Alan Corp. v. International Surplus Lines Ins. Co., Civ. A. No. 90-40179-GN.

• Decision Date: 01 June 1993
• Docket Number: Civ. A. No. 90-40179-GN.
• Citation: 823 F. Supp. 33
• Parties: The ALAN CORPORATION and East Side Oil Company, Inc., Plaintiffs, v. INTERNATIONAL SURPLUS LINES INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Massachusetts

823 F. Supp. 33

The ALAN CORPORATION and East Side Oil Company, Inc., Plaintiffs, v. INTERNATIONAL SURPLUS LINES INSURANCE COMPANY, Defendant.

Civ. A. No. 90-40179-GN.

United States District Court, D. Massachusetts.

June 1, 1993.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Michael J. Reed, Collins & Reed, Shrewsbury, MA, Raymond J. Reed, Stanley L. Weinberg, Collins, Reed & Weinberg, Worcester, MA, for plaintiffs.

Keith C. Long, Robert A. Whitney, Warner & Stackpole, Boston, MA, Donald V. Jernberg, Elaynne B. Cothran, Wolff & Donnelly, Chicago, IL, for defendant.

MEMORANDUM OF DECISION

GORTON, District Judge.

This action comes before the Court on cross-motions for summary judgment. The plaintiffs, The Alan Corporation and East Side Oil Company, Inc. (collectively referred to as "Alan Corp."), originally filed their complaint in this action on August 17, 1990, seeking a declaratory judgment that they are entitled to coverage for environmental cleanup costs under an environmental impairment liability insurance policy, and alleging claims for breach of contract and unfair and deceptive trade practices under M.G.L. c. 93A. The plaintiffs then moved for summary judgment on August 19, 1992. The defendant, International Surplus Lines Insurance Company ("ISLIC"), filed its own summary judgment motion on October 9, 1992, seeking a declaration that there is no coverage under the policy, and a determination that ISLIC did not engage in unfair claims practices which violated M.G.L. c. 93A.

I. FACTS

The facts in this case are generally not in dispute. Where such a dispute exists, however, the opposing contentions are noted in this summary. Prior to July 16, 1987, Alan Corp., a distributor of fuel oil to retail customers, used a site in Leominster, Massachusetts ("the Leominster site"), as a distribution facility and a bulk storage site for oil. The Leominster site contained nine underground storage tanks. Alan Corp. also used a site in Fitchburg, Massachusetts ("the Fitchburg site") as a distribution facility and a bulk storage site for oil, which contained two underground storage tanks.

On August 28, 1986, Alan Corp. obtained an environmental impairment liability insurance policy ("the policy") from ISLIC. The policy was a "claims made" policy providing coverage for third-party claims of bodily injury and property damage brought against the policyholder. The policy also provided for reimbursement of the policyholder for costs incurred pursuant to government action requiring the clean-up of environmental damage pursuant to a pollution incident. The policy term ran from August 28, 1986 until August 28, 1987. The policy contained the following provisions:

I. Pollution Liability Coverage

A. The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as compensatory damages because of bodily injury or property damage to which this insurance applies, provided that:

1) such bodily injury or property damage is caused by a pollution incident which commences subsequent to the retroactive date shown in the declarations of this policy; and

2) the claim for such damages is first made against the insured during the policy period and reported to the company during the policy period and reported to the company during the policy period or within fifteen days after its termination.... hereinafter "§ I.A"

B. The company will reimburse the insured for reasonable and necessary cleanup costs incurred by the insured in the discharge of a legal obligation validly imposed through governmental action which is initiated during the policy period, provided that:

1) such clean-up costs are incurred because of environmental damage to which this insurance applies; and

2) the environmental damage is caused by a pollution incident which commences subsequent to the retroactive date shown in the declarations of this policy.... hereinafter "§ I.B"

Alan Corp. shut down the Leominster and Fitchburg sites on July 16, 1987. On or about August 25, 1987, Alan Corp. first became aware that potential contamination problems existed at both the Leominster and Fitchburg sites. Alan Corp. then notified Mr. Parker Wellington, the insurance agent/broker, of the potential contamination at both sites. ISLIC claims that it received actual notice of these claims of potential contamination on August 28, 1987, the final day of the policy term.

An Alan Corp. employee, Mr. David White, also allegedly notified the Leominster Fire Department of the potential contamination at the Leominster site by telephone on or about August 25, 1987. In that telephone conversation, a Leominster Fire Department employee allegedly told Mr. White to determine the extent of the contamination, and report it to the Massachusetts Department of Environmental Protection ("D.E.P.").¹ Alan Corp. does not claim that an employee telephoned the Fitchburg Fire Department reporting any potential contamination of the Fitchburg site.

