Boston Gas Co. v. Century Indem. Co.
Decision Date | 24 July 2009 |
Docket Number | SJC-10246 |
Citation | 910 N.E.2d 290,454 Mass. 337 |
Parties | BOSTON GAS COMPANY<SMALL><SUP>1</SUP></SMALL> v. CENTURY INDEMNITY COMPANY; Certain Underwriters at Lloyd's London & others,<SMALL><SUP>2</SUP></SMALL> third-party defendants. |
Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Guy A. Cellucci, Philadelphia, PA (Shane R. Heskin with him) for the defendant.
David L. Elkind, Washington, DC (Ronald Macklin, Brooklyn, NY, with him) for the plaintiff.
Jo-Ann Horn Maynard, Seattle, WA, for the third-party defendants.
The following submitted briefs for amici curiae:
Eugene R. Anderson, William G. Passannante, & Carrie Maylor, New York, NY, & Amy Bach, Mill Valley, CA, for United Policyholders.
Richard Neumeier, Boston, for Continental Casualty Company.
Martin F. Gaynor, III, & Nicholas D. Stellakis, Boston, for A.W. Chesterton Company.
William F. Greaney, Deanna M. Wilcox, & Gregory M. Lipper, Washington, DC, & Francis J. Sally & Andrea Peraner-Sweet, Boston, for The Gillette Company.
Peter G. Hermes, Kevin J. O'Connor, & Michael S. Batson, Boston, for OneBeacon America Insurance Company.
Laura A. Foggan, Paul A. Dame, & Parker J. Lavin, Washington, DC, & Richard Riley & William P. Mekrut for The American Insurance Association & others.
Present: MARSHALL, C.J., IRELAND, SPINA, COWIN, CORDY, & BOTSFORD, JJ.
In connection with an appeal pending before it, the United States Court of Appeals for the First Circuit has certified the following questions to this court, pursuant to S.J.C. Rule 1:03, as appearing in 382 Mass. 700 (1981):
Boston Gas Co. v. Century Indem. Co., 529 F.3d 8, 24 (1st Cir.2008).
We answer the certified questions as follows with respect to the policies at issue. As to the first certified question, we respond that liability should be prorated. As to the second certified question, we respond by adopting the time-on-the-risk method of prorating liability in the absence of evidence more closely approximating the actual distribution of property damage. Our answers to the first two certified questions obviate the need to answer the third certified question.4
Facts. We summarize the background facts and procedural history set forth in the opinion accompanying the certification order, id. at 10-23, supplemented by additional undisputed facts from the record.
1. Background. Boston Gas Company (Boston Gas) is the largest provider of natural gas in the New England area. Before natural gas became New England's primary energy source, Boston Gas produced gas fuel at facilities called manufactured gas plants (MGPs). The MGPs created gas by heating coal in large ovens, generating gas that was then purified and piped out for use. This process produced a variety of byproducts, including ash, drip oil, tar, and coke. Many of these byproducts are nonbiodegradable and some are deemed carcinogenic. These byproducts now contaminate the ground and water around many former MGP sites. Contamination has been discovered at twenty-nine former Boston Gas MGPs. This case concerns only one of those sites, located in Everett.
Boston Gas operated the Everett MGP from 1908 until about 1969. The Everett MGP produced manufactured gas and processed coke oven gas purchased from a nearby coke plant. In 1995, a routine investigation uncovered contamination at the Everett site. The primary contaminant in this case was tar, which is the main liquid byproduct of manufactured gas production.5 Although the site had been sold to a new owner (DOMAC, LLC) in 1970, Boston Gas was strictly liable under Massachusetts law for all costs associated with the investigation and cleanup of the contamination caused by the Everett MGP's operations.6
2. The Century policies. Boston Gas purchased CGL insurance policies from several different insurers during its operation of the Everett MGP. During the period from December 1, 1951, through December 1, 1969, three different first-layer excess CGL policies were issued by Century Indemnity Company (Century) to Boston Gas which provided coverage for, among other things, operations at the Everett MGP.7 The policies were occurrence based, meaning that (subject to any self-insured retention,8 policy limits, and other terms and conditions) Century would indemnify Boston Gas for its "ultimate net loss" for liabilities stemming from, among other things, property damage caused by an "occurrence." The definitions of "ultimate net loss" and "occurrence" varied slightly among the policies. Other terms of the policies varied as well.
a. 1951-1960. The first Century policy, XPL-3392, was in effect during the years from 1951 to 1960. This policy was lost, but a jury hearing the case in the Federal District Court found that the policy had a $1 million policy limit in 1951 and from 1955-1960, and a limit of $500,000 from 1952 to 1954. The jury did not determine the amount of the lost policy's self-insured retention. The jury did not determine the other terms of this policy, nor are they apparent from the record, but the parties do not dispute that they were occurrence-based policies.
b. 1960-1966. The second Century policy, XPL-5607, was in effect during the years 1960 to 1966. This policy had a per occurrence limit of $1 million and a self-insured retention of $100,000. In the insuring agreement, Century agreed:
"[T]o indemnify [Boston Gas] for ultimate net loss in excess of the retained limit ... which [Boston Gas] may sustain by reason of the liability imposed upon [it] by law, or assumed by [it] under contract or agreement ... [f]or damages because of injury to or destruction of property, including the loss of use thereof, caused by an occurrence as defined herein" (emphasis added).
The policy defined "occurrence" as:
(Emphasis added.)
The policy defined "ultimate net loss" as:
"[T]he sum actually paid in cash in the settlement or satisfaction of losses for which [Boston Gas] is liable, either by adjudication or compromise with the written consent of [Century], after making proper deductions for all recoveries and salvages collectible, and for other insurance that is in excess of the retained limit, but shall exclude all salaries of employees and office expenses of [Boston Gas] incurred in investigation, adjustment and litigation" (emphasis added).
In a section of the insuring agreement entitled, "Policy Period, Territory," the policy stated that it "applie[d] only to occurrences which happen during the policy period within the United States of America, its territories or possessions, or Canada." Finally, the policy contained the following "[o]ther insurance" clause:
c. 1966-1969. The third Century policy, XCP-3547, was in effect during the years 1966 to 1969. This policy had a per occurrence limit of $17 million and a self-insured retention of $100,000. The insuring agreement provided:
"[Century] will indemnify [Boston Gas] for ultimate net loss in excess of the retained limit hereinafter stated which [Boston Gas] shall become legally obligated to pay as damages because of ... property damage ... to which this policy applies, caused by an occurrence."
The policy defined "[o]ccurrence," with respect to property damage, as "an accident including injurious exposure to conditions, which results, during the policy period, in property damage neither expected nor intended from the standpoint of [Boston Gas]." "Property damage" was defined as "injury to or destruction of tangible property." The policy defined "ultimate net loss" as:
"[T]he sum actually paid or payable in cash in the settlement or satisfaction of losses for which [Boston Gas] is liable either by adjudication or compromise with the written consent of [Century], after making proper deduction for all recoveries and salvages collectible, but excludes all loss expenses and...
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