Environmental – Insurance Statute of Limitations:

Does not begin to run until entry of final underlying judgment.

A New York Federal District Court applying Rhode Island and Massachusetts laws ordered an insurer to reimburse defense costs related to a CERCLA action involving the release of ferric ferrocyanide during a remediation of a Massachusetts landfill (Mendon Road in Attleboro, MA).  The insurer had asserted that the suit was filed after the expiration of the ten year statute of limitations for contract actions under Rhode Island law which governed the contractual dispute. The court rejected the insurer’s statute of limitations defense and found that the Rhode Island Supreme Court would likely follow the majority rule that a breach of the duty to defend does not accrue until there is a final judgment in the underlying litigation.  Therefore, the court found that the statute of limitations began to run in 2006, the date of the final judgment, and not when the insurer initially refused to defend in 1994. Therefore, the insured’s claim, filed in 2011, was timely. The court additionally found that the Massachusetts Supreme Judicial Court would allocate defense costs jointly and severally and did not require the insured to contribute for self-insured periods. However, the court did find that the insured was required to pay its own costs for litigation that the court found was too tenuously related to the original underlying action to be considered collateral to the underlying action. Finally, the court awarded damages to the insured for the costs incurred in the coverage declaratory action. Narragansett Elec. Co. v. American Home Assurance Co., et al., No. 1:11-cv-08299 (S.D.N.Y. Feb. 14, 2014).

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