Liberty Mut. Ins. Co. v. SCA Services, Inc.

Citation588 N.E.2d 1346,412 Mass. 330
PartiesLIBERTY MUTUAL INSURANCE COMPANY v. SCA SERVICES, INC. et al. 1
Decision Date26 March 1992
CourtUnited States State Supreme Judicial Court of Massachusetts

Ralph T. Lepore, III, Boston (Janice Kelley Rowan with him), for plaintiff.

Michael F. Aylward, Boston (Laurie J. Condos with him), for Transp. Ins. Co.

Fred A. Kelly, Jr., Boston (Gregory P. Deschenes with him), for Hartford Acc. & Indem. Co.

James J. Dillon, Boston (Kenneth J. Parsigian with him), for SCA Services, Inc.

Rosanna Sattler, Peter G. Hermes & Molly H. Sherden, Boston, & Thomas W. Brunner, Laura A. Foggan & Carol Barthel, Washington, D.C., for Ins. Environmental Litigation Ass'n & another, amici curiae, submitted a brief.

Before LIACOS, C.J., and WILKINS, ABRAMS and GREANEY, JJ.

GREANEY, Justice.

Liberty Mutual Insurance Company brought this action in the Superior Court seeking a declaration under G.L. c. 231A (1990 ed.) that it was not obligated to defend or indemnify its insured, SCA Services, Inc. (SCA), in an action brought by the State of New York and the town of Tusten, New York, for damages caused by hazardous waste leaching out of a landfill in Tusten to which SCA brought such waste for disposal. Liberty Mutual's complaint for declaratory relief also sought a judicial determination of the rights and liabilities of SCA's other insurers. 2 On cross-motions for summary judgment, a judge of the Superior Court ruled in favor of SCA and entered an order determining that Liberty Mutual, Transportation, and Hartford have a duty to defend SCA in the underlying New York action. The three insurers sought relief in the Appeals Court pursuant to G.L. c. 231, § 118, first par. (1990 ed.), and a single justice of that court allowed them to prosecute immediate appeals from the Superior Court order. We transferred the case to this court on our own motion. We conclude that the insurers are under no duty to defend SCA in the underlying action.

"[T]he question of the initial duty of a liability insurer to defend third-party actions against the insured is decided by matching the third-party complaint with the policy provisionsS if the allegations of the complaint are 'reasonably susceptible' of an interpretation that they state or adumbrate a claim covered by the policy terms, the insurer must undertake the defense.... Otherwise stated, the process is one of envisaging what kinds of losses may be proved as lying within the range of the allegations of the complaint, and then seeing whether any such loss fits the expectation of protective insurance reasonably generated by the terms of the policy." (Citations omitted.) Continental Casualty Co. v. Gilbane Bldg. Co., 391 Mass. 143 146-147, 461 N.E.2d 209 (1984), quoting Sterilite Corp. v. Continental Casualty Co., 17 Mass.App.Ct. 316, 318, 458 N.E.2d 338 (1983). See also Jimmy's Diner, Inc. v. Liquor Liab. Joint Underwriting Ass'n of Mass., 410 Mass. 61, 62, 571 N.E.2d 4 (1991); Boston Symphony Orchestra, Inc. v. Commercial Union Ins. Co., 406 Mass. 7, 10-11, 545 N.E.2d 1156 (1989); Lusalon, Inc. v. Hartford Accident & Indem. Co., 400 Mass. 767, 772, 511 N.E.2d 595 (1987).

The underlying action which SCA claims the insurers are obligated to defend was brought in the United States District Court for the Southern District of New York by the State of New York and the town of Tusten, New York, where the landfill is located. The complaint charges that SCA, whose business is described in the policies as "refuse collection" and "private sanitation," transported industrial and chemical wastes to the Tusten landfill for disposal during 1973 and 1974. SCA is alleged to have acted in concert with three codefendants: the operator of the landfill, its owner, and an individual who arranged for others to dispose of waste at the site. The complaint asserts that the site has been determined to be an "open dump" by the New York State Department of Environmental Conservation under criteria established by Federal law. The site is proximate to private homes and property, to a public drinking water well that provides water to the inhabitants of Tusten, and to the Delaware River, which furnishes public drinking water for communities in Pennsylvania and New Jersey. The surrounding area receives extensive use from recreational and commercial fishermen, and is a known region of bald eagle habitat. The complaint also asserts that the "site [has been] found to be in violation of Federal and State standards pertaining to the protection of endangered species (proximity to bald eagle habitat), prohibition of groundwater contamination (containing arsenic, barium, lead, iron, and various organic chemicals), and protection from disease (inadequate landfill cover)."

