Phila. Indem. Ins. Co. v. Associated Univs., Inc.

MEMORANDUM OPINION & ORDER

Norman K. Moon, Judge.

Plaintiff Philadelphia Indemnity Insurance Company ("PIIC") filed a complaint against Defendants Associated Universities, Inc. ("AUI"), Joseph Marino, and Ronald Yuhas, seeking a declaratory judgment that PIIC has no duty to defend or indemnify its insured, AUI, in Marino and Yuhas's lawsuits against AUI alleging bodily injury resulting from their exposure to trichloroethylene ("TCE") at the Brookhaven National Laboratory ("BNL") in Upton, New York. Dkt 1. Defendant AUI filed a motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Dkt. 6. For the reasons below, the Court will grant in part and deny in part AUFs motion to dismiss PIIC's claims regarding its duty to defend AUI and will deny AUFs motion to dismiss PIIC's claims regarding its duty to indemnify AUI.

I. ALLEGED FACTUAL BACKGROUND

For the purposes of ruling on the motion to dismiss, the Court must accept as true the well-pleaded allegations set forth in the complaint.

A. Associated Universities, Inc.'s Insurance Policies

In October 2014, the insurance broker for AUI submitted a "Specifications of Insurance" document to PIIC describing AUFs operations, locations, and types of insurance that AUI sought

to acquire. Dkt. 1 ¶¶ 10-11; 1-1. The Specifications noted that AUI was an educational institution created in 1946 for research, development, and education in the physical, biological, and engineering sciences, and that its charter was to "acquire, plan, construct and operate laboratories and facilities that would unite the resources of universities, research organizations and the Federal Government." Dkt. 1 ¶¶ 12-13; Dkt. 1-1.

Since 1956, AUI has managed the National Radio Astronomy Observatory ("NRAO") for the National Science Foundation. Dkt. 1 ¶ 14. At its headquarters in Charlottesville, Virginia, the NRAO designs, builds, and operates high-sensitivity telescopes. Id. ¶ 15. According to the Specifications, AUI sought commercial property coverage for certain personal property at AUI-managed facilities in Virginia, West Virginia, Washington, D.C., and New Mexico, which were limited to operations relating to radio telescopes and observatories. Id. ¶¶ 17-18. The Specifications also contained a schedule of locations for AUI and NRAO; neither included any facilities in New York. Id. ¶ 19. An "Extensions of Coverage" section sought enhancements of coverage based on industry endorsements. Id. ¶ 20. It did not list any endorsement or enhancement for locations that AUI no longer managed or at which AUI had discontinued operations. Id. ¶ 21. Finally, the Specifications sought Commercial Property Coverage, Commercial General Liability ("CGL") coverage, and Commercial Umbrella Liability ("Umbrella") coverage. Id. ¶ 26.

From December 2014 to December 2020, PIIC issued AUI and NRAO annual Commercial Package Policies including CGL Policies and Umbrella Policies. Id. ¶¶ 27-30. Until 2019, AUI and NRAO submitted to PIIC annual specifications that were substantially similar to the initial Specifications. Id. ¶ 31. None of the specifications ever identified any locations within New York, including the Brookhaven National Laboratory ("BNL"), as a location for which AUI

or NRAO sought insurance from PIIC. Id. ¶¶ 32-33. The specifications did not disclose that AUI had managed BNL from 1946 to 1998 for the U.S. Department of Energy ("DOE"), nor did they state that AUI sought insurance coverage for its discontinued operations at BNL. Id. ¶¶ 34-35.

The Declarations page for the CGL policies that PIIC provided to AUI identifies AUI as a "Non Profit Organization" and contains a Location Schedule listing 16 locations, none of which are in New York. Id. ¶¶ 38-40. In addition, the CGL policies' Supplemental Schedule listing the premium for each insured location does not refer to or include any property in New York. M¶¶ 41-42.

The CGL Policies' Insuring Agreement described PIIC's duty to defend AUI against lawsuits seeking damages because of "bodily injury" to which the insurance applied. Id. ¶ 43. The agreement stated that the insurance applied to "bodily injury" only if:

(1) The "bodily injury" ... is caused by an "occurrence" that takes place in the "coverage territory";

(2) The "bodily injury" . . . occurs during the policy period; and

(3) No listed insured or authorized employee of AUI knew prior to the policy period that the "bodily injury" had occurred.

Id. The agreements further provided that AUI would be deemed to have known that a "bodily injury" had occurred at the earliest time when any insured or authorized employee "(1) [r]eports ... the 'bodily injury' ... to us or any other insurer; (2) [r]eceives a written or verbal demand or claim for damages because of the 'bodily injury' ...; or (3) [b]ecomes aware by any other means that 'bodily injury' . . . has occurred or has begun to occur." Id.

