(CN) - Century Indemnity Co. scored a victory Thursday after a federal judge in New York found Northrop Grumman failed to give the insurer proper notice of contaminated groundwater on Long Island.
Century had argued that Northrop Grumman knew about contamination of the water supply around its Bethpage, N.Y. plant in 1977, but waited until 1983 to notify the insurer of the disaster. But U.S. District Judge Katherine Forrest, of the Southern District of New York, said that the aerospace company knew as early as 1973 that the town's aquifer had been contaminated with trichloroethylene, or TCE.
"In approximately 1973, Grumman's manager of environmental protection, John Ohlmann, learned of taste and odor problems at a newly opened well at the Bethpage facility," Forrest wrote, citing Northrop Grumman's own response to another of its insurers, Travelers Indemnity. "In 1975, Grumman detected three hydrocarbons in their own analysis of the groundwater on-site. Samples collected from the facility by the Bureau of Water Resources for the Nassau County Department of Health contained TCE. The department made a preliminary determination that the 'discharge of sanitary and industrial wastes at and in the vicinity of the Grumman Corporation is considered responsible for the degradation in quality of the Grumman Corporation wells.'"
By 1977, the Bethpage Water District filed a claim with Grumman, accusing the company of polluting its wells with TCE and demanding cleanup. The district reiterated its claim in 1978.
Grumman waited until 1983 to notify Century of the impending environmental catastrophe. And that notice, when it finally came, only mentioned one area of contamination instead of three, according to the 19-page opinion.
"First, the subject line of the cover letter refers to a different claim, covering a different area in Bethpage - the Old Bethpage Landfill," Forrest wrote. "That lawsuit concerned a sludge drying bed. Second, the letter gives no indication that it is in fact a notice of a claim; instead it stated that the cover letter attached 'additional information on the above captioned for your files.' Third, Century has proffered uncontradicted evidence that when the letter was found in its files, it was in the files of the Old Bethpage Landfill."
Grumman's letter to Century was "inadequate notice as a matter of law," since the company had intended to have Travelers foot the bill.
"As an initial and entirely dispositive matter, Century only received the 1983 Letter because it was a copyee on a cover letter with attachments that was addressed to Travelers," Forrest wrote. "There is no dispute that Grumman did not separately send Century its own notice, referring to the policies Century had issued. Such inadvertent notice is insufficient."
The judge also rejected the notion that Century failed to prove Grumman had any idea that cleanup costs would exceed primary policy limits and that excess policies with Century would be needed. She noted that a Nov. 22, 1977 letter from the Bethpage Water District put the environmental damage at "minimally hundreds of thousands of dollars," while an internal Grumman memo from 1976 estimated the investigation alone would cost $500,000.
"The record thus contains ample evidence that Grumman knew that liabilities would indeed exhaust the policies," Forrest concluded.
The Bethpage Water District finally filed its own federal lawsuit against Northrop Grumman this past November, for the improper disposal of chemicals from 1949 through 1962.
"Grumman's carelessness resulted in hazardous substances being released into the groundwater, which are now contaminating the source of Bethpage's water supply," the district said in a statement on its website. "After contaminating the community's groundwater, it closed its doors, leaving its mess and taking jobs elsewhere."
The district said it has installed high tech purification systems to treat the town's drinking water, and conducts over 10,000 water quality tests each year to insure safety.
"Northrop Grumman has refused to work with the district," Bethpage Water District Board treasurer John Sullivan said. "They have denied us access to test wells. They have refused to pay for treatment. They caused this problem and they should be held accountable for cleaning it up."