999 F. Supp. 511
S.D.N.Y.2014Background
- Narragansett (successor to Blackstone) seeks recovery of $5,541,705 in defense costs from Century (and predecessor carriers) under a 1985–1986 primary CGL policy that included a duty to defend and a pollution exclusion; Century declined to defend the underlying Massachusetts CERCLA litigation.
- Massachusetts sued Blackstone (1987) over contamination at the Mendon Road site; litigation produced district-court judgment, First Circuit remand to EPA, EPA final decision (2003), and a 2006 consent decree resolving escrowed funds.
- Blackstone/ Narragansett also filed a contribution action against Stone & Webster; that claim was stayed, Stone & Webster later filed bankruptcy, and Narragansett settled claims in 2004 as part of the bankruptcy process.
- In 2013 Judge Castel (S.D.N.Y.) ruled Massachusetts law applies and held Century had a duty to defend (declaring the pollution exclusion inapplicable); this action was transferred and Narragansett seeks damages for breach of the duty to defend (Count II).
- Century raises (1) a statute-of-limitations defense (arguing accrual in 1994), (2) a pro rata allocation of defense costs among insurers, (3) limits on the scope of recoverable defense costs, and (4) that some fees relate to voluntary/third-party or bankruptcy actions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Accrual / Statute of limitations for breach-of-duty-to-defend claim | Accrual occurs at final termination of underlying litigation (so claim is timely) | Accrual occurred when Century refused to defend (1994), making suit time-barred under Rhode Island law | Accrual is at final judgment/termination (2006); claim timely; Century’s SOL defense rejected |
| Law of the case / timeliness of raising SOL defense | Judge Castel’s prior duty-to-defend ruling is law of the case; SOL already considered | Century may properly assert SOL in its Answer and the court should consider it | Court considered SOL despite prior ruling; fairness warranted consideration; SOL defense rejected on merits |
| Allocation method for defense costs (pro rata vs. joint-and-several) | Joint-and-several: insurer who breached should pay full defense costs and seek contribution | Pro rata: allocate costs among insurers according to policy periods | Applied Massachusetts law and held joint-and-several applicable to duty-to-defend damages (insurer liable for full defense costs, may seek contribution) |
| Scope of recoverable defense costs (third-party actions; broadly beneficial work; litigation costs in this action) | Recoverable: all reasonable defense costs necessary for covered claims, including collateral benefits to other actions; plus litigation costs pursuing duty-to-defend | Exclude fees for offensive/strategic suits and bankruptcy-related fees; exclude fees for this declaratory litigation after duty established | Narragansett may recover reasonable defense costs for the Massachusetts action and the Stone & Webster Massachusetts contribution action (but not Stone & Webster bankruptcy fees); Century must also bear Narragansett’s litigation costs in this action while Century continues to litigate duty/scope |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard)
- Travelers Ins. Co. v. 633 Third Assocs., 14 F.3d 114 (2d Cir.) (predicting state-law outcomes)
- Boston Gas Co. v. Century Indem. Co., 454 Mass. 337 (Mass. 2009) (adopted pro rata allocation for indemnity; distinguished defense costs)
- Emhart Indus., Inc. v. Century Indem. Co., 559 F.3d 57 (1st Cir.) (allocation of defense costs under Massachusetts law)
- Metro. Prop. & Cas. Ins. Co. v. Morrison, 460 Mass. 352 (Mass. 2011) (insurer’s duty to defend analysis)
- Liberty Mut. Ins. Co. v. Metro. Life Ins. Co., 260 F.3d 54 (1st Cir.) (duty-to-defend damages for costs benefiting other actions)
- Preferred Mut. Ins. Co. v. Gamache, 426 Mass. 93 (Mass. 1997) (insurer must bear insured’s costs in duty-to-defend litigation)
- Rubenstein v. Royal Ins. Co., 429 Mass. 355 (Mass. 1999) (insured entitled to attorney’s fees in declaratory duty-to-defend action)