DRONEY, Circuit Judge:
Plaintiff-Appellant Olin Corporation ("Olin") appeals from a grant of summary judgment in favor of Defendant-Appellee American Home Assurance Company ("American Home") in the United States District Court for the Southern District of New York (Griesa, J.). Olin brought this action against its insurers, including American Home, regarding environmental contamination at Olin sites in the United States. This appeal arises from proceedings related to Olin's Morgan Hill, California, manufacturing site. At issue is whether the $30.3 million attachment point for American Home's excess policies for the years 1966-69 and 1969-72 could be reached by the alleged property damage at Morgan Hill.
For the reasons that follow, we vacate and remand.
This case began in 1984 when Olin brought a diversity action against its insurers seeking indemnification for environmental damage at Olin manufacturing sites throughout the United States.
I. Olin's Morgan Hill Site
Olin began manufacturing signal flares at Morgan Hill, California, in 1956.
Throughout this period, the concentration of perchlorate in the water table below the site increased, generating an underground plume of perchlorate that gradually spread down the valley. This underground plume reached equilibrium in 1987, meaning that the contamination of additional soil or groundwater ceased. By then, the plume extended approximately ten miles from the site. Olin estimated that it would incur costs of more than $102 million to fully remedy the damage caused by the underground perchlorate plume.
II. The American Home Policies
Olin had an insurance program consisting of general commercial liability insurance and layered excess policies. Two excess policies provided by American Home are at issue here: policy number CE351099 and policy number CE355541.
The 1969-72 American Home policy follows form to a policy issued by Underwriters at Lloyd's ("Lloyd's"). According to the terms of the Lloyd's policy, American Home is obligated
The Lloyd's policy defines "property damage" as "loss of or direct damage to or destruction of tangible property (other than property owned by the Named Assured)." The policy defines "occurrence" as "an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally result in personal injury, property damage or advertising liability during the policy period" and further specifies that "[a]ll such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence."
The Lloyd's policy also contains a Condition C: "Prior Insurance and Non-Cumulation of Liability." This provision, the principal subject of this appeal, states the following:
The 1966-69 American Home policy follows form to a policy issued by the Home Insurance Company, which in turn mostly follows form to a policy issued by Lloyd's. That Lloyd's policy appears to be identical to the policy underlying the 1969-72 American Home policy in nearly all relevant respects, employing the same definitions of "occurrence" and "property damage" and including an identical Condition C. The difference between the two American Home policies is that the Home Insurance Company policy underlying the 1966-69 American Home policy specifies that it only provides coverage for "accidents or occurrences ... taking place during the period of the Policy." No such language applies to the 1969-72 American Home policy.
III. Proceedings Related to the Morgan Hill Site
On June 14, 2010, Olin filed a third amended complaint seeking indemnity related
Olin did not dispute this basic analysis but argued that American Home had ignored the effect of Condition C on the policies. In Olin's view, the second paragraph of Condition C requires American Home to indemnify Olin not only for damage occurring during the policy periods but also for any damage in subsequent years. This is because property damage arising from a "covered occurrence" was "continuing at the time of termination" of each policy, and thus American Home's liability for the 1966-69 policy includes all damage from 1966 to 1987, and its liability for the 1969-72 policy includes all damage from 1969 to 1987. Using the pro rata approach of Olin I, $72.6 million in damage should be assigned to the 1966-69 policy, and $62.7 million should be assigned to the 1969-72 policy. Since these amounts far exceed the $30.3 million attachment point, each policy would be reached.
