDEC was proposing to, and ultimately did, include in the ROD it issued." (NGC Opp. 24 (citing NGC 56.1 ¶¶ 200, 201).) However, Grumman does not dispute that it committed to pay for wellhead treatment on this occasion as well as on two other occasions: in December 2000, when Grumman's consultants stated that Grumman would provide "fflunding for well head or other treatment for a public supply well," and in February 2002, when Grumman "agreed to provide treatment" for contaminated wells. (Insurers Reply 56.1 ¶¶ 2, 4.) In so doing, Grumman violated the plain language of the policies, which state that Grumman shall not "assume
Therefore, Grumman is not entitled to coverage from the Insurers for any Water District claims due to its violations of the voluntary payment provisions of the policies through its commitments to pay for treatment.
For the reasons set forth above, the insurers' motion for summary judgment is GRANTED with respect to the Aqua New York, South Farmingdale, and Massapequa Water Districts, and DENIED with respect to the Bethpage Water District.
The Clerk of Court is directed to terminate the motion at ECF No. 355.
The parties shall write to the Court regarding their views as to whether, having reviewed the Court's full opinions, they intend to move for Rule 54(b) certification or whether they intend to proceed to Phase II of the litigation, no later than
SO ORDERED.