Augat, Inc. v. Liberty Mut. Ins. Co.

• Citation: 571 N.E.2d 357,410 Mass. 117
• Parties: AUGAT, INC., et al. 1 v. LIBERTY MUTUAL INSURANCE COMPANY.
• Decision Date: 14 May 1991
• Court: United States State Supreme Judicial Court of Massachusetts

Page 357

571 N.E.2d 357

410 Mass. 117

AUGAT, INC., et al. ¹ v. LIBERTY MUTUAL INSURANCE COMPANY.

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued March 5, 1991.

Decided May 14, 1991.

Stephen H. Oleskey, Boston, for plaintiffs.

Lee H. Glickenhaus, Boston, for defendant.

Thomas W. Brunner, Marilyn E. Kerst and Joseph L. Ruby, Washington, D.C., of the District of Columbia, Peter G. Hermes and Molly H. Sherden, Boston, for Ins. Environmental Litigation Ass'n, amicus curiae, submitted a brief.

Before LIACOS, C.J., and WILKINS, ABRAMS, NOLAN and LYNCH, JJ.

LYNCH, Justice.

This is an action for damages and declaratory relief alleging that the defendant, Liberty Mutual Insurance Company (Liberty Mutual), breached an insurance contract issued to the plaintiffs, Augat, Inc., and its wholly-owned subsidiary, Reliable Electronic Finishing Company, Inc. (referred to collectively as Augat). A Superior Court judge granted Liberty Mutual's motion for summary judgment. Augat appealed, and we transferred the case to this court on our own motion. We affirm.

The facts are not in dispute. Augat, through its subsidiary corporation, operated a manufacturing facility in Canton where it electroplated mechanical devices by placing them in tanks of chemicals. The plant had a water treatment system to purify waste water generated by the electroplating process before it was released into the municipal sewer system. In late 1983, however, an inspection by the Massachusetts Department of Environmental Quality Engineering (DEQE) revealed that the water treatment system had failed, and that contaminated water had been discharged into the sewer system and the ground at the site.

The Commonwealth drafted a complaint against Augat seeking damages, injunctive relief, and civil penalties pursuant to G.L. c. 12, § 11D (1988 ed.). According to an Augat official, the Commonwealth indicated that, unless Augat consented to a judgment and agreed to decontaminate the site, the Commonwealth intended to clean up the site itself and then seek to recover three times the cleanup costs from Augat under G.L. c. 21E (1988 ed.) and other applicable statutes. Augat entered into negotiations with the Commonwealth and, on February 2, 1984, the Commonwealth simultaneously filed its complaint, a consent order signed by Augat and the Commonwealth, and a proposed form of judgment in Superior Court. Four days later, final judgment entered on the complaint imposing civil penalties and requiring that Augat decontaminate the site at its own expense. ²

On February 9, 1984, Augat wrote to Liberty Mutual that "[a] situation has arisen ... which may give rise to a claim" under a comprehensive general liability policy issued to Augat that covered the plant. Nearly two and one-half years later, in a letter dated July 30, 1986, Augat informed Liberty Mutual of the court order. In the letter, Augat requested reimbursement of $1,101,380 incurred thus far in cleanup costs and asked that Liberty Mutual acknowledge liability for an additional $3,850,000 in anticipated expenses. On September 17, 1987, after Liberty Mutual failed to respond to Augat's letters, Augat sent a demand letter pursuant to G.L. c. 93A, asserting that Liberty Mutual's refusal to address Augat's claim constituted bad faith conduct. On November 4, Liberty Mutual denied coverage under the policy.

Augat sued Liberty Mutual seeking damages for breach of contract and unfair trade practices, see G.L. c. 176D, § 3 (1988 ed.); G.L. c. 93A, and seeking a declaratory judgment resolving the parties' duties under the policy. Liberty Mutual moved for summary judgment asserting that Augat's obligations were incurred voluntarily and therefore were excluded from coverage by a policy provision that states: "The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for first aid to others at the time of the accident." ³ (We refer to this provision hereafter as the voluntary payment provision.) The judge granted summary judgment in Liberty Mutual's favor.

The standard of review of a grant of summary judgment is whether, viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to a judgment as a matter of law. Mass.R.Civ.P. 56(c), 365 Mass. 824 (1974). See Yakubowicz v. Paramount Pictures Corp., 404 Mass. 624, 626, 536 N.E.2d 1067 (1989); Leavitt v. Mizner, 404 Mass. 81, 88, 533 N.E.2d 1334 (1989); Pederson v. Time, Inc., 404 Mass. 14, 16-17, 532 N.E.2d 1211 (1989). We may consider any ground supporting the judgment. Champagne v. Commissioner of Correction, 395 Mass. 382, 386, 480 N.E.2d 609 (1985).

Augat argues, first, that the judge's decision was improperly based on Augat's failure to give prompt notice of its claim rather than on the violation of the voluntary payment provision. Second, Augat contends that it did not violate the voluntary payment provision because its consent to judgment was not "voluntary," but was coerced by the threat of a more costly verdict. Finally, Augat suggests that, even if the payment was voluntary, decisions of this court require Liberty Mutual to demonstrate that it was prejudiced by Augat's actions before it can disclaim coverage under the voluntary payment provision. Liberty Mutual did not introduce evidence that shows any specific prejudice flowing from Augat's decision to agree to a consent judgment. Therefore, Augat contends that a material fact remains in issue and summary judgment is inappropriate. We reject these arguments.

Augat initially contends that the judge's ruling was not based on Augat's voluntary assumption of liability at all, but was based on its failure to give prompt notice of its claim. Therefore, Augat argues, the ruling was in error because, where an insurance company seeks to avoid liability under a policy on the ground that the insured delayed in giving notice of a claim, the insurer is required to demonstrate that its position was prejudiced by the delay. See Johnson Controls, Inc. v. Bowes, 381 Mass. 278, 282, 409 N.E.2d 185 (1980); G.L. c. 175, § 112 (1988 ed.). Having reviewed the record, however, we conclude that neither Liberty Mutual's motion nor the judge's ruling was based on the defense of late notice. In fact, Liberty Mutual expressly declined to rely on late notice in arguing for summary judgment, and the judge clearly relied on the voluntary payment provision in his decision. ⁴ Augat's initial argument, therefore, is unsupported by the record. ⁵

The question then becomes whether, by entering into a consent judgment, Augat "voluntarily" assumed the obligation to fund the cleanup, thus releasing Liberty Mutual from the duty to indemnify under the voluntary payment provision of the policy. We conclude that the assumption of the obligation was "voluntary" for present purposes. Here, as Augat urges, we give a seemingly unambiguous term of the insurance policy its common, ordinary meaning. See Transamerica Ins. Co. v. Norfolk & Dedham Mut. Fire Ins. Co., 361 Mass. 144, 147, 279 N.E.2d 686 (1972). Webster's defines "voluntary" variously as "by an act of choice," "not constrained, impelled, or influenced by another," "acting or done of one's own free will," and adds that the word "implies freedom from any compulsion that could constrain one's choice." Webster's Third New International Dictionary 2564 (1961). Augat suggests that, under this definition, its settlement with the DEQE was not "voluntary" because the company did not want to assume the considerable expense of cleaning up the site of the spill. Instead, according to Augat, the company was presented with a "Hobson's choice": it could accept the settlement DEQE offered or risk paying treble damages following a suit. See Hazen Paper Co. v. United States Fidelity &...