Alan Corp. had previously reported contamination of a site they owned in Worcester, Massachusetts ("the Worcester site") to ISLIC, and insurance coverage for this site is not in issue. Alan Corp. alleges, however, that on an unspecified date, after they reported the potential contamination of the Leominster and Fitchburg sites to Mr. Wellington, an unnamed ISLIC employee told Alan Corp. to "lay low" with respect to the Leominster and Fitchburg sites until the clean-up of the Worcester site was completed. Alan Corp. also claims that at this same unspecified date, the unnamed ISLIC employee also told Alan Corp. that ISLIC would provide coverage for any necessary clean-up of the Leominster and Fitchburg sites, as soon as the Worcester site was cleaned up. ISLIC denies that any of its employees ever made any such representations.

After reporting the potential contamination on or about August 25, 1987 to Mr. Wellington and the Leominster Fire Department, Alan Corp. then contracted with Lycott Environmental Research Company, Inc. ("Lycott") to determine the extent, if any, of the contamination at both the Leominster and Fitchburg sites. Alan Corp. also then exercised its right to purchase an "extended reporting period option" for the policy from ISLIC, and this option was effective from August 28, 1987 to August 28, 1988. On October 30, 1987, Lycott completed its site assessments, which confirmed contamination at both the Leominster and Fitchburg sites. The conclusions of the Lycott report were forwarded to Mr. Wellington on November 3, 1987.

Alan Corp. reported the contamination of the Leominster site to the D.E.P. on July 12, 1988. On January 11, 1989, the D.E.P. notified Alan Corp. that it should remove stock piled soils at the Leominster site. On March 30, 1989, the D.E.P. issued a "notice of responsibility" to Alan Corp. relating to the Leominster site, and the company then conducted remedial efforts, as required by the D.E.P. Alan Corp. does not state when it notified the D.E.P. of the contamination of the Fitchburg site, but on August 13, 1991, the D.E.P. issued a "notice of responsibility" to Alan Corp. with respect to that site.

Alan Corp. did not report any claim for third-party bodily injury or property damage to ISLIC during the policy term (August 28, 1986 to August 28, 1987), or during the extended reporting period (August 28, 1987 to August 28, 1988). Alan Corp. has, however, sought coverage from ISLIC for the money it expended in cleaning up the Leominster and Fitchburg sites.

On June 8, 1989 and July 25, 1989, ISLIC denied insurance coverage under the policy for pollution claims pertaining to the Leominster site because it claimed that: 1) governmental action had not been initiated during the policy period, and 2) the purchase of the extended reporting period option did not extend coverage for environmental claims for clean-up costs, pursuant to § I.B of the policy. By letter of August 8, 1989, ISLIC denied coverage under the policy for Alan Corp.'s claims pertaining to the Fitchburg site because of the alleged lack of cooperation by the insured in determining whether contamination at the Fitchburg site existed. In the August 8, 1989 letter, ISLIC reserved its rights under all applicable conditions and exclusions of the policy in the event further investigative material was received.

II. THE SUMMARY JUDGMENT STANDARD

Summary Judgment shall be rendered where the pleadings, discovery on file and affidavits, if any, show "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). When one party has moved for summary judgment, it then falls to the opposing party to demonstrate a genuine disagreement as to some material fact. "In this context, `genuine' means that the evidence about the fact is such that a reasonable jury could resolve the point in favor of the nonmoving party and `material' means that the fact is one that might affect the outcome of the suit under the governing law." United States v. One Parcel of Real Property, Etc. (Great Harbor Neck, New Shoreham, R.I.), 960 F.2d 200, 204 (1st Cir.1992) (citations and internal quotation marks omitted). On a motion for summary judgment, the Court views the evidence and all reasonable inferences to be gleaned therefrom in the light most favorable to the nonmoving party. Pagano v. Frank, 983 F.2d 343, 347 (1st Cir.1993).

When a movant-defendant has suggested that competent evidence to prove the case is missing, the burden devolves upon the nonmovant-plaintiff to document some factual disagreement sufficient to withstand summary judgment. Wynne v. Tufts University School of Medicine, 976 F.2d 791, 794 (1st Cir.1992), cert. denied, ___ U.S. ___, 113 S.Ct. 1845, 123 L.Ed.2d 470 (1993), quoting Mesnick v. General Electric Co., 950 F.2d 816, 822 (1st Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 2965, 119 L.Ed.2d 586 (1992). The nonmovant-plaintiff must be able...