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American Ins. Co. v. Fairchild Indus., Inc.

Citation: 25 ELR 21224
No. No. 94-7606, 56 F.3d 435/(2d Cir., 06/01/1995)

The court holds that insurers have no duty to indemnify or defend an insured against Comprehensive Environmental Response, Compensation, and Liability Act and state-law claims brought by New York State for remediation of contamination at the insured's aircraft manufacturing plant in Farmingdale, New York. The insurance policies required the insured to give the insurers immediate notice of any claims brought against it. Moreover, under New York law, compliance with insurance policies' notice provisions is a condition precedent to an insurer's liability. The court first holds that the insured's notice of the state's claim for remediation of contamination at a plant discharge basin was untimely as a matter of law. The New York State Department of Environmental Conservation (NYSDEC) made clear long before the insured gave notice in 1989 that the NYSDEC was specifically seeking to compel the insured to undertake efforts to remediate the sediment in the discharge basin, and the insured's delay of at least three years in notifying the insurer of this claim was unreasonable as a matter of law. Further, as required by two of the insurance policies, the insurers have demonstrated prejudice from their lack of notice. Negotiations and studies concerning the discharge basin were ongoing for years without the insurers' participation and the insured's failure to notify the insurers of certain remediation options deprived them of the opportunity to reduce the ultimate costs of remediation. The court next holds that the insured's notice of the state's claim for remediation of an underground perchloroethylene plume was untimely. The insured and the NYSDEC were negotiating over remediation of the plume long before the insured gave notice in late 1989. The insured thus knew before 1989 that the NYSDEC was asserting the insured's liability for remediation of the plume area and that assertion of liability was a claim requiring notice to the insurers. The insured's delay of over one year in providing notice of this claim was unreasonable as a matter of law. Also, as required by two of the insurance policies, the insurers demonstrated that they were prejudiced by the insured's late notice of the claim as they were unable to participate in investigations of the plume or negotiations over the remedy.

Counsel for Plaintiffs
K. Thomas Shahriari
Gilberg & Kurent
1250 I St. NW, Ste. 600, Washington DC 20005
(202) 842-3222

Counsel for Defendant
Steven W. Phillips
Foley, Hoag & Eliot
One Post Office Sq., Boston MA 02109
(617) 482-1390

Before Kearse, Winter and Conner,* JJ.