Chemical Applications Co. v. Home Indemnity Co., Civ. A. No. 73-248-G.

Decision Date27 January 1977
Docket NumberCiv. A. No. 73-248-G.
Citation425 F. Supp. 777
PartiesCHEMICAL APPLICATIONS COMPANY, INC., Plaintiff, v. The HOME INDEMNITY COMPANY, Defendant.
CourtU.S. District Court — District of Massachusetts

Richard A. Dempsey, Glynn & Dempsey, Boston, Mass., for plaintiff.

Robert W. Cornell, Cornell & Gollub, Boston, Mass., for defendant.

OPINION

ALDRICH,* Senior Circuit Judge.

This is a diversity action by an insured under a liability policy1 to recover its costs in cleaning up an oil spill in navigable waters for which it was responsible, without regard to fault, under 33 U.S.C § 1321 (Supp. V, 1975), notably subsection (f)(2),

". . . shall be liable to the United States Government for the actual costs incurred under subsection (c) of this section for the removal of such oil from the water and shore line by the United States . . .."

The facts were stipulated,2 and so, apparently, is the correctness of plaintiff's contention that such loss constitutes "property damage" within the terms of the policy. There is no contrary contention in defendant's brief, and I so find, given the general purpose of the policy and the basic rule that terms are to be construed in favor of the insured. Transamerica Ins. Co. v. Norfolk & Dedham Mut. Fire Ins. Co., 1972, 361 Mass. 144, 147, 279 N.E.2d 686. The statutory liability is in no real sense a penalty, but is precisely measured in terms of the damage caused by the spill.

The only asserted defense is defendant's complaint that plaintiff, who was qualified to do so, did oil removal and cleanup work itself instead of permitting the government to have it done by others and bring suit. Plaintiff's costs, $31,619, which are just within the policy limit, are stipulated. It is further agreed that this figure includes nothing for overhead or profit, and that it was apparent at all times that, if others did the work, the charges against plaintiff would have substantially exceeded the policy limit.

Defendant relies on three policy "conditions." The first is easily disposed of. Paragraph 4(a) provides,

"The named insured shall promptly take at his expense all reasonable steps to prevent other bodily injury or property damage from arising out of the same or similar conditions, but such expense shall not be recoverable under this policy."

In terms, and concept, this imposes a duty on plaintiff to take steps to prevent further injury — to correct the fault — not to repair or restore what has already occurred. If the insured had to repair at its own expense the damage that had already occurred, the policy would be meaningless.

More complicated, but I hold equally meritless on the facts in this case, is defendant's invocation of two other policy provisions.

4(c) "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 accident."
5. "No action shall lie against the company unless, as a condition precedent thereto, there shall have been full compliance with all of the terms of this policy, nor until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company."

In connection with these provisions I note paragraph 4(b),

"If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative."

Strictly, this last is where the case begins. Plaintiff did notify defendant of the emergency. It also asked defendant to advance funds for it to do the work itself, which, because of the magnitude and its own limited resources, it would not be able to complete without financial help. Defendant made no response. In light of heavy government and public pressure to attack the spill promptly, plaintiff went to work as fast as its resources permitted. Defendant continued to make no response. Not until a month after the accident did it state its position — that not only would it refuse to advance funds (a matter plaintiff does not now press), but that, because of the aforesaid policy provisions, it would deny all liability for any work that plaintiff did itself. By that time plaintiff's resources were sufficiently drained that it could not proceed with the work fast enough to satisfy the government, and, although plaintiff continued to do some of the work, the government employed third parties to do the balance. The cost of the latter is not involved in this action.

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    ...recovery right and is, therefore, entitled to reimbursement for its reasonable expenses from its insurer. Chemical Applications Co. v. Home Indem. Co., 425 F.Supp. 777 (D.Mass.1977). In this context, I note that Couch interprets Leebov as a case not of recovery for mitigation expenses, but ......
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