Petition for Writ of Certiorari — Belleville Industries, Inc. v. Lumbermens Mutual Casualty Co.
Supreme Court brief1992
Ask Donna
What actually matters in this document.
Text
: O }, wove 6 t90t
Qi-s 4 DRBGE OF THE Genk
In the
Supreme Court of the United States
OCTOBER TERM, 1991
BELLEVILLE INDUSTRIES, INC.,
PETITIONER,
V.
LUMBERMENS MUTUAL CASUALTY CO.,
RESPONDENT.
ON PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
PETITION FOR WRIT OF CERTIORARI
Davip A. MCLAUGHLIN
Counsel of Record
Mary ALICE MCLAUGHLIN
MICHAEL J. MCGLONE
MCLAUGHLIN & FOLAN, P.C.
Post Office Box 2095
New Bedford, Massachusetts 02741-2095
(508) 992-9800
Counsel for Belleville Industries, Inc.
November 26, 1991
BATEMAN & SLADE, INC BOSTON. MASSACHUSETTS
QUESTIONS PRESENTED
1. Where an essential question of state law was certified to
the Supreme Judicial Court of Massachusetts by the District
Court, was the Circuit Court in error when it rejected the
substantive law established in this case in response to that
certified question?
2. Whether the Circuit Court violated Fed. R. Civ. P. 52(a)
when it disregarded specific findings of the District Court made
after trial and substituted therefor actual assumptions which
resulted in a holding antithetical to governing law of Massachu-
setts in contravention of Erie v. Tompkins.
3. Whether the Circuit Court refused to follow Erie v.
Tompkins when, after ignoring the provisions of 42 U.S.C.
§ 9067(j) and violating the provisions of Fed. R. Civ. P. 52(a)
by rejecting specific factual findings made by the District Court
after trial as to the basis of Belleville’s liability, the Circuit
Court substituted a standard which was contrary to well settled
law of Massachusetts.
iil
TABLE OF CONTENTS
QUESTIONS PRESENTED
TABLE OF CONTENTS
TABLE OF AUTHORITIES
OPINIONS BELOW
JURISDICTION
STATUTORY PROVISIONS AND RULES OF
COURT INVOLVED
STATEMENT OF THE CASE
I. Proceedings in the District Court
Il. The Court of Appeals Decision
ARGUMENT
I. The Circuit Court Totally Rejected The Control-
trolling Rule Established In This Very Case By
The Supreme Judicial Court Of Massachusetts
And, Thus, Violated The Directive Of Erie v.
Tompkins When It Ruled That The Specific
Basis Of Belleville’s Liability To The Govern-
mental Plaintiffs Would Not Affect Its Applica-
tion Of The Insurance Contract And Substituted
Its Own Rule Of Decision Founded On An As-
sumed Basis Of Liability
Il. The Circuit Court Opinion Was Violative Of
Fed. R. Civ. P. 52(a) In Its Rejection Of The
Trial Court’s Findings Of Belleville’s Expecta-
tions And Intent Which Led The Circuit Court
To Contravene, In Violation Of The Rule Of
YN DHA WY NY WD
iV
TABLE OF CONTENTS (cont.)
Erie v. Tompkins, The Settled Massachusetts
Law That An Actual Insured’s Expectations And
Intent Govern An Insurance Controversy, Not
Those Of Some Hypothetical Insured
Ill. The Circuit Court's Express Disregard Of The
District Court’s Findings As To The Specific
Basis Of Belleville’s Liability To The Govern-
ment Plaintiffs In The Consolidated CERCLA
Case Was A Repudiation Of The Rule Of Erie v.
Tompkins, Which Repudiation Was Grounded
Upon A Violation Of Fed. R. Civ. P. 52(a) And
A Misapprehension Of 42 U.S.C. 9607(j)
CONCLUSION
13
17
21
APPENDICES follows page 21
TABLE OF AUTHORITIES
Cases:
A. Johnson & Co., Inc. v. Aetna Casualty & Surety
Company, 933 F.2d 66 (Ist Cir. 1991)
American Home Prods. Corp. v. Liberty Mutual Ins.
Co., 565 F.Supp. 1485 (S.D.N.Y. 1983), aff'd as
modified, 748 F.2d 760 (2d Cir. 1984)
Cooter & Gell v. Hartmarx Corp., 496 U.S. . 110
L.Ed.2d 359, 110 S. Ct. (1990)
Covenant Ins. Co. v. Friday Engineering, Inc., 742
F.Supp. 708 (D. Mass. 1990)
7n.9n
7n.9n
Vv
TABLE OF AUTHORITIES (cont.)
CPC International, Inc. v. Northbrook Excesy & Sur-
plus Insurance Co., 759 F.Supp. 966(D. RI. 8A) -7n,9n
Erie Railroad Co. v. Tompkins, 304 U.S..64 (1938) 7,8,
911,12 et seq.
Great Lakes Container Corp. v. National Union Fire
Ins. Co., 727 F.2d 30 (Ist Cir. 1984) 15
Hazen Paper Co. v. United States Fidelity & Guaranty
Co., 407 Mass. 689, 555 N.E.2d 576 (1990) 7n,10n
In re Acushnet River & New Bedford Harbor, 675 F.
Supp. 22 (D. Mass. 1987) 7n,14n
In re Acushnet River & New Bedford Harbor, 7\2 F.
Supp. 994 (D. Mass. 1989) 7n,14n
In re Acushnet River & New Bedford Harbor, 712 F.
Supp. 1010 (D. Mass. 1989) 7n,14n
In re Acushnet River & New Bedford Harbor, 712 F.
Supp. 1019 (D. Mass. 1989) 7n,14n
In re Acushnet River & New Bedford Harbor, 716 F.
Supp. 676 (D. Mass. 1989) 7n,14n
In re Acushnet River & New Bedford Harbor, 722 F.
Supp. 888 (D. Mass. 1989) 7n,14n
In re Acushnet River & New Bedford Harbor, 722 F.
Supp. 893 (D. Mass. 1989) 7n,14n
In re Acushnet River & New Bedford Harbor, 725 F.
Supp. 1264 (D. Mass. 1989) 3,10,14n,16
Jertson v. Hartley and Lumbermens Mutual Casualty
Co., 342 Mass. 597, 174 N.E.2d 663 (1961) 17
Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487
(1941) 15
vi
TABLE OF AUTHORITIES (cont.)
Lumbermens Mutual Casualty Co. v. Belleville Indus-
tries, Inc., 938 F.2d 1423 (ist Cir. 1991) 9,10
Lumbermens Mutual Casualty Co. v. Belleville Indus-
tries, Inc., 407 Mass. 675, 555 N.E.2d 568 (1990) 7n,10
Miller v. U.S. Fidelity & Cas. Co., 291 Mass. 445, 197
N.E. 75 (1935) 17
New Castle County v. Hartford Acc. and Indem. Co.,
933 F.2d 1162 (3d Cir. 1991) 7n,9n
Pasquale v. Shore, 343 Mass. 239, 178 N.E.2d 281
(1961) 17
Quincy Mutual Fire Ins. Co. v. Abernathy, 393 Mass.
81, 469 N.E.2d 797 (1984) 15,16
Sterilite v. Continental Casualty Co., 17 Mass. App.
Ct. 316, 458 N.E.2d 338 (1983) 17,18,20
Tarr v. Manchester Insurance Corporation, 544 F.2d
14 (Ist Cir. 1976) |
Statutes and Regulations:
28 U.S.C. § 1652 2,8,15
42 U.S.C. 8§ 9601 ef seq. 2,3,19
42 U.S.C. § 9601010) 2,20
42 U.S.C. § 9607(j) 2,6,8,9n,17 et seq.
Massachusetts General Laws
c. 106, sec. 2-607(5)(a) 17
Rules of Court:
Federal Rules of Civil Procedure
Rule 52(a) 2,7,8,13,15 et seq.
Other Authorities:
17A Wright, Miller & Cooper, Federal Practice and
Procedure: Jurisdiction 2d, § 4248 11
ill
No. -
In the
Supreme Court of the United States
OCTOBER TERM, 1991
BELLEVILLE INDUSTRIES, INC.,
PETITIONER,
Vv.
LUMBERMENS MUTUAL CASUALTY CO.,
RESPONDENT.
ON PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
PETITION FOR WRIT OF CERTIORARI
The petitioner, defendant-appellee in the proceedings below,
prays that a writ of certiorari issue to review the judgment of
the United States Court of Appeals for the First Circuit entered
on July 16, 1991.
‘The parties to the proceeding in the United States Court of Appeals for the
First Circuit were Belleville Industries, Inc.; Lumbermens Mutual Casualty
Company; and Insurance Environmental Litigation Association and United
Technologies Corporation, Amici Curiae. Pursuant to Rule 29.1, Belleville
Industries, Inc. states that it has no parent corporation and no subsidiary
corporations.
2
OPINIONS BELOW
The July 16, 1991, opinion of the United States Court of
Appeals for the First Circuit is reported at 938 F.2d 1423 and
is reproduced in Appendix A herein. The Findings and Rulings
of Law of the United States District Court for the District of
Massachusetts dated January 4, 1991, appear in Appendix B
herein; they are unreported. The opinion of the Supreme Judi-
cial Court of the Commonwealth of Massachusetts is reported
at 555 N.E.2d 568 and 407 Mass. 675 and is reproduced in
Appendix B heiein.
JURISDICTION
The Court of Appeals judgment, affirming in part and revers-
ing in part the judgment of the District Court, was entered on
July 16, 1991. Appendix A. On August 28, 1991, the Court
of Appeals denied the timely petition for rehearing and sugges-
tion for rehearing en banc. Appendix C. This Court's jurisdic-
tion is invoked pursuant to 28 U.S.C. § 1254(1).
STATUTORY PROVISIONS AND RULES
OF COURT INVOLVED
The pertinent provisions of the federal statutes (28 U.S.C.
§ 1652; and 42 U.S.C. §§ 9607(j) and 9661(10) [CERCLA]})
and federal rules (Fed. R. Civ. P. 52(a)) are set forth in Ap-
pendix D herein.
STATEMENT OF THE CASE
I. Proceedings in the District Court
Late in 1983, the United States and the Commonwealth of
Massachusetts brought an action against Belleville Industries,
, |
3
Inc. (“Belleville”), seeking recovery under the Comprehensive
Environmental Response, Compensation, and Liability Act
(CERCLA) and other federal and state law due to the release
of polychlorinated biphenyls (PCBs) into the Acushnet River
(App. A. p. 3a). In its Answer, Belleville asserted the permit
defense authorized by 42 U.S.C. § 9607(j). The government
plaintiffs ultimately obtained partial summary judgment as to
Belleville’s CERCLA liability to them in this action (App. A.
p. 4a).
In 1984, Lumbermens Mutual Casualty Company (“Lumber-
mens”) brought this action under 28 U.S.C. §§ 2201 and 2202
to obtain a declaration of rights and obligations under contracts
of comprehensive general liability insurance issued by Lumber-
mens to Belleville (App. B. p. 3a). This action was consoli-
dated with the cases brought by the governments against Belle-
ville.
At issue in the insurance action was Lumbermens’ basic
undertaking to pay “all sums which the insured shall become
legally obligated to pay” as property damages because of “an
accident, . . . which results in . . . property damage neither
expected nor intended . . . .” (App. A. p. 4a). Lumbermens
asserted an exclusion of coverage for “property damage arising
out of the .. . release ... of . . . pollutants into or upon
land, the atmosphere or any water course or body of water,”
which further provides “[b]ut this exclusion does not apply if
such .. . release . . . is sudden and accidental.” (App. A.
p. 4a.)
The District Court certified to the Massachusetts Supreme
Judicial Court the question regarding the proper application of
this “sudden and accidental clause” in this case (App. A.
p. 4a). /n re Acushnet River & New Bedford Harbor, 725 F.
Supp. 1264 (D. Mass. 1989). The Supreme Judicial Court
issued its response to this certified question on June 14, 1990
(App. B. pp. 43a-56a).
4
After the District Court entered partial summary judgment
as to Belleville’s liability to the government plaintiffs in the
CERCLA case, Belleville, with the consent of Lumbermens,
settled the underlying action with the sovereigns, subject to
the Court’s approval of the appropriate consent decree, for the
payment of $4,000,000 (App. B. pp. 17a-18a).
This insurance action was thereafter tried jury waived over
nine days from November 13, 1990, to November 29, 1990
(App. B. p. 18a). The Trial Court issued its Findings and
Rulings of Law on January 4, 1991, and Judgment entered on
that date (App. B. pp. 17a-42a).
The Trial Court found the following facts:
Prior to January 2, 1973, when Belleville commenced oper-
ation of the electrical capacitor manufacturing plant, an appli-
cation had been made for a permit to discharge effluent into
the adjacent Acushnet River in accordance with 33 U.S.C.
§ 407, the Refuse Act (App. B. p. 21a). Belleyille’s operations
were conducted under that permit application until a formal
permit was issued to Belleville (App. B. pp. 21a). At all times
until it ceased doing business, Belleville operated under either
the permit application or the formal permit (App. B. p. 21a).
Belleville’s liability to the government plaintiffs was prem-
ised on its use of a PCB product known as Aroclor (App. B.
p. 41a). Ninety-nine percent of Belleville’s operation involved
the use of Aroclor 1016 (App. B. p. 41a). All but four-tenths
of one percent of that product, Aroclor 1016, was biodegrad-
able (App. B. p. 41a).
Belleville at all times considered that it ran an environmen-
tally safe, progressive, and largely incident-free operation
(App. B. p. 26a).
Belleville neither expected nor intended any property dam-
age or personal injury from its use of PCBs, and had no
knowledge that any such property damage or personal injury
was occurring (App. B. p. 39a).
2
During an intense tropical storm in 1973, the water table
rose from under the plant, flooding the interior to a height
where the entire floor in certain areas was inundated (App. B.
p. 30a). PCBs, which were washed from the floors and the
lower interior walls of the facility by the flooding, flowed out
under and around the door at the eastern (river) end of the
facility (App. B. p. 31a).
The District Court expressly found that this release was
“sudden and accidental” and was unexpected and unintended
by Belleville:
This escape of PCBs was sudden. After all, the
release was by operation of flood waters themselves
rather than through any natural underground
waterflow or natural erosion of sediments within the
harbor. What’s more, it was accidental in the sense
that the release was both unexpected and occurred
without the assistance of any human agency.
(App. B. p. 32a.) The District Court concluded that this was
a sudden and accidental release for which Belleville was enti-
tled to indemnification from Lumbermens (App. B. pp. 32a-
33a).
The Court further found, as a matter of fact on the evidence
adduced at trial, that:
Belleville has thus established that . . . the prop-
erty damage liability which it settled for the payment
of $4 million in the underlying action brought by
the sovereigns was neither expected nor intended
from its standpoint.
(App. B. p. 40a.)
However, reasoning that only .4 percent of the pollutants
washed out by the storm remained by the time at which I! :bility
6
under CERCLA adhered, the District Court multiplied the total
damages paid by Belleville by .004 and awarded Belleville an
indemnification from Lumbermens of $16,000.00 (App. A.
p. 9a).
Belleville timely appealed and Lumbermens filed a cross
appeal (App. A. p. 2a).
II. The Court of Appeals Decision
The United States Court of Appeals for the First Circuit,
while recognizing the improper nature of the calculation used
to reduce Belleville’s indemnification rights, nevertheless re-
versed the District Court’s judgment that Lumbermens had an
indemnity liability under the insurance policy issued to Bel-
leville (App. A. p. 16a).
In so ruling, the Circuit Court stated that the “sudden and
accidental” exception to the exclusion of coverage did not
apply, reasoning, in contrast to the District Court findings,
that the discharges were caused by events which could have
been within the long-range expectation of the insured (App.
A. p. 9a).
The Circuit Court also dismissed the District Court finding
regarding Belleville’s liability to the CERCLA plaintiffs and
stated that the specific basis of that liability would not affect
its application of the “sudden and accidental” clause in light
of Belleville’s ordinary business operations. The Circuit Court
refused to attach any significance to the federally permitted
release exception to CERCLA liability provided by 42 U.S.C.
§ 9607(j).
Belleville subsequently filed its Petition for Rehearing and
Suggestion for Rehearing En Banc, raising the arguments made
herein. That petition and suggestion were denied on August
28, 1991 (App. C. pp. 57a-58a). The present Petition for
Certiorari followed.
-
ARGUMENT
In violation of the rule of Erie v. Tompkins, the Circuit
Court decision repudiated the substantive law established by
the Supreme Judicial Court of Massachusetts in response to
questions certified by the District Court in this very case. The
Circuit Court holding also refused to acknowledge the impact
of the provisions of 42 U.S.C. § 9607(j), and rejected the
specific factual findings made by the District Court after trial
and relied on unwarranted assumptions in violation of Fed. R.
Civ. P. 52(a). This action and the consolidated CERCLA action
are landmark cases,’ and the errors in the Circuit Court opinion
and holding must not be allowed to remain as precedent.
By rejecting the specific factual findings of the Trial Court
and relying on unwarranted factual assumptions, the Circuit
Court’s opinion violated Fed. R. Civ. P. 52(a). The violations
>In re Acushnet River & New Bedford Harbor, 675 F.Supp. 22 (D. Mass.
1987) (“Acushnet I”) (jurisdiction and parties); 712 F.Supp. 994 (D. Mass.
1989) (“Acushnet II) (the right to jury trial); 712 F.Supp. 1010 (D. Mass.
