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Second Circuit Applies New York Late Notice Law to Deny Coverage for Environmental Claims

Blogs, Insurance Coverage

In Travelers Indem. Co. v. Northrop Grumman Corp., No. 15-3117-CV, 2017 WL 391926 (2d Cir. Jan. 27, 2017), the Second Circuit held in a Summary Order that Northrop Grumman Corp. is not entitled to coverage for certain environmental cleanup claims because it provided inadequate and untimely notice to its insurers. Grumman operated a naval aircraft manufacturing and testing facility in Bethpage, New York starting in the 1930s. This and neighboring sites were subject to numerous claims for remediation by governmental authorities. Grumman held primary and excess policies with both Travelers Indemnity Company and Century Indemnity Company.

The Second Circuit affirmed a grant of summary judgment in favor of Travelers and Century. Under New York law, an insured is required to notify the insurer of any loss covered under the policy “as soon as practicable.” Grumman had transmitted the Potentially Responsible Person letter to its insurance broker. The court ruled that this did not give rise to a presumption of receipt by Travelers. It did so even though the broker had forwarded the notice to an incorrect address, which had been provided by Travelers in connection with an unrelated claim. The court found that in the absence of a presumption in favor of or evidence supporting receipt, notice was not adequately provided. As to Century, the court found that notice was inadequate because even though Century was copied on a notice, that notice did not identify any Century policies under which coverage was sought, addressed a different suit at a different site, and was directed to a different insurer with different types of policies.

As to another site, the court held that notice provided seventy-seven (77) days after a state agency asserted Grumman was responsible for remediation of a “newly identified area” was untimely as a matter of law. As to yet other sites, it ruled that notice provided three years after receipt on an intent-to-sue letter was inadequate, and alternatively that waiting to provide notice until forty-seven (47) days after a complaint was filed rendered notice untimely. 

The court also concluded that neither insurer had waived its late notice defenses. It found that although Travelers did make certain waivers in a letter captioned “Grumman Facility, Bethpage, NY,” those waivers did not relate to the specific claims at issue. As for Century, the court found it could not waive a defense it did not know existed (by virtue of the notice deficiencies identified above), and that the argument that a late notice defense can be waived by the mere passage of time fails on its merits.