United States District Court, S.D. New York.
OLIN CORPORATION, Plaintiff,
INSURANCE COMPANY OF NORTH AMERICA, et al., Defendants.
No. 84 Civ.1968(TPG).
Aug. 28, 2002.
In this action plaintiff Olin seeks a declaration that its insurers are liable to it for the costs of
environmental remediation efforts undertaken at several of its manufacturing and waste disposal
sites. Olin also seeks to be reimbursed for costs of defending the environmental claims. Certain
defendants move for partial summary judgment, arguing that, as to three of the sites, they are not
obligated to defend or indemnify Olin because Olin failed to give timely notice. The three sites are
referred to as McIntosh, the Big D, and Lake Charles.
The moving defendants are the primary insurer, Insurance Company of North America ("INA"),
and excess insurers, American Re-Insurance Co., certain Underwriters at Lloyds of London and
certain London Market Insurance Companies, Commercial Union Insurance Companies,
Continental Casualty Co., General Reinsurance Corp., London & Edinburgh Insurance Co., North
River Insurance Co., and Employers Insurance of Wausau.
The court has decided that the motions should be granted.
In the early 1950s Olin opened a chloralkali plant in McIntosh, Alabama where it produced
chlorine and caustic soda. During the production process, various waste materials were generated.
Some of these wastes were disposed of in on- site ponds and an on-site landfill. Some wastes
were also disposed of in a ditch that drained into a nearby river.
In December 1980 Olin initiated a groundwater sampling program at the McIntosh site. By
February of 1982 the groundwater sampling program had revealed that a groundwater
contamination problem existed at or near the site. In a February 23, 1982 Olin interoffice
memorandum to B. Davidoff, Olin's in-house counsel, K.J. O'Leary, Olin's Vice-President of
Technology, stated that Olin's Environmental Affairs Department had met with the United States
EPA Region IV and the Alabama Water Improvement Commission to review the problem of
contamination at the McIntosh site following the findings of groundwater contamination. A plan
was described to the agencies to add an additional 10 test wells to identify further the
contaminated plume of groundwater that potentially could be contaminated. The memorandum
stated that it was Olin's current belief that this might stop the EPA from including the McIntosh
site on a potential Superfund list, but a long term problem was identified in that Olin "may have to
clean-up the contaminated groundwater by pumping through carbon beds. This could be a
multimillion dollar exposure." (emphasis in original).
In a memorandum dated March 11, 1982, in-house counsel G.H. Pain discussed the groundwater
contamination problem at the McIntosh facility which had come to light the previous month. The
memorandum listed the contaminants found in the ground water and described how the chemical
manufacturing process caused such contamination. The memorandum analyzed Olin's potential
liability under federal environmental statutes--the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"), the Safe Drinking Water Act ("SDWA"), the
Resource Conservation and Recovery Act ("RCRA"), and the Federal Water Pollution Control
Act ("FWPCA")--as well as possible liability under state statutes and common law theories. The
memorandum spoke of the possibility of the EPA making a remediation order and of the EPA
adding the McIntosh site to the Superfund list, the latter being described as "the greatest legal
risk." The memorandum expressed the view that Olin might be able to avoid the above if the
current testing showed that the results of the contamination were limited-- for instance, if the
contamination did not threaten drinking water. But the memorandum made an emphatic
presentation of possible liabilities based on the fact that contamination to some degree did exist. A
copy of the memorandum was sent to E. McIntosh Cover, Olin's general counsel.
As it turned out, Olin submitted a remediation plan to the State of Alabama on September 19,
1983, which was approved by the State on November 2, 1983. This bears out the idea that the
risks of liability described in the March 11, 1982 memorandum amounted to a high probability.
On February 15, 1984 Olin, through its broker Johnson & Higgins, provided insurers with a
notice of claim relating to the groundwater contamination at the McIntosh site. In the notice Olin
estimated that the total clean-up cost of this site would be $1,300,000, of which Olin had incurred
$50,000, and Olin also estimated total legal costs would be $100,000, of which none had yet been
From 1964 to 1973 Olin and a joint venture partner operated a Toluene Di- Isocyanate plant in
Ashtabula County, Ohio. Various hazardous wastes generated at the plant were disposed of at a
10 acre dump site known as the Big D site.
In December 1978 Olin retained a consultant to conduct groundwater and soil tests at the Big D
site. In March of 1979 that consultant issued a report that confirmed the presence of groundwater
and soil contamination.