The district court rendered an oral decision regarding the effect of Condition C, and based on this decision it later granted American Home's motion for summary judgment on Olin's claims. We interpret the district court's decision as turning on the definition of "occurrence." In the district court's view, Condition C covers only damage resulting from an occurrence that takes place within the policy period. The district court appears to have concluded that the actual spilling of perchlorate on the ground was the occurrence here, with each spill of the chemical being a separate occurrence. On this basis, Condition C would only implicate American Home's 1966-69 policy if the perchlorate spilled between 1966 and 1969 caused more than $30.3 million of the $102 million total damage, with the same being true for the 1969-72 policy regarding spills from 1969 to 1972. The district court thus granted American Home's motion because Olin had failed to raise a triable issue of material fact regarding whether the spills of perchlorate from 1966 to 1969 or 1969 to 1972 were sufficient to cause $30.3 million in damage. On September 20, 2011, the district court entered final judgment under Rule 54(b) of the Federal Rules of Civil Procedure in favor of American Home. Olin proceeded to trial against the remaining insurers implicated in the Morgan Hill site and settled with the other excess insurers
We review de novo a district court's grant of summary judgment. Kaytor v. Elec. Boat Corp., 609 F.3d 537, 546 (2d Cir.2010). Summary judgment may be granted only where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). In making this determination, a court should "draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000).
I. This Court's Prior
Two of our decisions involving other Olin sites are central to the issues of this case. Olin I, 221 F.3d 307, involved the allocation of damages related to an Olin fertilizer plant in Williamston, North Carolina. Olin produced pesticides at that site from 1950 to 1967. Id. at 311-12. Nearly two decades later, substantial contamination of the soil and groundwater of the site was discovered, requiring Olin to incur more than $4 million in cleanup costs. Id. at 313. At trial, the jury found injury to property at the Williamston site from 1951 through 1985, raising the issue of how the total damages should be allocated under New York law to the various insurance policies in effect during this thirty-five year period. Olin argued for the joint and several approach, in which Olin could select a particular year during the period of damage, collect damages up to the policy limits from the policies in effect that year, and the selected insurers could then seek contribution from other policies in effect during other years of the loss period. Id. at 322. The insurers argued that liability should be allocated among the policies according to "some objective factor." Id. Finding the language of the policies "inconclusive" on this question, we turned to public policy and equitable considerations and found these to "clearly indicate allocation" as the correct methodology. Id. at 324. Because the evidence in the case provided no basis on which to allocate liability for damages to any particular year or period, we affirmed the district court's decision to allocate damages equally to each year in which the jury found damage had occurred. Id. at 325, 327. The New York Court of Appeals subsequently confirmed our prediction of New York law on this point, holding that in the absence of contractual language to the contrary, courts should use the pro rata approach to allocating liability for damages in cases of progressive environmental injury under these circumstances. Consol. Edison Co. of N.Y. v. Allstate Ins. Co., 98 N.Y.2d 208, 746 N.Y.S.2d 622, 774 N.E.2d 687, 695 (2002).
Our second decision is Olin II, 468 F.3d 120. That case involved four Olin sites near Niagara Falls, New York. Id. at 123. As in the present case, chemical spills at these sites contaminated the soil, and subsequent groundwater flows spread this contamination. The contamination was not discovered for decades. When it was discovered, Olin incurred substantial cleanup costs, which it sought to recover from some of the very same policies involved
The effect of these two decisions on the instant case is clear. Under Olin I, in the absence of contractual provisions to the contrary or evidence indicating that ascertainable amounts of damage occurred in certain years, the $102 million in property damage in this case should be allocated equally to each year in which the property damage occurred. And under Olin II, property damage occurred from the time when perchlorate contamination first began until the time when this contamination reached its maximum extent through the spread of the underground plume in the water table.
II. Law of the Case, Estoppel, and Waiver
Before considering the effect of Condition C, we first must decide whether
The estoppel claim raised by American Home and OneBeacon could also be framed as a waiver issue. However, the district court expressly found that Olin had not waived its argument regarding Condition C by failing to raise it earlier, because the effect of Condition C was not an issue in earlier proceedings involving other Olin sites. A district court's determination that a party has not waived an argument by raising it earlier is reviewed for abuse of discretion. Saybolt Int'l, 407 F.3d at 45. Neither American Home nor OneBeacon has shown that the district court abused its discretion in finding no waiver. See id. at 45-46. For these reasons, we see no merit to the contention that we are unable to consider the proper interpretation of Condition C, and we now turn to that question.