1989) (“Acushnet III”) (successor liability); 712 F.Supp. 1019(D. Mass. 1989)
(“Acushnet IV”) (partial settlements); 716 F.Supp. 676 (D. Mass. 1989)
(“Acushnet V”, (natural resource damages under CERCLA); 722 F.Supp. 888
(D. Mass. 1989) (“Acushnet VI") (scope and standard of judicial review); 722
F.Supp. 893 (D. Mass. 1989) (“Acushnet VII’) (federally permitted releases);
and 725 F.Supp. 1264 (D. Mass. 1989) (“Acushnet VIII”) (certification of
insurance issues).
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc., 407 Mass.
675, 555 N.E.2d 568 (1990).
See Covenant Ins. Co. v. Friday Engineering, Inc., 742 F.Supp. 708, 709
(D. Mass. 1990); CPC International, Inc. v. Northbrook Excess & Surplus
Insurance Co., 759 F.Supp. 966 (D. R.I. 1991); A. Johnson & Co., Inc. v.
Aetna Casualty & Surety Company, 933 F.2d 66, 72 (Ist Cir. 1991); New
Castle County v. Hartford Acc. and Indem. Co., 933 F.2d 1162, 1195 (3d
Cir. 1991).
See also Hazen Paper Co. v. United States Fidelity & Guaranty Co., 407
“Mass. 689, 555 N.E.2d 576 (1990), which was argued with and decided the
same day as Lumbermens v. Belleville, supra.
8
of Fed. R. Civ. P. 52(a) were serious and, combined with that
Circuit Court’s refusal to apply the CERCLA permit defense,
provided a method whereby the Circuit Court could, in viola-
tion of the rule of Erie Railroad Co. v. Tompkins, 304 U.S.
64 (1938) and 28 U.S.C. § 1652, reject the settled law of
Massachusetts, which law governs this controversy. That law
was expressed by the Supreme Judicial Court of Massachusetts
in the decision accompanying its response to the questions
certified in this very case.
The violation of Erie was threefold. First, and most impor-
tant to the constitutional principles involved, the Circuit Court
decided this case on a basis which was expressly rejected by
the Supreme Judicial Court of Massachusetts when it responded
to questions certified to it by the District Court in this very case.
Second, the Circuit Court did noi follow the Massachusetts
substantive rule of law that it is a particular insured’s specific
expectations and intent that determine insurance coverage.
Third, the Circuit Court rejected the substantive rule of
Massachusetts law that it is the actual basis of the insured’s
liability to a claimant, such as the government plaintiffs in the
consolidated CERCLA case, that governs the decision in an
insurance action and substituted an erroneous concept based
on Belleville’s permitted business operations. Central to the
Circuit Court’s conclusion, that coverage would be denied to
Belleville due to the nature of its ordinary business operations,
was that Court’s failure to acknowledge, as the District Court
appreciated, that the provisions of 42 U.S.C. § 9607(j) (the
CERCLA permit defense) precluded discharges from those
operations from being a basis of Belleville’s liability to pay
the government plaintiffs $4,000,000.00. This aspect of the
Circuit Court opinion has far ranging implications, beyond
insurance actions, since it appears to reject the viability of the
permit defense in CERCLA actions.
9
These deviations from the rule of Erie v. Tompkins have
widespread ramifications since it is the present action of Lum-
bermens v. Belleville which ts establishing precedent for all
actions involving the application of insurance law in CERCLA
matters. *
Failure to correct these errors will, at a minimum, put forum
shopping at a premium and will doubtless waste substantial
resources of the Courts and litigants until these matters are
properly resolved. Chaos exists since no insured, situated simi-
larly to Belleville, can be expected to rely on the subject Circuit
Court opinion which is so manifestly in error.
I. The Circuit Court Totally Rejected The Controlling
Rule Established In This Very Case By The Supreme
Judicial Court Of Massachusetts And, Thus, Violated
The Directive Of Erie v. Tompkins When It Ruled
That The Specific Basis Of Belleville’s Liability To
The Governmental Plaintiffs Would Not Affect Its
Application Of The Insurance Contract And Substi-
tuted Its Own Rule Of Decision Founded On An As-
sumed Basis Of Liability* (App. A. p. 15a).
The Supreme Judicial Court of Massachusetts expressly re-
jected the analysis adopted by the Circuit Court, which held
that Belleville could not be indemnified due to the nature of
its ordinary business operations. Lumbermens Mutual Casualty
Co. v. Belleville Industries, Inc. , 938 F.2d 1423, 1430 (1st Cir.
See Covenant Ins. Co. v. Friday Engineering, Inc., 742 F.Supp. 708, 709
(D. Mass. 1990); CPC International, Inc. v. Northbrook Excess & Surplus
Insurance Co., 759 F.Supp. 966 (D. R.1. 1991), A. Johnson & Co., Inc. v.
Aetna Casualty & Surety Company, 933 F.2d 66, 72 (ist Cir. 1991); New
Castle County v. Hartford Acc. and Indem. Co., 933 F.2d 1162, 1195 (3d
Cir. 1991).
‘As will be discussed in Section III, infra, the facts referenced by the Circuit
Court to support its decision have no relevance to either the CERCLA action
or this action because of 42 U.S.C. § 9607()), the CERCLA permit detense.
10
1991) (App. A. p. 15a). In response to certified questions in
this very case, the Massachusetts Court held that application
of the pollution exclusion clause [the sudden and accidental
clause] is not to be determined by reference to the carse of
the release. Lumbermens Mutual Casualty Co. v. Belleville
Industries, Inc., 407 Mass. 675, 679, 555 N.E.2d 568, 571
(1990) (App. B. pp. 43a, 47a).
The normal business operations of Belleville were expli-
cated, in detail, by the District Court in its Memorandum and
Order accompanying the questions certified by it to the Su-
preme Judicial Court of Massachusetts. Jn re Acushnet River
& New Bedford Harbor, 725 F.Supp. 1264 (1989). The Su-
preme Judicial Court of Massachusetts referenced those oper-
ations in its response to the questions certified (App. B.
pp. 44a-45a), and held that they were not the operative facts
to be utilized in determining coverage under the sudden and
accidental clause.
The holding of the Supreme Judicial Court was precisely
that the sudden and accidental clause would provide coverage
to Belleville, a manufacturer whose processes involved the
use of a hazardous substance,* if the requisite factual findings
were made by the District Court.° Thus, under Massachusetts
law, the normal business operations standard adopted by the
Circuit Court is not the focal point.
‘See also the decision of the Massachusetts Supreme Judicial Court in the
case of Hazen Paper Co. v. United States Fidelity & Guaranty Co., 407 Mass.
689, 555 N.E.2d 576 (1990), which was argued with and decided the same
day as Lumbermens v. Belleville, wherein the Supreme Judicial Court did not
preclude coverage under the “sudden and accidental” clause for a facility whose
normal business operations consisted of a “hazardous waste facility.” 407
Mass. at 690, 692, 555 N.E.2d at 578-579. Thus, although the panel of the
Circuit Court might consider that only “health food” establishments have cover-
age (App. A. p. 15a), the full Supreme Judicial Court of Massachusetts ruled
that coverage might even apply to a waste facility.
*The careful analysis conducted by the District Court judge, as required by
Massachusetts law, was spurned as “a microanalytic approach’ (App. A.p. 10a)
by the Circuit Court.
The sudden event to which the exception in the
pollution exclusion clause applies concerns neither
the cause of the release of a pollutant nor the damage
caused by the release. It is the release of pollutants
itself that must have occurred suddenly, if the excep-
tion is to apply so as to provide coverage.
(App. B. p. 47a) (emphasis supplied). The sudden and acciden-
tal exception thus focuses on the circumstances of the release:
the “abruptnes' of the commencement of the release or dis-
charge of the pollutant is the crucial element.” (App. B.
p. 49a.)
It is obvious that the discharge or release has relevance
under Massachusetts law; the operations of the insured, relied
on by the Circuit Court, normal or otherwise, are inconsequen-
tial.
There can be no dispute that the response by the Supreme
Judicial Court of Massachusetts to the questions certified by
the District Court was entitled to the binding application of
Erie v. Tompkins. 17A Wright, Miller & Cooper, Federal
Practice and Procedure: Jurisdiction 2d, § 4248, at 179. The
First Circuit Court recognized that principle in Tarr v. Man-
chester Insurance Corporation, 544 F.2d 14, 15 (1st Cir.
1976):
The purpose of certification is to ascertain what the
state law is, not, when the state court has already
said what it is, to afford a party an opportunity to
persuade the court to say something else. The rule
of Erie RR. v. Tompkins, 1938, 304 U.S. 64, 58 S.
Ct. 817, 82 L.Ed. 1188, calls on us to apply state
law, not, if we can be persuaded to doubt its sound-
ness, to participate in an effort to change it.
12
Despite its well reasoned statement in Tarr, no other analysis
of the Circuit Court’s holding in the instant case is possible
than that the Court not only afforded a party the opportunity
to persuade the Court to say that the law was other than what
the state court said it was, but, more importantly, the Court
has participated in an attempt to change settled law.
The comment contained in American Home Prods. Corp.
v. Liberty Mutual Ins. Co., 565 F.Supp. 1485, 1512(S.D.N.Y.
1983), aff'd as modified, 748 F.2d 760 (2d Cir. 1984), is at
least as valid now as when it was written.
The disparities of construction among the federal
courts is a matter of national concern, because many
of the courts involved are not even attempting to
apply state law in reaching their results, and because
these rulings are having significant effects upon the
victims of insidious diseases, upon manufacturers,
and upon the insurance industry, throughout the na-
tion.
(Emphasis supplied. )
As understandable as it is that the Circuit Court would like
to frame rules of interpretation which can be universally applied
to all insurance coverage disputes no matter which state’s laws
should control, the price of that uniformity is to render the
rule of Erie v. Tompkins nugatory.
13
Il. The Circuit Court Opinion Was Violative Of Fed.
R. Civ. P. 52(a) In Its Rejection Of The Trial Court’s
Findings Of Belleville’s Expectations And Intent
Which Led The Circuit Court To Contravene, In
Violation Of The Rule Of Erie v. Tompkins, The
Settled Massachusetts Law That An Actual Insured’s
Expectations And Intent Govern An Insurance Con-
troversy, Not Those Of Some Hypothetical Insured.
Among the subsidiary facts found by the Trial Court to
support its findings and conclusion that Belleville, with respect
to the matters central to the insurance controversy, neither
expected nor intended releases, property damage, or liability
to result from its operations, were the following:
1. “Belleville at all times considered that it ran an environ-
mentally safe, progressive and largely incident free operation.”
(App. B. p. 26a.)
2. “This escape of PCBs was sudden. . . . What’s more,
it was accidental in the sense that the release was both unex-
pected and occurred without the assistance of any human
agency.” (App. B. p. 32a.)
3. “The simple fact is that while Belleville management
knew for years that PCBs could well be the cause of adverse
regulatory actions, Belleville neither expected nor intended
any property damage or personal injury from its use of PCBs
and had no knowledge that any such property damage or per-
sonal injury was occurring.” (App. B. p. 39a.)
4. “But at no time prior to the commencement of the instant
litigation could it reasonably have believed that it was causing
property damage to an insurable interest.” (App. B. p. 40a.)
5. Belleville’s liability to the government plaintiffs was
premised on its use of a PCB product known as Aroclor (App.
B. p. 41a). Ninety-nine percent of Belleville’s operation in-
volved the use of Aroclor 1016 (App. B. p. 41a). All but four-
14
tenths of one percent of that product, Aroclor 1016, was
biodegradable (App. B. p. 41a).
6. “Belleville has thus established that . . . the property
damage liability which it settled for the payment of $4 million
in the underlying action brought by the sovereigns was neithei
expected nor intended from its standpoint.” (App. B. p. 40a.)
It must be noted that these findings were made by a judge
who had many years experience as a justice of the Superior
Court of Massachusetts, had been responsible for the consoli-
dated actions for more than five years, had issued numerous
opinions in these cases,’ had received guidance in his decision
by the response of the Supreme Judicial Court of Massachusetts
to questions certified to it by the District Court in this very
case," and, most importantly, had conducted a nine-day trial
at which lay witnesses and the principal officers and other
employees of Belleville, including witnesses called by Lumber-
mens, had testified.
Despite those specific factual findings of the District Court,
the Circuit Court rejected them and factually opined to the
contrary:
1. The discharges were caused by events not clearly beyond
the long-range, reasonable expectation of the insured (App.
A. p. Ya).
2. The operations of Belleville involved a likelihood of
continuing polluting releases (App. A. p. 9a).
In re Acushnet River & New Bedford Harbor, 675 F.Supp. 22 (D. Mass.
1987) (Acushnet I") (Gurisdiction and parties), 712 F.Supp. 994 (D. Mass.
1989) (“Acushnet IIT) (the right to jury trial); 712 F.Supp. 1010 (D. Mass.
1989) (“Acushnet III) (successor liability); 712 F.Supp. 1019(D. Mass. 1989)
(“Acushnet IV”) (partial settlements), 716 F.Supp. 676 (D. Mass. 1989)
(“Acushnet V™) (natural resource damages under CERCLA), 722 F.Supp. &88
(D. Mass. 1989) (“Acushnet VI") (scope and standard of judicial review), 722
F.Supp. 893 (D. Mass. 1989) (“Acushnet VII") (federally permitted releases):
and 725 F.Supp. 1264 (D. Mass. 1989) (Acushnet VIII") (certificate of insur-
ance Issues).
*“Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc., 407 Mass
675, SSS N.E.2d 568 (1990) (App. B. pp. 43a-S6a)
15
The Circuit Court did not comply with the requirements of
Fed. R. Civ. P. 52(a). The directive of Fed. R. Civ.P. 52(a)
is clear: “Findings of fact . . . shall not be set aside unless
clearly erroneous, and due regard shall be given the opportunity
of the trial court to judge the credibility of the witnesses.”
Cooter & Gell v. Hartmarx Corp., 496 U.S. , 110 L.Ed.
2d 359, 378, 110 S.Ct. (1990).’ Despite language in its
opinion acknowledging this mandate (App. A. p. 9a), the Cir-
cuit Court clearly rejected the District Court’s findings with
respect to Belleville’s expectations and intent.
This rejection of the Trial Court’s findings that the insured,
Belleville, neither expected nor intended that either the damage
or the subject releases would result from its operations, allowed
the Circuit Court to support its holding by reference to deci-
sions '° which were not grounded upon similar findings reached
after trial on the merits.
Further, the failure of the Circuit Court to abide by the
provisions of Fed. R. Civ. P. 52(a) allowed that Court, sub
silentio, to violate the rule of Erie v. Tompkins and establish
a rule of insurance law directly contrary to the controlling law
of the Commonwealth of Massachusetts. Erie Railroad Co.
v. Tompkins, 304 U.S. 64 (1938); Klaxon Co. v. Stentor
Electric Mfg. Co., 313 U.S. 487 (1941); 28 U.S.C. § 1652.
The law of Massachusetts is totally settled with respect to
the point that it is the actual expectations and the actual intent
of a particular insured, such as Belleville, not those of a
hypothetical insured, which govern the issue of whether insur-
ance proceeds are payable. In Quincy Mutual Fire Ins. Co. v.
*Lumbermens never raised on appeal to the Circuit Court the contention that
the District Court findings of fact were erroneous or unsupported by evidence.
Among the cases relied on by the Circuit Court was its own opinion, Great
Lakes Container Corp. v. National Union Fire Ins. Co., 727 F.2d 30 (1st Cir
1984), a case involving New Hampshire law wherein not only was there no
trial on the merits, but also wherein the insured failed to respond to Summary
Judgment motions and was denied leave to respond late by the District Court.
FE
16
Abernathy, 393 Mass. 81, 469 N.E.2d 797 (1984), it was
made clear beyond peradventure that a trial court applying
substantive Massachusetts law is required to make inquiry into
the specific insured’s actual expectations and intent and that,
under Massachusetts law, some “reasonable insured standard”
could not be substituted therefor.
As properly noted by the Trial Court in its discussion accom-
panying the certification of questions, in this very case, to the
Supreme Judicial Court of Massachusetts:
Similarly, Massachusetts courts have held that an
unintentional result of an intentional act is still an
accident: the resulting injury which ensues from the
volitional act of an insured is still an “accident”
within the meaning of an insurance policy if the
insured does not specifically intend to cause the re-
sulting harm or is not substantially certain that such
harm will occur. /n re Acushnet River & New Bedford
Harbor, 725 F. Supp. 1264, 1273 (D. Mass. 1989),
citing Quincy Mutual Fire Ins. Co. v. Abernathy,
393 Mass. at 84, 469 N.E.2d 797.
(Emphasis supplied. )
For the Circuit Court to base its holding on surmised long-
range, reasonable expectations of some hypothetical insured
not only is contrary to the specific findings of the trial judge,
but also does not comport with the established requirement of
Massachusetts law that such a conclusion must be based on
the factual determination of a particular insured’s actual expec-
tations and intent.
It does not require extensive discussion to recognize that if
such a position is allowed to remain uncorrected, it will pro-
mote forum shopping and defeat the reasonable expectations
of insureds when the diversity rules cause their cases to be
tried in Federal Court.
17
Ill. The Circuit Court’s Express Disregard Of The Dis-
trict Court’s Findings As To The Specific Basis Of
Belleville’s Liability To The Government Plaintiffs
In The Consolidated CERCLA Case Was A Repudi-
ation Of The Rule Of Erie v. Tompkins, Which Re-
pudiation Was Grounded Upon A Violation Of Fed.
R. Civ. P. 52(a) And A Misapprehension Of 42
U.S.C. § 9607(j).
