115 F.3d 21 (1st Cir. 1997), 96-1788, Millipore Corp. v. Travelers Indem. Co.

Docket Nº:96-1788 to 96-1794, 96-1842.
Citation:115 F.3d 21
Party Name:MILLIPORE CORPORATION, Plaintiff, Appellant, v. The TRAVELERS INDEMNITY COMPANY, Hartford Accident and Indemnity Company, and Insurance Company of North America, Defendants, Appellees. The TRAVELERS INDEMNITY COMPANY and Insurance Company of North America, Defendants, Appellants, v. MILLIPORE CORPORATION, Plaintiff, Appellee.
Case Date:May 30, 1997
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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115 F.3d 21 (1st Cir. 1997)

MILLIPORE CORPORATION, Plaintiff, Appellant,

v.

The TRAVELERS INDEMNITY COMPANY, Hartford Accident and

Indemnity Company, and Insurance Company of North

America, Defendants, Appellees.

The TRAVELERS INDEMNITY COMPANY and Insurance Company of

North America, Defendants, Appellants,

v.

MILLIPORE CORPORATION, Plaintiff, Appellee.

Nos. 96-1788 to 96-1794, 96-1842.

United States Court of Appeals, First Circuit

May 30, 1997

Heard March 3, 1997.

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[Copyrighted Material Omitted]

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David A. Guberman, with whom Robert J. Muldoon, Jr., Nereyda Garcia and Sherin & Lodgen LLP were on brief, for plaintiff-appellant and cross-appellee Millipore Corporation.

Paul Koepff, with whom Rosemary Boller, James Arbogast, O'Melveny & Myers LLP, David Chaffin and Hare & Chaffin were on brief, for defendant-appellee and cross-appellant Century Indemnity Company, f.k.a. Insurance Company of North America.

James L. Ackerman, with whom Maura D. Sullivan and Day, Berry & Howard were on brief, for defendant-appellee and cross-appellant The Travelers Indemnity Company.

John P. Ryan, Robert G. Eaton and Sloane & Walsh were on brief, for defendant-appellee Hartford Accident and Indemnity Company.

Before BOUDIN, Circuit Judge, BOWNES, Senior Circuit Judge, and LYNCH, Circuit Judge.

LYNCH, Circuit Judge.

The substantial costs of remediating environmental damage under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq., and other environmental laws have pitted businesses against their insurers in fierce disputes over who will bear these costs. That is the case here.

Underlying this lawsuit is the cleanup of five hazardous waste sites, three in Massachusetts and two in New Jersey. Millipore Corporation was one of the sources of waste at the sites, and was a defendant in several actions alleging violations of federal and state environmental laws. Millipore defended these suits and incurred liability as to some of the sites. It may ultimately be responsible

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for contributing to the remediation costs of the other sites as well.

The primary issue here is whether the district court erred in entering summary judgment for the insurers (and then denying reconsideration) on the ground that none of Millipore's CERCLA liability is covered under any of the comprehensive general liability ("CGL") policies Millipore carried during the relevant periods. In considering this question, we must address, among other things, the "pollution exclusion" provisions of the insurance policies, which preclude coverage for pollution-related claims unless the release of pollutants was "sudden and accidental." Based on recent developments in Massachusetts environmental insurance law, we vacate in part the grant of summary judgment.

We also conclude that New Jersey law applies to claims under policies issued to a New Jersey corporation later acquired by Millipore, and that summary judgment was properly entered in favor of one of Millipore's insurers, Travelers Indemnity Company, because Millipore failed to produce evidence of an occurrence within the Travelers policy period. Finally, we hold that Millipore was entitled to summary judgment on the insurers' counterclaims for reimbursement for defense costs paid to Millipore.

I.

The insurance coverage issues involved in this case are best understood in context. CERCLA, which was enacted in 1980, is the primary federal statutory scheme regulating hazardous waste cleanups. Some states have enacted their own regimes as well. CERCLA imposes liability for the costs of cleaning up hazardous waste sites and for the loss of natural resources due to pollution on three categories of potentially responsible parties ("PRPs"): past and present owners and operators of hazardous waste sites, some companies that transported waste to these sites, and companies that generated waste disposed of at these sites. 42 U.S.C. § 9607(a). Suit may be brought against a PRP by the federal government, a state, or a private party who bore cleanup costs. Jerry, Understanding Insurance Law § 65, at 459-60 (2d ed.1996). See generally Ostrager & Newman, Insurance Coverage Disputes, §§ 10.01, 10.02 (8th ed.1995).