III. Relevant Principles of New York Contract Interpretation
Under New York law,
Second, contract terms are ambiguous if they are
Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1192 (2d Cir.1996) (citation omitted). If a court concludes a provision in an insurance contract is ambiguous, it may consider extrinsic evidence to ascertain the parties' intent at the formation of the contract. JA Apparel Corp. v. Abboud, 568 F.3d 390, 397 (2d Cir.2009). If the extrinsic evidence fails to establish the parties' intent, courts may apply other rules of contract interpretation, including New York's rule of contra proferentem, according to which ambiguity should be resolved in favor of the insured. See Haber v. St. Paul Guardian Ins. Co., 137 F.3d 691, 697-98 (2d Cir.1998). Ambiguity is absent where the contract's language provides "a definite and precise meaning, unattended by danger of misconception in the purport of the contract itself, and concerning which there is no reasonable basis for a difference of opinion." Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir.1989) (internal quotation marks and alteration omitted). "Language whose meaning is otherwise plain does not become ambiguous merely because the parties urge different interpretations in the litigation." Id. An unambiguous provision of the contract should be given its "plain and ordinary meaning" and the contract should be construed without reference to extrinsic evidence. Alexander & Alexander Servs., Inc. v. These Certain Underwriters at Lloyd's, London, 136 F.3d 82, 86 (2d Cir.1998). With these principles in mind, we turn to Condition C.
IV. Condition C
Condition C, the full text of which is quoted above, appears in both of the relevant American Home policies through their following form with the underlying Lloyd's policies.
By virtue of its plain language, we see three requirements for the application of the continuing coverage provision. First, there must be "personal injury or property damage." Second, this personal injury or property damage must "aris[e] out of an occurrence covered" by the policy. And third, this personal injury or property damage must be "continuing at the time of termination" of the policy. When these three conditions are met, the plain language of the provision requires the insurer to indemnify the insured for personal injury or property damage continuing after the termination of the policy. We conclude that all three of these conditions are met.
First, "property damage" occurred during both the 1966-69 and the 1969-72 coverage periods. This conclusion follows from Olin II, which held that the spread of earlier contamination met the definition of property damage in the same policies at issue here. The parties have assumed for the purpose of summary judgment that the perchlorate plume began in 1957 and reached equilibrium in 1987. No evidence was presented suggesting that the plume did not expand between 1966 and 1972. Thus we presume that the plume was spreading during this period, causing property damage. The parties agree on this point.
Second, this property damage arose out of an occurrence covered by both the 1966-69 and the 1969-72 policies. The policies define an "occurrence" as "an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally result in personal injury, property damage or advertising liability during the policy period" and specifies that "[a]ll such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence" (emphasis added).
American Home agrees that the perchlorate contamination at Morgan Hill qualifies as a single, multi-year occurrence "for purposes of determining applicability limits of liability and retentions." However, American Home argues that a single, multi-year occurrence spanning the policy period does not satisfy Condition C. We see no basis in the language of the policy for concluding that "occurrence" in Condition C has a different meaning than "occurrence" elsewhere in the policies. Indeed, the policies rule out such an interpretation by expressly stating that "occurrence" shall have the meaning provided by the policy "wherever used herein." Thus, if, as American Home concedes, thirty years of constant perchlorate exposure on the same site that through the same process caused property damage by the slow expansion of the plume satisfies the definition of "occurrence" for the purposes of applying other provisions of the policy, it suffices for Condition C. The second requirement of Condition C is therefore met because the property damage discussed above "arose out of" an "occurrence" covered by the policy.