The Trial Court correctly found the facts regarding the basis
of Belleville’s liability which were relevant under the law of
Massachusetts, and Lumbermens did not appeal from that find-
ing of fact. The Circuit Court substituted therefor unfounded
broad language relating to Belleville’s normal business opera-
tions which rejects, without reference, the unquestionable sub-
Stantive principles of Massachusetts law. The Circuit Court
holding, that the specific basis of Belleville’s CERCLA liabil-
ity tothe governmental plaintiffs is irrelevant, totally disregards
the rule of law of the Commonwealth of Massachusetts, despite
the directives of Erie v. Tompkins.
The governing substantive rule of state law is that the specific
basis of a defendant's liability to a claimant determines whether
there is a duty to indemnify. That rule applies to all types of
indemnity, not just insurance controversies. Pasquale v. Shore,
343 Mass. 239, 178 N.E.2d 281 (1961); see also the Uniform
Commercial Code, Massachusetts General Laws, Chapter 106,
§ 2-607(5)(a). In insurance controversies, the specific basis of
the insured’s liability to a claimant is the only correct basis
for determining whether an insurance policy applies. Jertson
v. Hartley and Lumbermens Mutual Casualty Co., 342 Mass.
597, 174 N.E.2d 663 (1961); Miller v. U.S. Fidelity & Cas.
Co., 291 Mass. 445, 197 N.E. 75 (1935). Sterilite v. Continen-
tal Casualty Co., 17 Mass. App. Ct. 316, 323-324, 4 58
N.E.2d 338, 343-344 (1983), clearly establishes that facts
which do not specifically form a basis of the insured’s liability
18
to a claimant are not a proper basis for determining an insurer’s
duties. The Supreme Judicial Court of Massachusetts, in ruling
on certified issues in this very case, recognized that principle
in upholding the validity of the Sterilite rulings (App. B.
pp. S5la-54a).
The District Court, applying the settled requirement of Mas-
sachusetts law that insurance coverage questions must be de-
termined by reference to the basis of an insured’s liability to
the original claimants, made such a factual determination. As
amplified in Belleviile’s Petition for Rehearing and Suggestion
for Rehearing En Banc at page 7, the trial judge properly recog-
nized that the insurance coverage determination had to be based
on Belleville’s liability in the consolidated CERCLA case:
Not liability now, because liability, of course, is
going to be decided by the jury and the judge in the
morning case and the insurers are just going to be
stuck with it, maybe they'll succeed, maybe they
won't, we'll see, but either way the resolution of
the underlying case is the resolution of the liability
aspects of the case.
(Emphasis supplied.) ''
After extensive recitation of the facts surrounding the release
which caused insurance coverage to apply (App. B. pp. 28a-
31a), the District Court expressly found the specific basis of
Belleville’s CERCLA liability and applied that finding to the
issue of insurance coverage:
Belleville has thus established that . . . the property
damage liability which it settled for the payment of
‘The contract of insurance clearly supports this analysis in the provision
that the policy refers only to “all sums which the insured shall become /egal/\
obligated to pay as [property] damages because of . . . an occurrence . . .”
(App. A. p. 12a) (emphasis supplied).
19
$4 million in the underlying action brought by the
sovereigns was neither expected nor intended from
its standpoint.
(App. B. p. 40a) (emphasis supplied).
The Circuit Court dismissed those specific findings, stating:
“Whatever the specific basis of Belleville’s liability to the
governmental plaintiffs, however, it does not affect our appli-
cation of the ‘sudden and accidental’ clause.” (App. A. p. 15a.)
For the Circuit Court to acknowledge the fact that Bel-
leville’s liability to the government plaintiffs was established
in the District Court CERCLA case (App. A. p. 3a), but refuse
to apply that trial judge’s determination of the basis for that
liability in its own decision, violated Fed.R. Civ. P. 52(a).
It is truly significant that the District Court was no stranger
to that underlying controversy, having published numerous
decisions on most aspects of the government case against Belle-
ville.'* Perhaps more importantly, that trial judge had ruled in
the consolidated case as to Belleville’s CERCLA liability.
The Circuit Court’s misplaced reliance on Belleville’s nor-
mal operations is further erroneous since those operations were,
as the trial court found, within the ambit of 42 U.S.C.
§ 9607(j), the CERCLA permit defense:
At all times material hereto Belleville’s operations
went forward under the permit application or the
formal permit until Belleville ceased doing business
in 1978.
(App. B. p. 21a.)
CERCLA liability is premised on proof that a defendant is
responsible for a release from a facility of a hazardous sub-
stance. 42 U.S.C. §§ 9601 et seq. The CERCLA permit defense
'* See footnote 6, supra.
20
provides that if releases result from operations which are con-
ducted either under a permit application or a formal permit
[42 U.S.C. § 9601(10)], then there is no CERCLA liability
associated with said discharges. 42 U.S.C. § 9607(j). Thus,
the reliance by the Circuit Court on releases or discharges
characterized as ‘‘an ordinary part of its business operations”
(App. A. p. 15a) was improper; and the analysis should and
must be limited to those incidents which were not concomitants
of ordinary business activities and, therefore, were beyond the
purview of Section 9607(j).
Thus, the Circuit Court’s violation of Fed. R. Civ.P. 52(a)
and its failure to appreciate the significance of 42 U.S.C.
§ 9607(j) led it inexorably into error which flagrantly violated
Erie v. Tompkins.
If the present opinion is allowed to stand, the Sterilite
analysis required by the Supreme Judicial Court of Massachu-
setts will have been eviscerated, and forum shopping must be
pursued by any counsel whose client’s position in an insurance
action cannot prevail if the specific basis of the insured’s
liability to a claimant is analyzed. The whole concept of the
underlying claimants, the insured, and the insurer all being
“bound” by the same specific facts will be irrelevant in a
federal trial despite being mandatory in the state courts.
21
a
CONCLUSION
For the foregoing reasons, the petition should be granted.
Respectfully submitted
DAVID A. MCLAUGHLIN
Counsel of Record
MARY ALICE McLAUGHLIN
MICHAEL J. MCGLONE
McLAUGHLIN & FOLAN, P.C.
Post Office Box 2095
New Bedford, Massachusetts 02741-2095
(508) 992-9800
Counsel for Belleville Industries, Inc.
November 26, 1991
—
2
Ie
et ee
< itliential
ata
TABLE OF CONTENTS
APPENDIX A
Opinion dated July 16, 1991 of the United States
Court of Appeals for the First Circuit la
APPENDIX B
Opinion dated January 4, 1991 of the United States
District Court for the District of Massachusetts 17a
Opinion dated June 14, 1990 of the Supreme Judi-
cial Court of the Commonwealth of Massachusetts 43a
APPENDIX C
Order of the Court dated August 28, 1991 of the
United States Court of Appeals for the First Circuit
Denying Rehearing and Denying Rehearing En Banc 57
APPENDIX D
Pertinent Statutes and Rules of Court Involved 59a
la
APPENDIX A
United States Court of Appeals
For the First Circuit
No. 91-1129
LUMBERMENS MUTUAL CASUALTY CO.,
Plaintiff, Appellee,
vs
BELLEVILLE INDUSTRIES, INC.,
Defendant, Appellant.
No. 91-1130
LUMBERMENS MUTUAL CASUALTY CO.,
Plaintiff, Appellant,
v.
BELLEVILLE INDUSTRIES, INC.,
Defendant, Appellee.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[HON. WILLIAM G. YOUNG, U.S. District Judge}
r
Before
TORRUELLA, Circuit Judge,
COFFIN AND BOWNES, Senior Circuit Judges
T. Andrew Culbert, with whom Stephen F. Brock, Paul
Saint-Antoine, Drinker Biddle & Reath, Michael S. Greco,
Lisa D. Campolo, and Hill & Barlow were on brief for Lum-
bermens Mutual Casualty Company.
Thomas W. Brunner, Carol A. Laham, Carol Barthel,
Stephen P. Keim, and Wiley, Rein & Fielding on brief for
Insurance Environmental Litigation Association, amicus
curiae.
2a
David A. McLaughlin, with whom Mary Alice McLaughlin,
Michael J. McGlone, Noreen M. McKenna, and McLaughlin
& Folan, P.C. were on brief for Belleville Industries, Inc.
Thomas L. Crotty, Jr., Peter J. Kalis, Thomas M. Reiter,
James R. Segerdahl, and Kirkpatrick & Lockhart on brief for
United Technologies Corperation, amicus curiae.
July 16, 1991
COFFIN, Senior Circuit Judge. The question we decide on
this appeal is whether a company’s general liability insurance
policy, which excludes coverage for property damage caused
by pollution, nevertheless provides coverage in this particular
case under the policy's exception for “sudden and accidental”
polluting events. Throughout the four-year period in which
the relevant policies were in effect, the insured’s manufacturing
operations involved continuing pollution-releasing activity.
The alleged “sudden and accidental” events occurred on two
days during this period, one in 1973 and the other in 1975.
We conclude that these events do not qualify as “sudden and
accidental” discharges of pollutants and, accordingly, need not
reach the trigger of coverage and notice issues that were decided
below.
The general liability insurer-appellant is Lumbermens
Mutual Insurance Company (Lumbermens). The manufacturer-
appellee is Belleville Industries, Inc. (Belleville).' In 1973
Belleville acquired an old brick and wood building on the
' These are actually cross-appeals. Lumbermens is appealing from the court's
award of damages for one “sudden and accidental” discharge, and from rulings
determining the event triggering coverage and the timeliness of notice to the
insurer. Belleville appeals rulings refusing to award full indemnity based on
two asserted “sudden and accidental” releases. We shall, however, refer to the
parties in the style we have indicated
3a
banks of the Acushnet River near its entry into New Bedford
Harbor. It carried on the same general process of manufacturing
capacitors as had the seller, Aerovox Corporation, for some
26 years. Capacitors are devices which accumulate and hold
electric charges. They consist of two oppositely charged sur-
faces, separated by a dielectric, or insulator. In this particular
operation the dielectric was a fluid, “Aroclor,” which consisted
of a chemical compound, polychlorinated biphenyls, or PCBs.
Belleville purchased PCBs from Monsanto Chemical Corpora-
tion between 1973 and early 1977, the period when Lumber-
mens provided general liability coverage for the company. By
1978 the toxicity of PCBs had become so well-recognized that
they were outlawed. Ninety-nine percent of the PCBs pur-
chased by Belleville was of a particular kind, Aroclor 1016,
which was 99.6% biodegradable. That is, over time most of
the pollutant would convert into non-polluting substances,
leaving only .4% in a toxic condition.
Late in 1983, the United States and the Commonwealth of
Massachusetts brought an action under the Comprehensive
Environmental Response, Compensation and Liability Act
(CERCLA) and other environmental and civil statutes against
Belleville and five other corporations, seeking damages and
cleanup costs resulting from pollution of the Acushnet River
and New Bedford Harbor. In August 1984, Belleville gave
written notice of its asserted liability to Lumbermens and de-
manded that the insurer defend and indemnify the company.
Lumbermens denied coverage and subsequently brought this
declaratory judgment action to determine its liability under the
policies. Meanwhile, it proceeded to defend Belleville. Ulti-
mately, after the district court issued a partial summary judg-
ment for the governmental plaintiffs on the issue of Belleville’s
liability, the company joined in a consent decree requiring it
to pay $4 million.
These are the salient provisions of the relevant insurance
policies:
4a
— Lumbermens’ basic undertaking was to pay “all
sums which the insured shall become legally obli-
gated to pay as [property] damages because of . . .
”
.
an occurrence... .”;
— The coverage-invoking event, an “occurrence,”
is “an accident, . . . which results in. . . property
damage neither expected nor intended... . .”;
— But coverage is excluded for “property damage
arising out of the... release... of . . . pollutants
into or upon land, the atmosphere or any water course
or body of water;”
— “[BJut this exclusion does not apply if such. . .
release . . . is sudden and accidental.”
The Prior Proceedings. \n dealing with the first of several
rounds of summary judgment motions in the declaratory judg-
ment action, the district court, though looking on the exclusion
provision as “straightforward,” refrained from issuing judg-
ment because of its perception that state law precluded any
judgment where the underlying claimants, the governmental
plaintiffs in the original lawsuits, would not be bound. Sub-
sequently, as we have noted, the sovereigns obtained partial
summary judgment on liability in the underlying action. The
court, however, continued to question its power to issue judg-
ment in the declaratory judgment action and therefore denied
all of Lumbermens’ motions for summary judgment. It then
certified several questions to the Massachusetts Supreme Judi-
cial Court.
The only question relevant to our discussion sought to deter-
mine the meaning of “sudden” in the policy provision creating
an exception to the exclusion of coverage for pollution dam-
ages. Courts had been divided over whether the term was
ambiguous and thus could be interpreted simply as “unex-
pected,’ making it potentially applicable to gradual releases
of pollutants. The Supreme Judicial Court responded that the
term was not, in its view, ambiguous, and “that when used in
Sa
describing a release of pollutants, ‘sudden’ in conjunction with
‘accidental’ has a temporal element.” Lumbermens Mutual
Casualty Co. v. Belleville Industries, Inc., 407 Mass. 675,
680, 555 N.E.2d 568, 572 (1990). It added, “[sjurely, the
abruptness of the commencement of the release or discharge
of the pollutant is the crucial element.” 407 Mass. at 681; 555
N.E.2d at 572.
Luimbermens then filed new motions for summary judgment,
in response to which Belleville proffered a number of alleged
“sudden and accidental” events that it claimed mandated cover-
age under the policies.’ The court rejected most of Belleville’s
candidates for the “sudden and accidental” exception, ruling
that the vast part of the damages was attributable to gradual
pollution. Belleville then voluntarily limited its claim to dis-
charges from two allegedly “sudden and accidental” events: a
very heavy rainstorm in 1973 and a fire in 1975. On these
issues, the parties proceeded with a nine-day, jury-waived trial.
The relevant evidence for present purposes concerns Bel-
leville’s manufacturing scenario and process, the magnitude
of the rainstorm and its discharges, and the nature of the fire
and resulting discharges.
The Manufacturing Process. Aroclor oil, i.e., liquid PCBs,
was delivered to storage tanks in the basement of the plant. It
was then pumped up to impregnation tanks on the second floor.
Aluminum capacitor canisters were then lowered in wire bas-
kets into hot Aroclor oil for a two-day “impregnation” period.
The oil then was piped back downstairs to dirty oil storage
‘They were the following: (1) a “catastrophic tropical storm” on December
16-17, 1973, (2) a 1975 500-gallon spill in the pump room, caused by an
overtiow in transferring Aroclor from one tank to another; (3) a fire in 1975,
(4) the bursting of steam or manifold jackets on impregnation tanks, happening
once or twice a year, (5) a break in the water main, flooding the parking lot,
which had been surtaced with waste oil; also three or four storms a year
Nooding the lot “up to your ankles”; and (6) spills in transferring Aroclor from
tanker trucks to storage tanks; and five-gallon spills of Aroclor in transferring
from rail car to tanker car, Occurring Once u year.
6a
tanks in the pump room, filtered, and then piped to the original
storage tanks for reuse. At the same time, the wire baskets
containing the impregnated capacitors were removed from the
tank.
Although a drip pan was used to catch oil dripping from
the baskets, drips and spills on the pump room floor occurred
and were sprinkled with Fuller's earth to absorb them or mop-
ped or squeegeed into sump pits. The contents of the sump
pits were pumped into the north trough outside the plant, which
led to the Acushnet River. PCBs routinely were dispersed
through the north trough, the municipal sewer system, the
emission of PCB vapors (which condensed as waxy residues
on the plant roof, walls, ground, pavement, and parking lot),
and through the leaching of PCB-contaminated waste, such as
“reject” capacitors dumped on the ground and on the mud flats
of the Acushnet River. During manufacturing, Aroclor in vapor
form also was released into the atmosphere by exhaust fans.
The Rainstorm. On December 17, 1973, a violent rainstorm
deposited 5.31 inches of water in 24 hours. One person said
it had been exceeded only by Hurricane Carol in 1954; an
expert’s testimony was that a storm of this intensity occurred
only once in seven years. Streets were flooded. Inside the
plant, was flooded into a shipping area and surrounded an
elevator pit, both of which were located on levels below the
pump room. Water depth was no greater than one to one-and-a-
half inches. Eyewitnesses reported that the pump room was
not reached by any waters but that in an adjacent area on the
same level, water spurted up through the floor in six-inch
geysers; it did not accumulate there but drained down a ramp
to a lower level where the shipping-receiving office was lo-
cated. There the water at its deepest was no more than two
inches; employees worked for 90 minutes to two hours cleaning
up, by pushing the water into a sump pit with mops and
squeegees.
Ta
The Fire. On September 24, 1975, a fire broke out in a
ventilator shaft leading from the tank room to the roof. Fire-
fighters used powerful hoses, which sent spray up to and
through the roof, and caused water to flow down the stairwell
and into the impregnation room. They also demolished part
of the roof and building to put out the fire. Aroclor, which
had accumulated on the walls, floors, and roof of the plant,
was released both through the roof — eventually landing on
and running off the parking lot — and down the stairs, where
it was released via the sump pits.
While there was evidence of the heavy flow of water from
the hoses, there was no evidence of the duration of the flow
or whether the relevant releases were particularly noteworthy.
The product manager observed “a stream of water coming
down like a waterfall.” The vice president for manufacturing,
who was at the rear of the plant at the beginning of the fire,
found the fire had been extinguished when he reached the site.
He saw the water draining into the sump pits two or three feet
below ground level. Another employee reported seeing “a lot
of water . . . in the aisles” that had been cleared up by the
following day.
The District Court Decision. Addressing the rainstorm dis-
charges, the district court first rejected as a “sudden and acci-
dental” release any movement of PCBs from the mud flats to
other areas of the harbor. It reasoned that although the storm
may have speeded up the process, the process itself was a
natural one, the water and wind spreading the PCBs. Being
natural, it could not “be considered sudden as that word is
used in construing the pollution exclusion under the laws of
Massachusetts.” Opinion at 19. In any event, it was not acci-
dental, added the court, since Belleville had never taken any
steps to reclaim or protect the flats.
