President & Fellows of Harvard College v. Westchester Fire Insurance Co.

• Decision Date: 24 February 2011
• Docket Number: 095398BLS2
• Court: Massachusetts Superior Court
• Parties: President & Fellows of Harvard College v. Westchester Fire Insurance Company et al.[1] No. 114568

President & Fellows of Harvard College v. Westchester Fire Insurance Company et al.^[1]

No. 114568

No. 095398BLS2

Superior Court of Massachusetts, Suffolk

February 24, 2011

Caption Date: February 24, 2011

Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Fabricant, Judith, J.

MEMORANDUM OF DECISION AND ORDER ON DEFENDANT CRUM & FORSTER’S MOTION TO DISMISS AND ON CROSS MOTIONS FOR PARTIAL SUMMARY JUDGMENT OF THE PRESIDENT & FELLOWS OF HARVARD COLLEGE WESTCHESTER FIRE INSURANCE COMPANY AND UNITED STATES FIRE INSURANCE COMPANY

Judith Fabricant, Justice of the Superior Court

This action presents a dispute over insurance coverage for environmental contamination. Before the Court are cross motions for summary judgment between plaintiff President & Fellows of Harvard College (Harvard) and defendants Westchester Fire Insurance Company (Westchester) and United States Fire Insurance Company (US Fire, or, with Westchester the insurers), along with a motion to dismiss by defendant Crum & Forster Holdings Corp. on the ground of lack of jurisdiction. For the reasons that will be explained Harvard’s motion for summary judgment will be allowed as against the insurers, and Crum & Forster’s motion to dismiss will be denied without prejudice to renewal after discovery limited to the issue of personal jurisdiction.

BACKGROUND

The record before the Court establishes the following facts as undisputed. Westchester issued to Harvard a series of six comprehensive general liability and umbrella insurance policies covering the period of July 1, 1963, to July 1 1972.^[2] Pricing for the policies was based on an annual amount per student enrolled in the University. The policies did not refer to or incorporate any list of covered real properties, activities, or other risks associated with the insured. United States Fire Insurance Company now has responsibility for the Westchester policies.^[3]

The insuring clause of the 1963-1969 CGL policy^[4] requires Westchester to pay “all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss thereof, resulting from an occurrence.” The policy defines an “occurrence” as

an unexpected event or happening which results in... injury to or destruction of property during the policy period or a continuous or repeated exposure to conditions which results in... injury to or destruction of property during the policy period, provided the insured did not intend or anticipate that injury would result.

Westchester also agreed that “[w]ith respect to such insurance as is afforded under this policy, the company shall: (a) defend any suit against the insured alleging such injury, sickness, disease, or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent..." Endorsement #9, entitled “WORLD-WIDE COVERAGE, ” amended the territorial scope of the coverage to include “occurrences which happen during the policy period anywhere in the world.”

On September 30, 1988, Harvard bought property located at 1609 Massachusetts Avenue, Cambridge. Among the commercial tenants then occupying the property was Crimson Cleaners, a dry cleaning business that had been operating there since the 1950s.^[5] Crimson Cleaners and/or its predecessors used perchloroethylene (PCE). In 1989 and early 1990, Harvard, through its environmental consultant, McPhail Associates, Inc. (McPhail) conducted an environmental site assessment of the property. The assessment confirmed the presence of PCE in shallow soils and groundwater “limited to localized areas of the parking lot, particularly in the area behind Crimson Cleaners.” According to the McPhail report, “the [PCE] in the groundwater, although in excess of normal background levels, is within acceptable limits and is considered to have no significant impact or threat of impact on the groundwater quality at the site.” Harvard notified the Massachusetts Department of Environmental Protection (DEP), and conducted a limited removal action. That action, according to McPhail, achieved a permanent solution. DEP did not require further action at that time.

In November 2006, in the context of a construction project on the Harvard Law School campus, Harvard conducted groundwater sampling. Sampling results received on November 30, 2006, revealed the presence of PCE in groundwater at levels that, under regulatory standards in effect at that time, ^[6] required prompt notification of DEP pursuant to 310 C.M.R. 40.0000, et seq. Harvard gave the required notice to DEP, which, exercising its statutory and regulatory authority, determined that the situation constituted “a release or threat of release of material that constituted or could pose an immediate hazard.” On that basis, it orally directed Harvard to institute certain “Immediate Response Actions.”

