A New York State trial court judge applied a pro rata time on the risk allocation for pollution from manufactured gas plants on Long Island. Keyspan Gas East Corp. v. Munich Reinsurance America, Inc.,Index No. 604715/1997, Amended Decision and Order (N.Y. Sup. Ct. Oct. 22, 2014). The adopted formula will deem the policyholder self-insured for the years 1971 to 1982, when the New York legislature required policies to contain pollution exclusions in order for companies to bear the full burden of their polluting activities.

Policyholder Keyspan Gas East Corporation sought coverage from Century Indemnity Company for the environmental cleanup of two former manufactured gas plants (MGP) that were operated by its predecessor, Long Island Lighting Company, beginning in 1903 and 1880. The Century policies covered the period between 1953 and 1969. This is not the first time the New York courts have grappled with coverage for MGP cleanup, so there was no real question that pro rata allocation would apply. Consol. Edison Co. of N.Y. v. Allstate Ins. Co., 98 N.Y.2d 208 (2002). Instead, the dispute focused on the period of property damage and when coverage was available in the marketplace.

The court held that there were questions of fact as to when the property damage began and ended, as well as the years that coverage was available in the marketplace for property damage caused by pollution. However, because the legislature intended policyholders to bear the cost of their pollution from 1971 to 1982, those years would be considered self-insured despite the unavailability of coverage in the marketplace.  See also N.Y. Ins. L. § 46.

A final allocation order is set to be entered after trial, which is currently ongoing. The resulting order will provide further guidance under New York law for complex environmental coverage allocations such as these.