The third requirement of Condition C is also met here: the property damage occurring during the policy period was clearly "continuing" at the time of termination of each policy. For the purposes of summary judgment, the parties assumed that the property damage — namely, the spread of the perchlorate plume — began in 1957 and continued until 1987. No evidence was presented that this damage was not "continuing" in 1969 when the first policy expired or that it did not continue until 1987. The same is true for the 1969-72 policy.
American Home and amicus OneBeacon argue, however, that the post-policy damage was "new" damage rather than "continuing" damage. Under this view, any additional damage occurring after the policy period is "new" and thus damage "continuing at the time of termination" of the policy means only prior damage that has not been fully remedied when the policy terminates. However, this interpretation deprives Condition C of any effect, since even without Condition C American Home would be obligated to indemnify Olin for damage occurring during the policy period that had not yet been remedied. See La-Salle Bank, 424 F.3d at 206 (stating that contracts "should be construed so as to give full meaning and effect to all [their] provisions" (internal quotation marks omitted)). We conclude instead that damage "continuing at the time of termination" of the policy clearly contemplates property damage from the migration of chemicals in the expanding groundwater plume during the term of the policy and continuing after the policy terminated. This is consistent with Olin II, which characterizes such damage as both "additional" and "continuing." See Olin II, 468 F.3d at 129-30.
Because the three requirements of Condition C are met, that provision applies here. American Home thereby could be obligated to indemnify Olin up to the limits of its policies for all property damage
American Home's main argument against applying the plain language of the continuing coverage provision of Condition C is that this result would be contrary to the pro rata allocation rule applied in Olin I and Olin II. However, those decisions simply provide that when insurance contracts do not adequately define how progressive environmental damage is to be apportioned across multiple triggered policies, and the evidence cannot make that distinction, New York law requires damage to be allocated pro rata. New York law does not preclude parties from contracting to indemnify the insured for damage allocated to years after the termination of the policy. This is precisely what American Home's policies do here with Condition C. American Home has agreed to indemnify Olin not only for damage taking place during the policy period but also continuing after the termination of the policy. The provision thus simply adds additional years of exposure, using the same pro rata allocation method for determining the amount of damage attributed to each year.
Some state courts in other jurisdictions interpreting policies containing Condition C have concluded that the language of those policies is "inconsistent" with the pro rata approach and have imposed joint and several liability among triggered policies in cases involving so-called long-tail liability. See, e.g., Hercules, Inc. v. AIU Ins. Co., 784 A.2d 481, 493-94 (Del.2001); Chi. Bridge & Iron Co. v. Certain Underwriters at Lloyd's, London, 59 Mass.App.Ct. 646, 797 N.E.2d 434, 441-44 (2003); Dow Corning Corp. v. Cont'l Cas. Co., No. 200143, 1999 WL 33435067, at *6-7 (Mich.Ct.App. Oct. 12, 1999) (per curiam) (unpublished opinion). American Home argues that these decisions support its view that the interpretation of Condition C we adopt here is inconsistent with our pro rata decisions in Olin I and Olin II. We agree with American Home that New York state court decisions and those prior decisions of this Court endorsing the pro rata approach foreclose us from interpreting Condition C as imposing joint and several liability. However, the decisions from other jurisdictions endorsing joint and several liability did not principally rely on Condition C to reach that outcome. Instead, those decisions relied on language in the policies providing coverage for "all sums which the Assured shall be obligated to pay." See, e.g., Hercules, 784 A.2d at 489-90, 493-94. This same "all sums" language appears in the American Home policies, but both this Court in Olin I and the New York Court of Appeals in Consolidated Edison have expressly rejected the conclusion that such language requires joint and several allocation of damages and instead have endorsed the pro rata allocation method for policies with that language. See Olin I, 221 F.3d at 323-24; Consol. Edison, 746 N.Y.S.2d 622, 774 N.E.2d at 695. Thus the only difference in language between the American Home policies here and the provisions of the policies considered by the Olin I and Consolidated Edison courts is Condition
Our prior holdings regarding pro rata allocation and those of the New York state courts call for us to endorse the pro rata allocation method and allocate $3.3 million in damage to each year from 1957 to 1987. But the plain language of the continuing coverage provision of Condition C extends liability temporally by providing that the insurer will cover damage allocated pro rata to years after the termination of the policy if that damage (1) is "continuing" at the time of the policy's termination and (2) arises from an occurrence covered by the policy. Thus the continuing coverage provision of the 1966-69 policy applies to all damage allocated to the years 1966 until the time when property damage ceases (here 1987). The same is true of the 1969-72 policy for the period of 1969-1987. We believe that this interpretation best harmonizes the plain language of Condition C with the holdings of our Court involving similar policies.