As for releases from the interior of the plant, the court
rejected any outflow of water through cracks in the floor be-
cause a release “by the natural progression of the flow of under-
8a
ground water” is not accidental, id. at 22. It also rejected any
release caused by the pumping of water from the sump pits,
for pumping is intended, not accidental.
The court did, however, on its own initiative, find one type
of release to be both sudden and accidental. Although the plant
has been reconstructed since 1973, the court inferred that there
must have been a door at the first level on the eastern side to
give access to both the parking lot and the tidal flats. It further
reasoned that PCB-bearing water “receded under and around
that door,” id. at 21. This release was sudden, being caused
“by operation of flood waters themselves rather than through
any natural underground waterflow or natural erosion of sed-
iments within the harbor’; it was “accidental in the sense that
the release was both unexpected and occurred without the
assistance of any human agency.” /d. at 23. The court had
earlier, in ruling on Lumbermens’ motion for judgment at the
end of Belleville’s evidence, explained, “And I believe that
the accidental event . . . meets the standards of the insurance
policy, at least until such time as the rushing flood waters
recede to the level where manmade pumps. manmade drainage
ditches, sump pumps and the like, take over.” App. III at 883.
The court rejected as accidental any discharge attributable
to the use of the fire hoses. The running off of water from the
parking lot or through the storm sewers was not accidental
because this was “the normal fashion of rainwater.” Opinion
at 27. And the release of water from within the plant by the
sump pumps was not sudden because the pumps “operated in
the fashion they were intended to,” id. at 28, and not accidental
because use of the sump pumps was intentional.
While there were other rulings made by the court, there is
only one other which is relevant to our discussion — its ruling
on damages. It placed on Lumbermens the burden to prove
the percentage of damage attributable to covered and uncovered
risks. It noted the difficulty in such a complex factual situation
9a
as this case presented, but observed that the present record
made possible a reasonable allocation. It reasoned that virtually
all of the pollutants washed out by the 1973 storm were Aroclor
1016, and that by 1983, the threshold year for liability under
CERCLA, only .4% of the pollutant remained. It then multi-
plied the total damages paid by Belleville by .004, and awarded
Belleville an indemnification from Lumbermens of $16,000.
Discussion
We defer, of course, to any factual findings of the district
court. Indeed, there is no issue as to underlying facts. The
only dispositive issue is whether the underlying facts establish
“sudden and accidental” releases within the intendment of the
policies. This is a question of law that we must decide de novo.
In setting forth the heroic efforts of the district court to be
scrupulously fair and to honor the traditional solicitude given
insureds, we also have revealed the Augean labors inherent in
microanalysis in a case of this kind. The nature of these efforts,
together with a contextual view of the policy language and
consideration of relevant case law, persuades us that the “sud-
den and accidental” exception should not be construed to pro-
vide coverage in these circumstances — and in other words,
when the discharges consisted of long accumulated, unat-
tended, and unsegregated pollutants, and were caused by events
not clearly beyond the long-range reasonable expectation of
the insured. When, in the case of an insured whose operations
involve a likelihood of continuing polluting releases, a court
might properly identify a sudden release so beyond the pale
of reasonable expectability as to be considered “accidental,”
we need not decide. We have been told that the particular
policy language we must deal with here is no longer in vogue.
Happily, courts may be spared further line drawing in this area.
Our analysis begins with an effort to discern the sense of
the policy provisions that first exclude damages o¢casioned
by pollution and then carve out an exception for “sudden and
10a
accidental” releases. It continues with a survey of some of the
problems encountered in a microanalytical approach. And it
concludes with a look at relevant case law.
Our reading of the two pollution provisions in the policy
suggests that in the “ordinary” case, i.e., a case involving a
“clean” operation, such as an office building housing company
headquarters, insurers were willing to commit to covering a
possible but unlikely event resulting in the release of pollutants.
A coverable occurrence would be clearly identifiable as “sud-
den and accidental” because it would be marked departure
from normal operations. But in the case of a pollution-prone
operation, where the emission of pollutants is part and parcel
of the daily conduct of business, there is the possibility of
infinite variations on the usual theme; i.e., polluting incidents
are likely to occur that are on the fringe of normal operations
but that the company seeks to characterize as sudden and
accidental. As this case illustrates, determining where along
the spectrum of polluting events coverage should begin is a
perplexing and, ultimately, unsatisfying endeavor. We think
it illogical to believe that insurers intended through the “sudden
and accidental” exception to buy into a risk and/or litigation
package of this nature. See New Castle County v. Hartford
Accident and Indemnity Co., Nos. 89-3814, 90-3012, 90-3030,
slip. op. at 94 (3d Cir. Apr. 30 1991) (referring to “the insurers’
underlying intent to distance themselves from deliberate pollut-
ers — 1.e., those who intentionally or knowingly discharge
pollutants into the environment”).
More important than our bare reading of the language, how-
ever, is the actual spectrum of problems, revealed in this case,
that stem from microanalysis of a continuous pattern of pollu-
tion. The district court’s focus on the means by which the
PCBs were spread, as a way of identifying “sudden and acci-
dental” pollution, strikes us as a well-meaning but ill-fated
effort to distinguish between virtually indistinguishable occur-
rences. The court concluded that “sudden and accidental” cov-
lla
erage would be unavailable if releases take place through in-
tended or manmade devices and also if releases follow natural
underground watercourses. But, as Belleville asks, “[i]s dam-
age resulting from [manmade] automatic sprinklers triggered
by a fire not accidental?” Similarly, is a discharge of pollutants
necessarily expected simply because the release happens to
travel a natural route? We think not.
Moreover, the court seemed, to some extent, to merge the
concepts of sudden and accidental. For example, the court
found the release of storm water by the sump pumps not be
sudden because the pumps were working as intended, and not
accidental because the use of the pumps was intentional. We
also have problems with the court’s double jump — the first
to an inferred door on the first level of the eastern face of the
plant; the second to water moving under and around that door.
A more generic problem lies in determining what is suffi-
ciently expected. In this case an expert witness had testified
that storms of the intensity of that experience in 1973 occurred
no more frequently than once every seven years. Putting aside
the thought that events which occur over time with some reg-
ularity, like the onset of locusts or gypsy moths, may be said
to be expected, we wonder whether a one-in-four-years storm
would qualify as unexpected. What about a one-a-year deluge?
From a microanalytical viewpoint, almost any event can be
labelled unexpected, since history probably never repeats itself
precisely. But such an approach would eviscerate the exclusion
for pollution.
Perhaps the best evidence of the infeasibility of attempting
to assess discrete “fringe” events, in the case of a company
with a history of contributing over a lengthy period to a gradual
accumulation of pollutants, is the catalogue of “sudden and
accidental” discharges submitted by Belleville. See note 2
supra. Other similar litigable possibilities would include an
employee tripping and spilling Aroclor oil, a drip pan giving
way, a pipe breached . . . . The prospect is limitless.
12a
One final problem is that of determining the percentage of
damage caused by uninsured releases and damage caused by
insured “sudden and accidental” releases. In this case the court
made a calculation by multiplying a quality of the (covered)
pollutant (.4%) and the amount of total damages paid by Bel-
leville ($4 million). Only if we knew what percent of the total
pollution (post-CERCLA) caused by the nonbiodegradable re-
sidue of Aroclor 1016 was attributable to the 1973 rainstorm
runoff around the east side door would we have a figure to
multiply with the damages total. But apart from calculations,
and the inherent problems of proof that allocation would in-
volve, there is a more basic problem. Belleville argues that
the policy 'anguage leaves no room for allocation. Once Lum-
bermens is found obligated to cover a “sudden and accidental”
release, Belleville argues, the policy requires it to pay “all
sums.” The complete wording, however, is “all sums which
the insured shall become legally obligated to pay as [property|
damages because of . . . an occurrence . . . .” Whether this
language permits allocation we need not decide. But we do
observe that if Belleville’s interpretation were correct, the re-
sult would be that of a very small tail ragging a very large
dog; in this case, the flow of storm waters around a door for
a few hours at the most would be sufficient to make Lumber-
mens indemnify Belleville for four years of pollution at a price
of $4 million.
This range of practical problems reinforces our view, based
on a common sense reading of the policy language, that the
“sudden and accidental” exception to the pollution exclusion
was not designed to operate in circumstances such as those
existing in this case. We draw further support from the strong
body of case law rejecting insurance coverage where a company
has for a lengthy period of time purposefully and regularly
been carrying on operations involving continual pollution.
In Great Lakes Container Corp. v. National Union Fire
Ins. Co., 727 F.2d 30 (1st Cir. 1984), although the precise issue
13a
of “sudden and accidental” releases was not raised, we had
no difficulty in holding at an insurer whose insured was de-
scribed as discharging chemical pollutants on its land “as a
concomitant of its regular business activity,” id. at 33. had no
obligation to defend or indemnify in light of the “type of
activity” described. /d. at 34.
Other circuits have used a similar formulation. In Ogden
Corp. ¥. Travelers Indem. Co., 924 F.2d 39, 42 (2d Cir.
1991), dealing with a scrap metal processing and storage busi-
ness with a 33-year history, the court said that it was “doubtful
whether the continuous discharge of pollutants resulting from
the purposeful operation of a scrapyard can be construed as
accidental.” That same court made a more emphatic statement
a year earlier in EAD Metallurgical, Inc. v. Aetna Casualty
& Sur. Co., 905 F.2d 8, 11 (2d Cir. 1990): “damage | resulting
from purposeful conduct [ ] cannot be considered ‘acciden-
tal.’ United States Fidelity & Guar. Co. v. Star Fire Coals,
Inc., 856 F.2d 31 (6th Cir. 1988), involved a coal loading
operation that had been in business for many years, loading
as many as five or six 60-car trains a week. A great amount
of damaging coal dust had been discharged during a period of
seven or eight year when crushed coa! unintentionally dropped
from the conveyor belt. The court, viewing these incidents “as
a normal part of the coal processing operation,” held that it
was “impossible to characterize these discharges of dust as
‘sudden’ ”’: “[t}he ‘sudden and accidental’ exception to th[e]
exclusion is inapplicable here where the pollutants at issue
were discharged on a regular ongoing basis.” /d. at 35.
More specific rulings, in cases where parties attempted to
distinguish discrete episodes of pollution from ongoing activ-
ity, have been made by a number of federal district courts and
State intermediate appellate courts. Fireman’s Fund Ins. Cos.
v. Ex-Cell-O Corp., 750 F. Supp. 1340 (E.D. Mich. 1990),
involved a manufacturer of instrument panels that generated
both solid and liquid wastes that entered groundwater. The
l4a
company, much like Belleville, sought coverage for a tank
spill in 1977 and a pipe rupture in 1978. The court held that
even if these incidents and damage therefrom could be proved,
they were “expected.” /d. at 1350. The insurer had proved
that “international practices, including disposal of waste water
into the Pokamoonshine Brook tributary; subsequent disposal
to the north end of the plant site; and finally disposal into the
lagoon system, resulted in groundwater contamination.” /d. at
1350-51. In other words, “[t]he evidence support[ed] insurers’
theory that policyholders expected property damage to result
from their day-to-day manufacturing processes.” /d.
A year earlier the same court had faced the same set of
issues. In Ray Industries, Inc. v. Liberty Mutual Ins. Co., 728
F. Supp. 1310 (E.D. Mich. 1989), a boat manufacturer had,
for 13 years, relied on a contractor to deposit 55-gallon drums
of waste in a landfill. In the process some barrels were
punctured and crushed. In responding to the insured’s argument
that discrete sudden and accidental releases occurred each time
a barrel was smashed, the court held: “because . . . discharges
took place continually and regularly for approximately thirteen
years, they were not sudden and accidental.” /d. at 1318.
The absence of suddenness was the basis for the holding in
Industrial Indem. Ins. Co. v. Crown Auto Dealerships, Inc.,
731 F. Supp. 1517 (M.D. Fla. 1990). In this case a recycler
of used crankcase oil stored waste oil sludge in unlined storage
ponds. Chemicals leached, spills and leaks occurred, and there
was occasional runoff of rainwater. The court viewed the pol-
lution as gradual and the normal result of the recycler’s 29
years of operations. The alleged incidents were “clearly
cumulative,” id. at 1521. “Consequently, the leaching and
occasional spills of chemicals and runoff from sludge ponds
during major rainfalls cannot be classified as abrupt or sudden
events.” /d. Similarly, in Fischer & Porter Co. v. Liberty
Mutual Ins. Co., 656 F. Supp. 132 (E.D. Pa. 1986), a tank
spillage was not sudden and accidental because it was “part
lSa
of the regular conduct of the insured’s business.” /d. at 136.
Even if employees dumped the pollutant, “pollution resulted
from voluntary acts within the regular, routine business oper-
ations.” /d. at 139.
A recent state court case is Outboard Marine Corp. v. Lib-
erty Mutual Ins. Co., Nos. 2-90-0349 and 2-90-0399 (ill. App.
Ct., 2d Dist. Jan. 31, 1991) (1991 Ill. App. LEXIS 126). In
that case the insured had, for over a decade, discharged PCBs
into “North Ditch” leading into Waukegan Harbor. In trying
to establish the exception to the pollution exclusion clause,
the insured offered evidence that the harbor contamination
“could have resulted from one or more events . . . such as a
major rainstorm, a flood, or a fire.” LEXIS at 34. The court
held that there is “nothing sudden about discharging pollutants -
over an | 1-year period.” /d. at 39.
Belleville cites no cases supporting its theory. It attempts
to distinguish most of the cases cited above by asserting that
they did not involve an insured that was discharging pollutants,
as it was, under a federal permit. See 42 U.S.C. § 9607 (j)
(federally permitted release exception to CERCLA liability).
Belleville’s point in emphasizing its permit is hard to decipher.
We think that what it intends us to understand is that, because
of the permit, its liability in this case cannot stem from “regular
business discharges into the harbor” but only from the releases
associated with the rainstorm and fire. Thus, the fact that it
was a regular polluter should not enter into our analysis.
Whatever the specific basis of Belleville’s liability to the
governmental plaintiffs, however, it does not affect our appli-
cation of the “sudden and accidental” clause. It is, rather, the
nature of an insured’s enterprise and its historical operations
that determine the applicability of the policy provision. Bel-
leville discharged pollutants as an ordinary part of its business
operations; we simply cannot analyze these provisions as if it
were a manufacturer of health foods that rarely, if ever, experi-
enced a pollution-producing event.
16a
We therefore AFFIRM the judgment below except its decla-
ration that Lumbermens is liable under the 1973 policy; we
REVERSE its judgment of liability under the 1973 policy.
17a
APPENDIX B
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
LUMBERMENS MUTUAL CASUALTY Civil Action No.
COMPANY 84-2676-Y
Plaintiff, New Bedford
V Harbor Cases
Consolidated Civil
BELLEVILLE INDUSTRIES, INC., Action No. 83-
Defendant. 3882-Y
FINDINGS AND RULINGS OF LAW
Lumbermens Mutual Casualty Company brings this action
to obtain a declaration of its obligations under insurance con-
tracts it issued to Belleville Industries, Incorporated. The oc-
casion for this insurance declaratory judgment action is the
fact that, on December 10, 1983, the United States and the
Commonwealth of Massachusetts. brought an action against
several corporations, including Belleville, alleging that all
those corporations are liable for damages under the provisions
of the Comprehensive Environmental Response, Compensa-
tion, and Liability Act (CERCLA) and other provisions of
federal and state law for the polychlorinated bipheny! pollution
of New Bedford Harbor. Belleville settled this underlying pol-
lution action with the sovereigns, subject to the Court’s ap-
proval of the appropriate consent decree, for the payment of
$4 million. Lumbermens, who provided Belleville with the
funds for its defense of the underlying action, denies any duty
to indemnify Belleville for this payment to the sovereigns.
Belleville here seeks to recover the $4 million paid in settle-
18a
ment. There is here no dispute but that the settlement with the
sovereigns 1s in all respects reasonable and proper.
This insurance action was tried jury waived over seven days
from November 13, 1990 to November 29, 1990. The Court
delivers its findings and rulings from the bench in order that
all the parties may promptly understand that Court’s conclu-
sions concerning the facts and its reasoning about the law
which governs the parties’ obligations. The court reserves its
rignt to expand on the legal analysis should further proceedings
eventuate and to grammatically correct, reorder, and generally
clean up its discursive fact finding. No factual finding will,
however, be substantively altered, the court intending this
dictated opinion to provide full compliance with Federal Rule
of Civil Procedure 52 and to enable the prompt entry of judg-
ment herein. The requisite findings of fact and conclusions of
law follow.
Lumbermens Mutual Casualty Company is a mutual insur-
ance company organized and existing under the laws of the
State of Illinois with is principal place of business at Long
Grove, Illinois. At all relevant times Lumbermens has been
engaged in the business of issuing contracts of primary and
excess liability insurance and is licensed to do business in the
Commonwealth of Massachusetts.
Belleville Industries, Incorporated was incorporated in 1972
in the Commonwealth of Massachusetts with its principal place
of business at 740 Belleville Avenue, New Bedford, Massachu-
setts.
Lumbermens brought this declaratory judgment action under
28 U.S.C. Sections 2201 and 2202 to obtain a declaration of
rights and obligations under certain contracts of liability insur-
ance issued by Lumbermens to Belleville. Lumbermens and
Belleville had entered into contracts for primary and excess
liability insurance that provided $10 million coverage for Bel-
leville for the periods from 1973 through 1975, inclusive.
