Keyspan Gas E. Corp. v Munich Reins. Am., Inc.
Court of Appeals of New York
February 6, 2018, Argued ; March 27, 2018, Decided
[**211] [*56] [***115] Stein, J.
On this appeal, we once again venture into the complex realm of long-tail insurance claims. The particular question before us is whether, under the "pro rata time-on-the-risk" method of allocation, defendant Century Indemnity Company is liable to its insured, plaintiff KeySpan Gas East Corporation, for years outside of its policy periods when there was no applicable insurance coverage available on the market. For the reasons explained herein, we hold that KeySpan, not Century, bears the risk for those years during which such coverage was unavailable. We, therefore, affirm the order of the Appellate Division.
The liability underlying this insurance dispute emanates from environmental contamination caused by manufactured gas plants owned and operated by KeySpan's predecessor, Long Island Lighting Company (LILCO), in Rockaway Park and Hempstead. Gas production at the sites began in the late 1880s and early 1900s. After operations ceased decades [****2] later, the New York State Department of Environmental Conservation (DEC) determined that there had been long-term, gradual environmental damage at both sites due to contaminants, such as tar, [**212] [***116] seeping into the ground and leeching into groundwater. The DEC required KeySpan to undertake costly remediation efforts, which were apparently concluded at the Hempstead and Rockaway Park sites in 2002 and 2012, respectively.
Between 1953 and 1969, Century issued eight excess liability insurance policies to LILCO covering property damage. For the purposes of this appeal, it is undisputed that environmental contamination at the sites occurred gradually and continuously before, during, and after the Century policy periods. It is also uncontroverted that the environmental contamination that occurred in any given year is unidentifiable and indivisible from the total resulting damages.
KeySpan eventually commenced this action, seeking a declaration of coverage and determination of liability owed under a [*57] number of insurance policies, including the policies issued by Century. This litigation has spanned decades and involves multiple insurers, but only Century's policies are relevant to this appeal. In 2014, [****3] Century moved for partial summary judgment declaring that it was "not responsible for any portion of the property damage at the Rockaway Park and Hempstead sites that occurred outside the Century policy periods," and that "[a]ny covered costs are to be allocated pro rata over the entire period during which property damage at each site occurred." In opposition, KeySpan did not dispute that pro rata time-on-the-risk allocation controlled under the relevant policies, but argued that Century's pro rata share should not be reduced by factoring in the years in which pollution property damage liability insurance was unavailable. According to KeySpan, Century's expert had opined that such coverage was not available to utilities until approximately 1925, and that a "sudden and accidental pollution exclusion" was later generally adopted by the insurance industry sometime in or after October 1970. Thus, KeySpan argued, the allocation should not take into account any years prior to the availability, or after the unavailability, of the applicable coverage.Read The Full CaseNot a Lexis Advance subscriber? Try it out for free.
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
31 N.Y.3d 51 *; 96 N.E.3d 209 **; 73 N.Y.S.3d 113 ***; 2018 N.Y. LEXIS 494 ****; 2018 NY Slip Op 02116; 2018 WL 1472635
 Keyspan Gas East Corporation, Appellant, v Munich Reinsurance America, Inc., Defendant, and Century Indemnity Company et al., Respondents.
Prior History: Appeal, by permission of the Appellate Division of the Supreme Court in the First Judicial Department, from an order of that Court, entered September 1, 2016. The Appellate Division (1) reversed, on the law, so much of an order of the Supreme Court, New York County (Saliann Scarpulla, J.; op 46 Misc 3d 395, 998 NYS2d 781 ), as, to the extent appealed from, had denied defendant Century Indemnity Company's motion for partial summary judgment declaring that it is not responsible for any part of the costs of cleanup for periods of time when insurance was unavailable before 1953 and after 1986; (2) granted defendant's motion; and (3) declared that defendant Century Indemnity Company is not responsible for any part of the costs of cleanup for periods of time where insurance was unavailable before 1953 and after 1986. The Appellate Division certified to the Court of Appeals the question whether its order was properly made.
Keyspan Gas E. Corp. v Munich Reins. Am., Inc., 143 AD3d 86, 37 NYS3d 85, 2016 N.Y. App. Div. LEXIS 5824 (Sept. 1, 2016), affirmed.
pro rata, policy period, unavailability, insurer, coverage, policyholder, insurance policy, courts, occurrences, policies, insurance coverage, policy language, time-on-the-risk, allocated, sites, contamination, environmental
Insurance Law, Claim, Contract & Practice Issues, Allocation, Policy Interpretation, Policy Interpretation, Plain Language