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Travelers not liable for Northrop Grumman pollution claim

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Travelers Cos. Inc. is not obligated to provide coverage to Northrop Grumman Corp. under its environmental policies in connection with a polluted park because of inadequate notice of the claim, a federal appeals court said Friday in upholding a lower court ruling.

Grumman Corp., a predecessor company to Falls Church, Virginia-based Northrop Grumman, operated a 600-acre naval aircraft manufacturing and testing facility in Bethpage, New York, beginning in the 1930s, according to Friday’s ruling by the 2nd U.S. Circuit Court of Appeals in New York in Travelers Indemnity Co. et al. v. Northrop Grumman Corp. et al.

Within the boundaries of the facility is an 18-acre parcel now constituting the Bethpage Community Park, which Grumman donated to the Town of Oyster Bay in October 1962, said the ruling. “The park sits on what used to be ’sludge drying beds,’ where Grumman placed wastewater treatment sludge generated from its plants,” said the ruling.

From 1968 to 1985, Grumman purchased primary and excess lability insurance policies from Travelers that included two claims-made environmental hazard polices for 1983 and 1984. 

For many years, the policies provided Grumman more than $100 million in coverage per occurrence, per year, said the ruling. Grumman also purchased coverage from Century Indemnity Co., which is now in runoff.

In connection with its operations at the facility, Grumman used and stored contaminants such as trichloroethylene, or TCE, a toxic liquid used as a degreaser for metal parts. Eventually, a large plume of groundwater contamination developed below the facility and now extends across more than 2,000 acres in Long island, according to the ruling. In addition, in the early 2000s, the park’s soil was found to contain high levels of TCE.

Grumman sought coverage in 1984 under its policies. A unanimous three-judge appeals court panel upheld a summary judgment by the U.S. District Court in New York denying coverage because of late notice.

“We conclude that neither Century nor Travelers waived their late notice defenses,” said the ruling. An issue in the litigation was a 1984 package sent to an insurance broker regarding the claim.

In New York, “the duty to provide notice is not satisfied merely by placing the notice in the mail; rather the specific insurer to whom notice is due must actually or presumptively have received such notice,” said the ruling. There is “some affirmative, albeit circumstantial, evidence that Travelers never received the letter,” the ruling said.

“In the absence of a presumption in favor of, or any evidence supporting, Travelers’ receipt of the 1984 package, we conclude that notice was not adequately provided to Travelers as to the facility claim, and coverage is barred on that bias,” said the ruling.