Admiral Ins. Co. v. Niagara Transformer Corp., No. 21-2733 (2d Cir. 2023)
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Admiral Insurance Co. (“Admiral”) sought a declaration that it need not defend or indemnify its historical insured, Niagara Transformer Corp. (“Niagara”), in potential litigation between Niagara and nonparties Monsanto Co., Pharmacia LLC, and Solutia Inc. (collectively, “Monsanto”) over harms caused by polychlorinated biphenyls that Monsanto had sold to Niagara in the 1960s and 1970s. Admiral appealed from the order of the district court dismissing its action for lack of a justiciable “case of actual controversy” within the meaning of the Declaratory Judgment Act (the “DJA”). The district court principally relied on (1) the fact that Monsanto has not commenced or explicitly threatened formal litigation against Niagara, and (2) its assessment that Monsanto would not be likely to prevail in such litigation.
The Second Circuit affirmed the district court’s order dismissing Admiral’s action to the extent that it sought a declaration of Admiral’s duty to indemnify Niagara, and remanded for the district court to determine whether there exists a practical likelihood that Monsanto will file suit against Niagara. The court explained that while the district court properly concluded that it lacked jurisdiction to declare Admiral’s duty to indemnify Niagara, it did not adequately distinguish between that duty and the insurer’s separate duty to defend its insured. Because a declaratory-judgment action concerning either duty becomes justiciable upon a “practical likelihood” that the duty will be triggered, the justiciability of Admiral’s duty-to-defend claim turns on the practical likelihood that Monsanto will file suit against Niagara – not on whether Monsanto has already in fact done so.
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