Opinion
122807-1996.
Decided July 17, 2008.
McCarter English, LLP, Newark, New Jersey, (Keith E. Lynott, Esq., Brian J. Osias, Esq., Louis Chiafallo, Esq., Gita F. Rothschild, Esq., Arnold L. Natali, Esq.), Attorneys for General Electric Co.
Ford Marrin Esposito Witmeyer, Glesser, LLP, New York, New York, (Elizabeth M. DeCristofaro, Esq.), Attorneys for Continental Casualty Co. and Continental Insurance Co.
Littleton Joyce Ughetta, Park Kelly, LLP, New York, New York, (Sarah J. Edwards, Esq., Robert L. Joyce, Esq.), Attorneys for Royal Indemnity Co.
Rivkin Radler, LLP, Hackensack, New Jersey, (Anthony LaPorta, Esq., Brian R. Ade, Esq., Timothy B. Parlin, Esq.), Attorneys for Federal Insurance Co.
Skadden, Arps, Slate, Meagher Flom, LLP, Four Times Square, New York, New York, (Michael J. Balch, Esq.), Attorneys for General Reinsurance Corp. and North Star Reinsurance Corp.
Landman Corsi Ballaine Ford, PC, New York, New York, (Michael L. Gioia, Esq., Patrick Stoltz, Esq.), Attorneys for Republic Insurance Co.
White and Williams, LLP, Philadelphia, PA, (Patricia B. Santelle, Esq., Thomas M. Going, Esq., Daniel M. Isaacs, Esq.), Attorneys for Century Indemnity Co., Pacific Employers Insurance Co., and OneBeacon American Insurance Co.
Thorp Reed Armstrong, Philadelphia, Pennsylvania, (John R. Embick, Esq.), Attorneys for Lincoln Insurance Co.
Motion sequence numbers 035, 037, 038, 039, 040, 042, and 044, are consolidated for purposes of this decision. These are motions for partial summary judgment to determine the choice of law applicable to excess insurance policies issued to the General Electric Company ("GE") by the Insurers in this action.
The remaining non-settling insurers are: (1) Royal Indemnity Company (Motion Sequence 035); (2) General Reinsurance Corporation and North Star Reinsurance Corporation (Motion Sequence 037); (3) Century Indemnity Company, Pacific Employers Insurance Company, and OneBeacon America Insurance Company (Motion Sequence 038); (4) Continental Casualty Company and Continental Insurance Company (Motion Sequence 039); (5) Federal Insurance Company (Motion Sequence 040); (6) Republic Insurance Company (Motion Sequence 042); (7) Lincoln Insurance Company (Motion Sequence 044).
In the underlying action, GE seeks a declaratory judgment that the Insurers have a duty to indemnify GE against all liabilities incurred as a result of GE's environmental contamination of numerous sites around the country. The insurance policies that are in dispute were issued to GE between 1956 and 1986 and provide coverage for GE's liability to third parties. For purposes of the instant motions, the parties agree that the underlying claims in this action are not at issue, and that the coverage provided by the various excess general liability policies is the same.
At various times prior to December 30, 1996, the United States, along with state and local governmental agencies, asserted claims against GE for property damage relating to GE's environmental contamination of numerous sites around the country. In this action, GE seeks a declaratory judgment in connection with the company's environmental liabilities at these remaining sites: (1) Massachusetts (2) California (3) Indiana (4) Washington (5) Georgia (6) Kentucky (7) New York (8) Ohio. (General Electric Co.'s Opposition to Defendant Excess Insurers' Motions Regarding Application of NY Law and in Support of its Cross-Motion for Partial Summary Judgment against all Insurer Parties on Application of Law of the Site [GE Memorandum of Law], Affirmation of Brian J. Osias ["Osias Aff."], ¶ 5).
The parties' disagree as to which state's law governs the interpretation of these insurance policies. The Insurers move, pursuant to CPLR 3212, for partial summary judgment declaring that New York law applies to all insurance coverage issues raised in this matter. GE cross-moves for a partial summary judgment order declaring that the "law of the site" should be applied to resolve the coverage issues. In the alternative, GE argues that the law of Massachusetts should apply. A summary judgment motion shall be granted if, "upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party." (CPLR 3212[b]).
By letter dated July 11, 2008, the Insurers submitted a copy of a recent decision by the Massachusetts Superior Court in General Electric Co. v. Lines no. 06-3106 (Mass.Sup.Ct., July 10, 2008). The decision was issued in an action brought by GE in Massachusetts seeking coverage under the primary policies issued by Electric Mutual Liability Insurance Company, Ltd. for GE's environmental claims (including the claims at issue in this case). As in this case, GE contested the application of New York law, and argued that Massachusetts law should govern the interpretation of the insurance policies. Applying Massachusetts conflict principles, the Massachusetts court ruled that New York law should be applied to the coverage disputes arising from GE's claims. Since I have not received an opposition from GE, I will file this submission.
For the reasons that follow, I conclude that New York law is applicable in this action and grant the Insurer's motions for partial summary judgment.
"The first step in any case presenting a potential choice of law issue is to determine whether there is an actual conflict between the laws of the jurisdictions involved." ( Matter of Allstate Ins. Co. [Stolarz], 81 NY2d 219, 223). Here, the parties agree that there is an actual conflict between the laws of New York and the laws of the other states in which GE's environmental sites are located. Given this actual conflict, a choice of law ruling is warranted.
For example, there is an actual conflict with respect to the pollution exclusion in the insurance policies. In New York, the phrase "sudden and accidental" in the pollution exclusion has a temporal component, thus requiring that both contingencies to the exception are satisfied. This means that a toxic discharge must be both "sudden" and "accidental" in order to fall within the exception to the exclusion. ( See Northville Indus. Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 89 NY2d 621, 632-33 [1997]; Technicon Elecs. Corp. v. Am. Home Assurance Co., 74 NY2d 66, 75 [1989] [holding that "discharges that are either nonsudden or nonaccidental block the exception from nullifying the pollution exclusion"]; Borg-Warner Corp. v. Ins. Co. of N. Am., 174 AD2d 24 [3d Dep't 1992]). On the other hand, under the laws of other states in which some of the sites are located, such as Georgia, Washington, and Indiana, the phrase "sudden and accidental" has no temporal component. ( See, e.g., Claussen v. Aetna Cas. Sur. Co., 380 S.E.2d 686 [Ga. 1989]; Queen City Farms, Inc. v. Cent. Nat. Ins. Co. of Omaha, 882 P.2d 703 [Wash. 1994]; Am. States Ins. Co. v. Kiger, 662 N.E.2d 945 [Ind. 1996]).
In addition, there is a conflict between the laws of New York and the laws of some of the other states with respect to the allocation of damages for environmental property damage that occurred over several years. In New York, courts allocate damages using a pro rata methodology, thus distributing damages horizontally amongst the insurers in proportion to time on the risk. ( Consol. Edison Co. of NY, Inc. v. Allstate Ins. Co., 98 NY2d 208 [2002]). However, the courts of Massachusetts, Indiana, and Washington allocate damages using an "all sums" methodology, thus permitting the corporate insured to seek full coverage for its claims from any policy in effect during the time period of the injury or damage. ( See, e.g., Rubenstein v. Royal Ins. Co. of Am., 44 Mass. App. Ct. 842, 852 [1998], aff'd in part on other grounds, 429 Mass. 355 [1999]; Allstate Ins. Co. v. Dana Corp., 759 N.E.2d 1049 [Ind. 2001]; Am. Nat'l Fire Ins. Co. v. B L Trucking Constr. Co., 951 P.2d 250 [Wash. 1998]). Moreover, there may be other conflicts between New York law and the law of the other site states. ( See e.g., General Electric Co. v. Lines, no. 06-3106 [Mass. Sup. Ct., July 10, 2008]).
It is well-settled that in a contract dispute, New York's choice of law rules require courts to apply the law of the state which has the most contacts with the contract. ( Zurich Ins. Co. v. Shearson Lehman Hutton, Inc., 84 NY2d 309, 317; Auten v. Auten, 308 NY 155, 160). Also referred to as the "center of gravity" or "grouping of contacts" test, this approach determines "which State has the most significant relationship to the transaction and the parties." ( Zurich Ins. Co., 84 NY2d at 317 [quoting Restatement (Second) of Conflict of Laws (hereinafter Restatement) § 188 (1)]; Certain Underwriters at Lloyd's, London v. Foster Wheeler Corp. , 36 AD3d 17 , 21 [1st Dep't 2006], aff'd, 9 NY3d 928). There are five factors to consider in determining the "center of gravity" for the contractual dispute: (1) the place of contracting; (2) the places of negotiation of the contract; (3) the place of performance; (4) the location of the subject matter of the contract; and (5) the domicile or the place of business of the contracting parties. ( Zurich Ins. Co., 84 NY2d at 317 [citing Restatement § 188 (2)]).
In Foster Wheeler, the Court of Appeals adopted the decision of the Appellate Division below. For purposes of brevity, I will cite only to the Appellate Division decision.
Where the choice of law analysis concerns a liability insurance contract, "the principal location of the insured risk" is the primary factor in determining the governing law. ( Id.; Restatement § 193). However, although the location of the insured risk can be a compelling factor in a choice of law analysis, ( see e.g. Avnet, Inc. v. Aetna Cas. Sur. Co., 160 AD2d 463 [1st Dep't 1990]; Employers Ins. of Wausau v. Am. Home Products Corp., N.Y.L.J., June 12, 1997, at 28, col. 4 [Sup. Ct. NY County 1997]; Flinkote Co. v. Am. Mut. Liab. Ins. Co., 103 AD2d 501 [2d Dep't. 1984], aff'd 67 NY2d 857), it is necessary for courts to modify the location of the insured risk rule when the risk is located in several states. ( Foster Wheeler Corp., 36 AD3d at 22; Maryland Cas. Co. v. Cont'l Cas. Co., 332 F.3d 145, 153 [2d Cir. 2003] [citing cases in which courts applying New York choice of law rules have disregarded or discounted the location of the insured risk when the risk is located in two or more states]; see also Restatement § 193 cmt. b [stating that the location of the insured risk will be given greater weight than other contacts unless the insurance policy covers risks that are scattered throughout two or more states]).
Where it is necessary to determine the law governing a liability insurance policy covering risks in multiple states, Foster Wheeler held that the state of the insured's domicile should be regarded as a proxy for the principal location of the insured risk. ( Foster Wheeler Corp., 36 AD3d at 24.) As such, the state of the insured's domicile is the source of applicable law. ( Id.)
The Insurers argue that the proxy rule set out in Foster Wheeler is applicable. In Foster Wheeler, the insured sought coverage for hundreds of thousands of asbestos claims that had been asserted in jurisdictions throughout the United States. ( Id. at 19). The risks covered by the unsettled policies in Foster Wheeler were global in scope and the insured's operations were widespread. ( Id.) The Insurers contend that as in Foster Wheeler, GE's insurance policies cover multistate risks and GE's operations are similarly widespread. Therefore, the Insurers argue, Foster Wheeler's proxy rule is applicable and the state of GE's domicile should be regarded as a proxy for the principal location of the insured risk. The Insurers contend that New York was GE's domicile at the time the policies were issued and thus New York is the source of applicable law.
In response, GE argues that the law of the site should be applied to the insurance policies because the insured risks were located at the company's various operational facilities. GE argues that the location of the insured risks is site specific for four reasons. First, GE argues that as a result of its decentralized operations, the insured risks were located at the company's various operational facilities because that is where the actions giving rise to the insured risks were made. Second, GE argues that Foster Wheeler is not applicable because the nature of the underlying claims in this case is different. Third, GE claims that the insured risks are site specific because the states where the environmental sites are located have a strong interest in the resolution of this dispute. Finally, GE cites New York case law in support of its position that multiple state laws should be applied to this dispute. I will address each of these arguments in seriatim.
First, GE argues that the insured risks are site specific because the actions and decisions giving rise to the insured risks were made at the facilities of GE's various operating components. GE describes at length the company's model of decentralization and the global nature of GE's operations. ( See generally Osias Aff., Exs. 4-6). According to this model of decentralization, the senior officers at GE's executive headquarters vest operational authority in the General Managers of the "operating components" located around the country. ( See generally Osias Aff., Exs. 4 and 5). These operating components are considered separate and distinct businesses. As a result of these decentralized operations, GE claims that "the operational decisions and actions giving rise to insured risks were not made at executive headquarters . . ., but were instead made at the facilities of GE's various operating components around the country." (GE Memorandum of Law at 33). GE argues the insured risks are located at the company's operating components because GE's operational decisions and actions giving rise to the insured risks occurred there.
However, "[i]n just the scenario that GE depicts of insured risks scattered throughout the country, New York courts deem the risk insured to be located principally in one state and apply only one state's law to the contract." (Royal's and Certain Excess Insurers' Reply Memorandum of Law in Support of their Motions for Partial Summary Judgment Seeking the Application of New York Law at 3 [hereinafter Insurer Reply Brief]; see Foster Wheeler Corp., 36 AD3d at 24 [citing Steadfast Ins. Co. v. Sentinel Real Estate Corp., 283 AD2d 44, 50 (1st Dep't 2001) (holding that where policy risks arising from the "nationwide scope of [the insured's] operations, the principal location of the insured risk should be deemed to be the state where [the] insured is incorporated and has its principal place of business")]). Foster Wheeler, similar to this action, involved a large corporation with risks scattered throughout the country and multistate operations that gave rise to the insurance claims. When a liability insurance policy covers risks in multiple states, the insured risk is deemed to be located principally in one state, namely the state of the insured's domicile. ( Id. at 24).
Second, GE argues that Foster Wheeler' s proxy rule is not applicable and attempts to distinguish Foster Wheeler based on the subject matter of the underlying claims. GE contends that there is an inherent distinction between environmental claims and asbestos claims. GE argues that the asbestos claims in Foster Wheeler are "transient" because each individual asbestos claimant could have been exposed to asbestos and developed an injury in any state. Thus it was appropriate to apply the proxy rule in Foster Wheeler because "any attempt to ascertain the location of the insured risk would have been highly problematic." (GE Memorandum of Law at 26). In this case, the underlying insurance claims involve environmental damage to property located at fixed sites in specific states. GE argues that since the location of GE's local business operations were known to the insurers at the time of contracting, applying law of the site to the insurance policy would conform to the parties' expectations because the parties' knew the location of the insured risks at the time of contracting. Additionally, GE argues that it would not be difficult to ascertain the location of the insured risks in the case of an environmental claim, and thus a proxy for the insured risk is unnecessary.
GE's "fixed property" theory conflates first-party property risks with third-party liability coverage. Although the location of GE's operating facilities may have been a fact known to the parties at the time of contracting, this is not relevant in determining the location of the insured risk because the insurance policies do not cover damage to GE's operating facilities. The insurance policies in this case, like the policies in Foster Wheeler, cover the insured against third-party liability. Given GE's widespread business operations, the third-party liability claims insured under the policies could potentially arise anywhere in the world. Thus, with respect to the third-party liability policies that are at issue, the "transient" asbestos claims in Foster Wheeler, and the "fixed" environmental claims in this case are indistinguishable.
Third, GE argues that the law of the site should be applied because the states where the environmental sites are located have a strong interest in the resolution of this dispute. GE maintains that these states not only have a predominant interest in connection with the performance of the environmental cleanup, but also in the resolution of the coverage issues presented in this case. This is because in the absence of insurance proceeds, the taxpayers of the state might otherwise have to bear the cost of remediation.
This argument fails for two reasons. First, GE fails to distinguish this case from Foster Wheeler. Surely, the states in Foster Wheeler, where the underlying asbestos claims reside, have a similar interest as those states in which the environmental claims arise. Second, GE's state interest argument fails because this coverage dispute will not impact the environmental cleanup in the site states. This is not a dispute over GE's liability for the pollution that occurred at the various sites, and the question of whether the victims of the pollution will be compensated is not involved. Rather, this dispute concerns the extent to which GE or the Insurers must bear the cost of the environmental cleanup. Thus, the interest of the site states in this action is minimized because this action will not impact the cleanup of pollution in those states. ( Maryland Cas. Co., 332 F.3d at 155 [citing the District Court opinion, Maryland Cas. Co. v. W.R. Grace Co., 1992 WL 142038 (S.D.NY 1992), the court noted that "the interest (of a state in which a waste site is located) diminishes when the question is not whether someone will or can pay for the cleanup but rather who will pay."] [internal quotation marks omitted]).
As GE concedes, the corporation has the resources to perform the environmental cleanup. (Transcript of Oral Argument at 48).
Finally, GE cites several New York cases in support of its position that multiple state laws should be applied to this dispute. All of GE's cited cases pre-date the Court of Appeal's decision in Foster Wheeler. Moreover, the cases that GE cites are distinguishable from this dispute and thus all fail to support its position that the law of the site applies.
GE cites G. Heileman Brewing Co., where the federal district court, applying New York choice of law principles, held that Michigan law governed a coverage dispute between the parties because the waste site was located in Michigan. ( G. Heileman Brewing Co. v. Royal Group, Inc., No. 88 Civ.1041, 1991 WL 120366 at *3 [S.D.NY June 21, 1991], aff'd, 969 F.2d 1042 [2d Cir. 1992]). The court found that Michigan had a greater interest in this dispute, even though the insured's predecessor was a Maryland corporation with headquarters in Maryland. ( Id.)However, Heileman is not applicable to this dispute. Unlike the present case, the insured risk in Heileman was located in one state, thus enabling the court to apply that one state's law. In light of this distinction, Heileman does not support GE's contention that the law of multiple states may govern every substantive coverage issue under the insurance policies at issue in this case. In fact, the Second Circuit in Maryland Casualty, distinguished Heileman on this very basis. ( Maryland Cas. Co., 332 F.3d at 154).
GE also cites to Munzer v. St. Paul Fire Marine Ins. Co., 203 AD2d 770 (3d Dep't 1994), for the proposition that the locus of the contaminated site has a paramount interest in the outcome of an environmental dispute. GE's reliance on Munzer is misplaced because it actually supports the application of New York law. In Munzer, "the Third Department held that the primary factor' in ascertaining the law governing a liability policy covering risks in multiple states was that the insured was a Vermont based business.'" ( Foster Wheeler Corp., 36 AD3d at 24 [citing Munzer, 203 AD2d at 772]).
Finally, GE cites three decisions in which New York courts have held that an insurance policy was to be interpreted under the laws of more than one state. ( See Employers Ins. of Wausau v. Am. Home Prods. Corp., N.Y.L.J., June 12, 1997, at 25 [NY Sup. Ct.]; Aetna Cas. Sur. Co. v. Witco Corp., No. 93-118985/037 [NY Sup. Ct. Sept. 15, 1995]; Avnet, Inc. v. Aetna Cas. Sur. Co., 160 AD2d 463 [1st Dep't 1990]). However, these are forum non conveniens decisions which turn, for the most part, on different factors. ( Rheem Mfg. Co. v. Home Indem. Co., No. 89-6349, slip op. at 7, n. 1 [NY Sup. Ct. July 20, 1998], aff'd, 282 AD2d 316 [1st Dep't 2002] [distinguishing forum non conveniens cases, including Avnet, cited as support for the proposition that the laws of the state where the site is located will govern]). Furthermore, these decisions are contrary to the weight of New York authority which generally opposes the application of multiple states' laws to a single insurance policy. ( Maryland Cas. Co., 332 F.3d at 145, n. 8).
If GE's law of the site theory is adopted, it will be necessary to apply the law of multiple states to the same issues and contracts. This is contrary to well-established New York law that requires courts to apply the law of the one state with the most significant contacts to the dispute. ( Zurich Ins. Co., 84 NY2d at 317 [holding that under New York's "center of gravity" approach to choice of law questions, courts are required to apply the law of the state with the most significant relationship to the dispute]; Maryland Cas. Co., 332 F.3d at 152-54 [determining that the language of Restatement § 193 requires courts to apply the law of the one state in which the parties understood the risk to be principally located] ["[The] choice-of-law argument-that the laws of as many as fifty states should simultaneously govern the same clause of the same insurance policy-would be amusing, had it not been advanced with such sincerity."])
Furthermore, GE's law of the site theory would violate the principles underlying New York's choice of law rules, which promote judicial economy and uniformity. ( See Rheem Mfg. Co., No. 89-6349, slip op. at 7 [rejecting the law of the site theory because "such an approach would violate the principles underlying New York's choice of law rules which promote, inter alia, predictability, uniformity of results and ease of determination of law."] [citing Restatement § 6]). It would be not only an enormous burden to consider the laws of numerous states on every issue in this case, but such an approach would make uniform interpretation of the contract impossible. Therefore, I reject GE's law of the site argument and find that the law of one state applies to the insurance policies.
It is undisputed that given GE's widespread operations and the broad coverage provided by the insurance policies, both GE and the Insurers understood at the time of contracting that the policies cover multistate risks. New York courts have determined that in selecting the law controlling insurance contracts that cover multistate risks, the state of the insured's domicile serves as a proxy for the location of the insured risk, and is thus the primary factor in the choice of law analysis:
The state of the insured's domicile is a fact known to the parties at the time of contracting, and (in the absence of a contractual choice-of-law provision) application of the law of that state is most likely to conform to their expectations. . . . Moreover, the state of the insured's domicile can be ascertained in any subsequent litigation without a fact-intensive inquiry or unguided weighing of different contacts, and making the insured's domicile the primary factor in selecting applicable law minimizes the likelihood that contemporaneous policies will be deemed governed by the laws of different states. Thus, in addition to rendering the resolution of the choice-of-law issues less difficult, adoption of a rule to apply the law of the insured's domicile makes it more likely that consistent and uniform results will be reached in different cases.
( Foster Wheeler Corp., 36 AD3d at 23 [emphasis supplied]; see also Munzer v. St. Paul Fire Marine Ins. Co., 203 AD2d 770, 772 [3d Dep't 1994] [holding that the primary factor in ascertaining the law governing a liability policy covering multistate risks was that the insured was a "Vermont based business"]). Thus, under Foster Wheeler, the law of GE's domicile serves as a proxy for the principal location of the insured risk. ( Id.) As such, GE's domicile is the source of applicable law. ( Id.)
GE's domicile at the time of the issuance of the insurance policies was New York. The insurance policies were issued between 1956 and 1986. (Defendants General Reinsurance Corporation and Northstar Reinsurance Corporation's Memorandum of Law in Support of Motion for Partial Summary Judgment on Application of NY Law, Affirmation of Michael J. Balch ["Balch Aff."], Ex. A, ¶ 55). During this time, GE was incorporated in New York. (Balch Aff., Ex. E, ¶¶ 1,2,3). GE's corporate headquarters were located in New York until 1974. (Balch Aff., Ex. D, ¶ 4). In 1974, GE moved its headquarters to Connecticut, while continuing to maintain offices in New York. (Balch Aff., Ex. E, ¶ 5). Even after moving its executive office to Connecticut, GE continued to maintain its principal place of business in New York. This is demonstrated by cases which have recognized that GE's principal place of business remains in New York. ( See Northeast Nuclear Energy Co. v. General Electric Co., 435 F. Supp. 344, 346-48 [D. Conn. 1977] [examining the details of GE's relocation to Connecticut in 1974 and concluding that GE's principal place of business continued to be in New York]; see also Klesman Associates, Inc. v. Weatherco, Inc., 92 F. Supp.2d 765, 766 [N.D. Ill. 2000] [GE is a New York corporation with its principal place of business in New York]; United States v. Wedzeb Enterprises, Inc., 844 F. Supp. 1328, 1330 [S.D. Ind. 1994]; Gafford v. General Electric Co., 997 F.2d 150, 161 [6th Cir. 1993] [accepting GE's argument that New York is its principal place of business]; In re Air Crash Disaster, 781 F. Supp. 1307, 1310 [N.D. Ill. 1991] [GE is a New York corporation with its principal place of business in New York]). In addition, GE has made assertions that its principal place of business is in New York. ( See General Electric Co. v. California Franchise Tax Board, 2006 WL 3908221, at 3 [Cal. Ct. App., 1st App. Dist., Nov. 22, 2006] [GE's appellate brief], Balch Aff., Ex. I). In sum, notwithstanding GE's move to Connecticut in 1974 and the company's highly decentralized organization, prior cases and GE's own assertions show that GE's domicile continued to be New York. Thus, under Foster Wheeler's proxy rule, New York law is applicable to this dispute.
In adopting the proxy rule in Foster Wheeler, I recognize that the resolution of a choice of law issue in contract cases generally involves consideration of five factors. ( See Restatement § 188 (2); Zurich, 84 NY2d at 317). Even if consideration of all five Restatement factors were required, it would compel the conclusion that New York law applies because New York is the place of contracting and negotiation. Although GE's various operating components participated in obtaining insurance coverage and paying premiums, GE acknowledges that the general managers at GE's various operating components relied on "pooled insurance coverage arranged by the GE Service Component known as Insurance Service" to obtain a company-wide insurance policy. ( See Osias Aff., Ex. 7). This "Insurance Service" was located in New York until at least 1986. (¶ 11, Balch Aff., Ex. D). In addition, most of the insurance policies were brokered by GE's New York insurance brokerage firm and all of the policies list GE as the insured and state that GE is located in New York. ( See e.g. Balch Aff., Ex. E). The policies also state that notice of occurrence and cancellation must be sent to GE's New York broker or to GE's address in New York. (Balch Aff., Exs. F and G).
In the alternative, GE argues that Massachusetts law should apply, arguing that Massachusetts has the most significant relationship to this dispute because it is the state in which most of the remaining waste sites are located and where GE's defense and remedial efforts have been the most costly to date. (GE Memorandum of Law, Affidavit of Thomas H. Hill, ¶ 13). Therefore, GE argues, Massachusetts has the most significant relationship to the transaction and Massachusetts law should apply to the insurance policies.
Although Massachusetts may have a relationship to some of the underlying claims and certain GE operations, this is not relevant for purposes of this action. The basis of this action is the meaning and applicability of the insurance policies. Therefore, as already explained, the choice of law analysis does not focus on the contacts to the underlying environmental claims. Instead, the choice of law analysis must focus on the state contacts to the insurance policies, the parties, and the insurance transactions. Since GE has not demonstrated that Massachusetts has a significant relationship to the negotiation and formation of the insurance policies, I reject its alternative argument to apply Massachusetts law.
GE's argument to apply Massachusetts law was also rejected by the Massachusetts Superior Court in General Electric Co. v. Lines no. 06-3106 (Mass.Sup.Ct., July 10, 2008) ( see supra note 3).
Accordingly, since I have concluded that New York law applies to all insurance coverage issues raised in this action, the Insurer's motions for partial summary judgment are granted.