The complaint includes the specific allegations against the involvement of SCA in paragraphs numbered therein as follows:

"24. In 1973, SCA, through its agents, servants and employees, contacted [the landfill operator] and arranged to dispose of industrial and chemical wastes at the ... landfill site.

"25. Pursuant to this arrangement, several thousand barrels of industrial and chemical wastes were transported to the site by SCA during 1973 and 1974. Many of these wastes contained 'hazardous substances.'

"26. SCA delivered these wastes to the site in trucks driven by its own employees, or contracted with private parties to drive SCA trucks containing wastes to the site.

"27. At the time SCA arranged for disposal of these wastes, it knew or should have known that they were noxious, dangerous and hazardous substances, and could harm the land, water and air resources of the State of New York and human, animal and plant life if they were not disposed of in a manner which would prevent their release into the environment.

"28. SCA knew or should have known that these wastes were deposited directly into the ground at the site in trenches dug for that purpose."

. . . . .

"46. Wastes accepted by [the landfill operator] were disposed of at the site in trenches dug by him for that purpose. Barrels of waste were dumped into the open trenches and flattened with a bulldozer, or the contents of the barrels were emptied into the trenches and the barrels salvaged for reuse."

The complaint goes on to assert that "[h]azardous substances disposed of at the site remain there in open trenches, in the ground and groundwater. Wastes deposited at the site have been and continue to be released into the air, soil and groundwater in the vicinity of the site and into the Delaware River." The complaint states three claims for relief: (1) recovery of response costs under CERCLA, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C § § 9601-9657 [1982] ); 3 (2) public nuisance; and (3) restitution.

In the comprehensive general liability insurance policies issued to SCA by Liberty Mutual, Transportation, and Hartford, each insurer agrees, subject to certain exclusions, to provide coverage for liability due to property damage caused by an "occurrence." The policies define "occurrence" as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." Each policy also contains a pollution exclusion clause, which states that the insurance does not apply to "property damage arising out of the discharge, dispersal, release or 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; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental" (emphasis supplied).

Under the terms of these policies, the insurers would be obligated to defend SCA in the underlying lawsuit pending in the Federal District Court in New York if the complaint in that suit was reasonably susceptible of an interpretation that the release of pollutants was "sudden and accidental." See Lumbermens Mut. Casualty Co. v. Belleville Indus. Inc., 407 Mass. 675, 677-683, 555 N.E.2d 568 (1990); Hazen Paper Co. v. United States Fidelity & Guar. Co., 407 Mass. 689, 692, 555 N.E.2d 576 (1990). If the underlying complaint does not allege a "sudden and accidental" discharge, the resulting damage is eliminated from coverage by the exclusion clause, even though the discharge might qualify as an "occurrence" within the policy terms. A threshold question, therefore, is whether, applying the comparison test stated above, the complaint in the underlying New York action, alleges a "sudden and accidental" release of pollutants. 4 We conclude that it does not.

We construed the "sudden and accidental" exception to the pollution exclusion clause in Lumbermens Mut. Casualty Co. v. Belleville Indus., supra at 679-683, 555 N.E.2d 568. In that decision, we held that the word "sudden" has a temporal element, and that "only an abrupt discharge or release of pollutants falls within the exception." Id. at 680-681 & n. 4, 555 N.E.2d 568. We rejected an alternative interpretation that the word "sudden" may also mean merely "unexpected," and should be construed in this way on the principle that ambiguities in an insurance contract are construed against the insurer and in favor of the insured. 5 See Claussen v. Aetna Casualty & Sur. Co., 259 Ga. 333, 338, 380 S.E.2d 686 (1989); Just v. Land Reclamation, Ltd., 155 Wis.2d 737, 746, 456 N.W.2d 570 (1990).

The pollution alleged in this case was not "sudden," as we defined that term in the Lumbermens case. The complaint details routine business activity lasting over several months in which the toxic contents of the barrels brought by SCA to the landfill were either emptied into open trenches or dumped into trenches and flattened with a bulldozer. To an ordinary intelligent person reading...

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