American Home argues that this interpretation of Condition C would produce a result inconsistent with the other terms of the policies. Specifically, the 1966-69 policy (with the application of Condition C) covers property damage from the perchlorate plume for the period of 1966 to 1987. This would be anomalous, it is argued, because perchlorate continued to be spilled at the site into the mid-1980s. Thus under the 1966-69 policy, Olin could potentially recover for property damage occurring in 1985 that was contributed to by chemicals spilled in 1982, making American Home liable for the release of chemicals that occurred long after the policy had terminated. However, this result follows not from our interpretation of whether the damage is "continuing" but rather from the fact that the American Home policies define the constant, three-decade-long exposure of the soil and groundwater to perchlorate dust as one, multi-year occurrence, as well as from the holding of Olin II that the spread of the perchlorate plume is property damage.
We now turn to the final issue: how the "prior insurance" provision of Condition C applies to the two American Home policies.
We agree with Olin that the prior insurance provision does not apply to prior insurance policies at a lower level of excess coverage. An excess insurance policy, such as the American Home policies here, is not triggered unless the coverage limits of lower-level policies have first been exhausted. Reducing American Home's liability on an excess policy at the $30.3 million level because of damages paid by a policy, for example, at the $20 million level would conflict with the terms of the higher-level excess policy, since the intent of purchasing insurance at the $30.3 million level is to be indemnified only when lower-level policies are unable to fully indemnify a particular loss and the total damages reach that higher-level policy's attachment point. American Home's $30.3 million excess policy insures against a different loss than an excess policy at the $20 million level: a loss in excess of $30.3 million. Thus we conclude that the prior insurance provision reduces American Home's liability only to the extent that a prior insurance policy at the same level of coverage, here $30.3 million, indemnifies for a loss that is also covered by an American Home policy. This accords with Condition C's apparent purpose of sweeping a continuing loss into the earliest triggered policy, with that policy then fully indemnifying the insured for that loss.
Based on this interpretation of the prior insurance provision, the most Olin can recover from the two American Home policies is the policy limit of one policy, $1
V. Proceedings on Remand
For the reasons stated above, we conclude that the district court's basis for granting summary judgment was in error. Condition C obligates American Home to indemnify Olin not only for property damage occurring during the policy period, but also for property damage arising from covered occurrences that continues after the policy period. Three decades of perchlorate exposure and the damage it created are treated as a single, multi-year occurrence for the purposes of this policy. And because this single, multi-year occurrence took place in part during each of the two policy periods here, the district court was incorrect to conclude that neither policy would be reached because of the allocation method. On the record before the district court, $72.6 million in damage falls within the coverage of the 1966-69 policy, while $62.7 million falls within the coverage of the 1969-72 policy. These figures exceed the American Home policies' $30.3 million attachment points.
On remand, American Home may demonstrate that these attachment points cannot be reached for other reasons. For example, this estimate of the years in which property damage occurred may be inaccurate. Or the evidence may permit the court to assign greater damage to the years before the inception of the two policies. We decide only that issues of material fact remain regarding American Home's liability.
For the foregoing reasons, we VACATE the district court's grant of summary judgment to the defendant and REMAND for further proceedings.