IN THIS LONG TERM ENVIRONMENTAL CONTAMINATION CASE, THE INSURER IS NOT LIABLE TO THE INSURED FOR LOSSES ATTRIBUTABLE TO TIME PERIODS WHEN LIABILITY INSURANCE WAS UNAVAILABLE (CT APP).

The Court of Appeals, affirming the Appellate Division, in a full-fledged opinion by Judge Stein, determined the insured, Keyspan Gas, not the insurer, Century, bore the risk of damages from environmental contamination during the years that coverage for such damage was not available:

The liability underlying this insurance dispute emanates from environmental contamination caused by manufactured gas plants (MGPs) owned and operated by KeySpan’s predecessor … .Gas production at the sites began in the late 1880s and early 1900s. After operations ceased decades later, the New York Department of Environmental Conservation (DEC) determined that there had been long-term, gradual environmental damage at both sites due to contaminants, such as tar, seeping nto the ground and leeching into groundwater. The DEC required KeySpan to undertake costly remediation efforts … . …

… [Environmental contamination] coverage was not available to utilities until approximately 1925, and … a “sudden and accidental pollution exclusion” was later generally adopted by the insurance industry sometime in or after October 1970. Thus, KeySpan argued, the allocation should not take into account any years prior to the availability, or after the unavailability, of the applicable coverage. * * *

… [T]he Appellate Division … [held] that “under the insurance policies at issue, Century does not have to indemnify KeySpan for losses that are attributable to time periods when liability insurance was otherwise unavailable in the marketplace” … . * * *

The policyholder is the one who allegedly caused the injury and, therefore, who ultimately will be financially responsible should insurance prove insufficient” … . …

… “[T]he very essence of pro rata allocation is that the insurance policy language limits indemnification to losses and occurrences during the policy period” … . Keyspan Gas E. Corp. v Munich Reins. Am., Inc., 2018 NY Slip Op 02116, CtApp 3-27-18

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