GRIFFITH OIL COMPANY INC v. American Home Assurance Company, Defendant-Respondent, et al., Defendants.  (Appeal No. 2.) (2005)

Plaintiffs sought coverage from defendants National Union Fire Insurance Company of Pittsburgh, Pa. (National Union) and American Home Assurance Company (American Home) (collectively, defendants) for liability resulting from a spur pipeline oil leak in Steuben County (see Steuben Contracting v. Griffith Oil Co., 283 A.D.2d 1008, 726 N.Y.S.2d 308).   Defendants denied coverage, whereupon plaintiffs commenced this action seeking a declaration that defendants had a duty to defend and indemnify and alleging, inter alia, breach of contract for failure to defend and indemnify, intentional misconduct and liability pursuant to Navigation Law § 190.

 Because Supreme Court granted leave to reargue with respect to that part of the order in appeal No. 1 that denied that part of plaintiffs' cross motion seeking summary judgment on plaintiffs' first cause of action, we dismiss plaintiffs' appeal from the order in appeal No. 1 insofar as it denied that part of plaintiffs' cross motion (see Cooper v. Cooper & Clement, 198 A.D.2d 812, 813, 605 N.Y.S.2d 720;  Loafin' Tree Rest. v. Pardi [Appeal No. 1], 162 A.D.2d 985, 559 N.Y.S.2d 154), but we otherwise affirm that order.   The court properly granted those parts of defendants' motions seeking partial summary judgment dismissing plaintiffs' third cause of action for intentional misconduct.   In support of their motions, defendants made a prima facie showing of entitlement to judgment as a matter of law (see Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324, 508 N.Y.S.2d 923, 501 N.E.2d 572) by tendering evidence that, upon receiving notice of the occurrence, they had an arguable basis for denying coverage (see Redcross v. Aetna Cas. & Sur. Co., 260 A.D.2d 908, 913, 688 N.Y.S.2d 817, citing Dawn Frosted Meats v. Insurance Co. of N. Am., 99 A.D.2d 448, 470 N.Y.S.2d 624, affd. 62 N.Y.2d 895, 478 N.Y.S.2d 867, 467 N.E.2d 531).   In opposition, plaintiffs failed to raise a material issue of fact whether the conduct of defendants constituted a “deliberate or reckless failure to place on equal footing the interests of [their] insured with [their] own interests” (Cappelletti v. Unigard Ins. Co., 222 A.D.2d 1029, 1032, 636 N.Y.S.2d 958).   We further conclude that the court properly denied that part of the cross motion of plaintiffs seeking summary judgment on their fourth cause of action based upon Navigation Law § 190 because that statute has no relevance to the coverage issues that form the basis of plaintiffs' complaint.

 With respect to appeal No. 2, we conclude that the court properly denied that part of plaintiffs' cross motion for partial summary judgment seeking indemnification under the National Union policy as set forth in the first cause of action.   In support of their cross motion, plaintiffs submitted contradictory evidence whether an exception to the pollution exclusion clause in the policy is applicable, and thus they failed to meet their burden (see Northville Indus. Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 218 A.D.2d 19, 25-26, 636 N.Y.S.2d 359, affd. 89 N.Y.2d 621, 657 N.Y.S.2d 564, 679 N.E.2d 1044).   We further conclude that the court properly declared that National Union had a duty to defend plaintiffs in the underlying litigation because plaintiffs' claims arguably arise from a covered occurrence, and thus National Union is required to defend the entire action (see Graphic Arts Mut. Ins. Co. v. Abrams, 1 A.D.3d 890, 891, 767 N.Y.S.2d 733).   Nevertheless, the court erred by denying that part of the cross motion of plaintiffs seeking a declaration that National Union had a duty to defend and indemnify them in the proceeding brought by the United States Environmental Protection Agency (EPA).   The National Union policy, by its explicit terms, covers the “claim or suit” brought by the EPA in its field notice and the loss occasioned by the consent order resolving the claims by the EPA.   Finally, we conclude that the court erred by denying that part of plaintiffs' cross motion seeking a declaration and granting that part of American Home's motion with respect to plaintiffs' claims for indemnification for “lost product” as set forth in the first cause of action, because the record establishes that plaintiffs gave notice to American Home of an “occurrence which may give rise to a claim” as required by the American Home policy.   We therefore modify the judgment in appeal No. 2 by granting those parts of the cross motion of plaintiffs with respect to the EPA proceeding and their claim for “lost product,” by declaring that National Union must defend plaintiffs in the EPA proceeding and further declaring that American Home must indemnify plaintiffs with respect to their claim for “lost product” as set forth in the first cause of action and by denying American Home's motion with respect to that claim.

It is hereby ORDERED that the judgment so appealed from be and the same hereby is unanimously modified on the law by granting those parts of the cross motion of plaintiffs with respect to the proceeding brought by the United States Environmental Protection Agency and their claim for “lost product,” by granting judgment in favor of plaintiffs as follows:

It is ADJUDGED AND DECLARED that defendant National Union Fire Insurance Company of Pittsburgh, Pa. must defend plaintiffs in the proceeding brought by the United States Environmental Protection Agency and

It is further ADJUDGED AND DECLARED that defendant American Home Assurance Company must indemnify plaintiffs with respect to their claim for “lost product” as set forth in the first cause of action

and by denying the motion of defendant American Home Assurance Company with respect to that claim and as modified the judgment is affirmed without costs.

MEMORANDUM: