Opinion
X04-HHD-CV-12-6067744-S
05-19-2017
MACDERMID, INCORPORATED v. THE TRAVELERS INDEMNITY COMPANY and THE TRAVELERS INDEMNITY COMPANY OF CONNECTICUT f/k/a THE TRAVELERS INDEMNITY COMPANY OF RHODE ISLAND
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT (#214)
Sheridan, J.
In this case, the plaintiff, MacDermid, Inc. (" MacDermid") seeks liability insurance coverage from the defendants, The Travelers Indemnity Company and The Travelers Indemnity Company of Connecticut f/k/a The Travelers Indemnity Company of Rhode Island (collectively " Travelers") for the costs of remediating polluted property. Travelers has moved for partial summary judgment on the ground that MacDermid's breaches of the " notice" and " no voluntary payments" provisions of the applicable insurance policies relieve Travelers of any obligation to provide liability insurance coverage. The plaintiff opposes summary judgment, arguing that disputed issues of fact exist.
For the reasons set forth below, partial summary judgment is granted in favor of the defendants on the basis of a breach of the no voluntary payments provision of the applicable insurance policies.
I. SUMMARY OF FACTS
A. Factual Background
From 1922 to 2003, MacDermid conducted chemical production and processing operations on property located at 526 Huntingdon Avenue in Waterbury, Connecticut. MacDermid blended or compounded chemicals used in the metal finishing, plating and printed circuit industries, and recycled spent chemicals returned to its facility. MacDermid generated hazardous industrial waste from those chemical production and processing operations. For some time, the industrial wastes were simply discharged to the Waterbury sewer system. In the 1970s, MacDermid began a practice of holding and treating wastewater from its operations in shallow retention basins, or " lagoons, " located on the Huntingdon Avenue property. At undetermined times, hazardous chemicals and toxic substances were caused to enter the soil and groundwater of the Huntingdon Avenue property. Among the potential sources of soil and groundwater pollution were the wastewater lagoons that MacDermid operated at the Site
MacDermid's Huntingdon Avenue property was a hazardous waste treatment, storage or disposal facility regulated by the Resource Conservation and Recovery Act (RCRA), a federal law regulating the treatment, storage, or disposal of hazardous waste. RCRA imposes certain closure, clean-up and environmental remediation requirements upon the owners and operators of facilities that generate, store or dispose of hazardous waste. The federal government delegates the administration and enforcement of RCRA to certain states, including the state of Connecticut - acting through the Connecticut Department of Environmental Protection (CT DEP).
Effective July 1, 2011, as part of an agency consolidation, the CT DEP was merged into a larger agency, known as the Connecticut Department of Energy and Environmental Protection, or " CT DEEP." For purposes of convenience, throughout this memorandum - regardless of time frame - the agency will be referred to as CT DEP.
MacDermid ceased its operations at the Huntingdon Avenue property effective December 31, 2003. After ceasing operations at the Huntingdon Avenue property, MacDermid entered into negotiations with the CT DEP regarding its remediation obligations under RCRA. At some point in this process, allegedly " following threats of enforcement actions from environmental regulators, " MacDermid applied to the CT DEP for a " Stewardship Permit."
The court notes that the only proof of these " threats of enforcement actions" is a hearsay statement of John L. Cordani in his affidavit which, without more, is most likely inadmissible. Similarly, the hearsay statements in the affidavit of Franca L. DeRosa which are attributed to a DEP employee are, without more, likely inadmissible.
A Stewardship Permit is a document setting forth enforceable long-term obligations for the permittee - including required closure and post-closure activities and a schedule for performing those activities - with respect to a contaminated property. The permit (and by extension, the property) are transferable. At the completion of all closure obligations under the Stewardship Permit, the property owner is issued a certificate from the DEP confirming that the property has been " clean closed." The Stewardship Permit process requires a detailed technical review by the agency, preparation of a draft permit, notice to the public followed by a public comment period, and a public hearing.
After completing this process, MacDermid was issued its Stewardship Permit, with a ten-year term, effective September 28, 2007. The permit authorized MacDermid to " perform sitewide environmental investigation and cleanup (" closure" and " corrective action" measures) at the former commercial hazardous waste storage and recycling facility ... [and] ... to perform closure and corrective action measures at the facility." The Permit also provided that " [n]oncompliance by the Permittee with the terms of this permit, except under the terms of an Emergency Permit, shall constitute a violation of this permit and any applicable laws or regulations and is grounds for enforcement action, for permit termination, revocation and reissuance or for denial of a permit renewal."
On November 13, 2009, more than two years after the issuance of the Stewardship Permit, MacDermid first notified Travelers of a liability claim related to the Huntingdon Avenue property. In a letter, MacDermid's legal counsel " advised" Travelers that MacDermid had incurred and was continuing to incur costs " in response to environmental claims made by the Connecticut and U.S. governments" in connection with the Huntingdon Avenue property. " This letter is formal notice to The Travelers of these claims and of MacDermid's claims of coverage under Travelers policies." MacDermid listed six of its policies with Travelers: the 1975 Policy, the 1977 Policy, the 1978 Policy, the 1979 Policy, the 1980 Policy, and the 1981 Policy.
In a response letter dated November 20, 2009, Travelers noted that it did not appear that a lawsuit had been filed or served upon MacDermid. Travelers therefore requested that MacDermid provide all written " inquiries, notices, orders, claims, demands, or other communications by the agency/ics for the State of Connecticut and the U.S. government for each Site" so that Travelers could evaluate MacDermid's claim and " determine the extent of our coverage obligations, if any, in these matters."
By letter dated April 1, 2010, MacDermid's legal counsel responded with information regarding the Huntingdon Avenue property and the Stewardship Permit. As far as specific notices, demands, suits, enforcement orders, or anything of a similar nature, it appears that none were provided with the letter, and none have been provided in support of the opposition to summary judgment.
B. Pertinent Insurance Policy Provisions
Between at least 1961 and 1983, MacDermid maintained its comprehensive general liability insurance coverage with Travelers. Each of the policies at issue contains provisions regarding the policyholder's obligation to provide notice to the insurer in the case of a loss. The policies require, as a condition precedent to coverage, that the insured provide notice of an occurrence of an event likely to give rise to a claim " as soon as practicable."
As the Defendants have noted in their motion, there are some policies for which neither party has located or produced a complete copy, and Travelers thus does not concede that it issued all of the policies that MacDermid alleges. The present motion addresses only those counts that are asserted on policies that exist in sufficiently complete form to identify the conditions to coverage (Counts 1 through 16 and Counts 21 through 40).
For the policies issued in 1967 through 1969, the " notice" provision requires that: " In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable. The named insured shall promptly take at his expense all reasonable steps to prevent other bodily injury or property damage from arising out of the same or similar conditions, but such expense shall not be recoverable under this policy." For the policies issued in 1972 and afterward, the " notice" provision states: " In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable." For the policies issued between 1961 and 1966, the " notice" provision is as follows: " When an occurrence occurs written notice shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable. Such notice shall contain particulars sufficient to identify the insured and also reasonably obtainable information respecting the time, place and circumstances of the accident, the names and addresses of the injured and of available witnesses" .
Each of the insurance policies at issue also contains a provision commonly referred to as a " no voluntary payments" clause, which prohibits an insured from making any payment or assuming any obligation prior to informing its insurer.
The " no voluntary payments" clause in the policies issued in 1967 and afterward provides: " The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for first aid to others at the time of the accident." The " no voluntary payments" clause in the 1961 Policy, 1962 Policy, 1963 Policy, 1965 Policy, and 1966 Policy provides: " The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for such immediate medical and surgical relief to others as shall be imperative at the time of the accident."
In the present case, the " notice" and " no voluntary payment" insurance policy provisions are clear and unambiguous. Neither party claims otherwise.
C. This Action
The plaintiff commenced this action in January of 2012. The operative complaint is in 44 counts. In Counts One through Forty Two, as to each of the policies issued by Travelers, the plaintiff seeks a declaratory judgment regarding coverage and alleges that Traveler's conduct constitutes a breach of its contractual obligations under those policies. Count Forty Three alleges that Travelers' actions with regard to the plaintiff's claims under the policies were dishonest and done in in bad faith. Count Forty Four alleges that Travelers' conduct violates the Connecticut Unfair Insurance Practices Act (" CUIPA"), Connecticut General Statutes Sections 38a-815 et. seq. and the Connecticut Unfair Trade Practices Act (" CUTPA"), Connecticut General Statutes Sections 42-110a et seq.
Travelers has pled twenty-three special defenses. Of these, the Fourth and Eighth Special Defenses are especially relevant to this motion. The Fourth Special Defense alleges that: " [p]laintiffs claims are barred to the extent that it failed to timely comply with those provisions of the policies requiring it, in substance, to give the relevant Defendant notice of the accident(s), occurrence(s), claim(s) or suit(s) for which it seeks coverage." The Eighth Special Defense alleges that: " [p]laintiffs claims are barred to the extent that they arise from payments or obligations voluntarily assumed by the plaintiff without the knowledge or consent of the relevant Defendant."
On June 20, 2016, Travelers filed the present motion for summary judgment. The argument in support of summary judgment is relatively straightforward. The defendants contend that there is no genuine issue of material fact concerning MacDermid's failure to comply with the notice provisions of the policies and the resulting prejudice to Travelers. Since MacDermid's duty to provide timely notice is a condition precedent to coverage, its failure to provide notice defeats any coverage claim. Travelers also asserts that there is no genuine issue of material fact concerning MacDermid's voluntary payments prior to tendering its claim to Travelers, and such voluntary payments are not recoverable. In this regard, Travelers cites case authority from Connecticut and other jurisdictions for the proposition that a policyholder may not recover costs paid or committed to be paid prior to tender of the claim to the insurer. In support of its motion, Travelers has submitted documentation related to the insurance policies, MacDermid's activities at the Huntingdon Avenue property, the Stewardship Permit and MacDermid's tender of the liability claim to Travelers, all of which has been authenticated by affidavit.
In opposition, MacDermid argues that disputed issues of material fact prevent summary judgment from entering based on the " late notice" and " voluntary payments" provisions and, in any event, Travelers has suffered no prejudice from the failure to comply with the " late notice" and " voluntary payments" provisions. To deny MacDermid coverage under such circumstances, the defendants argue, would result in a wholly disproportionate forfeiture. In connection with its opposition, MacDermid has appended affidavits of its General Counsel, a Licensed Environmental Professional and an environmental attorney familiar with the Stewardship Permit program, all with supporting documents.
The parties were heard at argument on January 30, 2017.
II. STANDARD OF REVIEW
" Issues of insurance coverage and contractual disputes are particularly appropriate for summary judgment because the meaning of the insurance contract presents questions of law unsuitable for jury resolution." Edelman v. Pacific Employers Ins. Co., Superior Court, judicial district of Hartford, Docket No. CV 93-0533463-S (December 11, 1997, Aurigemma, J.) (21 Conn.L.Rptr. 107, ), aff'd, 53 Conn.App. 54, 728 A.2d 531, cert. denied, 249 Conn. 918, 733 A.2d 229 (1999). " The court may address the merits of a declaratory judgment action upon a motion for summary judgment ... Summary judgment is an appropriate method to determine whether an insurer has a duty to defend and indemnify an insured." New London County Mutual Insurance Co. v. Sielski, Superior Court, judicial district of Hartford, No. 126032774S (April 17, 2014, Wiese, J.) (58 Conn.L.Rptr. 57, ), aff'd, 159 Conn.App. 650, 123 A.3d 925 (2015).
" In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law. The courts hold the movant to a strict standard." (Internal quotation marks omitted.) Romprey v. Safeco Ins. Co. of America, 310 Conn. 304, 319-20, 77 A.3d 726 (2013).
" To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact. . . . As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent. . . . When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue. . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue. . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17-45]." (Internal quotation marks omitted.) Ferri v. Powell-Ferri, 317 Conn. 223, 228, 116 A.3d 297 (2015).
" The movant has the burden of showing the nonexistence of such issues but the evidence thus presented, if otherwise sufficient, is not rebutted by the bald statement that an issue of fact does exist. . . . To oppose a motion for summary judgment successfully, the nonmovant must recite specific facts . . . which contradict those stated in the movant's affidavits and documents." (Internal quotation marks omitted.) Bank of America, N.A. v. Aubut, 167 Conn.App. 347, 358, 143 A.3d 638 (2016).
III. ANALYSIS
A. The Notice Provisions of the Policies .
Travelers argues that it is undisputed that MacDermid failed to comply with the policies' provisions requiring the insured to give notice of the occurrence of an event likely to give rise to a claim " as soon as practicable." Since compliance with the notice requirement is a condition precedent to coverage, Travelers asserts that MacDermid's failure to adhere to the policies' notice requirement precludes coverage entirely.
" Connecticut requires two conditions to be satisfied before an insurer's duties can be discharged pursuant to the notice provision of a policy: (1) an unexcused, unreasonable delay in notification by the insured; and (2) resulting material prejudice to the insurer." (Internal quotation marks omitted.) Arrowood Indemnity Co. v. King, 304 Conn. 179, 198, 39 A.3d. 712 (2011).
1. Did MacDermid Give Notice of the Claim " as Soon as Practicable" ?
" The duty to give notice does not arise unless and until facts develop which would suggest to a person of ordinary and reasonable prudence that liability may have been incurred, and is complied with if notice is given within a reasonable time after the situation so assumes an aspect suggestive of a possible claim for damages." (Internal quotation marks omitted.) Arrowood Indemnity Co. v. King, 304 Conn. 179, 199, 39 A.3d 712 (2012). See also, Danulevich v. Hartford Fire Insurance Co., 36 Conn.Supp. 570, 576, 421 A.2d 559 (App.Sess.1980). (" There is no obligation to give notice until there are reasonable grounds to believe that a loss covered by the policy has been sustained.").
The plaintiff argues that it gave notice of the claim " as soon as practicable." It explains that the determination of whether a claim for environmental contamination exists under a given insurance policy takes time because it is " complex" and requires " environmental expertise, knowledge of historical uses of a property, testing, and studies." For this reason, MacDermid argues that its environmental professionals only began to " develop an understanding of the characteristics and timeframe of the contamination" when they undertook investigation and remediation activities as part of the Stewardship Permit process. Those activities resulted in a September 2009 " Site Characterization Report" that provided data and information showing that some releases to soil and groundwater occurred during the period during which MacDermid was insured by Travelers. After receiving that report, MacDermid argues that it acted promptly in notifying Travelers of its claim on November 13, 2009.
This argument is completely inconsistent with MacDermid's argument, made elsewhere, that prior to entering into the Stewardship Permit process it had received " threats of enforcement actions from environmental regulators" and it had been " presented with an ultimatum" to either clean up the property or face fines of up to $25,000 per day.
" [C]ircumstances may be such as to explain or excuse delay in giving notice and show it to be reasonable ... When the facts are undisputed and one conclusion only is reasonably possible, the question of compliance with a provision for notice is one of law; otherwise it is a question of fact." (Internal quotation marks omitted.) West Haven v. U.S. Fidelity & Guaranty Co., 174 Conn. 392, 397-98, 389 A.2d 741 (1978).
Under these circumstances, the question of where on the continuum of information known to the insured the " situation" assumed " an aspect suggestive of a possible claim for damages, " see Arrowood Indemnity, supra, 304 Conn. 199 (2012), is a disputed issue of fact. " The determinative question is whether the facts known to the assured would require a person of ordinary and reasonable prudence to believe that liability because of injury may arise, and he is entitled to have all of the facts and attendant circumstances considered." (Internal quotation marks omitted.) Silver v. Indemnity Ins. Co., 137 Conn. 525, 528, 79 A.2d 355 (1951). In the present case, the facts known to the insured, and when they were known to the insured, are in dispute and it cannot be said that only one conclusion from those facts is reasonably possible. Reasonable minds could disagree on the conclusions to be drawn from the known facts, i.e., whether liability could arise that would possibly support a claim under the policies. Accordingly, the court concludes that a genuine issue of material fact exists concerning whether policy requirements as to notice were, or were not, met. Summary judgment therefore cannot be granted on that basis. Given this conclusion, the court need not address the issue of whether Travelers has met its burden of presenting proofs sufficient to eliminate any issue of material fact that it has been prejudiced by MacDermid's failure to comply with the notice provisions.
B. The " No Voluntary Payments" Provisions of the Policies .
The defendants argue that it is undisputed that MacDermid chose to investigate and commence remediation of the Site, and assume certain future obligations, prior to tendering the claim to Travelers. As such, MacDermid is prohibited from seeking reimbursement from Travelers for sums paid or committed to be paid prior to tendering the claim.
In opposition, MacDermid argues that any payments it may have made or obliged itself to make in the future under the terms of the Stewardship Permit were not " voluntary" because the cleanup and remediation was required by RCRA. If MacDermid had not entered into the Stewardship Permit program, either CT DEP or the federal Environmental Protection Agency would have issued an order to enforce the RCRA regulations. Moreover, MacDermid argues, Travelers has not demonstrated any prejudice from MacDermid's entry into the Stewardship permit process that would justify the forfeiture of coverage that it seeks.
1. Were the Payments and Financial Obligations Under the Stewardship Permit Voluntarily Made or Assumed ?
The purpose of a " no voluntary payments" clause " is to prevent collusion as well as to invest the insurer with the complete control and direction of the defense or compromise of suits or claims" Corthera, Inc. v. Scottsdale Ins. Co., No. 14-CV-05014-EMC, 2016 WL 270951, at *5 (N.D. Cal. Jan. 22, 2016). The " no voluntary payments" clause, " far from amounting to a mere technicality imposed upon an insured in an adhesion contract, [is] a fundamental term defining the limits or extent of coverage." Travelers Prop. Cas. Co. of Am. v. Stresscon Corp., 2016 CO 22M, ¶ 13, 370 P.3d 140, 144, as modified on denial of reh'g (May 23, 2016).
The voluntariness of a particular action is generally a question of fact. Compare, State v. Hafford, 252 Conn. 274, 298, 746 A.2d 150 (2000) (voluntariness of a confession must be determined by the trial court as a preliminary question of fact); Wilson v. Cedarcrest Reg'l Hosp., No. CV 90 0373901S, 1994 WL 518305, at *1 (Conn. Super. Ct. Sept. 12, 1994) question of fact as to whether plaintiff made a voluntary decision to be confined in a hospital). However, in the context of a " no voluntary payments" provision, when there is no genuine dispute of material fact, the voluntariness of unauthorized payments can be decided as a matter of law. See, e.g. Faust v. The Travelers, 55 F.3d 471, 473 (9th Cir. 1995); Dietz, 796 F.Supp.2d at 1216. (" [T]he district court did not err in concluding that no genuine dispute of material fact existed as to the voluntariness of the pre-tender costs and that Travelers was thus entitled to judgment on this issue as a matter of law"); Dietz Int'l Pub. Adjusters of California, Inc. v. Evanston Ins. Co., 796 F.Supp.2d 1197, 1216 (C.D. Cal. 2011), aff'd, 515 Fed.Appx. 680 (9th Cir. 2013).
MacDermid argues that the Stewardship Permit is not a voluntary action since it resolves existing liabilities under RCRA regulations, which mandate that any hazardous contaminants on the property be cleaned up or remediated. In the event the owner or operator of a RCRA facility does not agree to enter into the Stewardship Permit process to satisfy that madate, CT DEP can issue a consent order, commence a lawsuit, or perform the remedial activities itself and seek reimbursement from the owner or operator.
