Travelers Indemnity Co. et al v. Northrop Grumman Corp et al.[1]

Insurer Travelers Indemnity Co. recently won in a coverage dispute with a finding that it is not responsible for part of some coverage claims that it’s insured, Northrop Grumman Corp., made after facing a class action lawsuit over industrial waste. This was based on the Court’s finding that Northrup Grumman failed to timely notify Travelers of the relevant policy occurrences under its majority primary policies. Thus, the Court granted partial summary judgment to  Travelers. However, because Northrup’s notice was timely under the minority primary and umbrella policies, which only require notice of the injuries themselves, so summary judgment was denied as to those policies.

In an underlying suit, residents and property owners near a 600-acre Northrop manufacturing facility on Long Island brought a putative mass tort class action in September 2016, claiming industrial waste from the facility contaminated groundwater and soil in the nearby community, leading to bodily injury and property damage. After the suit was filed, Travelers sent a letter to Northrop denying coverage for the claims based on pollution exclusions in its policies, then filed a declaratory judgment action against Northrop in November 2016. The court rejected Northrop’s argument that its notice obligation began when it learned about each individual plaintiff’s complaint in the suit, saying the Second Circuit previously found that an “occurrence” arises when the policyholder has sufficient information that a contamination may cause injury, not when it learns particular individuals were injured.

The Judge also stated that Northrop was required under the majority primary policy to notify Travelers of at least two distinct occurrences underlying the class action suit — one related to groundwater contamination and the other to soil contamination. Northrup’s notice obligation regarding groundwater contamination started by June 1976, after Northrop knew from regulator and consultant reports that it could be responsible for severe groundwater contamination that could pose health risks. By that point the company was notified that it should look for an alternative drinking water supply, the court said, but Northrop did not give notice to Travelers until December 1976. “Based on these undisputed facts, no reasonable jury could conclude that in June 1976, [Northrop] lacked ‘sufficient information reasonably to apprehend that a colorable claim of injury’ could be made against it,” the court stated, quoting the Second Circuit’s opinion in Olin Corp. v. Insurance Co. of North America. Northrop’s notice obligation for the soil contamination arose by May 2001, but Northrop did not notify Travelers until October 2002.

Underwriters at Lloyds of London v. Illinois National Insurance Co. of the State of Pennsylvania et al.[2]

In this recent decision, a New York district court assigned equal blame to four construction companies for a crane accident at Goldman Sachs’ headquarters that left an architect paralyzed and led to $22 million in settlements. A group of insurers, including Underwriters at Lloyd’s of London, will be on the hook for roughly three-quarters of the cost, and Continental Insurance Agency Inc. will be responsible for the rest.

The order stems from a 2007 accident. The investment bank’s headquarters in downtown Manhattan were under construction when a 14,000-pound load of metal studs fell from a crane and crushed a jobsite trailer, leaving the architect inside paralyzed from the waist down. The immediate cause of the accident was the nylon rigging used to secure the load, which snapped while the tubes were heading up to the 13th floor. But liability for the accident has fanned out widely in the decade of litigation since it occurred. The judge placed slightly more responsibility on the site managers than the crane operators, finding that Tishman Construction Co. and Total Safety Consulting LLC should shoulder 55% of the liability, while 45% should fall to crane operators DCM Erectors Inc. and Component Assembly Systems Inc. Lloyd’s underwriters, Aspen Insurance UK Ltd. and the European arm of Arch Insurance Co. must cover the full liability of the site managers and split liability for the crane operators 50-50 with Continental, per prior rulings in the case.

The group of insurers had sought to lay responsibility fully at the feet of the crane operators, arguing that the burden of proof was on them to prove they were not liable under the doctrine of inferred, or res ipsa, negligence. The court disagreed, finding that while the crane operators were to blame for using nylon straps that had shown signs of wear, the site managers were also liable for placing the architect’s trailer in a dangerous spot. In assigning slightly more liability to the site managers, the Judge ruled that it would have been easier for them to place the office in a safer location than it would have been for the crane operators to constantly monitor the condition of the nylon straps and remove the damaged ones from service. She cited expert testimony holding that many straps have visible defects, and throwing out all of those would be impractical and lead to construction delays.

In Re: World Trade Center Lower Manhattan Disaster Site Litigation[3]

A New York district court recently disposed of a class action brought by a group of 9/11 recovery workers against the Battery Park City Authority for alleged injuries related to harmful dust exposure in the wake of the 2001 terrorist attacks. The action consisted of the remaining 138 cases in the long-running litigation.

According to the judge, the cleanup and recovery workers at Stuyvesant High School in lower Manhattan are covered by provisions in their 2010 settlement agreements with New York City and WTC Captive Insurance Co. Inc. that reduce the amount of any additional claims against certain other defendants, including Battery Park City Authority (“the authority”). The settlements require that any judgment against other defendants be reduced to the extent that the organizations have an indemnification claim against New York City. The BPCA’s indemnity claim against the city for work on Stuyvesant High School property dates back to 1987, when the authority leased the land to the city. As a result, any judgment against the BPCA would have to be reduced to zero, meaning the workers cannot recover anything from pursuing the case.

“Because BPCA has made a claim for indemnification, and the city has acknowledged it, plaintiffs, by their own earlier settlement agreement have no potential for additional recovery in the present action,” the opinion said. “Put another way, plaintiffs have already received compensation in full satisfaction of their claims against the city, the WTC and its indemnitees,” Judge Hellerstein said Friday. “Plaintiffs stand to gain nothing further from further proceedings, even if successful, against BPCA.”

The case was brought by workers who were at sites near the World Trade Center following the 9/11 attacks. Many of those sites were privately owned. The workers had alleged that the BPCA controlled and managed cleanup work at Stuyvesant High School and failed to keep the site safe, including by failing to take steps to mitigate the effects of toxic smoke and dust in the wake of the terror attacks, according to court documents. The BPCA owns the land under the school, Judge Hellerstein’s opinion noted. The court rejected the argument that the authority controlled the cleanup efforts, calling those allegations “conclusory” and “not plausible.” The court also expressed doubt about additional claims brought under state labor laws. Those laws address industrial accidents related to construction, demolition or excavation work, and it was not clear that the work performed at the site actually constituted any of those activities, the judge said. The site did serve as a “staging area,” which might have triggered duties of care, according to the opinion. But the claims clearly had to be nixed on the judgment-reduction grounds, so this uncertainty could not save the case.

[1] Travelers Indemnity Co. et al v. Northrop Grumman Corp et al., Case No. 1:16-cv-08778, U.S. District Court for the Southern District of New York

[2] Underwriters at Lloyds of London v. Illinois National Insurance Co. of the State of Pennsylvania et al., Case No. 1:09-cv-04418, U.S. District Court for the Southern District of New York

[3] In Re: World Trade Center Lower Manhattan Disaster Site Litigation, Case No. 1:21-mc-00102, U.S. District Court for the Southern District of New York

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