19a
Subject matter jurisdiction exists under 28 U.S.C.
1332(a)(1), since the matter in controversy exceeds the value
of $50,000, exclusive of interest and costs, and there is diver-
sity of citizenship between Lumbermens and Belleville.
Venue is proper in this Court under 28 U.S.C. Section
1391(a) and (c) since both Lumbermens and Belleville, for
purposes of venue, are residents of the Commonwealth of
Massachusetts.
Moreover, the law of the Commonwealth of Massachusetts
governs the substantive issues in this action. Erie Railroad
Co. v. Tompkins, 304 U.S. 64 (1938); Klaxon Co. v. Stentor
Electric Mfg. Co., 313 U.S. 487 (1941).
The insurance policies issued by Lumbermens to Belleville
were standard form comprehensive general liability policies.
The insuring agreement of the Lumbermens policies states in
part that, “The insurer will pay on behalf of the insured all
sums which the insured shall become legally liable to pay as
obligated to because of . . . property damage to which the
insurance applies, caused by an occurrence.”
The insurance policies define “occurrence” as: an accident,
including continuous or repeated exposure to conditions which
results in. . . property damage neither expected nor intended
from the standpoint of the insured.
The insurance policies define “property damage” as: (1)
physical injury to or destruction of tangible property which
occurs during the policy period, including the loss of use
thereof at any time resulting therefrom, or (2) loss of use of
tangible property which has not been physically injured or
destroyed provided such loss of use is caused by an occurrence
during the policy period.
During each of the three policy years in question exclusion
(f), the pollution exclusion, stated that the insurance will not
apply to property damage arising out of releases of products
deemed contaminants except for releases that are sudden and
accidental.
20a
The Court took an extensive view of the facility which
included a tour of the perimeter of the property, examining
the tidal flats and observing the areas of the north trough and
the south trough. During the view the Court not only toured
interior sections of the plant but also observed manufacturing
operations which were substantially similar to the operations
conducted during the period in controversy. Detailed attention
was paid to the area in which the fire, discussed below, oc-
curred and areas adjacent thereto.
Belleville was the owner and operator of a manufacturing
plant and associated property in New Bedford, Massachusetts,
from January 2nd, 1973 until October 27, 1978. The facility
in question was, at all times material hereto, utilized to man-
ufacture electrical capacitors for use by industry in products
utilizing electrical power. This manufacturing process at the
facility by Belleville followed a long-term manufacturing proc-
ess similar in nature which had earlier been carried on for
years by AVX, Incorporated. Polychlorinated biphenyls
(PCBs) were used in that manufacturing process since they
afford a greater protection from fire and provide greater safety
to the consumer than any alternate product. Belleville used
PCBs in its manufacturing process at the Aerovox plant from
January 2nd, 1973 until January Ist, 1977. Prior to January
2nd, 1973, AVX owned and operated the Aerovox plant and
used PCBs in its manufacturing process.
When Belleville purchased the as-ets of AVX, many forrner
AVX employees continued to work at the plant as Belleville
employees. These employees brought to their work at Belleville
certain knowledge gained in the course of their employment
at the AVX plant while it was owned and operated by AVX
prior to 1973. Clifford Tuttle was among the former AVX
employees who later worked for Belleville. Tuttle was the
Vice President of Sales and Marketing at AVX from 1970
until 1972 when he left to prepare to purchase the company’s
electrical products division through the newly formed Belleville
2la
corporation. Tuttle was a founder of Belleville and served as
its president throughout its corporate existence.
In 1971 AVX applied, pursuant to 33 U.S.C. Section 407,
the Refuse Act, for permission to discharge effluent into the
Acushnet River. This application under the Refuse Act fulfilled
the requirements of the Federal Water Pollution Control Act,
33 U.S.C. 1342(a)(4). The formal permit itself dated May 23,
1975, was forwarded to Belleville which filed its first six
months report pursuant to that permit on or about October 17,
1975. .
At all times material hereto Belleville’s operations went
forward under the permit application or the formal permit until
Belleville ceased doing business in 1978.
AVX, and later Belleville, obtained PCBs from the Mon-
santo Chemical Company in the form of blended PCB formulas
sold under the trade name Aroclor. Monsanto was the sole
source of PCBs to AVX and Belleville. Four types of Aroclors
figure in this analysis. These are: 1260, 1254, 1242, and 1016.
Aroclor 1260 is the most toxic. That Aroclor was never used
at this facility. AVX during its operation of the facility used
primarily Aroclor 1254 which was 70 percent nonbiodegrada-
ble. By contrast, Aroclor 1242 was seven percent nonbiodeg-
radable, and Aroclor 1016 was only .4 percent nonbiodegrad-
able.
After purchasing the assets of AVX and establishing its own
manufacturing process at the facility, Belleville used Aroclor
1016 aimost exclusively and Aroclor 1254 only for certain
limited applications.
Over the course of its manufacturing at the facility the use
by volume of the two Aroclors here involved were: Aroclor
1016, 99 percent; Aroclor 1254, | percent.
During the late 1960’s scientists became aware that PCBs
are accumulated in the tissues of many biological species even
when exposure is to very low concentrations of PCBs.
22a
In 1970, Monsanto began to alert AVX to a potential problem
of environmental contamination due to PCBs. Over the next
several years Monsanto provided continuing information re-
garding this potential problem to AVX.
On April 10, 1970, and again on July 16, 1970, Monsanto
issued press releases describing its six-point program, begun
in 1968, to identify and measure PCBs in the environment.
The April 10, 1970 press release reported Monsanto’s an-
nouncement that it was well aware of the concern over possible
environmental contamination by PCBs.
During the summer of 1970, two Monsanto representatives,
William Papageorge and Randall Graham, visited the AVX
facility in New Bedford for the purpose of bringing AVX up
to date on PCB environmental problems. Papageorge and
Graham informed AVX representatives that they ought keep
PCBs out of the water.
Towards the middle or latter part of 1970, Monsanto
routinely included the following cautionary statement on its
invoices to customers who purchased PCB Aroclors from it,
including AVX. This is the statement:
“This product contains polychlorinated biphenyls (PCBs)
which some studies have shown may be persistent, an environ-
mental contaminant, and possibly injurious to certain forms
of bird, aquatic and animal life. Prevent any entry into the
environment through spills, leakage, disposal, vaporization,
reuse of containers or otherwise. Spills, leakages, and waste
product must be collected.”
By January, 1971, John Hutzler, who replaced Abe Kalstein
as AVX’s manager of product engineering, was aware of the
tendency of PCBs to persist in the environment. Kalstein in-
formed Hutzler of the problem of PCB biocumulation in fish
and birds. By 1971, Hutzler knew that PCBs posed a danger
to bird wildlife.
In 1971, Monsanto replaced the PCB formula known as
Aroclor 1242 with Aroclor 1016, a more biodegradable formula.
23a
Monsanto informed AVX that the change to Aroclor 1016 was
due primarily to Monsanto’s concern about alleged environ-
ment hazards relating to PCBs. Monsanto advised AVX that
the purpose of Aroclor 1016 is to produce essentially the same
characteristics as Aroclor 1242 except that higher chlorinated
biphenyls have been removed to help alleviate the PCB pollu-
tion problem.
On October 14, 1971, Hutzler sent a memorandum to various
AVX employees concerning a visit by two Monsanto represen-
tatives. Hutzler noted that there was an increase in published
reports of PCB ecology scares and referred to legislation pend-
ing before the United States Congress, including one bill that
listed PCBs among a long list of materials which are dangerous
to the environment, and the second bill which would prohibit
all shipment of PCBs.
On December 20, 1971, Hutzier circulated an inter-office
memorandum at AVX which stated that Monsanto had been
named in a lawsuit seeking damages of $60 million due to
alleged PCB pollution.
In late 1971, Monsanto sent to AVX a document entitled
“Special Undertaking by Purchasers of Polychlorinated
Biphenyls,” with a cover letter which stated that PCBs had
been found in food and food chains. Monsanto informed its
customers that it would no longer supply Aroclor to them
unless they signed the Special Undertaking thereby agreeing
to indemnify Monsanto for any environmental damages arising
from the use of Monsanto’s PCBs.
Monsanto's Special Undertaking states that the Buyer: is
aware and has been advised by Monsanto that PCBs tend to
persist in the environment; that care is required in their han-
dling, possession, use and disposition; that tolerance limits
have been or are being established for PCBs in various food
products.
It further provided that the Buyer agrees to hold Monsanto
harmless for any claim arising out of the use of PCBs, including
——————
24a
any contamination or adverse effect on humans, marine and
wildlife, food, animal feed, or the environment by reason of
such PCBs.
Along with the Special Undertaking Monsanto sent to
Aerovox an article dated October 10, 1970 by one Carl G.
Gustafson entitled “PCBs — Prevalent and Persistent.”
In describing how PCBs entered the environment, Gustafson
refers to the escape of PCBs from manufacturing plants through
the plant ventilation and exhaust systems into the atmosphere
and through its waste treatment system into sewers or directly
into waterways.
Monsanto notified AVX in writing that PCBs are highly
stable compounds and are not readily biodegradable. There-
fore, when placed in the environment they may be considered
contaminants and may adversely affect some species of animal
and marine life.
Monsanto warned AVX to take every precaution to prevent
any entry of polychlorinated biphenyls into the environment
through spills, usage, leakage, disposal, vaporization, or other-
wise.
Belleville employees were aware that individuals working
in its manufacturing process sometimes developed a skin irri-
tation Known as chloracne and reasonably inferred that this
irritation or rash was related to the use of PCBs in the manufac-
turing process.
Since AVX and Belleville believed that no commercially
viable electrical capacitor could be made without the use of
PCBs, a reliable supply of that chemical was the very life's
blood of this industry.
On February 10, 1972, T. Kenwood Mullare, corporate
counsel to AVX, drafted a memorandum explaining the cir-
cumstances under which AVX had signed the Special Under-
taking required by Monsanto as condition of future sales of
PCBs. Among Other things, Mullare advised that the risks
which AVX would take by signing the indemnity agreement
25a
were in part at least uninsurable. The company’s general lia-
bility policy contains an exclusion, common to the insurance
industry, which states that no coverage is provided for damage
to the environment except damage caused by sudden and acci-
dental occurrences. Therefore, this insurance coverage, looked
at either as product liability or general contractual protection,
would not give protection for damage due to a gradual buildup
of PCBs in the environment.
On March 21, 1972, Tuttle received a copy of an Aerovox
inter-office memorandum which reflected Monsanto's in-
creases in the price of supplying Aroclor 1016. Tuttle was told
by Monsanto representatives that increases in the price of Aroc-
lor were due to Monsanto’s efforts to deal with concerns about
the environmental effect of PCBs.
In April 1972 Monsanto notified Aerovox: We wish to
strongly reemphasize with you the importance of avoiding
direct or accidental PCB contamination of feed, food and pack-
aging material, and of preventing PCBs from escaping into
the environment. We direct your attention to the recent FDA
notice of proposed rule making on PCBs. . . . If PCBs are
still present at your locations you are urged to thoroughly
review your procedures and inspect your facilities to insure
that extreme care is taken in the handling, use, storage and
disposal of these materials.
Similarly, the 1972 invoices received by AVX trom Mon-
santo contain wamings against allowing the entry of PCBs
into the environment due to their persistent and possibly
dangerous tendencies.
Late in 1972, Tuttle made an offer to the present of AVX,
one Daniel McQuilan, to buy the AVX electrical products
division and the New Bedford facility. Tuttle then left AVX
to form Belleville, raise capital, and complete the negotiations
for Belleville’s purchase of AVX’s AC oil capacitor manufac-
turing business.
26a
On December 19, 1972, Belleville purchased all the assets,
properties, business and good will of AVX _ nonceramic
capacitor business.
On January 2nd, 1973, Belleville assumed from AVX the
assets and liabilities outlined in the previously signed purchase
agreement. After buying the AVX assets Belleville continued
to make the very same line of AC oil capacitor products that
AVX had made at the facility.
From January 2nd, 1973 to January |, 1977, approximately
90 percent of Belleville’s product lines consisted of capacitors
containing PCBs. Belleville at all times considered that it ran
an environmentally safe, progressive and largely incident free
operation.
Over the course of Belleville’s manufacturing operations
PCBs came to be handled with increasing care until they were
finally discontinued altogether.
Over the time when PCBs were used by Belleville they were
routinely handled in the following fashion. Aroclor oil deliv-
ered to Belleville was transferred into storage tanks in the
pump room located in the basement of the plant. From the
storage tanks the Aroclor was pumped up into impregnation
tanks on the second floor of the plant. After the completion
of an impregnation cycle, the Aroclor in the tanks was piped
back downstairs into separate oil storage tanks to be filtered.
After filtration, the oil was piped back into the original storage
tanks for reuse in the impregnation process.
To begin the impregnation cycle, a tank man opens the lid
of an impregnation tank and places wire baskets filled with
preassembled capacitor canisters into the tank. The tank man
then seals the tank shut and draws a vacuum inside the impreg-
nation tank by means of a vacuum pump located in the pump
room and connected to the impregnation tank on the second
floor. The Aroclor oil is then pumped into the impregnation
tank.
27a
After allowing sufficient time for impregnation of the
capacitor with Aroclor oil, the oil is cooled by a separate
noncontact cooling water system sent around the outside of
the tank in an independent piping system. The Aroclor oil left
in the tank after the impregnation process is then piped into
the so-called dirty oil storage tank. The dirty oil is oil contami-
nated with water or other impurities due to touching the
capacitors. The dirty oil storage tanks are located in the pump
room.
After the impregnation process is completed, the tank man
opens the tank and removes the wire baskets containing the
impregnated capacitors. A drip pan is used to catch the oil
dripping from the baskets removed from the tank.
After impregnation, capacitors are taken from the tank room
for final process and final heat and voltage testing.
When PCBs were dripped or spilled onto the floor of the
pump room, Belleville employees cleaned up the drips or spills
by sprinkling Fuller’s earth on the floor to absorb the oil or
by mopping or squeegeeing the oil into sump pits. The contents
of the sump pits were routinely pumped into the north trough
until 1974 when the sump pits were disconnected from that
trough.
In the course of the manufacturing process at the facility,
Aroclor vapors were generated. Exhaust fans at the facility
released Aroclor vapors into the air surrounding the facility.
Upon Belleville commencing manufacturing operations at
_ the facility, Monsanto required it to execute a copy of the
“Special Undertaking by Purchasers of Polychlorinated
Biphenyls” in order to receive a continuing supply of Aroclor.
Tuttle, as president of Belleville, signed the Special Undertak-
ing on Belleville’s behalf and returned executed copies to
Monsanto on January 8, 1973.
During normal weather conditions PCBs that had been
routinely placed into and upon the mud flats at the eastern
28a
edge of the facility bordering the Acushnet River during the
course of many years of manufacturing operations at the facility
by AVX were released into the environment on a gradual,
ongoing basis.
An intense fropical storm hit the New Bedford area during
the period December 16-18, 1973. In a city with an annual
rainfall of approximately 40 inches, this storm deposited 5.31
inches in one 24-hour period. Between 8:00 a.m. and I1 a.m.
on December 17th, 1973, more than 2.75 inches of rain fell.
Witnesses who had lived their lives in the area were able to
identify only one other storm, a hurricane in 1954, which
exceeded this 1973 storm in intensity. Expert testimony con-
firms that a storm of such intensity occurs in New Bedford
less than once every seven years.
This storm had two significant effects each of which warrants
separate analysis. First, the Court finds that the tidal mud flats
just east of the facility, which were covered by waters of the
Acushnet River and New Bedford Harbor once during each
tidal cycle, were in December 1973, and had been for years
before, impregnated with PCBs as a result primarily of AVX
manufacturing process over those years that the facility and
to a lesser extent by Belleville’s manufacturing process since
1972. PCBs discharged into the Acushnet River over the years
from the north trough settle out to some degree on the tidal
flats. Some PCBs are volatilized, that is, they are dispersed
into the air as part of the evaporation process of the water
vapor. Some are suspended in the water, but each tidal cycle
suspended less since the PCBs being heavier than water tend
to settle out. Certain of the PCBs may be found in the fluff,
that is, the interface between the surface of the tidal flats and
the water, that is, that portion of the tidal flats approximately
one millimeter thick which tends to be stirred up by the flow
of water across the flats. Others come to be deposited more
deeply into the tidal flats themselves, although a process of
29a
bioturbation tends gradually to move PCBs toward the surface
of mud flats where they have been deposited due to biological
activity. A few millimeters of material gets resuspended each
tidal cycle.
The geography of the area itself must also be considered.
The Belleville facility is located on the west bank of the
Acushnet River where that river widens out to merge with
New Bedford Harbor. Not far north of the facility the river is
only 30 to 40 feet wide. But in the area of the facility is a
hundred to one hundred fifty feet wide with mud flats on the
western bank and marshlands on the eastern. During the storm
the mouth of the river turns into a sluiceway. This is precisely
what happened during the storm of December 1973.
In view of the extraordinary rainfall, streamflow at the mouth
of the Acushnet River increased tenfold with an accompanying
increase in the velocity of the water flowing over the PCB
impregnated tidal flats. Indeed, the velocity of flow can be
calculated to have reached 30 centimeters a second. This is a
significant increase over average ambient conditions and in-
deed does not take into account the effect of the wind on the
surface of the water. Had that wind effect been calculated as
well the velocity of the water over the surface of the flats
would increase. Assuming an area of PCB impregnated tidal
flats of 33,000 square feet, approximately 140 pounds of PCBs
were moved by the force of this storm from the mud flat
surface where they had previously been deposited to other
areas of the harbor floor either not yet tainted by PCBs or not
yet tainted to the extend as existed after this storm.