MacDermid argues that at the time it ceased its operations at the Huntingdon Avenue property, " by law" it was " presented with an ultimatum." MacDermid could either choose to clean up any contamination at the site itself, or it could " do nothing" and face fines up to $25,000 per day and/or be required to reimburse the State for any amount it spent cleaning up the site, together with its administrative costs. By assuming that these were its only choices, MacDermid concludes that in reality it had no choice at all, and therefore the decision to enter into the Stewardship Permit program was not " voluntary." MacDermid basically argues that it had no choice but to conduct the remediation itself, and it had no choice but to enter into the Stewardship Permit process.
Other than inadmissible hearsay, there is no evidence before this court that an " ultimatum" was delivered or communicated to MacDermid by any regulatory authority. The court suggests that MacDermid's situation at the time it closed the Huntingdon Avenue site is more accurately described as a " dilemma, " based on the requirements of the RCRA regulations, wherein MacDermid was faced with choosing between two or more potentially unpleasant and expensive alternatives. Incurring costs to comply with one's obligations under statutory and regulatory law is not the equivalent of incurring costs " in response to environmental claims made by the Connecticut and U.S. governments, " as MacDermid suggests. Potential legal liability, without more, does not make a payment " involuntary."
Under similar circumstances, courts have rejected this " Hobson's Choice" argument because it is based upon a false premise. Those are not the only two choices; there is one more choice: notify the insurer and demand that the insurer provide a defense and indemnity. See, e.g., Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 122, 571 N.E.2d 357 (1991) (" We conclude that the decision [to enter into a consent judgment] was " voluntary, " however, because Augat had an alternative-it had the right to demand that Liberty Mutual defend the claim and assume the obligation to pay for the cleanup. Nevertheless, Augat failed to exercise this right. Thus, while Augat's decision obviously was not " voluntary" in the sense of " spontaneous" or entirely free from outside influence, it was " voluntary" in the sense of " by an act of choice.").
By reason of the plaintiff's choice, Travelers was denied the opportunity to defend or negotiate the settlement of the claim of environmental contamination. " [T]he defendant was not given an opportunity to enter into settlement negotiations in any way to determine whether the concessions that were being made by the ... plaintiff in this case were in any way reasonable" Perini/Tompkins Joint Venture v. Ace Am. Ins. Co., 738 F.3d 95, 100 (4th Cir. 2013). Allowing MacDermid to obtain coverage for past and future liabilities that were fixed and irreversibly settled would transform the insurer's bargained-for right to control the defense and settlement of the underlying obligation into a simple duty to reimburse. See AMI Entm't Network, Inc. v. Zurich Am. Ins. Co., 526 Fed.Appx. 635, 638 (6th Cir. 2013) (summary judgment granted for insurer on insured's claim for defense costs incurred prior to tender of claim); Klepper v. ACE Am. Ins. Co., 999 N.E.2d 86, 96-97 (Ind.Ct.App. 2013) (policy's " voluntary payment" provision precluded coverage. " To hold otherwise, would, effectively require us to write the 'voluntary payment' and 'legally obligated to pay' provisions out of the Policy, which we cannot do.").
The plaintiff relies on the Connecticut Supreme Court's decision in R.T. Vanderbilt Co. v. Continental Casualty. Co., 273 Conn. 448, 870 A.2d 1048 (2005) for the proposition that letters from administrative agencies that purport to impose " voluntary" obligations on insureds actually have the force of an order and, thus, trigger insurers' obligations. The court agrees with Travelers that R.T. Vanderbilt has no bearing on the issues presented in this summary judgment. Even assuming that a " Stewardship Permit" has the force of an order from an enforcement agency, that still does not permit the plaintiff MacDermid to breach its contractual obligations under the insurance policies by making payments and incurring obligations prior to complying with its obligation to tender the matter to Travelers.
Any such assumption requires a leap of logic, because there is no letter in the record of this case from any agency " imposing" the Stewardship Permit process upon the plaintiff. In fact, the documents appended to the plaintiff's opposition make it clear that a RCRA facility owner or operator applies for a Stewardship Permit and the application is not automatically approved.
