Opinion
02-CV-0261E(Sc)
January 2, 2003
MEMORANDUM AND ORDER
This decision may be cited in whole or in any part.
The operative facts are relatively straightforward and ostensibly undisputed. A fire occurred at a plant operated by plaintiff Cataract Metal Finishing, Inc. ("Cataract") on February 3, 2000 and the plant was completely destroyed. As part of Cataract's metal finishing business, the plant had housed open vessels containing hazardous materials including muriatic acid, sodium cyanide, cadmium cyanide and trichlorethylene. The Niagara Falls Fire Department had used water to fight the fire, which allegedly caused the hazardous materials to overflow and spill into the sewer and adjacent properties (the "Haz-Mat Spill"). The New York State Department of Environmental Conservation ("DEC") sent Cataract's President a letter February 4, 2000 demanding that Cataract immediately clean-up the Haz-Mat Spill, and warning that the DEC would do so — subject to reimbursement — if Cataract failed to act. Cataract did not remedy the Haz-Mat Spill. Consequently, the DEC hired private contractors to clean-up the Haz-Mat Spill, which involved testing, containment, treatment and disposal of affected materials. The DEC now seeks reimbursement from Cataract in the amount of $810,823.86; Cataract in turn seeks indemnification from its insurer, Hartford Fire Insurance Company ("Hartford").
Cataract named several entities allegedly part of the Hartford family of companies, which will collectively be referred to as "Hartford".
Hartford denied Cataract's claim on the basis of an absolute pollution exclusion ("APE"), which provides exceptions to coverage under Cataract's Business Liability Coverage ("BLC") as contained in its insurance policy (the "Policy"). See Cataract Policy, BCL Form at ¶ (f). The APE contains two sections, including a "governmental direction" exclusion ("GDE"), which excepts from coverage:
"(2) Any loss, cost or expense arising out of any:
"(a) Request, demand or order that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of pollutants; or
"(b) Claim or suit by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of pollutants.
"Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." Cataract Policy, BCL Form at ¶ (f)(2).
Although Hartford also declined coverage on the basis of paragraph (f)(1), this Court will only address the GDE contained in paragraph (f)(2) inasmuch as it is the only basis upon which Hartford seeks summary judgment.
Consequently, the majority of Cataract's Memorandum of Law need not be addressed. See Pl.'s Mem. of Law, at 5-12 (addressing paragraph (f)(1)).
Cataract filed suit March 1, 2002 in state court seeking declaratory judgment that Hartford is required under the Policy to pay the cost of cleaning up the Haz-Mat Spill. Hartford removed the action to this Court April 5, 2002 and filed an Answer April 19, 2002 asserting various affirmative defenses. Hartford moved for summary judgment October 18, 2002 on the ground that there is no coverage obligation under paragraph (f)(2) of the Policy. Cataract cross-moved for summary judgment November 25, 2002 on the grounds that the Policy's APE is ambiguous and unenforceable. These motions were argued and submitted December 13, 2002. For the following reasons, Hartford's motion will be granted and Cataract's motion will be denied.
Rule 56(c) of the Federal Rules of Civil Procedure ("FRCvP") states that summary judgment may be granted only if the record shows "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." In other words, after discovery and upon a motion, summary judgment shall be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Summary judgment is thus appropriate where there is "no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Of course, the moving party bears the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995) (citing Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970)). If the moving party makes such a showing, the non-moving party must then come forward with evidence of specific facts sufficient to support a jury verdict in order to survive the summary judgment motion. Ibid.; FRCvP 56(e).
With respect to the first prong of Anderson, a genuine issue of material fact exists if the evidence in the record "is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, at 248. Stated another way, there is "no genuine issue as to any material fact" where there is a "complete failure of proof concerning an essential element of the nonmoving party's case." Celotex, at 323. Under the second prong of Anderson, the disputed fact must be material, which is to say that it "might affect the outcome of the suit under the governing law * * *." Anderson, at 248.
See also Anderson, at 252 ("The mere existence of a scintilla of evidence in support of the [movant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [movant].")
Furthermore, "[i]n assessing the record to determine whether there is a genuine issue as to any material fact, the district court is required to resolve all ambiguities and draw all factual inferences in favor of the party against whom summary judgment is sought." St. Pierre v. Dyer, 208 F.3d 394, 404 (2d Cir. 2000) (citing Anderson, at 255). Nonetheless, mere conclusions, conjecture, unsubstantiated allegations or surmise on the part of the non-moving party are insufficient to defeat a well-grounded motion for summary judgment. Goenaga, at 18. Moreover, "[w]here the sole question presented on a motion for summary judgment is the interpretation of a clear and unambiguous written agreement, the issue is one of law for the court and may be decided upon a motion for summary judgment." Jakobson Shipyard, Inc. v. Aetna Cas. Sur. Co., 775 F. Supp. 606, 609 (S.D.N.Y. 1991). "This principle applies equally to contracts of insurance." Ibid.
See footnote 4.
