Supreme Court Rules on Many Aspects of Oil Spill Law

Eskenazi v. Mackoul, Nassau SCt, Justice Phelan; No.: 017248/06  (Dec. 11, 2008)

An interesting case out of Nassau Supreme Court, which covers many topics related to oil spill liability:  liability under the Navigation Law, damages recoverable, mitigation of damages, insurance coverage pro-ration, and spoliation of evidence.

“M” purchased property in Lido Beach in a foreclosure sale March 1993.  At the time of sale, the house had no heating system.  M denied knowing there was an underground fuel tank on the property.  M installed a gas heat system for the premises.

The Court holds M strictly liable for the discharge.  Navigation Law section 181(1) provides that any person responsible for a discharge may be held strictly liable, without regard to fault, for all cleanup and removal costs.  Even though M claims he lacked knowledge that the tank was on the property at the time he took title, he was “in a position to control the site and the source of the discharge” and thus is strictly liable.  The court further found that, should plaintiff’s property not be restored to its pre-discharge condition, plaintiff would be entitled – in addition to remediation costs – to “the total amount of the diminution in value.”  In this regard, the court may consider whether a “stigma” caused by the oil spill has had an impact on the value of the property.  While plaintiff could not recover for alleged personal injuries under the Navigation Law, plaintiff could pursue same under a negligence common law theory.

Defendant M argued that plaintiff failed to mitigate damages because plaintiff refused to enter into a remediation contract with M’s cleanup contractor and this delayed the cleanup.  The Court rejected this argument.  It is the discharger (M) who has the primary responsibility to promptly clean up and remove the oil spill.  Plaintiff’s refusal to sign the contract was “eminently reasonable” because the responsibility for the cleanup lay with M and plaintiff’s refusal could not be considered a “failure to mitigate.”

M had been insured since March 5, 2002 by Hanover Insurance.  General Accident (n/k/a OneBeacon) insured “M” prior to March 5, 2002.  M sought coverage under the OneBeacon policy.  In a previous motion, OneBeacon moved for summary judgment, arguing that it was M’s burden to show oil discharged during the applicable coverage period (i.e., prior to March 5, 2002).  The Court in an earlier decision denied OneBeacon’s motion, ruling that the burden was on OneBeacon to prove that oil did not discharge during its coverage period.  In the present motion, Hanover presented expert proof in the form of affidavits that, based upon the absence of “normal alkanes” and the level of corrosion in the tank, the spill occurred more than five years prior to its discovery in 2005.  OneBeacon’s motion for summary judgment is denied and the matter of coverage – and possible pro-ration between OneBeacon and Hanover -- is left to the jury to resolve.

M’s cleanup contractor had removed and disposed of the tank.  OneBeacon is awarded spoliation sanctions based on having been “deprived… of the opportunity to inspect or test [the tank].”  Hanover and M are precluded at trial from offering an expert opinion as to when the oil spill occurred based on the extent of corrosion of the tank.

I hope you’ve enjoyed reading my column these last three-plus years.  While it was a scramble some months coming up with something interesting to report on, and to meet the mid-month deadline, I appreciated having the opportunity to learn and tell you about new environmental regulations, statutes and court decisions.  As I begin my service on the ACBA Board of Directors, I am handing this column off to the capable hands of my colleague and suite-mate, Gary Bowitch.  For those of you who don’t know Gary, he is a former AAG and former counsel for the NYS DEC who practices exclusively in environmental matters.   I’m sure you will enjoy reading Gary’s column in the future. - Daniel Coffey