Clean Harbors v. Boston Basement Technologies

• Decision Date: 09 November 2009
• Docket Number: No. 08-P-576.,08-P-576.
• Citation: 916 N.E.2d 406,75 Mass. App. Ct. 709
• Parties: CLEAN HARBORS ENVIRONMENTAL SERVICES, INC. v. BOSTON BASEMENT TECHNOLOGIES, INC.; Admiral Insurance Company, third-party defendant.
• Court: Appeals Court of Massachusetts

916 N.E.2d 406

75 Mass. App. Ct. 709

CLEAN HARBORS ENVIRONMENTAL SERVICES, INC. v. BOSTON BASEMENT TECHNOLOGIES, INC.; Admiral Insurance Company, third-party defendant.

No. 08-P-576.

Appeals Court of Massachusetts, Norfolk.

Argued February 6, 2009.

Decided November 9, 2009.

Douglas W. Salvesen, Boston, for Boston Basement Technologies, Inc.

Brian R. Birke, Boston, for Admiral Insurance Company.

Present: LENK, CYPHER, & MILLS, JJ.

LENK, J.

Boston Basement Technologies, Inc. (Basement Technologies), appeals from a summary judgment entered in favor of its insurer, Admiral Insurance Company (Admiral), on Basement Technologies' claim for coverage of the cost of cleaning up an oil spill, performed at its request by Clean Harbors Environmental Services, Inc. (Clean Harbors). We are asked to interpret the meaning of the insurance policy's exclusion for certain pollution cleanup costs and the exception to that exclusion providing coverage for common-law property damage. We hold that certain cleanup costs may be covered as property damage under the exception to the policy's pollution exclusion clause when they constitute an appropriate and reasonable recovery at common law. Questions of fact, however, preclude our determination of coverage for Clean Harbors' services in this case.

1. Background. The summary judgment record discloses that in April, 2005, Basement Technologies, while installing a waterproofing system in the home of Richard Silva, broke a heating oil line and caused approximately 150 gallons of heating oil to leak into Silva's basement. The oil collected in a sump pump, which then pumped the oil outside into Silva's yard.

On or about April 21, 2005, Basement Technologies hired Clean Harbors to clean up the oil spill. Clean Harbors thereafter sent Basement Technologies invoices in the amount of $12,638.40. On April 28, 2005, the Massachusetts Department of Environmental Services (DEP) issued a notice of responsibility to Basement Technologies, pursuant to the Massachusetts Oil and Hazardous Material Release Prevention and Response Act, G.L. c. 21E. The notice identified Basement Technologies as a potentially responsible party under the statute, and thereby strictly liable for the costs of remedial response actions incurred at the property. Basement Technologies was instructed to take certain immediate response actions,¹ as well as to submit certain notices and filings for DEP approval, and to hire a licensed site professional "to manage, supervise or actually perform the necessary response actions at this site."

Basement Technologies sought payment of Clean Harbors' invoices under its commercial general liability policy with Admiral. Admiral denied coverage. Clean Harbors' invoices went unpaid, and Clean Harbors brought this action against Basement Technologies in District Court. Basement Technologies filed a third-party complaint against Silva, the property owner, who asserted a counterclaim in negligence against Basement Technologies for damages and cleanup costs associated with the oil spill. Basement Technologies also filed a third-party complaint against Admiral, seeking defense and indemnification. Admiral agreed to defend Basement Technologies against Silva's counterclaim under a reservation of rights, based on the potential for nonremediation property damage. Admiral denied coverage for Clean Harbors' claims.

Clean Harbors and Basement Technologies settled, and Basement Technologies sought reimbursement from Admiral for the settlement costs. Admiral moved for summary judgment based on the pollution exclusion clause in the policy. A District Court judge allowed the motion, reasoning in a thoughtful memorandum that Clean Harbors' services constituted environmental response costs, which were excluded under the policy. Basement Technologies appealed to the Appellate Division of the District Court Department, which affirmed the judgment in Admiral's favor. Basement Technologies then filed this appeal.

Basement Technologies informed us in its brief that it had also settled its dispute with Silva and that, in so doing, "it acknowledged that there was sufficient evidence that the accidental spill was caused by its negligence." We have not been informed of the specifics concerning Basement Technologies' settlements with Clean Harbors and Silva.

