Century Indemnity v. Brooklyn Union Gas (2025): New York Clarifies the Insured’s Notice Obligation and Duty to Investigate in Long-Tail Environmental Coverage

1. Introduction

Century Indemnity Company v. Brooklyn Union Gas Company, 2025 N.Y. Slip Op. 03379, marks the most recent chapter in nearly a quarter-century of litigation over insurance coverage for environmental contamination emanating from three historic manufactured gas plant (MGP) sites along Brooklyn’s Gowanus Canal. The core dispute pits Century Indemnity Company (“Century”), the excess insurer supplying six one-year liability policies (1941-1969), against its former insured, Brooklyn Union Gas Company (“BUG”) (now part of National Grid).

At stake are tens of millions of dollars in remediation costs demanded by state and federal regulators. After a 2022 jury verdict largely favoring BUG, both parties appealed. The Appellate Division, First Department, has now modified the trial court’s order, requiring a new trial limited to the issues of (a) timely notice and (b) BUG’s duty to investigate once on inquiry notice, while leaving intact most other aspects of the verdict, including allocation methodology and the rejection of BUG’s attempt to annualize per-occurrence limits.

2. Summary of the Judgment

The Appellate Division remanded for a new trial solely on two topics:
- whether BUG’s February 1993 notices of occurrence were timely under the six excess policies; and
- whether, and when, BUG was on inquiry notice so as to trigger a duty to investigate potential excess losses.
The court held that the trial judge erred in instructing the jury that BUG’s notice analysis necessarily included pro rata allocation. The jury should instead have weighed all relevant factors (including motive evidence Century sought to introduce) when assessing timeliness.
The panel affirmed:
- Pro rata allocation of continuous environmental damage across multiple policy years (per Con Edison v. Allstate) for measuring loss and retention.
- Equal apportionment of Gowanus Canal cleanup costs among the three MGP sites.
- Rejection of contra proferentem because BUG is a sophisticated insured with ample bargaining power.
- The ruling that multi-year policies’ per-occurrence limits applied once, not annually.
Objections to excluded expert testimony were rendered moot by the remand.

3. Analysis

3.1 Precedents Cited and Their Influence

Consolidated Edison Co. v. Allstate Ins. Co., 98 N.Y.2d 208 (2002)
Established pro rata allocation for long-tail environmental losses spanning multiple policy periods. The 2019 intermediate appeal in this case applied Con Ed directly; the present decision re-affirms that allocation governs here.
Century Indem. Co. v. Brooklyn Union Gas Co., 58 A.D.3d 573 (1st Dep’t 2009)
Earlier stage in same litigation holding that material fact issues as to timeliness of notice precluded summary judgment; specifically suggested that BUG’s consideration (or not) of pro rata allocation was a fact question. The current panel holds the trial court departed from this mandate by turning the question into an assumption baked into the jury charge.
Long Island Lighting Co. v. Allianz Underwriters Ins. Co., 24 A.D.3d 172 (1st Dep’t 2005)
Recognizes that timeliness of notice depends on what a reasonable insured knew or should have known; the current decision cites it to emphasize that jurors must evaluate the totality of circumstances, not a single predetermined factor.
Green Door Realty Corp. v. TIG Ins. Co., 329 F.3d 282 (2d Cir. 2003)
Addresses “inquiry notice” and the obligation of insureds to investigate. The panel relies on it to remand for fresh fact-finding on whether BUG triggered its duty to investigate earlier than 1993.
Cummins Inc. v. Atlantic Mut. Ins. Co., 56 A.D.3d 288 (1st Dep’t 2008)
Limits the use of contra proferentem against insurers where the insured is sophisticated. This case supplies the rationale for refusing BUG’s request to construe ambiguous per-occurrence limits in its favor.

3.2 Legal Reasoning

The crux of the appellate court’s reasoning turns on two legal questions: (i) the proper framework for determining when an insured must give notice to an excess carrier, and (ii) the scope of an insured’s duty to investigate potential claims once placed on inquiry notice. The court held:

Timeliness of Notice: New York follows an objective “reasonably likely to implicate coverage” standard for most of the Century policies, and a subjective standard for two later policies. Whether BUG’s knowledge crossed either threshold is a classic question of fact. By instructing the jury to factor in pro rata allocation as if BUG necessarily performed that calculation in real time, the trial court invaded the jury’s province. Evidence that BUG never actually thought about allocation should have been admissible.
Inquiry Notice & Duty to Investigate: Even if BUG lacked full knowledge of contamination costs, New York law imposes a duty to investigate once an insured has information that would raise suspicion in a reasonably prudent insured. The trial court erroneously withheld that issue from the jury.
Allocation & Limits: The panel reaffirmed that continuous damage is allocated pro rata across policies and that multi-year policy limits do not reset annually—positions consistent with statewide precedent and reflecting commercial expectations of excess coverage.
Contra Proferentem: Not available when both parties are sophisticated; BUG’s extensive in-house insurance expertise placed it on equal footing with Century.

3.3 Impact on Future Litigation and Insurance Practice

Notice Standard Clarified
Courts and coverage counsel must now treat pro rata allocation as one potential factor, not an automatic component, when assessing an insured’s duty to notify an excess carrier of long-tail losses. This prevents insureds from retroactively relying on legal doctrines unknown or unconsidered at the time of the occurrence.
Inquiry Duty Spotlighted
The decision revitalizes the inquiry-notice doctrine in environmental coverage disputes. Insurers will likely press for discovery into internal documents showing what an insured “should have known.”
Sophisticated Policyholders & Ambiguities
The refusal to apply contra proferentem continues a recent trend limiting that doctrine where commercial parties possess substantial bargaining power. Manuscript or renewal policies between large corporates and insurers will be construed more neutrally.
Trial Management Guidance
Remanding on discrete issues while keeping the bulk of the verdict discourages wholesale retrials yet ensures that critical fact questions reach the jury free of instructional error.
Environmental Remediation Cost Allocation
Equal apportionment among multiple contiguous sites, when aligned with regulatory cost-sharing, gained judicial endorsement, offering a practical template for similar Superfund or state remediation disputes.

4. Complex Concepts Simplified

Excess Liability Policy: Insurance that pays only after the insured exhausts a specified “retained limit” or the limits of underlying primary insurance.
Self-Insured Retention (SIR): The dollar amount (here $100,000) that an insured must pay before excess coverage attaches—akin to a very large deductible.
Pro Rata Allocation: Spreading losses proportionally across all policy years in which gradual damage occurred, rather than allowing the insured to select the most favorable year.
Per-Occurrence Limit: The maximum the insurer will pay for each distinct “occurrence.” The dispute was whether this resets annually in multi-year policies; the court says “no.”
Inquiry Notice: A legal trigger whereby an insured, upon receiving information suggesting potential liability, must investigate further; failing to do so can render later notice untimely.
Contra Proferentem: A rule that ambiguous contract terms are construed against the drafter—limited here due to BUG’s sophistication.

5. Conclusion

Century Indemnity v. Brooklyn Union Gas reinforces New York’s nuanced approach to notice under excess insurance policies in long-tail environmental cases. While confirming the mainstream pro rata allocation framework and rebuffing annualization of per-occurrence limits, the Appellate Division cautions that allocation cannot be assumed to influence an insured’s contemporaneous decision to notify its carrier. By remanding solely on notice and inquiry duty, the court underscores the fact-driven nature of these issues and signals that sophisticated insureds bear significant responsibility for diligent investigation and timely communication. The decision will inform coverage litigation strategy, jury instructions, and policy drafting nationwide, solidifying New York’s influence over complex insurance jurisprudence.