See also VKK Corp. v. Nat'l Football League, 244 F.3d 114, 129 (2d Cir. 2001) (stating that, under New York law, "the initial interpretation of a contract `is a matter of law for the court to decide") (citations omitted); Fulton Cogeneration Assoc. v. Niagara Mohawk Power Corp., 84 F.3d 91, 98 (2d Cir. 1996) (holding that summary judgment is appropriate where the "language of the contract is unambiguous, and reasonable persons could not differ as to its meaning").
Turning to the merits, this Court finds that there is no genuine issue of material fact whether Cataract's claim is excluded under the Policy's GDE because Cataract seeks indemnification for the DEC's reimbursement request, which stems from its coordination of the environmental clean-up necessitated by the Haz-Mat Spill.
Under New York law, insurance contracts are interpreted "to give effect to the intent of the parties as expressed in the clear language of the contract." McCarthy v. Am. Int'l Group, Inc., 283 F.3d 121, 124 (2d Cir. 2002) (quoting Vill. of Sylvan Beach, N.Y. v. Travelers Indem. Co., 55 F.3d 114, 115 (2d Cir. 1995)). Moreover, "[u]nambiguous terms are to be given their plain and ordinary meaning." Ibid. (quoting Nat'l Union Fire Ins. Co. of Pittsburgh, P.A. v. Stroh Cos., 265 F.3d 97, 103 (2d Cir. 2001)). This Court finds the GDE to be unambiguous. Indeed, the language of the GDE unambiguously and expressly covers the situation here — Cataract has received a claim from the DEC for funds owed resulting from the DEC's "testing for," "cleaning up," "removing," "containing," "treating," and "in any way responding to" the Haz-Mat Spill. Insurance policies are construed liberally in favor of the insured and are to be interpreted according to the "reasonable expectation and purposes of the ordinary business [person]." Nonetheless, no business person could reasonably expect that the GDE would not exclude a claim by the DEC for the response costs resulting from a spill of hazardous materials — regardless of who is culpable for such pollution. See Crane v. Reliance Nat. Indem. Ins. Co., No. 119610/97, slip. op. at 2-4 (N.Y.Sup.Ct. 2000) (finding that substantively similar GDE was unambiguous and applicable where the DEC directed the insured to clean-up an oil spill and subsequently sought reimbursement for its hiring of a private contractor to do so), aff'd, 287 A.D.2d 332 (1st Dep't 2001). Likewise, in Budofsky v. Hartford Ins. Co., 556 N.Y.S.2d 438, 439-441 (N.Y.Sup.Ct. 1990), a third party caused pollution stemming from its use of insured's metal finishing plant, which resulted in a DEC directive for site remediation. The Budofsky court — construing a substantially similar GDE — held that "the policy language indicates that the exclusion was meant to apply regardless of whether the acts which resulted in contamination were accidental or intentional * * * [because] damage to property from all discharges or releases of pollutants is excluded" — regardless of whether the insured is an actual polluter. Ibid. Consequently, the GDE applies here to bar Cataract's claim.
Neither party explicitly addressed the choice-of-law issue, but rather implicitly assumed that New York law applied by relying exclusively thereon. Accordingly, this Court shall apply New York law because the parties have impliedly consented to such. See Int'l Bus. Machines, Inc. v. Liberty Mut. Fire Ins. Co., 303 F.3d 419, 423 (2d Cir. 2002).
See Walk-in Med. Centers, Inc. v. Breuer Capital Corp., 818 F.2d 260, 263 (2d Cir. 1987) (defining "ambiguous" as "capable of more than one meaning when viewed objectively by a reasonably intelligent person").
See Schenectady Int'l Inc. v. Employer's Ins. of Wassau, 665 N.Y.S.2d 455, 457 (3d Dep't 1997) (holding that "[n]othing in the [APE] itself or in the remainder of the policy language justifies concluding, as plaintiff would have it, that ambiguity exists with respect to whether coverage is provided for accidental discharges or when the insured is not the actual polluter") (emphasis added); Stoney Run Co. v. Prudential-LMI Commercial Ins. Co., 47 F.3d 34, 36-37 (2d Cir. 1995) (holding that an insurer "may negate coverage by virtue of an exclusionary clause if the insurer establishes that the clause `is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in a particular case * * * [and] that it is appropriate to construe the standard pollution exclusion clause in light of its general purpose, which is to exclude coverage for environmental pollution."); Steuben Contracting v. Employers Ins. Of Wausau, 975 F. Supp. 479 (W.D.N.Y. 1997) (same). Moreover, there is no question that the Haz-Mat Spill involved pollution of the environment — as opposed to non-environmental pollution. See Belt Painting Corp. v. TIG Ins. Co., 742 N.Y.S.2d 332, 335-336 (2d Dep't 2002) (holding that APE's do not apply to non-environmental pollution, such as the discharge of noxious fumes inside a building while painting); Roofers' Joint Training, Apprentice Educ. Comm. of W.N.Y. v. Gen. Acc. Ins. Co. of Am., 275 A.D.2d 90 (4th Dep't 2000) (same); see also Westview Assocs. v. Guaranty Nat'l Ins. Co., 95 N.Y.2d 334, 339-340 (2000) (holding that APE did not apply to claim related to child's ingestion of lead paint).