For these reasons, the court concludes that MacDermid has breached the " no voluntary payments" provisions of the relevant insurance policies by incurring costs and negotiating and entering into the Stewardship Permit prior to notifying Travelers of the existence of the claim.
2. Was Travelers Prejudiced by the Breach of the No Voluntary Payments Provisions in the Policies ?
MacDermid argues that Travelers has not demonstrated that it was prejudiced by the entry into the Stewardship Permit two years before the tender of the claim. Travelers argues that an insurer is prejudiced as a matter of law when it is not provided notice until after the underlying claims against the policyholder have been resolved by a binding agreement.
Travelers relies upon the Connecticut Supreme Court's decision in Interface Flooring Systems, Inc. v. Aetna Cas. & Sur. Co., 261 Conn. 601, 804 A.2d 201 (2002) which held that a policyholder cannot recover from its insurer any costs that it incurred before notifying the insurer of its claim.
In Interface Flooring, the insured plaintiff was sued in the underlying action by a competitor for alleged copyright infringement and unfair trade practices. The insured and the competitor reached a nonmonetary settlement of their dispute while the insured incurred defense costs of $330,000. Six months after the settlement, the insured tendered the defense costs to Aetna, claiming a right to reimbursement because the underlying action alleged a covered advertising injury under the policy. The Supreme Court, applying Georgia law, held that the Aetna policy required the insured to forward the lawsuit papers immediately and not to incur any expenses without Aetna's consent, and as such, the pre-tender defense costs of $330,000 were not recoverable under the policy.
MacDermid attempts to negate the effect of Interface Flooring with several arguments: 1) the court's holding in Interface is based solely on Georgia law; 2) Interface was decided before Arrowood, and is therefore irrelevant; 3) the same fundamental policy consideration that underpins the prejudice rule articulated in Arrowood as applied to late notice cases applies equally to " no voluntary payment" cases. None of those arguments is persuasive.
First, although the case was decided under Georgia law, the Supreme Court expressly held that there was no conflict between Georgia law and Connecticut law on the " the issue of reimbursement for pre-tender expenses." Interface Flooring Sys., Inc. v. Aetna Cas. & Sur. Co., 261 Conn. 601, 611, 804 A.2d 201 (2002). Second, Arrowood in no way affects the holding of Interface Flooring. Arrowood reversed Aetna Casualty & Surety Co. v. Murphy, 206 Conn. 409, 538 A.2d 219 (1988) and shifted the burden of proof to the insurer with respect to the proving prejudice under the late notice. Arrowood did not reverse or modify Interface Flooring, which addressed the " no voluntary payments" provision.
Finally, as to the proposition that the " policy considerations" underlying Arrowood should also apply to the application of the " no voluntary payments clause, " the Supreme Court specifically limited its analysis in Arrowood to the no voluntary payments provision, avoiding any effort to link previous analyses applied to late notice provisions - such as in Murphy - to the analysis in Arrowood of the no voluntary payment provision. 261 Conn. at 611.
The policy language at issue in Interface Flooring is identical to that contained in the policies at issue here. 261 Conn. at 619. In Interface Flooring the Supreme Court unambiguously held that a policyholder cannot recover from its insurer any costs that it incurred before notifying the insurer of its claim. The Court held that such a conclusion was " buttressed by the language in the insurance policies . . . [and] according to the plain language of the policies, [pre-tender] costs must be borne by the [insured]." Id. As such, Interface Flooring controls this case.
Although Interface Flooring does not directly address the issue, Travelers points out that many courts in other jurisdictions that have considered similar insurance policy provisions have recognized that an insurer need not demonstrate prejudice to invoke the " no voluntary payments" provision, since an insurer is necessarily prejudiced when it is presented with notice of the claim after the resolution of the claim against the policyholder.
