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Avondale Indus. v. Travelers Indem. Co.

Citation: 19 ELR 20509
No. No. 86-Civ-9626-KC, 697 F. Supp. 1314/(S.D.N.Y., 10/19/1988)

The court, interpreting New York law, holds that an insurer has an obligation to defend a company that sold salvage oil to the operator of a hazardous waste disposal site. The court first holds that the insurer must defend the company in the private lawsuits to which the company is a party. The pleadings in those lawsuits do not establish that the insured was an active, continuous polluter. The court next holds that the insurer must also defend the insured in an administrative proceeding initiated by the Louisiana Department of Environmental Quality (DEQ). The court posits that the New York Court of Appeals would find that waste site cleanup costs are "damages" under the comprehensive general liability policy. An average businessman would consider himself to be covered for cleanup costs applicable to a third party's property. Even if the New York court would find cleanup costs to be restitutionary and thus excluded from policy coverage, by statute Louisiana may elect to recover damages rather than restitution. Moreover, a Louisiana court may decide that damages are the most appropriate remedy. The court also finds that the New York court would consider the insured's receipt of the Louisiana DEQ's demand letter to be a "suit" necessitating a defense by the insurer. Failure to respond to the letter can lead to adverse legal consequences, and under the relevant Louisiana statute the DEQ may undertake remedial action that is binding on the insured even though no suit has yet been filed.

Counsel for Plaintiffs
Hugh N. Fryer, Edward M. Joyce
Fryer, Ross & Gowen
551 fifth Ave., New York NY 10176
(212) 286-0099

Counsel for Defendant
Seth A. Ribner
Simpson, Thacher & Bartlett
One Battery Park Plaza, New York NY 10004
(212) 483-9000