See Kimmins Indus. Service Corp. v. Reliance Ins. Co., 19 F.3d 78, 81 (2d Cir. 1994) (citing Miller v. Continental Ins. Co., 40 N.Y.2d 675, 678 (1976)).
First Investors Corp. v. Liberty Mut. Ins. Co., 152 F.2d 162, 167-168 (2d Cir. 1998) (citation omitted).
See also Cortland Pump Equip. Co. v. Fireman's Ins. Co. of Newark, N.J., 604 N.Y.S.2d 633, 635-637 (3d Dep't 1993) (finding APE and GDE unambiguous and applicable where third-party repairman caused gas leakage resulting in DEC directive to clean-up site); Employers Ins. Of Wausau v. Trico Prods. Corp., 1997 U.S. Dist. Lexis 19680, at *13 (W.D.N.Y. 1997) (holding that identical GDE contained "clear and unmistakable language"); Makepeace v. Travelers Indem. Co. of Conn., No. 98-1045, slip. op. at 5-6 (N.Y.Sup.Ct. 1999) (finding substantively similar GDE unambiguous and "absolute"); Tartan Oil Corp. v. Royal Ins. Co., 10 Mealey's Litig. Reports Ins., Issue #46, at E-2 (N.Y.Sup.Ct. 1996) (finding substantively similar GDE unambiguous); cf. Tartan Oil Corp. v. Clark, 684 N.Y.S.2d 600, 601 (2d Dep't) (finding "total pollution exclusion" to be unambiguous), lv. denied, 94 N.Y.2d 751 (1999); see also Utica Mut. Ins. Co. v. Hall Equip., Inc., 73 F. Supp.2d 83, 87 (D.Mass. 1999) (holding that paragraph f(2)(a) of verbatim APE was unambiguous with respect to environmental response costs incurred because of an oil spill caused by a third party), aff'd, 292 F.3d 77 (1st Cir. 2002); Cincinnati Ins. Co. v. Flanders Elec. Motor Service, Inc., 1993 WL 764462, at *6 (S.D.Ind. 1993) (holding that substantially verbatim GDE "is not ambiguous" and that EPA's request for reimbursement for response costs fell "squarely within the unambiguous language of the exclusion" because "this language clearly and unambiguously provides * * * that the policy does not apply to any loss, cost or expense arising out of a governmental direction or request that you test for, monitor, cleanup, remove, contain, treat, detoxify or neutralize pollutants."), aff'd, 40 F.3d 146 (7th Cir. 1994); Guilford Indus. Inc. v. Liberty Mut. Ins. Co., 688 F. Supp. 792, 793-794 (D.Me. 1988) (same), aff'd, 879 F.2d 853 (1st Cir. 1989). Despite Cataract's suggestion to the contrary, Cortland Pump is not distinguishable. In any event, the "actual polluter" argument is unavailing, as noted below.
Cataract attempts to distinguish the cases cited by Hartford by suggesting that such cases involved "active polluters" who Cataract contends should not be indemnified as a matter of public policy. Cataract's argument is unavailing. First, as noted above, the language of the GDE is unambiguous. Accordingly, there is no need to resort to extrinsic matters in an attempt to interpret the Policy. Second, to the extent that Cataract is contending that the GDE is unenforceable as a matter of public policy, such is rejected because New York law does not recognize an "actual polluter" exception to APE's. Consequently, Hartford has no indemnification obligations under the Policy with respect to the Haz-Mat Spill.
See Schenectady Int'l, — footnote 10 supra — at 457 (dismissing plaintiff's public policy argument predicated upon "a former Insurance Law provision, which essentially prohibited insurers from offering coverage for certain pollution-related costs (but not those resulting from `sudden and accidental' discharges) * * * [because] the interests which prompted enactment of that statute — a desire `to assure that corporate polluters bear the full burden of their own actions spoiling the environment' * * * in no way militate[s] against the use of the broader [APE] employed by the defendant in the subject policies"); see also Continental Cas. Co. v. Rapid-American Corp., 80 N.Y.2d 640, 652 (1993) (discussing former Insurance Law § 46). Indeed, the New York Court of Appeals has held that an APE applies regardless of the insured's culpability. See Town of Harrison v. Nat'l Union Fire Ins. Co. of Pittsburgh, P.A. 89 N.Y.2d 308, 316-317 (1996) (holding that APE applied regardless of whether the insured was the "actual polluter") (citing Powers Chemco v. Fed. Ins. Co., 74 N.Y.2d 910, 911 (1989)).
Accordingly, it is hereby ORDERED that plaintiff's motion for summary judgment is denied, that defendant's motion for summary judgment is granted and that the Clerk of this Court shall close this action.