CERCLA creates novel forms of liability for environmental harm. It is, in general, a strict liability regime. St. Paul Fire & Marine Ins. Co. v. Warwick Dyeing Corp., 26 F.3d 1195, 1197-98 (1st Cir.1994). The CERCLA cost allocation scheme may operate retroactively as well: a PRP may be held responsible for actions taken before CERCLA was enacted and before the PRP was aware that its actions might lead to environmental liability. Jerry, supra, § 65, at 459-60. CERCLA allows joint and several liability when specific damage cannot be attributed to particular PRPs, which is often the case at hazardous waste sites. Id. § 65, at 460. 1

Faced with environmental liability, companies began turning to their third-party liability insurance carriers for coverage under CGL policies. Comment, The 1970 Pollution Exclusion in Comprehensive General Liability Policies, 24 Duq. L.Rev. 1083, 1083 (1996). See generally Ballard & Manus, Clearing Muddy Waters: Anatomy of the Comprehensive General Liability Pollution Exclusion, 75 Cornell L.Rev. 610 (1990). CGL policies are usually occurrence policies that protect insureds against most types of risk and are available for nearly all types of business ventures. Note, The "Sudden and Accidental" Exception to the Pollution Exclusion Clause in Comprehensive General Liability Insurance Policies, 45 Vand. L.Rev. 161, 163-65 (1992).

Since 1970, the standard CGL policy has contained a pollution exclusion clause barring coverage for pollution-related damage which should reasonably have been foreseen. Id. at 167; see also Greenlaw, The CGL Policy and the Pollution Exclusion Clause, 23 Colum. J.L. & Soc. Probs. 233, 240-41 (1990). The provision in general use from 1970 until 1985 excludes coverage for:

bodily injury or property damage arising out of the discharge, dispersal, release or

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escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water....

Note, supra, at 167. However, the pollution exclusion clause generally "does not apply if such discharge, dispersal, release or escape is sudden or accidental." Id. 2

Based on the language of their CGL policies, insurers developed a three-step process for determining whether environmental liability was covered: "(1) did an 'occurrence' occur? ... If so, (2) does the pollution exclusion apply, i.e., was the injury or damage caused by one of the named materials in connection with one of the four events ('discharge,' etc.) in the exclusion? ... If so, (3) does the exception to the exclusion apply, i.e., was the event 'sudden and accidental'?" Jerry, supra, § 65, at 463-64. The insurers often argued that claims based on CERCLA liability were precluded from coverage due to the pollution exclusion clause. 3 As a result, the meaning of the exception to the pollution clause, and particularly the definition of the term "sudden and accidental," has been hotly contested.

II.

Against this backdrop, the facts are recited in the light most favorable to Millipore, the party against whom summary judgment was granted. Soileau v. Guilford of Maine, Inc., 105 F.3d 12, 13 (1st Cir.1997).

Millipore is a Massachusetts corporation primarily engaged in manufacturing products and providing services for the analysis and purification of liquids. Millipore has its corporate headquarters as well as a manufacturing facility in Bedford, Massachusetts, with other Massachusetts manufacturing facilities in Milford and Taunton. Millipore disposed of its manufacturing wastes at several different sites in Massachusetts, including the Silresim Waste Reclamation and Disposal Facility in Lowell, the Charles George Landfill in Tyngsboro, and the Re-Solve Waste Reclamation and Disposal Facility in North Dartmouth.

Between December 1975 and March 1982, Millipore owned the Worthington Biochemical Corporation, located in Freehold, New Jersey, which produced research enzymes and related chemicals. The Worthington manufacturing process involved the use of substances defined as hazardous, including trichloroethylene and freons. Worthington disposed of much of its waste materials at the Lone Pine Landfill in Freehold.

All four of these sites where Millipore and Worthington disposed of their wastes have a history of contaminating neighboring land and water. These troubled sites share numerous similarities involving poor design and sloppy operations. At the Silresim site, chemicals dumped into the disposal pit regularly seeped through the concrete lining of the pit into the ground. In 1973, the Commonwealth of Massachusetts required the operators of the site to find a solution to the problem of contaminated runoff. The landfill operators failed to do so, and also committed numerous violations of state regulations between 1973 and 1975. The Commonwealth made continued operation of the facility contingent upon regulatory compliance. The operators filed for bankruptcy, leading to the revocation of their operating permit in 1977. They abandoned the site later that year. Raging chemical fires swept the site in October 1977, August 1978, and again in April 1983.

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In 1983, Millipore received notification from the EPA that it was a PRP with respect to the Silresim site. Later that year, in December, Massachusetts initiated a legal action in federal court under CERCLA and various state environmental laws....

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