On January 16, 2007, DEP issued a Notice of Responsibility (NOR) that identified Harvard as a “Potentially Responsible Party (PRP) liable for response actions and costs under G.L.c. 21E, §5.” Harvard’s liability, the NOR stated, was “joint and several, meaning that you may be liable for all response action costs incurred at the site, regardless of the existence of any other liable parties.” The NOR stated that PCE contamination existed at the Crimson Cleaners site and had migrated to additional properties owned by Harvard and others. It ordered Harvard to take certain specific, as well as other, more general, response actions, and advised that “[t]he subject site shall not be deemed to have had all necessary and required response actions unless and until all substantial hazards presented by the site have been eliminated and a level of No Significant Risk... exists or has been achieved...”

The NOR further advised Harvard that, if it did not comply, it “may be liable for up to three (3) times all response action costs incurred by MassDEP... [including], without limitation, the cost of direct hours spent by MassDEP employees arranging for response actions or overseeing work performed by persons other than MassDEP or their contractors, expenses incurred by MassDEP in support of those direct hours, and payments to MassDEP contractors”; that MassDEP could assess interest on costs at the rate of twelve percent compounded annually; that to secure payment, the Commonwealth could place liens on Harvard’s property and foreclose on those liens; that Harvard could also be liable for damages to natural resources; that civil and criminal liability could be imposed pursuant to G.L.c. 21E, §11; and that civil administrative penalties could be imposed under G.L.c. 21A, §16 for each violation of c. 21E, the Massachusetts Contingency Plan (MCP) or any “order, permit or approval issued thereunder.”^[7]

Harvard proceeded with the response actions ordered by DEP, under the supervision of Licensed Site Professional (LSP) Deborah H. Gevalt and the firm of Haley & Aldrich. It also undertook a dendroecological investigation, which involved analyzing tree rings and their chemical compounds, so as to determine whether releases of PCE had occurred during the period of the Westchester policies. On November 29, 2007, while it awaited the results of the dendroecological assessment, Harvard’s attorney sent a letter to Westchester and Resolute Management Inc. (Resolute), the entity Harvard then believed was responsible for the Westchester policies, notifying them that it reserved the right to seek indemnification and defense under the policies for its investigation and response actions in response to the NOR.

Harvard’s attorney received a response in the form of a letter dated January 4, 2008, from Claims Specialist Steven Albertson. Albertson’s letterhead displayed the name “Crum & Forster” in large type, followed by “A Fairfax Company, ” and then, in smaller type, the names of U.S. Fire and two other companies. Albertson acknowledged receipt of Harvard’s notice, requested that Harvard direct all future correspondence to him “at Crum & Forster, ” requested additional documentation, and represented that, upon review of documentation, “we will provide Harvard with a coverage determination.” Harvard provided the requested documentation, along with a cover letter expressing its understanding that Crum & Forster was responding on behalf of Westchester. After further correspondence between Harvard’s counsel and Albertson, Harvard’s counsel received an e-mail dated March 7, 2008, from a Boston attorney indicating that his firm had “been retained by Crum & Forster in connection with this matter, ” and requesting further documentation.

On April 10, 2008, Harvard received the results of the dendroecological investigation, indicating that PCE had been released to and/or migrated into groundwater during the effective periods of one or more of the Westchester policies. Harvard’s counsel provided those results to the attorney for Crum & Forster in a letter dated April 17, 2008, and requested defense and indemnity under the Westchester policies. She provided various additional information over the next several months, in response to requests. In an October 15, 2008 email, counsel for Crum & Forster informed Harvard’s counsel that Harvard’s claim “is being discussed this week at the most senior management levels within the Crum & Forster organization.” Further correspondence and requests for information followed; in response, Harvard provided cost information.

By letter to Crum & Forster’s attorney dated March 5 2009, Harvard’s attorney indicated that it was considering litigation as a result of Crum & Forster’s failure to respond to its coverage claim. A response arrived in the form of a letter dated April 10, 2009, on Crum & Forster letterhead, signed by ...