On March 13, 1980 the Ohio Environmental Protection Agency contacted Olin to request
information regarding the Big D site. In an interoffice memorandum dated June 6, 1980 Barry F.
Davidoff, Olin's in-house regulatory affairs assistant counsel, stated that any response to OEPA's
inquiries about the Big D site should be promptly forwarded to Olin's Law Department. The
memorandum stated that "the request from the State of Ohio may possess extremely serious
overtones. Such a request from the State of Ohio is to be regarded as being within the scope of
potential or anticipated litigation."
A memorandum dated April 22, 1981 of Michael J. Bellotti, a hydrologist at Olin, stated that all
three of the groundwater monitoring wells installed at the Big D site "show some evidence of
contamination" and that "known contamination appears to be moving from the landfill southward
toward the creek."
At some point the site was added to the Ohio Environmental Protection Agency's Superfund list.
An Olin interoffice memorandum dated February 26, 1982 shows that Olin was aware of this.
On December 20, 1982 the federal EPA placed the Big D site on its Proposed Superfund
Priorities List. The 419 sites on this list were described by EPA as the "worst cases" of abandoned
waste sites in the country. On December 21, 1982 C.L. Knowles, Olin's in-house environmental
counsel, notified Olin's chief executive officer, J.M. Henske, and other senior executives at Olin of
the federal EPA action.
On February 15, 1984 Olin, through its broker Johnson & Higgins, provided insurers with a
notice of claim relating to the groundwater and soil contamination at the Big D site. In the notice
Olin estimated that the total clean-up cost of this site would be $1,000,000, of which of which
Olin had incurred $765,000 to stabilize the site and that legal costs would total $50,000, of which
$9,000 had been incurred.
Beginning sometime in the 1930s Olin operated a soda ash plant in Lake Charles, Louisiana,
which Olin later converted into an industrial chemical manufacturing plant. The manufacturing
process resulted in a variety of wastes, some of which were disposed of on-site.
On October 8, 1982 the Olin Environmental Affairs Department wrote L.E. Kerr, the plant
manager at the Lake Charles site, about the "contamination of shallow groundwaters" at the site.
On January 17, 1983 the Department further informed Kerr that the site's groundwater monitoring
wells showed contamination of the shallow groundwater. On February 10, 1984 Kerr passed this
information along to the Louisiana Department of Environmental Quality ("LADEQ"). On
February 29, 1984 LADEQ issued an order requiring that LADEQ be kept informed of Olin's
continued evaluation of the groundwater at the Lake Charles site.
In November 1985 Olin received a draft Compliance Order from LADEQ regarding remediation
of the groundwater contamination at the site. A formal Compliance Order followed on July 7,
1986 requiring Olin to take remedial measures with respect to the groundwater contamination and
to develop and implement more extensive monitoring measures. On July 28, 1986 Olin filed a
Motion and Request for Hearing with LADEQ challenging the Compliance Order. On July 29,
1986 Olin entered into a Settlement Agreement with LADEQ in which Olin agreed to undertake
the investigation and remediation of ground and surface water contamination at or near the Lake
By January 1987 Olin had prepared various remediation plans, including one in which Olin
estimated a cost of $7,000,000 to close two on-site disposal ponds at the Lake Charles site.
On September 15, 1988 Olin, through its broker Johnson & Higgins, provided insurers with a notice of claim relating to the groundwater contamination at the Lake Charles site. In the notice Olin estimated that the total clean-up cost of this site would be $16,934,000, of which Olin had incurred $13,000,000, and that outside legal fees would total $32,000, of which $32,000 had been incurred.
Insurance Policy Notice Provisions
Insurance Company of North America (INA)
INA provided Olin's primary layer of comprehensive general liability coverage for policy periods
from the 1950's (the exact year is apparently in dispute) until January 1, 1974. INA policy XCP
1049, which was in effect from June 1, 1955 to January 1, 1960, provided:
H. Notice of Occurrence or Accident
Upon the happening of an occurrence or an accident written notice shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable.
I. Notice of Claim or Suit
If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by the insured or the insured's representatives.
It is agreed that if INA provided coverage before 1955, the above language was applicable to the
INA policy XCP 3191, covering the period January 1, 1960 to January 1, 1969, contained
identical notice provisions, until it was amended on June 8, 1965. After this date the language of
the Notice of Occurrence provision was as follows:
When an occurrence or accident happens, written notice shall be given by or on behalf of
the Insured to the Company or any of its authorized agents as soon as practicable after
said occurrence or accident becomes known to the Loss Prevention Department of the
INA policy SRL 2217, covering the period January 1, 1969 to January 1, 1974, contained the
It is agreed that knowledge of an occurrence or suit by agents servants or employees of
the insured shall not in itself constitute knowledge to the insured unless the Insurance and
Loss Prevention Department of the Insured's Corporation shall have received such notice
from its agent, servant or employee.
