Defendant Had Sufficient Bargaining Power to Craft an Agreement to its Benefit.

By Barry Zalma on June 10, 2025

Contra Proferentem Doctrine Does Not Apply to the Interpretation of Insurance Policies

Post 5093

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Polluter’s Insurer Loses 25 Year Litigation Over Interpretation of Ambiguous Policies

The Plaintiff (Century) insurer’s motion to set aside and modify a jury verdict and for a new trial on certain issues were presented after 25 years of litigation while the defendant sought that its motion to modify the verdict, unanimously modified, on the law.

In Century Indemnity Company v. Brooklyn Union Gas Company, American Reinsurance Co, et al., Brooklyn Union Gas Company v. Century Indemnity Company, Munich Reinsurance America Inc., Appeal Nos. 3551, 3552, 2025 NY Slip Op 03379, Index Nos. 603405/01, 403087/02, Case Nos. 2024-00848, 2024-00850 Supreme Court of New York, First Department (June 5, 2025) the judgment of the trial court was affirmed.

FACTS

Almost 25-year-old litigation continued with a focus on three manufacturing gas plants (MGPs) defendant formerly owned and operated at the Fulton (1880-1928), Citizens (1860-1963) and Metropolitan (1872-1928) sites (collectively, the three sites) in Brooklyn, all of which bordered the Gowanus Canal.

It was undisputed that when processing gas, these MGPs environmentally contaminated the canal and the subsoil at the three sites. In the early to mid-2000s, defendant received a series of orders from both the New York State Department of Environmental Protection and the U.S. Environmental Protection Agency requiring it to investigate and remediate the pollution in the canal and at the three sites.

Century was the excess liability insurer that issued six policies to defendant during the period 1941-1969 to cover liability for third-party property damage. Each of these policies was for a one-year term, contained a self-insured retention of $100,000, and was renewed yearly.

The court was faced with this 2001 action where Century sought a declaration that it lawfully disclaimed excess coverage for contamination remediation and related costs based on defendant’s untimely notice of an occurrence. Defendant counter sued to compel coverage.

In 2009, the court affirmed the denial of Century’s motion for summary judgment on its claim of untimely notice. Ten years later and relevant to the damages issues raised in this post trial appeal, the court affirmed the motion court’s holding that Century’s successive policies were subject to a pro rata allocation for all losses resulting from long term, continuous contamination that spanned the successive policy periods.

In 2022, the matter proceeded to trial and the jury returned a verdict for defendant, finding that there was excess coverage for the three sites in differing amounts and that Century’s defenses, including untimely notice, lacked merit.

Century argued that no controlling precedent permitted an instruction that the jury must simply perform a pro rata allocation calculation of the potential clean-up costs (damages).

In its cross-appeal, Defendant challenged the court’s finding as a matter of law that the per-occurrence limits for multi-year policies and multi-year renewals were for the entire period and did not reset annually.

The Court rejected Century’s argument that the trial court should not have apportioned the coverage for cleanup costs.

CONCLUSION

The trial court properly refused to apply the doctrine of contra proferentem to resolve ambiguities in the policy as to whether per-occurrence limits in multi-year policies and multi-year renewals applied on an annual basis. Defendant, which has a large in-house insurance department, processes dozens of claims in house monthly, self-insures for large amounts, and has numerous lawyers and brokers, is sophisticated in insurance coverage matters and thus has sufficient knowledge and bargaining power to craft an agreement to its benefit.

ZALMA OPINION

For 25 years the litigants went back and forth to trial and appellate courts expending much money to obtain or refuse the benefits of an excess insurance policy only to find that since the plaintiff insurer and the defendant gas companies were both sophisticated and a large in-house insurance department, processes dozens of claims in house monthly, self-insures for large amounts, and has numerous lawyers and brokers, is sophisticated in insurance coverage matters and thus has sufficient knowledge and bargaining power to craft an agreement to its benefit and had no argument against the policy it accepted. Everyone was unhappy with the result.

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