The movement of these PCBs from the tidal flats which are
owned by Belleville other areas of the harbor constitutes a
release of a contaminant which subjects Belleville to liability
under CERCLA. Accordingly, Belleville argues that the re-
lease occasioned by the 1973 storm was both sudden and acci-
dental and since it is outside the reach of the pollution exclusion
30a
Lumbermens must indemnify Belleville for the liability oc-
casioned by such release. The Court disagrees.
This process, the Court concludes, was neither sudden nor
accidental. Rather, it was a natural process of spreading PCBs
caused by the gradual movement of the molecules due to the
water 2 the wind. True, the December 1973 storm may have
speeded up the process but the storm in no way changed its
character. The natural movement of PCBs from tidal flats
owned by the facility into other areas cannot be considered
sudden as that word is used in construing the pollution ex-
clusion under the laws of Massachusetts. Even if the process
were sudden, however, it certainly was not accidental. The
PCB impregnated tidal flats were never the subject of any
protective, reclamation, or conservation efforts by either AVX
or Belleville.
Indeed, AVX appears to have dumped defective capacitors
onto the tidal flats and allowed them to rust out thus releasing
the PCB impregnation into the environment. Belleville for its
part, while it may have taken steps to improve the nature of
its operations within the facility, did nothing about the tidal
flats. It took no steps, commenced no reclamation process. In
short, it established no standard or routine of procedure against
which this storm could in any way be considered an accident.
What happened in December 1973 on the tidal flats was the
natural consequence of years of improvident PCB disposal.
The second aspect of the storm concerns what happened
within the plant itself. During the height of the storm the streets
around the facility were flooded. Indeed, in one area of Bel-
leville Avenue a rowboat was seen to make its way along the
street.
Inside the plant the water table rose, first flooding an unused
elevator pit, next flooding the sump pits, and finally, rising
to a height where the entire floor of the storage area locker
room and shipping area was inundated.
3la
Electrical power failed. In the darkness, jets of water, six
inches high, started up through cracks in the floor of the pump
room where the Aroclor oil tanks were located. These jets of
water were occasioned by the extent of water pressure from
the rising water table below and around the plant. In the boiler
room, which was a higher level, employees took care to tighten
the stuffing boxes of the boilers.
As the waters receded they took with them, in suspension,
certain molecules of PCBs which were washed from the floors
and the lower walls of the interior of the facility by the flooding
_ itself. Certain of these PCB molecules flowed out around the
door or doors which the Court infers were located at the eastern
end of the facility. At present, there is a door at that eastern
end of the facility which gives access to a storage area. How-
ever, during the view the Court was informed, and it is not
disputed, that the eastern face of the facility has been recon-
structed and does not now exist in the manner as it stood in
December 1973. Nevertheless, given the need to have access
to the parking lot from that end of the facility, as well as to
have access to the tidal flat area, the Court infers that in
December 1973 there was at a minimum a pedestrian door
located on the first level of the plant. Flood waters receded
under and around that door carrying with them PCBs washed
from the floor and walls of the facility. Other PCBs were
mopped up and pumped out of the facility once the sump
pumps were returned to operation. Still other PCBs left the
plant as a consequence of the December storm when the water
receded back down through the cracks in the plant’s floor
carrying with it the PCBs released from the interior of the
facility.
All these various releases of PCBs from the area of the
facility subject Belleville to liability under CERCLA. Only
one type of release, however, is sudden and accidental so as
to subject Lumbermens to liability. The outflow of water
through cracks in the floor is both sudden and accidental, but
32a
that outflow does not constitutes a release. PCBs working their
way out through the cracks in the floor find themselves under
the plant and part of the normal underground water system.
Those PCBs which worked their way through that system to
be released from the geographic boundary of the facility were
not released in a sudden or accidental manner. Rather, they
were released by the natural progression of the flow of under-
ground water. As there is nothing accidental about such flow,
such a release of PCBs falls within the pollution exclusion.
Likewise, the restarting of the sump pumps qualifies as
sudden. Indeed, there appears to have been an emergency in
the plant. Starting the pumps constitutes the first and most
effective line of defense. Pumping out PCB impregnated water
into the environment is not, however, accidental. The PCBs
leached from the floor and walls of the plant and suspended
in the flood waters did not escape from the facility by accident
in this manner, rather, they were pumped out in an attempt to
dry out the plant’s interior. The nonaccidental nature of this
conduct can best be understood were the PCBs in this case to
be analogized to radioactive elements in a nuclear power plant.
A mishap in a nuclear power plant which resulted in the inten-
tional pumping out of radioactive impregnated water would
hardly be considered an accident. The sole escape of PCBs
which does qualify both as sudden and accidental are the PCBs
which escaped over the transom and around the door in the
eastern face of the facility as the flood waters ran out of the
basement as part of the receding flow of the Acushnet River
into New Bedford Harbor.
This escape of PCBs was sudden. After all, the release was
by operation of flood waters themselves rather than through
any natural underground waterflow or natural erosion of sed-
iments within the harbor. What’s more, it was accidental in
the sense that the release was both unexpected and occurred
without the assistance of any human agency.
33a
The Court therefore rules that solely with respect to that
relatively small discharge of PCB impregnated water into the
Acushnet River and New Bedford Harbor, Lumbermens is
liable under the terms of the policy then in effect to indemnify
Belleville. :
By 1974, Belleville knew that some ecologists considered
PCBs to be dangerous to the environment. And at a spring
meeting of the Electronics Industry Association Tuttle learned
that the United States Environmental Protection Agency was
planning to issue regulations with respect to PCB usage. Tuttle
discussed the matter with others at Belleville since they recog-
nized that some release of PCBs into the environment was an
inevitable result of the manufacturing process used at that
facility and that if Belleville continued its normal use and
handling procedures in its manufacturing operations it would
not be able to meet the government’s proposed discharge stand-
ards for PCBs.
In March 1974, Tuttle notified Monsanto that Belleville
wished to take advantage of Monsanto’s offer to analyze Bel-
leville’s discharges of PCBs. Accordingly, Monsanto began
to test Belleville’s discharge samples for PCBs.
On August 6th, 1974, Tuttle wrote to his congressman, the
Honorable Gerry E. Studds, to request assistance in obtaining
a three year grace period or delay in the enforcement of certain
proposed federal regulations regarding the use of PCBs.
On October 10, 1974, Monsanto returned to Belleville the
results of its analysis of effluent samples taken from the facility
which analysis reflected the presence of Aroclor 1016 and
Aroclor 1254 in Belleville’s liquid discharges.
On October 25, 1974, Norman Butterworth, the environ-
mental control officer at Belleville, circulated a memorandum
regarding Aroclor handling procedures. The memorandum
stated in part that PCBs are deemed by some ecologists to be
very dangerous to the environment since they are essentially
34a
nonbiodegradable and can accumulate in the fatty tissues of
fish, birds, et cetera. The memorandum was intended to bring
home the realization that this material, i.e., PCBs, must be
handled carefully if we are to prevent very serious future prob-
lems. ‘
In 1974 Tuttle formed the Electronics Industry Association
PCB AD Hoc Committee. He served as chairman of this com-
mittee for the next several years directing its efforts towards
lobbying to reduce the proposed PCB discharge standards being
considered by EPA and Congress. Throughout 1975 Tuttle
regularly sent letters to the members of the committee and
prepared and circulated the minutes of the committee meetings.
Tuttle circulated various information concerning the proposed
federal regulations of PCB use, including the revised EPA
advance notice on the proposed rule making for toxic pollutant
effluent standards. He also collected information regarding the
PCB use and discharge levels of other members of the capacitor
manufacturing industry. During this period Belleville con-
tinued to monitor its own PCB discharge levels regularly.
On September 24, 1975, a fire broke out in a wooden ven-
tilation shaft which led from the tank room on the second floor
of the plant to the sawtooth area of the roof. The fire was
caused by a malfunction in a fan and motor that were housed
in the ventilation shaft. The shaft as directly above a partially
enclosed stairway between the impregnation room and the
vacuum pump area of the floor below. Due to the proximity
of the impregnation room and the location of the vacuum
pumps, there were concentrations of Aroclors on the walls,
roofs and floors of the plant in the vicinity of the area of the
fire. Belleville personnel were unaware of the fire until notified
by employees of a company located nearby, which employees
notified the New Bedford Fire Department.
In order to extinguish the fire, the New Bedford Fire Depart-
ment had to utilize two-to-three man hoses from both inside and
35a
outside the plant. The hoses discharged between 375 gallons
and 500 gallons per minute and had a pressure at the nozzle
head of 50 pounds per square inch. Discharge from the hoses
is sufficient to knock over steel targets at 30 feet. The force
of the water displaced PCBs which had adhered to the surface
of the ventilation shaft.
Firemen went up to the sawtooth roof and used axes and
pike poles to remove the roof and adjoining areas of the building
in order to totally quell the fire. This further discharged PCBs.
Copious amounts of water, likened to a waterfall, flowed down
the stairwell and over the vacuum pumps. Water also poured
through the impregnation area where PCBs were utilized to
fill the capacitors. This caused release of PCBs into the water
from the fire hoses.
Beljeville contends that this event gave rise to the sudden
and accidental release of PCBs into the environment. Once
again, the specific nature of the releases must be analyzed.
First, it is true that the force of the water from the firefighters’
hoses, especially those directed upwards from inside the plant,
caused a spray of PCB impregnated water to be released into
the environment above the facility. For aught that appears,
however, this release was but momentary. True, it was sudden
and accidental, but momentary.
There is no credible evidence that the flume of water shot
up from inside, fell to earth anywhere other than within the
geographic boundaries of the facility. Once there, it ran off
the parking lot, or down through the storm sewers, in the
normal fashion of rainwater — a release arguably sudden but
certainly not accidental.
The water cascading down inside the facility was pumped
out by the sump pumps in the normal manner. Here again,
while the flow of water within the facility carrying newly
moved PCBs was both sudden and accidental, the release of
~ the PCB impregnated water by virtue of the operation of the
36a
sump pumps was neither. It was not sudden since the sump
pumps operated in the fashion they were intended to, and had
operated for years and years; nor was it accidental. The release
was intentional. And the agency of such release was designed
by the operators of the facility themselves, i.e., the sump
pumps.
The fire, thus, does not fall outside the pollution exclusion
in any respect and is not the ground for assigning liability to
Lumbermens.
On September 29, 1975, Butterworth responded to the
EPA’s earlier request for information regarding Belleville’s
use and disposal of PCBs by providing data regarding the
levels of PCB discharges from the facility, the number of
pounds of Aroclor purchased by Belleville each year, and the
number of pounds of waste Aroclor disposed of each year by
Belleville by various methods.
Beginning on November 7, 1975, Butterworth asked all
supervisors to rigidly enforce a policy of no discharges or
placement so liquids or solids in the north trough except from
cooling waters and Hot Tin Room rinsing waters. Butterworth
specified that the policy meant there should be absolutely no
oil purges, oil placements, degreaser residue placements, sump
oil discharges, papers or other debris made into the discharge
stream. Butterworth emphasized that it is extremely important
that all supervision on all shifts realize that we can no longer
tolerate past practices and that failure to enforce our new policy
can result in possible fines, possible plant (or operation) shut-
down, and very substantial expenditures to correct discharge
conditions which we can control ourselves through good house-
keeping and good common sense.
A month later Butterworth stated in an inter-office memoran-
dum that it is extremely important that we keep Aroclor losses
to the environment at an absolute minimum. Butterworth out-
lined a series of actions recommended to minimize such losses.
37a
On December 22nd, 1975, EPA issued a press release stating
that the United States must move toward totally eliminating
the use of polychlorinated biphenyls as rapidly as possible and
must in the meantime make ever effort to ensure that PCBs
do not enter the environment.
On December 30, 1975, three inspectors from the EPA and
one representative of the Massachusetts Department of En-
vironmental Quality Engineering, visited the facility to prepare
for the sampling of its liquid discharges. The visit, attended
by Tuttle and Butterworth, included a tour of the facility’s
Aroclor handling operations and the north trough where PCB
sampling was conducted. |
In January 1976, the EPA began its first sampling of liquid
discharges from the facility, and at the same time began testing
the waters of New Bedford Harbors for PCB content. Results
from sampling conducted by the EPA in January 1976 found
that the facility was discharging up to 9.9 ounces of PCBs daily.
On March |, 1976, Butterworth notified Belleville manage-
ment that analyses performed by the EPA of various discharge
samples taken at the facility showed a PCB level of 50.6 parts
per billion in discharges from the north trough. The EPA
continued to monitor the PCB discharges from the facility in
1976 and Belleville also continued to conduct its own sampling
program. Belleville repeatedly received analytical results
which confirmed the continued presence of PCBs in Belleville’s
effluent discharges.
Throughout the spring of 1976 Belleville knew that the EPA
planned to regulated PCB discharge levels from the facility.
Belleville executives took steps seeking to delay or liberalize
the proposed PCB discharge levels claiming that they were
“unrealistic at this time.”
During that same year, Belleville, believing there were PCBs
in the concrete which lined the north trough that ran alongside
the northern outer wall of the plant down to the mud flats of
38a
the Acushnet River, lined the trough to prevent the leaching
out of PCBs from the concrete. Belleville also set up a waterless
hand cleaning station at the facility to help minimize the entry
of Aroclor into the environment.
On September 17, 1976, Tuttle sent a letter and several
newspaper articles concerning the discovery of PCBs in the
Acushnet River and New Bedford Harbor to Marshall Butler,
the president of AVX. Tuttle’s letter was drafted by Belleville’s
outside counsel, Bert Putman, Esq., and reviewed by Bel-
leville’s chief financial officer, Ronald Murphy before it was
sent to Butler.
The letter reflects Tuttle’s anticipation that at some point
that state might pursue a course of action mandating a cleanup
of the river and an assertion of liability against past users of
PCBs for all or any portion of the cleanup costs.
The letter further states that EPA has recently discovered
the presence of high quantities of PCBs in the river and harbor,
that the state has chosen to single out our company, i.e.,
Belleville, and Cornell-Dubilier Electrical Corporation, and
that there would appear to be some potential liability if a river
cleanup program is mandated.
One of the newspaper articles enclosed with Tuttle’s letter
detailing the Commonwealth’s then current plans for cleaning
up the Acushnet River. Tuttle sent additional correspondence
and news clippings concerning the PCB issue in New Bedford
to Butler in June and July 1977.
On October 4, 1976, Belleville was formally notified that
Monsanto would cease the sale and delivery of all PCB products
used a dielectrics effective October 31, 1977.
On March 8, 1977, the public health commissioner of the
Massachusetts Department of Public Health directed that bot-
tom feeding fish, shellfish, and eels should not be taken for
eating from the Acushnet River area of health reasons due to
PCB contamination.
39a
Effective July 1, 1977, Belleville’s federal discharge permit
specified that no more than 10 quarts per billion of PCBs could
be discharged into the Acushnet River. In view of this new
restriction Belleville instructed all of its foremen and depart-
ment heads in May of 1977 that there can be absolutely no
dumping of Aroclor or any oil or solvent into any of our sumps,
hand basins, troughs, et cetera.
Belleville sold the facility to Aerovox Incorporated on Sep-
tember 28, 1978. In connection with that sale, all the liabilities
resulting directly or indirectly from the use or disposal of PCBs
by Belleville or its predecessors were expressly retained by
Belleville.
On December 20, 1983, Belleville was sued by the United
States and the Commonwealth of Massachusetts for violation
of CERCLA and various state and federal laws.
On August 27, 1984, Lumbermens was notified that Belle-
ville was named a s a defendant in this lawsuit and a defense
by Lumbermems and indemnity was demanded and this de-
mand was renewed on September 11, 1984.
The Court rules that this notice was reasonable notice of an
occurrence under the applicable insurance policies. Indeed, it
was impractical for Belleville to give any notice of any occur-
rence prior to the enactment of CERCLA. The simple fact is
that while Belleville management knew for years that PCBs
could well be the cause of adverse regulatory actions, Belleville
neither expected nor intended any property damage or personal
injury from its use of PCBs and had no knowledge that any
such property damage or personal injury was occurring. True,
it was aware of the potential of injury to the biota, that is, to
plants and animals. Belleville executives, however, did not
consider such injury to constitute property damage and, until
the enactment of CERCLA they were on relatively firm ground
in this view. Their view about the matter was confirmed, if
anything, by the summary dismissal of lawsuits brought by
lobsterers for injury to their lobstering grounds in 1981.
40a
The policies in question do not require an insured to com-
municate speculations or threats of lawsuits, only actual claims
or lawsuits need require notice to be given. The very language
of the policy indicates clearly that notice is required if claim
is made or suit is brought and this Belleville did within a
reasonable time.
Belleville is also required to give notice in the event of an
occurrence. However, given the difficulty that the courts them-
selves have had in defining what constitutes an occurrence,
under these policies it would be unreasonable to hold Belleville
to such clairvoyance that it ought have given notice any earlier
than it in fact did in this case. Belleville simply did not expect
until 1983 that it could be held liable for any property damage
as a result of its discharge of PCBs. Of course it understood
that regulatory activities could cause sanctions to be imposed
against it, could result in litigation with government entities.
and indeed could cause it to be shut down. But at no time
prior to the commencement of the instant litigation could it
reasonably have believed that it was causing property damage
to an insurable interest. Its view was that birds and fish don’t
count. CERCLA changed that view. It would be an unreason-
able interpretation of the policy language, however, to vitiate
Belleville’s coverage in these circumstances where at the time
it thought no occurrence within the policy terms had occurred
and where Lumbermens has striven mightily to the present
day contending that no occurrence in fact ever took place.
