Coakley v. Maine Bonding and Cas. Co.

• Citation: 618 A.2d 777,136 N.H. 402
• Decision Date: 25 November 1992
• Docket Number: No. 90-401,90-401
• Parties: Ronald C. COAKLEY and Coakley Landfill, Inc. v. MAINE BONDING AND CASUALTY COMPANY and St. Paul Fire and Marine Insurance Company.
• Court: Supreme Court of New Hampshire

Page 777

618 A.2d 777

136 N.H. 402

Ronald C. COAKLEY and Coakley Landfill, Inc. v. MAINE BONDING AND CASUALTY COMPANY and St. Paul Fire and Marine Insurance Company.

No. 90-401.

Supreme Court of New Hampshire.

Nov. 25, 1992.

As Modified on Denial of Rehearing Feb. 11, 1993.

Hamblett & Kerrigan, P.A., of Nashua (Timothy G. Kerrigan on the brief), and Goodwin, Proctor & Hoar, of Boston (James J. Dillon and another on the brief, and Nancer Ballard orally), for plaintiffs.

Wiggin & Nourie, of Manchester (Edward L. Cross, Jr. on the brief), and Wiley, Rein & Fielding, of Washington, DC (Thomas W. Brunner and another on the brief, and Laura A. Foggan orally), for defendant Maine Bonding and Cas. Co.

Morrison, Mahoney & Miller, of Boston (Michael F. Aylward on the brief and orally), for defendant St. Paul Fire and Marine Ins. Co.

Ouellette, Hallisey, Dibble & Tanguay, P.A., of Dover (Stephen H. Roberts on the brief), by brief for Aetna Cas. & Sur. Co., as amicus curiae.

Merrill & Broderick, of Manchester (Richard C. Nelson on the brief), and Drinker Biddle & Reath, of Philadelphia (James M. Sweet and Paul McDonald on the brief), by brief for American Motorists Ins. Co., as amicus curiae.

Hibbard & Spinella, P.A., of Concord (Frank P. Spinella, Jr. on the brief), and Covington & Burling, of Washington, DC (William H. Allen and another on the brief), by brief for Business and Industry Ass'n of New Hampshire and another, as amicus curiae.

Finis E. Williams, III, of Concord, by brief for Hitchiner Mfg. Co., Inc., as amicus curiae.

McLane, Graf, Raulerson & Middleton, of Manchester (Thomas J. Donovan on the brief), and Warner & Stackpole, of Boston (Ralph T. Lepore, III and another on the brief), by brief for Ins. Environmental Litigation Ass'n, as amicus curiae, jointly with Green, McMahon & Heed, of Keene (Douglas F. Green on the brief), and Gaston & Snow, of Boston (James P. Whitters, III on the brief), by brief for Peerless Ins. Co., as amicus curiae.

Orr and Reno Prof. Assoc., of Concord (R. James Steiner on the brief), and Nutter, McClennen & Fish, of Boston (Stephen J. Brake on the brief), by brief for K.J. Quinn & Co., Inc., as amicus curiae.

Sheehan, Phinney, Bass & Green P.A., of Portsmouth (Michael C. Harvell and another on the brief), by brief for New Hampshire Ball Bearings, Inc., as amicus curiae.

Sanders and McDermott, of Hampton (Mark E. Beliveau and Lawrence M. Edelman on the brief), H. Bernard Waugh, Jr., of Concord, and Anderson Kill Olick & Oshinsky, of Washington, D.C. (Jerold Oshinsky and Geri L. Weiseman on the brief), by brief for The New Hampshire Mun. Ass'n et al., as amicus curiae.

John P. Arnold, Atty. Gen. (Leslie J. Ludtke, Asst. Atty. Gen., on the brief), by brief for the State, as amicus curiae.

JOHNSON, Justice.

The central issue in this appeal is whether the defendants, Maine Bonding and Casualty Company (Maine Bonding) and St. Paul Fire and Marine Insurance Company (St. Paul), must indemnify the plaintiffs, Ronald C. Coakley and Coakley Landfill, Inc. (collectively, the Coakleys), for environmental "response" costs imposed or likely to be imposed by the United States Environmental Protection Agency (EPA) and the New Hampshire Department of Environmental Services (NHDES) pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.A. §§ 9601 et seq. (1983 & Supp.1992) (CERCLA), and comparable State statutes, RSA chapter 147-B (1990 & Supp.1991). The Superior Court (Hollman, J.) granted the defendants' motion for summary judgment below, ruling that the word "damages," found in the granting clause of the defendants' comprehensive general liability policies, does not include these response costs. In addition, the court ruled that the EPA and NHDES demands concerning Coakley Landfill, contained in "notices of potential responsibility" and other letters, are not "suits," and that therefore the defendants are not bound to defend the Coakleys. The Coakleys appeal both rulings and we reverse.

Coakley Landfill, the focal point of this dispute, straddles the border of Greenland and North Hampton. For many years, it accepted municipal and industrial waste from the Portsmouth area, as well as incinerator residue from the Pease Air Force Base. In 1984, the Coakleys were forced to close the landfill after the NHDES discovered contaminants in the area's groundwater and in the wells of neighboring properties. The contamination also forced surrounding municipalities to extend water supply distribution lines to service the residents who had depended on the well-water.

In 1984, the environmental protection division of the State Attorney General's office notified Ronald Coakley that he was "potentially responsible" for the contamination at the Coakley Landfill and asked him to fund and help conduct a "Remedial Investigation/Feasibility Study" (RI/FS) of the site, at an expected cost of at least $500,000. The division warned that "EPA is prepared to initiate the RI/FS process whenever it appears that our cooperative effort will not succeed." It appears that the Coakleys chose not to heed this warning because the EPA eventually conducted an RI/FS itself. The cost of the RI/FS and other landfill-related investigations exceeded $1,225,000.

In September 1987, the EPA sent Ronald Coakley a "Request for Information" about the landfill. The letter stated that compliance with the request was mandatory, and subject to a $25,000 penalty for each day of non-compliance. The record does not disclose whether the Coakleys complied with this "request." Next, in May 1989, the NHDES ordered Mr. Coakley to cover all ash piles at the landfill and post warnings to prevent public access. Again, it is unclear from the record whether the Coakleys performed these tasks.

Finally, in February 1990, the EPA sent Coakley Landfill, Inc. a "Notice of Potential Liability." The notice warned that, under CERCLA, a potentially responsible party (PRP) could be obligated to (1) "implement relief actions deemed necessary by EPA to protect the public health, welfare or environment"; (2) pay "for all costs incurred by the government in responding to any release or threatened release at the [landfill]"; and (3) "pay damages for injury to, destruction of, or loss of natural resources." In addition, the notice demanded that Coakley Landfill, Inc. pay the $1,225,000 already incurred by the EPA and requested that Coakley Landfill, Inc. "voluntarily perform or finance the response activities described below that EPA has determined are required at the [landfill]."

The "response activities" referenced in the EPA's PRP notice consist of "[d]esign and implementation of the Remedial Action selected and approved by EPA for the [landfill]" and "[o]peration, maintenance and monitoring necessary at the [landfill]." As of February 1990, the EPA's proposed "Remedial Action," or "Preferred Alternative," included "placing a cap over the landfill to minimize the migration of contaminants from the landfill" and "collection and treatment of groundwater to remove and prevent further migration of contaminants." This containment and cleanup plan, bearing an estimated cost of $20,200,000, represents a compromise between less expensive, less environmentally protective plans and more costly, more protective ones.

Attached to the PRP notice was a list of parties identified by the EPA as potentially responsible for the contamination at the landfill. The EPA made the list available to each entry on the list "to further the settlement negotiations and to encourage communication among the parties." The notice, however, made clear that "[i]nclusion on or exclusion from the list does not constitute a final determination by the Agency concerning the liability of any party for the hazard or contamination at the [landfill]."

In the midst of all this agency activity, the Coakleys contacted two of their insurance carriers, Maine Bonding and St. Paul, and requested coverage for any costs they might be forced to bear in connection with the EPA and NHDES demands. The relevant portion of the carriers' comprehensive general liability policies, purchased by the Coakleys, reads as follows:

"The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

A. bodily injury or

B. property damage

to which this insurance applies, caused by an occurrence, and the Company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient...."

(Emphasis added.) Similarly, the pertinent part of Maine Bonding's excess (umbrella) liability policies, also purchased by the Coakleys, reads:

"The Company will indemnify the Insured for ultimate net loss in excess of the retained limit which the Insured by reason of liability imposed upon the Insured by law or assumed by the Insured under any contract or agreement, shall become legally obligated to pay as damages because of Personal Injury Liability or Property Damage Liability or Advertising Offense Liability to which this policy applies, caused by an occurrence....

When underlying insurance does not apply to an occurrence:

With respect to any occurrence not covered by underlying insurance, but covered by this policy except for the amount of retained limit, the Company will, in addition to the amount of the ultimate net loss payable:

(1) defend any suit against the Insured seeking damages on account of personal injury, property damage or advertising offense, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient...."

(Emphasis added.) The carriers either refused to...