This policy did not contain the complete notice provisions previously in effect. However Judge
Sand, in Olin Corp. v. INA, 743 F.Supp. 1044, 1051 (S.D.N.Y.1990), aff'd, 929 F.2d 62 (2d
Cir.1991), found that the parties intended to include the same notice of occurrence and notice of
claim provisions as were contained in the earlier policies. The court held that policy SRL 2217
would be deemed reformed to reflect the intentions of the parties.
Excess Insurance Carriers
With respect to the excess policies at issue, Olin was required to provide notice of an occurrence
or claim "as soon as practicable" after Olin had information from which it could reasonably
conclude that an occurrence covered under the respective excess policies involved injuries or
damage which, in the event Olin is held liable, would be likely to trigger the excess policies. See
Olin Corp. v. INA, 743 F.Supp. 1044 (S.D.N.Y.1990).
There are two types of events which give rise to the need to provide notice to the insurer. One such event is described as "an occurrence," and the policies provide that upon the happening of an occurrence notice shall be given "as soon as practicable." The other event is the making of a claim or the bringing of a suit against the insured, and when this happens notice is to be given "immediately."
The obligation to give notice based upon an occurrence arises when "the circumstances known to
the insured at that time would have suggested to a reasonable person the possibility of a claim."
Commercial Union Ins. Co. v. International Flavors & Fragrances, Inc., 822 F.2d 267, 272 (2d
Cir.1987). A notice of occurrence provision focuses on the insured's knowledge of events and
reasonable conclusions based on that knowledge. See American Ins. Co. v. Fairchild Industries,
Inc., 56 F.3d 435, 439 (2d Cir.1995).
Where a claim is made or a suit is filed, the notice requirement is less flexible since notice must be
As described earlier, the INA policy language used after 1965 provided that the duty to give
notice was only triggered after the occurrence became known to the Loss Prevention Department,
or the Insurance and Loss Prevention Department, of the insured. However, no such specification
existed before 1965. In the absence of such a specification, knowledge of the corporation's
supervisory employees can generally be imputed to the corporation. Woolverton v. Fidelity and
Casualty Co. of New York, 190 N.Y. 41, 48 (1907); Stone & Webster Management Consultants,
Inc. v. Travelers Indem. Co., No. 94 Civ. 6619, 1996 WL 180025, at *17-19 (S.D.N.Y.1996).
With these basic rules of law in mind, the court reaches the following conclusions regarding the
three sites in question on this motion.
Persons of a supervisory and executive stature at Olin had knowledge of a contamination problem
subjecting it to potential liability for remediation. They knew of this circumstance at least by
February 1982, at which time Olin was meeting with the federal EPA and with the Alabama Water
Improvement Commission. The court concludes that Olin had knowledge of an "occurrence" at
that time which gave rise to an obligation to notify insurers as soon as practicable. Waiting until
February 15, 1984 did not meet that obligation.
The obligation to give notice regarding this site arose no later than December 20, 1982 when the EPA put the Big D site on its Proposed Superfund Priorities List. Inclusion on this list was known to the senior executives at Olin. Notice to insurers was not given until February 15, 1984, which was not as soon as practicable within the meaning of the insurance policies.
Here there was an actual claim, which gave rise to the obligation to give notice "immediately." Olin received a draft Compliance Order from the State of Louisiana in November 1985 and a formal Compliance Order on July 7, 1986. On July 29, 1986 Olin entered into a Settlement Agreement with the State of Louisiana. No notice was given to insurers until September 15, 1988. This was not immediate notice.
The Issue of Excuses
Various arguments have been made by Olin to excuse its failure to give notice at earlier times.
The principal argument is that, because of the position of insurers that they would resist these
types of claims in litigation, it was futile for Olin to provide notice within the time required. As a
legal proposition, there is some support in the cases for Olin's theory. However, Olin has
presented no evidence to indicate that the responsible persons delayed giving notice because of
some thought about futility. Notice was in fact given as to all three sites. The problem is the delay,
and no sufficient explanation has been provided for such delay based on futility or any other factor.
The motion for partial summary judgment dismissing Olin's claims against insurers regarding
McIntosh, the Big D and Lake Charles sites is granted.