Belleville has thus established that it gave reasonable notice
of an occurrence under the insurance policies and that the
property damage liability which it settled for the payment of
$4 million in the underlying action brought by the sovereigns
was neither expected nor intended from its standpoint. Whe
is more, it has proved that at least a small fraction of the
releases which took place during the year 1973, that is, the
releases of PCBs which were washed from the walls and floor
4la
of the facility and which suspended in the floodwaters, ran
out around the east door of the facility into the Acushnet River
and New Bedford Harbor, were both sudden and accidental.
As to these releases, during 1973, then, Lumbermens is liable
to indemnify Belleville.
With respect to the remaining policy years at issue, 1974
and 1975, Belleville has failed to prove that any releases during
these periods were sudden dnd accidental. All such releases
are, therefore, excluded from coverage under the pollution
exclusion and Belleville cannot be indemnified for any such
releases by Lumbermens.
With respect to the sudden and accidental releases in 1973,
it falls to Lumbermens to prove what percentage of the property
damage occasioned during the year 1973 and continuing into
the period following the enactment of CERCLA is due to
covered and uninsured risks. The Court can readily infer that
by far the bulk of the releases in 1973 which subject Belleville
to liability to the sovereigns were in no way sudden or acciden-
tal and thus do not subject Lumbermens to any liability. Indeed,
it is only a portion of the releases occasioned by the storm in
December of 1973 that are covered. Even so, there remains a
very real issue whether Lumbérmens can bear its burden of
allocation or whether in light of the factual complexity of the
issues the Court can do more than roughly approximate as
between covered and uninsured risks entering judgment for
Belleville for something less than fifty percent of the $4 million
it has paid in settlement.
On the present record, however, such allocation is both
possible and reasonable. It will be recalled that at the time of
the December 1973 tropical storm Belleville’s operations were
devoted 99 percent to manufacturing involving Aroclor 1016,
and Aroclor that is four-tenths of one percent biodegradable.
The Court infers that the top layer of deposited PCBs on the
floor and walls of the facility was, in December 1973, com-
42a
prised almost entirely of Aroclor 1016. The Court further infers
that it is this particular Aroclor that was washed out of the
east door by the receding floodwaters during the course of the
storm.
It will be remembered that in order for liability to attach to
Belleville there must be a release from the facility which con-
tinues to cause damage during the period following the date
of the enactment of CERCLA. /n re Acushnet River and New
Bedford Harbor Proceedings re Alleged PCB Pollution, 716
F.Supp. 676, 684 D. Mass. (1989).
The Court thus concludes that all but four-tenths of one
percent of the Aroclor 1016 suddenly and accidentally washed
out of the facility during the tropical storm had biodegraded
into other substances prior to the enactment of CERCLA.
Four-tenths of one percent of $4 million is $16,000. In light
of the biodegradability of Aroclor 1016 and the small percen-
tage of sudden and accidental releases by Belleville, in com-
parison to the uninsured releases, this sum represents the most
accurate allocation of damages.
Accordingly, judgment shall enter declaring that as to the
1973 insurance policy only Lumbermens is liable to indemnify
Belleville for property damage occasioned by the sudden and
accidental release of PCBs. Such indemnification is awarded
in the sum of $16,000.
So ordered.
William G. Young
United States District Judge
Date: January 4, 1991
407 Mass. 675 430 675
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc.
LUMBERMENS MUTUAL CASUALTY COMPANY VS.
BELLEVILLE INDUSTRIES, INC.
Suffolk. March 7, 1990. - June !4, 1990.
Present: Liacos. CJ. Witxins, Aprams, Lyncu, & Greaney, JJ
Insurance, Comprehensive liability insurance, Pollution exclusion clause,
Defense of proceedings against insured, Coverage, Construction of pol-
icy. Contract, Insurance, Construction of contract. Supreme Judicial
Court, Certification of questions of law. Words, “Sudden,” “Ac-
cidental.”
In construing, as matter of Massachusetts law, an exception to the pollu-
tion exclusion clause contained in a policy of comprehensive general
liability insurance, providing, “[T]his exclusion shall not apply if the
discharge . . . [of pollutants] is sudden and accidental,” this court held
that the word “sudden,” in conjunction with “accidental,” was unam-
biguous and had a temporal element, that is, only an abrupt discharge
or release of pollutants would fall within the exception and thus be cov-
ered by the policy. [677-682]
Where language in the poilution exclusion clause contained in a policy of
comprehensive general liability insurance was unambiguous, this court
had no occasion to consider either the drafting history of the clause or
statements made by insurance company representatives concerning the
intent of the drafters. [682-683]
In reply to a question of Massachusetts law certified to it by a Federal
court, this court expressed the view that a declaratory judgment pro-
ceeding under G. L. c. 231A appears to be the only procedure clearly
availiable in all circumstances for determining whether, in light of the
allegations in a particular complaint, an insurer has a duty to defend an
action against its insured. [683-686]
This court declined to answer a question of law certified to it by a Federal
court where the record in the Federal case revealed substantial issues of
fact and where the certification order did not contain the statement of
facts required by S.J.C. Rule 1:03, § 3(2). [686-688]
676 44a 407 Mass. 675
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc.
CERTIFICATION of questions of law to the Supreme Judi-
cial Court by the United States District Court for the Dis-
trict of Massachusetts.
Timothy C. Russell of the District of Columbia (Michael
S. Greco with him) for the plaintiff.
David A. McLaughlin for the defendant.
William M. Savino, Stephen J. Smirti, Jr., Gary D.
Centola, & Laurence Levy of New York, & Cynthia J. Co-
hen for Fireman’s Fund Insurance Company joined in a
brief.
The following submitted briefs for amici curiae:
Wm. Gerald McElroy, Jr., Janet L. R. Menna & Karl S.
Vasiloff for Employers Insurance of Wausau.
James L. Ackerman for Aetna Casualty & Surety Co.
Howard T. Weir of the District of Columbia, Brian T.
Kenner, Martin C. Pentz, Maria Raia Hamilton, Richard
W. Benka & Edward J. Stein for AVX Corporation, &
others.
Thomas W. Brunner, James M. Johnstone & Lyn S.
Entzeroth of the District of Columbia, & Peter G. Hermes
& Molly H. Sherden for Insurance Environmental Litigation
Association & another.
WILKINS, J. A judge of the United States District Court
for the District of Massachusetts has certified questions of
law to us, pursuant to S.J.C. Rule 1:03, 382 Mass. 700
(1980), that arise out of a dispute between Lumbermens
Mutual Casualty Company (Lumbermens) and its insured,
Belleville Industries, Inc. (Belleville).' Belleville is one of the
defendants in an action brought by the United States and the
Commonwealth of Massachusetts in the United States Dis-
trict Court for the District of Massachusetts alleging that the
defendants are liable for the polychlorinated biphenyl (PCB)
pollution of New Bedford Harbor. In the mid-1970s, Belle-
ville used PCBs in manufacturing electrical capacitators in a
*At the time the judge certified the questions to us, a similar dispute
between Aerovox, Inc., and Fireman’s Fund Insurance Company was also
before him. That dispute, however, was settled before oral argument in
this court.
407 Mass. 675 — 677
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc.
plant it owned on the east bank of the Acushnet River, which
flows into New Bedford Harbor. The background for the cer-
tification of the questions of law appears in Jn re Acushnet
River & New Bedford Harbor: Proceedings Re Alleged PCB
Pollution, 725 F. Supp. 1264 (D. Mass. 1989), which we
shall refer to hereafter as Acushnet River. The first set of
questions concerns a dispute over the proper interpretation of
an exception to the pollution exclusion clause in the compre-
hensive general liability policies that Lumbermens issued to
Belleville. The second question deals with how an insurer
might effectively terminate its duty to defend an action when
the complaint alleges a claim that, on its face, falls within
the coverage of the policy, but it appears from the known
facts that the claim is entirely or almost entirely outside the
policy coverage. The third question concerns which of the
successive policies Lumbermens issued to Belleville provide
coverage for damage caused by the occurrences. In addition,
the judge has offered us an opportunity to comment on any
other aspect of his discussion of Massachusetts law.
Acushnet River, 725 F. Supp. at 1280-1281. We do not,
however, see any additional matter on which we wish to
comment.
1. In Belleville’s comprehensive general liability insurance
policy, Lumbermen’s agreed, among other things and subject
to certain exclusions and exceptions, to provide coverage for
liability due to property damage caused by an occurrence.
An “occurrence” is defined in the policy as “an accident .. .
which results in . . . property damage neither expected nor
intended from the standpoint of the insured.” For the pur-
poses of this case, the judge and the ‘parties have assumed
that the State and Federal governments, in their underlying
claims, seek to recover for property damage caused by an
occurrence.
Our focus has been directed to exclusion (f), the so-called
pollution exclusion clause, which states that no insurance ap-
plies to property damage “‘arising out of the discharge, dis-
persal, release or escape of smoke, vapors, soot, fumes, acids,
alkalis, toxic chemicals, liquids or gases, waste materials or
678 “ta 407 Mass. 675
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc.
other irritants, contaminants or pollutants into or upon land,
the atmosphere or any water course or body of water; but
this exclusion does not apply if such discharge, dispersal,
release or escape is sudden and accidental” (emphasis sup-
plied). In this case, Belleville argues that the exclusion does
not apply to deny coverage because the releases of pollutants
at issue in the underlying case were both “sudden and acci-
dental” within the meaning of those words in the Lumber-
mens policy.
The certifying judge recognized that there is no unanimity
of opinion, even within Massachusetts, concerning the proper
interpretation of the “sudden and accidental” exception to
the pollution exclusion clause. Acushnet River, 725 F. Supp.
at 1279. He noted Shapiro v. Public Serv. Mut. Ins. Co., 19
Mass. App. Ct. 648 (1985), in which the Appeals Court had
concluded that the clause was ambiguous and, theréfore, pro-
vided coverage for the consequences of a gradual discharge
of a pollutant. Acushnet River, 725 F. Supp. at 1267 n.7,
1279. He recognized, on the other hand, that another judge
of the United States District Court for the District of Massa-
chusetts had not followed the holding in the Shapiro case
and had questioned whether this court would do so. /d. at
1279, citing C.L. Hauthaway & Sons Corp. v. American
Motorists Ins. Co., 712 F. Supp. 265, 268-269 (D. Mass.
1989). Indeed, the certifying judge himself rejected the Sha-
piro holding and concluded that the words “sudden and acci-
dental” were not ambiguous. Acushnet River, 725 F. Supp.
at 1267-1268 & nn.7-8.? But see Allstate Ins. Co. v. Quinn
Constr. Co., 713 F. Supp. 35, 41 (D. Mass. 1989), accepting,
in dicta, the Shapiro opinion as authoritative.
*For other cases in which a Federal judge has declined to follow a State
intermediate appellate court's conclusion that the language is ambiguous
and has instead expressed the view that the State's highest court would not
follow the intermediate appellate court, see FL Aerospace v. Aetna Casu-
alty & Sur. Co., 897 F.4d 214, 219-220 (6th Cir. 1990); State v. Amro
Realty Corp., 697 F. Supp. 99, 109-110 (N.D.N.Y. 1988); Borden, Inc. v.
Affiliated FM Ins. Co., 682 F. Supp. 927, 929 (S.D. Ohio 1987), affd
without op., 865 F.2d 1267 (6th Cir.), cert. denied, 110 S.Ct. 68 (1989).
407 Mass. 675 47a 679
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc
Although the certifying judge announced his construction
of the exception in the pollution exclusion clause, he certified
to us three questions concerning that issue: “(a) Is the word
‘sudden’ as appearing in the pollution exclusion clauses at is-
sue in this case unambiguous? (b) If the answer to question
(a) above is yes, does that term have a temporal quality? (c)
If the answer to question (b) above is yes, what considera-
tions ought this Court employ in determining which events
qualify as ‘sudden’?” Acushnet River, 725 F. Supp. at 1279.
The sudden event to which the exception in the pollution
exclusion clause applies concerns neither the cause of the re-
lease of a pollutant nor the damage caused by the release. It
is the release of pollutants itself that must have occurred
suddenly, if the exception is to apply so as to orovide cover-
age. The exception thus focuses on the circumstances of the
release. In deciding whether there was an occurrence, on the
other hand, the focus of the inquiry is on the property dam-
age, asking whether it was expected or intended from the in-
sured’s point of view. Courts that have failed to appreciate
this distinction have led themselves to identify an ambiguity
in the policy language that does not exist. See American Mo-
torists Ins. Co. v. General Host Corp., 667 F. Supp. 1423,
1427-1429 (D. Kan. 1987), discussing the mistreatment of
the pollution exclusion clause by certain courts. Other courts
have construed “sudden” in isolation without recognizing the
significance of the companion word “‘accidental.”” See Claus-
sen v. Aetna Casualty & Sur. Co., 259 Ga. 333, 335 (1989).
See also Note, The Pollution Exclusion Clause Through the
Looking Glass, 74 Geo. L.J. 1237, 1240 (1986), criticizing
judicial treatment of the pollution exclusion clause.* We, of
*“Paradoxically, the courts have almost uniformly ignored the insurers’
intent and distorted the phrase ‘sudden and accidental’ beyond recognition.
With few exceptions, the courts have extended the coverage of policies
containing the pollution exclusion ‘to mean just what they choose it to
mean.’”’ The Pollution Exclusion Clause Through the Looking Glass, 74
Geo. L.J. 1237, 1240 (1986). The note correctly recognized three more
recent opinions that denied coverage in particular circumstances as a possi-
ble “beginning of a trend of accurate judicial construction of the pollution
exclusion.” /d. at 1264-1268.
680 48a 407 Mass. 675
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc
course, reject any temptation to let our own ideas of public
policy concerning the desirability of insurance coverage for
environmental damage guide our legal conclusions.
We dealt with the words “sudden and accidental” in an
insurance policy in New England Gas & Elec. Ass'n v. Ocean
Accident & Guar. Corp., 330 Mass. 640 (1953). There, the
question was whether the damage to property, a crack in the
spindle of a turbine, was a sudden and accidental break. /d.
at 650. The court did not need to define the word “sudden”
with specificity because the cracking of the spindle was
neither gradual (hence was rapid or quick) nor reasonably
expected or foreseen. Jd. at 654. In short, that opinion left
unanswered the question whether “sudden,” in conjunction
with the word “accidental,” means only unexpected and un-
foreseen (as Belleview argues) or whether it also has a tem-
poral quality (as Lumbermens argues).
For the word “sudden” to have any significant purpose,
and not to be surplusage when used generally in conjunction
with the word “accidental,” it must have a temporal aspect
to its meaning, and not just the sense of something unex-
pected. We hold, therefore, that when used in describing a
release of pollutants, “sudden” in conjunction with “acciden-
tal” has a temporal element. The issue is whether the release
was sudden. The alternative is that it was gradual. If the re-
lease was abrupt and also accidental, there is coverage for an
occurrence arising out of the discharge of pollutants.
We answer the first two portions of the first question as
follows: (a) the word “‘sudden” in the context of the pollution
exclusion clause is unambiguous and (b) it has a temporal
quality. This is the conclusion of the better reasoned, and
particularly the more recent, judicial interpretations of the
pollution exclusion clause that appears in the standard com-
prehensive general liability policy. There are many opinions
*See, ¢.g., United States Fidelity & Guar. Co. v. Star Fire Coals, Inc.,
856 F.2d 31, 34 (6th Cir. 1988) (“We do not believe that it is possible to
define ‘sudden’ without reference to a temporal element that joins together
conceptually the immediate and the unexpected.”); Fireman's Fund Ins.
Cos. v. Ex-Cell-O Corp., 702 F. Supp. 1317, 1326 (E.D. Mich. 1988)
407 Mass. 675 49a 681
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc
reaching a contrary conclusion, the reasoning of which is
criticized in many of the opinions just cited.® If the word
“sudden” is to have any meaning or value in the exception to
the pollution exclusion clause, only an abrupt discharge on
release of pollutants falls within the exception.
The facts concerning the discharge of pollutants by Belle-
ville have not been certified to us. Dealing with the certified
questions in the abstract, we have said all that we can con-
cerning the considerations that the judge should “employ in
determining which events qualify as ‘sudden.’ Surely, the
abruptness of the commencement of the release or discharge
of the pollutant is the crucial element.® Our certification rule
calls for the presentation of the facts on which the certified
question of law is based. See S.J.C. Rule 1:03, § 3 (2). We
do not know enough about what the pollution was, and when
(Increasingly, the courts have rejected arguments similar to that being
inade here .. . that the phrase ‘sudden and accidental’ is ambiguous and
are holding that ‘sudden’ includes a temporal aspect.”’); State v. Amro Re-
alty Corp., 697 F. Supp. 99, 110 (N.D.N.Y. 1988); Borden, Inc. v. Affili-
ated FM Ins. Co., 682 F. Supp. 927, 930 (S.D. Ohio 1987); American
Motorists Ins. Co. y. General Host Corp., 667 F. Supp. 1423, 1428 (D.
Kan. 1987); International Minerals & Chemical Corp. v. Liberty Mut.
Ins. Co., 168 Ill. App. 3d 361, 378 (1988); Technicon Elecs. Corp. v.
American Home Assurance Co., 141 A.D.2d 124, 131 (N.Y. 1988) (“A
review of the most recent cases reveals that there is an emerging nation-—
wide judicial consensus that the ‘pollution exclusion’ clause is unambigu-
ous’'), affd on other grounds, 74 N.Y.2d 66 (1989); Waste Management
of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688, 699-700 (1986);
Lower Paxon Township v. United States Fidelity & Guar. Co., 383 Pa.
