New York Navigation Law Update

New York’s Navigation Law deals with oil spills, who must clean them up, and who must pay for the damage. Despite the name, the law applies to discharges of petroleum on land that may adversely impact the “waters of the State,” which include groundwater. Some recent court decisions are of interest.

Benjamin v. Keyspan Corp., 104 A.D.3d 891 (2nd Dept. 2013).

The normal statute of limitations for a claim of damage to property from petroleum contamination is three years from when the property owner knew or should have known of the problem.  In this case, defendant Keyspan showed that the plaintiff had agreed to the installation of monitoring wells on his property, had participated in a survey regarding possible contamination in the area, and was notified of monitoring and testing results in the vicinity of the property at least eight years before the plaintiff filed suit.  Thus, the action was dismissed as time-barred. 

This decision from the Appellate Division, which has jurisdiction over Nassau, Suffolk, Staten Island, Brooklyn, Queens, Westchester, Dutchess, Rockland, Orange and Putnam Counties, underscores the importance of timely action by a property owner who knows or reasonably suspects that his property has been contaminated.

State of New York v. Zurich American Insurance Co., 106 A.D.3d 1222 (3rd Dept., 2013).

The Navigation Law allows any injured party to recover damages, not only from the “discharger”, but also from that person’s insurance company, by suing the insurance company directly. In this case, New York State expended over $124,000 to clean up contamination at a gas station in Northport, Suffolk County.  It then tried to recover its costs by commencing an action against Zurich.  However, Zurich had already obtained a declaratory judgment against its insured, stating that the claim is not covered under the policy.  It argued that this decision meant that it could not be now sued by the State.

The Appellate Division disagreed.  It pointed out that the State had not been a party to the earlier lawsuit and was therefore not bound by that court’s decision.  The State must be given its own opportunity to convince the court that the policy covers the discharge.  Of course, if it cannot, the insurance company will be off the hook. Another possibility is that, to avoid litigation costs, Zurich will agree to pay some of the cleanup costs as part of a settlement agreement. 

Thus, if there is a dispute over policy coverage of a petroleum spill, the insurance carrier should add as a party to any lawsuit the injured party who may have incurred costs as a result of the discharge.  That will create “collateral estoppel”, i.e. be binding on all the participating parties and deter subsequent litigation.  Of course, the downside of including the State in a declaratory judgment action is that doing so will guarantee that the State becomes aware of the potential insurance coverage.

State of New York v. C. J. Burth Services, Inc., 39 Misc. 3d 1221(A) (Sup. Ct. Albany Co. 2013).

Anyone who violated the Navigation Law may be subject to penalties of up to $25,000 per day, with each day of a continuing violation counting as a new offense.  In this case, the State asked the court to impose these penalties on the owners of a gas station, even though the latter claimed that they did not cause any spill and that the contamination had occurred years earlier before they had purchased the property. The State’s rationale was that, once they became aware of the contamination, “defendants failed to take all necessary actions to abate [it]”, by rejecting the Department of Environmental Conservation’s proposed stipulation about the work that had to be done and not doing any cleanup on their own. The court agreed that penalties could be imposed in this instance and set the matter for trial.

The important lesson to be learned from this case is that the net of Navigation Law liability can ensnare not only the person who causes a spill and his/her insurance company, but also a subsequent owner who discovers the contamination and does nothing to address it. To avoid heavy penalties, the innocent owner may consider applying to the Brownfields Program as a “volunteer”.  This status allows the owner to limit the cleanup to the boundaries of the property without requiring him or her to investigate and remediate the off-site contaminant plume. 

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Frederick Eisenbud and Lilia Factor

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