The policies defined "bodily injury" as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time." Id. They defined "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Id.

The policies excluded insurance coverage for '"[b]odily injury' . . . expected or intended from the standpoint of the insured," "[a]ny obligation of the insured under a workers' compensation, disability benefits or unemployment compensation law . . .," '"[b]odily injury' to . . . [a]n 'employee' of the insured arising out of an[d] in the course of (a) [e]mployment by the insured . . .," and '"[b]odily injury' . . . arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of 'pollutants.'" Id. ¶ 44.

Finally, the CGL Policies included a Representations clause stating that AUI's acceptance of the policy constitutes its agreement that the statements in the Declarations are accurate and complete, that the statements in the Declarations are based on AUI's representations to PIIC, and that PIIC issued the insurance in reliance on those representations. Id. ¶ 45.

The Umbrella Policies contained similar definitions, exclusions, and disclaimers. Id. ¶¶ 46-47, 49. In addition, they stated that PIIC "will have no duty to defend the insured against any claim or 'suit' that any other insurer has a duty to defend." Id. ¶ 48.

B. TCE Exposure Lawsuits Against AUI

1. Marino's Lawsuit (Marino v. Brookhaven Science Associates, LLC, et al., No. 2:19-cv-04839, E.D.N.Y.)

In July 2019, Marino filed a complaint naming AUI as a defendant and alleging the following facts. Id. ¶¶ 50-52.

From 1947 to 1998, AUI contracted with the DOE to operate and manage BNL, an atomic, nuclear, and high-energy physics, chemical, and biological research facility. Id. ¶¶ 53, 57. Marino alleged that he used trichloroethylene ("TCE") in aerosol form while working at BNL from 1999 to 2000 as a computer technician for Carlyle Technical Services and Entex. Id. ¶¶ 54, 64, 68. AUI negligently supplied, directed, and instructed him to use TCE during his work

without giving warnings about the dangers of exposure or protection against such exposure. Id. ¶ 55. As a result, Marino inhaled, touched, and ingested hazardous levels of TCE. Id. ¶ 69.

In addition, AUI directed workers to discard used TCE into sinks, basins, floor drains, sewers, septic systems, soils, and landfills. Id. ¶ 65. AUI also discharged, released, and disposed of radioactive fuels, toxic chemicals, and substances known as human health hazards, resulting in severe and pervasive pollution and environmental contamination. Id. ¶¶ 59-60, 67.

In 1989, the U.S. Environmental Protection Agency (“EPA”) declared BNL a Superfund Site. Id. ¶ 61. DOE banned use of TCE at its facilities in 1990, but AUI stockpiled it at BNL for future use, and Marino continued to use it beyond 2006. Id. ¶ 66. The EPA issued violation notices to AUI in 1998 for violating federal environmental laws. Id. ¶ 73. Marino alleged that AUI fraudulently concealed the presence of TCE in the buildings, structures, facilities, soils, surface waters, groundwaters, ambient indoor air, and drinking water. Id. ¶ 56.

Marino was diagnosed with carcinoma in his right kidney in 2009 and chronic kidney disease in his left kidney in 2018. Id. ¶¶ 70-71. Although he did not know until 2016 that his TCE exposure caused his kidney cancer, his TCE exposure over time caused both his kidney cancer and chronic kidney disease. Id. ¶¶ 72, 74. In 2017, Marino submitted a claim for benefits under the U.S. Department of Labor's (“DOL”) Energy Employees Occupational Illness Compensation Program Part E; in 2018, DOL recognized his claim, finding that his occupational exposures at BNL caused his cancer. Id. ¶¶ 75-76.

Marino has sued AUI for negligence, strict products liability, intentional tortious conduct, and fraudulent concealment. Id. ¶¶ 78-82. He seeks $25 million in damages. Id. ¶ 83.

2. Yuhas's Lawsuit (Yuhas v. Associated Universities, Inc., et al., No. 2:19-cv-05475, E.D.N.Y.)

In September 2019, Yuhas filed a complaint naming AUI as a defendant. Id. ¶¶ 84-85. His complaint is substantially similar to Marino's complaint except for the following alleged facts.

Yuhas worked as a computer operator, information and telecommunications technician at BNL for AUI from 1964 to 1998 and for Brookhaven Science Associates (“BSA”) from 1998 to 2007. Id. ¶ 87. Yuhas used TCE on a daily basis at work. Id. ¶ 88. Even though DOE banned TCE use at BNL in 1990, AUI continued to use TCE there until 1998 and stockpiled TCE in such large amounts...