Super. 558, 576-578 (1989); Just v. Land Reclamation, Ltd., 151 Wis. 2d
593, 601-602 (Ct. App. 1989).
*For examples of opinions that conclude that the pollution exclusion
clause should be construed in favor of the insured to mean “unexpected
and unintended,” see Claussen v. Aetna Casualty & Sur. Co., 259 Ga.
333, 338 (1989) (four to three decision); Summit Assocs. v. Liberty Mut.
Fire Ins. Co., 229 N.J. Super. 56, 63 (1988); Kipin Indus., Inc. v. Ameri-
can Universal Ins. Co., 41 Ohio App. 3d 228, 231-232 (1987); United Pac.
Ins. Co. v. Van's Westlake Union, Inc., 34 Wash. App. 708, 714 (1983).
*We decline to speculate on the proper construction of the exception, if a
release or discharge, initially both accidental and sudden, continues for an
extended period. As the discharge or release continues, at some point, pre-
sumably, it would likely cease to be accidental or sudden (even in the sense
of unexpected).
50a
682 407 Mass. 675
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc.
and how the release or discharge started, to say anything
further.
We acknowledge that, in answering the first set of ques-
tions certified to us, we are rejecting the contrary holding in
Shapiro v. Public Serv. Mut. Ins. Co., 19 Mass. App. Ct.
648, 651-652 (1985). That opinion found guidance in our
opinion in New England Gas & Elec. Ass'n vy. Ocean Acci-
dent & Guar. Corp., 330 Mass. 640 (1953), that we do not
similarly find. The Shapiro opinion did not analyze the pol-
icy language but concluded that the policy was not free from
ambiguity. We have analyzed the policy ianguage and con-
clude that there is no construction of the word “sudden” that
is a reasonable alternative to that which we have given it in
the context of the pollution exclusion clause.
Recause the word “sudden” in the pollution exclusion
clause is not ambiguous, we have no need to consider the
drafting history of that clause or any statements made by
insurance company representatives concerning the intention
of its drafters. There is no evidence in the record that Belle-
ville relied on or was even aware of any of this background
information when it purchased coverage from Lumbermens.
The use of such information to resolve an ambiguity in Belle-
vilie’s insurance policies would have nothing to do with con-
tract negotiations, and thus its use would be different from
the use of parol evidence to aid in resolving an ambiguity in
a contract. Attempts to use the drafting history and official
comments about the purpose of a provision in an insurance
policy seem somewhat analogous to attempts to use legisla-
tive history in construing an ambiguous statute.
This court has not indicated the extent to which it is ap-
propriate to use the drafting history of a provision in a stan-
dard form of insurance policy to resolve a dispute over the
meaning of policy language. A formally published, explana-
tory report of an industry-wide committee that drafted par-
ticular policy language would appear likely to be a reliable
source for resolving a policy ambiguity. Language changes
from one standard policy form to the next would perhaps be
instructive. See Ratner v. Canadian Universal Ins. Co., 359
407 Mass. 675 Sia 683
Lumbermens Mutual Casualty Co. v. Believille Industries, Inc.
Mass. 375, 380 (1971). We have not considered, however,
whether statements made after the adoption of standard lan-
guage may properly be considered or whether the views of
one insurance executive may properly be used to guide the
interpretation of a standard form of policy used by many
companies. Additionally, we have not decided whether the
drafting history and other possibly instructive material must
be included in the record on appeal and thus have been
presented in a manner that would permit countervailing or
explanatory material to be submitted in response. See Eagle-
Picher Indus., Inc. v. Liberty Mut. Ins. Co., 682 F.2d 12, 22
n.8 (Ist Cir. 1982), cert. denied, 460 U.S. 1028 (1983);
Lower Paxon Township v. United States Fidelity & Guar.
Co., 383 Pa. Super. 558, 578 n.S (1989). We mention this
subject only because it appears that the issue will arise in
subsequent litigation concerning the interpretation of stan-
dard form insurance policies.
2. The second certified question asks whether, under the
common law of the Commonwealth, there is any procedure
by which an insurer, with a duty to defend but with appar-
ently only a negligible duty to indemnify, can terminate its
duty to defend short of conclusively establishing the extent of
the underlying claim in circumstances binding on the under-
lying claimant. The judge points to the opinion authored by
Justice Kaplan in Sterilite Corp. v. Continental Casualty
Co., 17 Mass. App. Ct. 316, 323-324 (1983).7 The full state-
ment of the judge’s reasons for asking the question appears
7Justice Kaplan wrote: “When, as in the present case, the allegations of
the third-party complaint find apparent lodgment in the effective coverage
of the policy, the insurer is obligated to defend. But it can, by certain
steps, get clear of the duty from and after the time when it demonstrates
with conclusive effect on the third party that as matter of fact — as distin-
guished from the appearances of the complaint and policy -— the third
party cannot establish a claim within the insurance. .. . What is not per-
mitted is that an insurer shall escape its duty to defend the insured against
a liability arising on the face of the complaint and policy, by dint of its
own assertion that there is no coverage in fact: the insurer then stands in
breach of its duty even if the third party fails in the end to support any
such claim of liability by adequate proof.” /d.
684 52a 407 Mass. 675
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc
in the margin.® In concluding that the duty to indemnify was
negligible, the judge assumed that the word “sudden” in the
pollution exclusion clause had the temporal meaning that he
had given it in discussing the first question certified to us.
Lumbermens makes no attempt to describe to us a com-
mon law procedure under which its duty to defend could be
terminated conclusively without the entry of an order binding
on the governmental claimants in this case. Lumbermens ar-
gues that, under Fed. R. Civ. P. 19, the underlying claimants
are not necessary parties to a declaratory judgment action
*“2. De Minimus Liability to Indemnify Pursuant to the Sterilite
Decision
“The decision of the Massachusetts Appeals Court in Sterilite Corp. v.
Continental Casualty Co., 17 Mass. App. Ct. 316, . . . clearly sets forth
the procedure which an insurer with a duty to defend must follow to bring
that duty to an end. This Court reads Sterilite as directly declaring the
law of the Commonwealth and raises no question concerning it. Neverthe-
less, its application to the particular circumstances of this case warrants
certification. This is so because, while this Court has ruled that the insur-
ers in these related cases have an undoubted duty to defend, their ultimate
duty to indemnify their insurees appears limited to only a small fraction of
the damages which may ultimately be recoverable in this case. In aid of
the record in addressing the question to be posed, this Court takes judicial
notice, Fed.R.Evid. 201, that each of the insurers herein has incurred more
than one million dollars in legal costs in providing a defense of its client in
the underlying actions. Even so, were it not for the Sterilite requirement,
there appears virtually no evidence that any significant contribution to the
pollution at issue in the underlying case flowed from incidents which were
‘sudden and accidental.’ That is, if an insured is liable for PCB pollution
of the Acushnet River and New Bedford Harbor as alleged by the sover-
eigns herein, it appears from the entire record assembled by this Court
that the proportion of that pollution which may properly be characterized
as ‘sudden and accidental’ is slight comparéd to the whole, and perhaps
infinitesimal. Thus, it is only this small portion of the potential damages as
to which the insurers have a duty to indemnify. Nevertheless, it appears
clear under Sterilite that the insurers have a continuing duty to defend
and this Court has so held. However, in the absence of a controlling deci-
sion from the Supreme Judicial Court, this Court deems it appropriate to
inquire whether, pursuant to the common law of the Commonwealth, there
is any procedure whereby an insurer with an undoubted duty to defend but
with a negligible duty to indemnify can bring the continuing duty to de-
fend to an end short of conclusively establishing as against the plaintiff in
the underlying action the extent of the claim that is covered by the insur-
ance.” Acushnet River, 725 F. Supp. at 1279-1280.
407 Mass. 675 53a 685
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc.
brought against an insured to determine insurance coverage
rights. Further, Lumbermens argues that, because the gov-
ernmental claimants opposed efforts to place them in a pro-
cedural posture in which they could be conclusively bound,
they should either be deemed not to be necessary parties or
to have waived any requirement that they-be conclusively
bound by any declaration of rights. Finally, citing Burlington
N. R.R. v. Woods, 480 U.S. 1, 5 (1987), and Hanna vy.
Plumer, 380 U.S. 460, 471 (1965), Lumbermens argues that
principles governing the entry of summary judgment: under
Fed. R. Civ. P. 56 override the asserted additional prerequi-
site of the Sterilite Corp. opinion that the declaration must
have a binding effect on underlying claimants.
Each of these arguments concerns an issue that Lumber-
mens could have raised, and indeed may have raised, with
the Federal judge. None of them concerns a question of State
law. Our rule authorizing certified questions from other
courts relates solely to questions of Massachusetts law. We
do not offer our gratuitous services to opine on questions of
Federal law. In any event, the judge did not ask us about
these issues of Federal law. He has asked us if there is a
common law procedure for conclusively cutting short an in-
surer’s duty to defend in which the underlying plaintiff would
not be bound by the determination. In circumstances in
which the party to be benefited by a particular answer does
not argue the point to us, we feel no heavy burden to answer
a certified question in detail. We abstain from speculating on
why a declaratory judgment proceeding involving all con-
cerned entities was not maintained in the Federal court.
A declaratory judgment in an action provides an appropri-
ate means of deciding a dispute concerning the meaning of
language in an insurance policy. See Boston Symphony
Orchestra, Inc. v. Commercial Union Ins. Co., 406 Mass, 7,
15-16 (1989). The problem becomes more complicated when
the dispute between insurer and insured involves, not the
construction of policy terms, but rather whether, in light of
the allegations in a particular complaint, the insurer has a
duty to defend. It is that issue that is discussed so thought-
686 54a 407 Mass. 675
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc.
fully in the Sterilite Corp. opinion. The need to have the un-
derlying claimant bound by any judicial declaration concern-
ing the insured’s duty to defend does not exist because the
underlying claimant would be a necessary party to the action
(a matter on which we express no opinion). Rather, that need
exists because, until there is an unalterable determination as
to the nature of the underlying claim, any declaration of
rights concerning the insurer’s duty to defend cannot be con-
clusive. Although our answer (that a declaratory judgment
proceeding under G. L. c. 231A [1988 ed.] provides a “pro-
cedure” for definitively resolving a “duty to defend” dispute)
does not identify a common law procedure (as to which the
judge inquired), it appears to be the only procedure clearly
available in all circumstances.
We do not discount the possibility of an action solely be-
tween an insurer and an insured concerning the insurer's
duty to defend, where the complaint in the underlying action
is so general as to allege a claim arguably falling within the
coverage of the policy, but it is apparent from the event that
gave rise to the underlying claim that the loss is not covered
by the insurance policy. See, e.g., Atlantic Mut. Fire Ins. Co.
v. Cook, 619 F.2d 553, 554-555 (Sth Cir. 1980). Although a
determination that the insurer had no duty to defend in those
circumstances would not foreclose such a duty if the facts of
the underlying claim changed, or if the complaint were
amended, that determination would relieve the insurer of a
current duty to defend based on then-current circumstances.
See Terrio v. McDonough, 16 Mass. App. Ct. 163, 168-169
(1983).
3. The third certified question asks which approach Massa-
chusetts would follow in determining the point at which ac-
tual injury or damage to property takes place under the pol-
icy provisions in this case.* The certifying judge identified six
*The full statement of the judge's question appears below:
“3. The ‘Trigger’ Issue
“In the body of this opinion, this Court has held that the ‘occurrence’
provisions of the insurance policies here at issue require that the injury
must take place during the policy period in order for coverage to be pro-
407 Mass. 675 55a 687
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc.
so-called “trigger theories” that have been adopted by vari-
ous courts, and the parties collectively have urged this court
to consider three of those theories.'®
We agree with the certifying judge the “[a] crucial factor
in determining when an injury occurs for purposes of insur-
ance coverage is the nature of the injury.” Acushnet River,
725 F. Supp. at 1276. On the record before us, there are
substantial issues of fact as to the nature and scope of the
property damage the sovereigns will seek to prove. See id. at
1272, 1276-1277. Indeed, the certifying judge himself con-
cluded that the factual record was insufficiently developed to
permit him to reach the question of which trigger theory is
appropriate. Jd. Our rule requires that certification orders
contain “a statement of all facts relevant to the questions
certified and showing fully the nature of the controversy in
which the questions arose.” S.J.C. Rule 1:03, § 3 (2). We
vided. In addressing when the injury took place in this case, the Court has
identified six different approaches, each supported by case citation. These
are: the wrongful act theory, the release theory, the injury-in-fact theory,
the manifestation theory, the first discovery theory, and the continuous
trigger theory. While the most analogous Supreme Judicial Court decision,
Continental Casualty Co. v. Gilbane Bldg. Co., 391 Mass. 143, 146, 461
N.E.2d 209 (1984), rejects the wrongful act theory, it does not provide
definitive guidance concerning the manner of determining when the actual
injury takes place and thus which policy of insurance provides the cover-
age. Accordingly, this Court certifies the following query—-under the pro-
visions which trigger insurance coverage in the policies at issue in these
related cases, what approach is followed under Massachusetts law in deter-
mining at whaf point, or over what period, insurance coverage is to at-
tach?” Acushnet River, 725 F. Supp. at 1280.
'*Under the policies, “ ‘property damage’ means (1) physical injury to or
destruction of tangible property which occurs during the policy period, in-
cluding the loss of use thereof at any time resulting therefrom, or (2) loss
of use of tangible property which has not been physically injured or de-
stroyed provided such loss of use is caused by an occurrence during the
policy period.”
Lumbermens urges us to adopt either the manifestation theory or the
first-discovery theory. Belleville argues that the injury-in-fact theory is cor-
rect. This court already has rejected the wrongful act theory as contrary to
the language of the policy. See Continental Casualty Co. v. Gilbane Bidg
Co., 391 Mass. 143, 152 (1984).
56a 407 Mass. 675
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc.
688
have no such statement. Accordingly, we too decline to an-
swer the third question.
S7a
APPENDIX C
United States Court of Appeals
For the First Circuit
No. 91-1129
LUMBERMENS MUTUAL CASUALTY CO.,
Plaintiff, Appellee,
v.
BELLEVILLE INDUSTRIES, INC.,
Defendant, Appellant.
No. 91-1130
LUMBERMENS MUTUAL CASUALTY CO.,
Plaintiff, Appellant,
ws
BELLEVILLE INDUSTRIES, INC.,
Defendant, Appellee.
Before
CAMPBELL, Circuit Judge,
COFFIN AND BOwNES, Senior Circuit Judges,
TURRUELLA, SELYA AND Cyr, Circuit Judges*.
ORDER OF COURT
Entered: August 28, 199]
The panel of judges that rendered the decision in this case
having voted to deny the petition for rehearing and the sugges-
tion for the holding of a rehearing en banc having been carefully
considered by the judges of the Court in regular active service
and a majority of said judges not having voted to order that
the appeal be heard or reheard by the Court en banc,
58a
It is ordered that the petition for rehearing and the suggestion
for rehearing en banc be denied.
The motion of Polaroid Corporztion for leave to file a brief
amicus curiae is denied.
By the Court:
FRANCIS P. SCIGLIANO, CLERK
By:
Daniel F. Loughry
Chief Deputy Clerk
*Chief Judge Breyer did not participate as
{cc: Messrs. Culbert, Brunner, McLaughlin and Crotty]
59a
APPENDIX D
Statutes.
28 U.S.C. § 1652
State Laws as Rules of Decision
The laws of the several states, except where the Constitu-
ion or treaties of the United States or Acts of Congress other-
wise require or provide, shall be regarded as rules of decision
in civil actions in the courts of the United States, in cases
where they appiy.
42 U.S.C. § 9607
Liability
(j) Obligations or liability pursuant to federally per-
mitted release. Recovery by any person (including the United
States or any State or Indian tribe) for response costs or dam-
ages resulting from a federally permitted release shall be pur-
suant to existing law in lieu of this section. Nothing in this
paragraph shall affect or modify in any way the obligations or
liability of any person under any other provision of State or
Federal law, including common law, for damages, injury, or
loss resulting from a release of any hazardous substance or for
removal or remedial action or the costs of removal or remedial
action of such hazardous substance. In addition, costs of re-
sponse incurred by the Federal Government in connection with
a discharge specified in section 101(10)(B) or (C) [42 USCS
sec. 9601(10)(B) or (C)] shall be recoverable in an action
brought under section 309(b) of the Clean Water Act [33 USCS
sec. 1319(b)].
42 U.S.C. § 9601
Definitions
* * *
(10) The term “federally permitted release” means (A) dis-
charges in compliance with a permit under section 402 of the
Federal Water Pollution Control Act [33 USCS § 1342], (B)
discharges resulting from circumstances identified and re-
viewed and made part of the public record with respect to a
permit issued or modified under section 402 of the Federal
Water Pollution Control Act [33 USCS § 1342] and subject
to a condition of such permit, (C) continuous or anticipated
intermittent discharges from a point source, identified in a
permit or permit application under section 402 of the Federal
Water Pollution Control Act [33 USCS § 1342], which are
caused by events occurring within the scope of relevant operat-
ing or treatment systems, (D) discharges in compliance with
a legally enforceable permit under section 404 of the Federal
Water Pollution Control Act [42 USCS § 1344] (E) releases
in compliance with a legally enforceable final permit issued
pursuant to section 3005(a) through (d) of the Solid Waste
Disposal Act [42 USCS § 6925(a)-(d)] from a hazardous waste
treatment, storage, or disposal facility when such permit spec-
ifically identifies the hazardous substances and makes such
substances subject to a standard of practice, control procedure
or bioassay limitation or condition, or other control on the
hazardous substances in such releases, (F) any release in com-
pliance with a legally enforceable permit issued under
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.