As a primary example, Travelers points to the decision in Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 123, 571 N.E.2d 357 (1991), In that case, the court held that an insurer was entitled to deny coverage on the basis of a voluntary payment clause where the insured, without notifying the insurer or obtaining its permission, had " agreed to a settlement, entered into a consent judgment, assumed the obligation to pay the entire cost of the cleanup, and in fact paid a portion of that cost." Although the court recognized a " general rule" that " the insured's noncompliance with a voluntary payment clause does not discharge the insurer's contractual duty unless the insurer demonstrates actual prejudice, it held that no further showing of prejudice was required where the record clearly established that the insured's breach undermined the purpose of the voluntary payment clause - that of giving the insurer an opportunity to protect its interests. The court noted that by the time the insured involved the insurer, " it was too late for the insurer to act to protect its interests. There was nothing left for the insurer to do but issue a check." 410 Mass. at 123, 571 N.E.2d 357.
Other cases have reached similar results. In Perini/Tompkins Joint Venture v. Ace American Insurance Co., the court held: " By failing to notify the [insurer] of the incident, claim, and lawsuit until after the judgment, the [insured] nullified unilaterally all of the [insurer]'s rights and presented the [insurer] with a fait accompli. ... By itself, the abrogation of all of the [insurer's] contractual rights constituted prejudice. We hold that the [insurer] was prejudiced as a matter of law when the [insured] failed to notify the [insurer] of the incident, claim, and lawsuit until after an adverse judgment was entered." Perini/Tompkins Joint Venture v. Ace Am. Ins. Co., 738 F.3d 95, 104 (4th Cir. 2013).
In Arch Specialty Insurance Co. v. Go-Mart, Inc. , after concluding that proof of prejudice was not required due to the unreasonableness of the policyholder's delay in providing notice, the court concluded that the insurer was prejudiced in any case " inasmuch as it was denied any right to compromise, defend or even assist in the claims against [the policyholder] prior to jury verdict and judgment ...." Arch Specialty Ins. Co. v. Go-Mart, Inc., No. 2:08-0285, 2009 WL 5214916, at *10 (S.D.W.Va. Dec. 28, 2009). Because the insurer was presented with fait accompli and nothing was left to do but issue a check, the court concluded that prejudice was established. Id. at *13
In the end, whether or not prejudice may be presumed as a matter of law, this court concludes that under the particular facts in this case, Travelers has satisfied its burden of showing that there are no material facts in dispute as to its having been prejudiced. MacDermid failed to provide notice to Travelers until well after the claim of environmental contamination had been identified, negotiated, and resolved, leaving Travelers with " nothing to do but issue a check." Travelers was thereby deprived of the ability to investigate the claim to - at the very least - determine the extent (if any) of its coverage. It was deprived of any involvement whatsoever in the investigation, defense or resolution of the claim - something that was essential to inducing Travelers to assume the liability risk in the first place.
An insurance policy is a contract which expresses the reasonable expectations of the parties. Hammer v. Lumberman's Mut. Cas. Co., 214 Conn. 573, 591, 573 A.2d 699 (1990). Travelers had a reasonable expectation that, in the event of a claim, it would have the right to control the defense and resolution of the claim. If the " no voluntary payments" provision is ignored, Travelers' expectations from the insurance contract are completely eradicated, while MacDermid receives the full benefit of its contractual expectations, and more. Travelers' right to manage and control the defense of the claim and thereby define the nature and scope of the indemnity is transformed into a nondiscretionary obligation to reimburse the insured. MacDermid's obligation to surrender control of the claim in return for a defense and possible indemnity is transformed into a right to control the defense and the nature and scope of the indemnity. " A court cannot rewrite the policy of insurance or read into the insurance contract that which is not there." Hammer v. Lumberman's Mut. Cas. Co., 214 Conn. 573, 591, 573 A.2d 699 (1990). In and of itself, the nullification of a significant, material, bargained-for contractual right constitutes prejudice.
For these reasons, the court concludes that there is no genuine dispute of material fact as to whether Travelers has been prejudiced by MacDermid's breach of the " no voluntary payments" provisions of the relevant policies.
IV. CONCLUSION
For the foregoing reasons, partial summary judgment is entered for the defendants on Counts One through Sixteen and Counts Twenty-One through Forty of the Second Amended Complaint.