2. The policy. The commercial general liability policy issued to Basement Technologies by Admiral provides, under Section I, coverage A, in subsection 1a, in relevant part: "We will pay those sums that the insured becomes legally obligated to pay as damages because of ... `property damage' to which this insurance applies." The policy also contains various pollution exclusions, set out in subsection 2f. Significant for our purposes is the following exclusion in subsection 2f:

"(2) Any loss, cost or expense arising out of any:

"(a) Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, `pollutants'; or

"(b) Claim or `suit' by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of, `pollutants'.

"However, this paragraph does not apply to liability for damages because of `property damage' that the insured would have in the absence of such request, demand, order or statutory or regulatory requirement, or such claim or `suit' by or on behalf of a governmental authority."²

Property damage is defined in the policy, in relevant part, as: "Physical injury to tangible property, including all resulting loss of use of that property." We note that damages on account of damage to property caused by the discharge of pollutants is considered property damage under the policy definition, subject to the application of other provisions in the policy. See Hazen Paper Co. v. United States Fid. & Guar. Co., 407 Mass. 689, 701, 555 N.E.2d 576 (1990). And a spill of home heating oil is considered a pollutant under the policy. See McGregor v. Allamerica Ins. Co., 449 Mass. 400, 403, 868 N.E.2d 1225 (2007). With that, we turn to the question of coverage.

3. Coverage for property damage. It is undisputed, for purposes of summary judgment, that absent the requirement to respond to the oil spill imposed by G.L. c. 21E, Basement Technologies still would be liable in negligence to the property owner for damage caused by the oil spill. See Mailman's Steam Carpet Cleaning Corp. v. Lizotte, 415 Mass. 865, 870, 616 N.E.2d 85 (1993) (common-law liability is not dependent on either actual or potential liability under c. 21E).³ The pollution exclusion in the policy exempts from coverage any loss, cost, or expense arising out of, among other things, a statutory requirement to clean up or otherwise respond to the effects of the oil spill. See, e.g., Feinberg v. Commercial Union Ins. Co., 54 Mass.App.Ct. 587, 593, 766 N.E.2d 888 (2002). But the exception to the pollution exclusion for statutory response costs provides coverage for liability pursuant to common law for property damage caused by the oil spill.⁴

The issue before us is whether coverage for common-law property damage caused by the oil spill, pursuant to the exception to the pollution exclusion for statutory response costs, extends to the cost of Clean Harbors' services. Admiral maintains that the exception to the pollution exclusion must be interpreted to mean that any costs associated with removing the spilled oil and contaminated soil are not covered, because those costs are part and parcel of the response actions imposed upon Basement Technologies pursuant to G.L. c. 21E. Basement Technologies argues that the exception covers whatever damages are recoverable against it at common law, including cleanup costs to restore the property to its precontamination value.⁵ There appear to be no cases interpreting these particular provisions.⁶

Admiral concedes, however, that diminution in the value of Silva's property as a result of the oil spill would be a covered loss, under the exception for common-law damages to the pollution exclusion for statutory response costs. We agree, noting that, even with respect to a policy containing a somewhat similar pollution exclusion for statutory response costs but no exception for common-law damages, the judge in Utica Mut. Ins. Co. v. Hall Equip., Inc., 73 F.Supp.2d 83, 87-89 (D.Mass.1999), aff'd sub nom. Utica Mut. Ins. Co. v. Weathermark Invs., Inc., 292 F.3d 77 (1st Cir.2002), ruled that diminution in property value was a covered loss, being separate and distinct from environmental response costs to assess, contain, and remove the pollutants.

Accordingly, we start from the premise that diminution in property value resulting from the oil spill on Silva's property is a covered loss under the exception to the pollution exclusion for statutory cleanup costs. At common law, diminution of value is generally viewed as the proper measure of damages for permanent injury to property. Guaranty-First Trust Co. v. Textron, Inc., 416 Mass. 332, 336, 622 N.E.2d 597 (1993). Black v. Coastal Oil New England, Inc., 45 Mass.App.Ct. 461, 465, 699 N.E.2d 353 (1998).

But diminution in value is not the sole measure of damages for harm negligently caused to property. "At common law, the measure of damages to real property is dependent upon whether `the injury is permanent' or `reasonably curable by repairs.'" Black v. Coastal Oil New England, Inc., 45 Mass.App.Ct. at 465, 699 N.E.2d 353, quoting from Belkus v. Brockton, 282 Mass. 285, 287-288, 184 N.E. 812 (1933). "When the injury is temporary, that is, `reasonably curable by repairs, the expense of repairs, if less than the diminished market value, is the measure of recovery.'" Black v. Coastal Oil New England, Inc., supra, quoting from ...