CPC Intern., Inc. v. Northbrook Excess & Surplus Ins. Co.
| Decision Date | 26 December 1995 |
| Docket Number | No. 95-36-A,95-36-A |
| Citation | 668 A.2d 647 |
| Court | Rhode Island Supreme Court |
| Parties | CPC INTERNATIONAL, INC. v. NORTHBROOK EXCESS & SURPLUS INSURANCE CO. ppeal. |
This case comes to us as a certified question from the United States Court of Appeals for the First Circuit pursuant to Rule 6 of the Supreme Court Rules of Appellate Procedure. 1 The certified question reads as follows:
"What trigger-of-coverage standard would the Rhode Island Supreme Court use for determining at what point an 'occurrence' causing 'property damage' took place, within the meaning of the insurance policy provisions provided in the separate opinion in this case, where an insured alleges that a spill of hazardous contaminants in 1974 migrated through the groundwater, causing immediate injury to the pertinent property, which was not, in fact, discovered, however, until at least 1979?"
The facts as relevant to the certified question are as follows. The defendant, Northbrook Excess & Surplus Insurance Co. (Northbrook) provided a $25 million excess-liability policy to plaintiff, CPC International, Inc. (CPC), a New Jersey packaging and manufacturing corporation. The policy was in effect from July 1, 1979, to July 1, 1980. CPC's former subsidiary, Peterson/Puritan, an aerosol-packaging plant located in Cumberland Rhode Island, was allegedly responsible for land and water contamination for which the EPA required an environmental cleanup. CPC now seeks indemnity for the costs of the cleanup from Northbrook.
Peterson/Puritan, a manufacturer of flea spray, hair spray, spot remover, and oven cleaner, among other products, became a subsidiary of CPC in 1968. The Peterson/Puritan plant was bounded on its western edge by the Blackstone River. On June 21, 1974, there was a massive spill of more than 6,200 gallons of perchloroethylene (perc) onto the soil at the Peterson/Puritan plant following an accidental rupture of a storage tank. At that time, CPC claims that there was no indication of any damage to the Quinnville well fields that feed the municipal water supply of the towns of Cumberland and Lincoln. In October 1979, both towns discovered that their municipal water supply was contaminated by chemicals. Later that year, the Quinnville wells were closed. In 1982, the town of Lincoln and the Board of Water Commissioners of Lincoln sued Peterson/Puritan for the contamination of the wells. The suit was settled in 1984 for $780,000, paid by CPC's primary insurer, Northwestern National Insurance Company (Northwestern). The Northwestern policy had a coverage limit of $1 million.
In 1983 the EPA investigated an area it designated OU-1, which included the Peterson/Puritan site and the aquifer east of the Blackstone River. In 1987 the EPA identified Peterson/Puritan as the party responsible for the chemical contamination of the ground water and ordered it to do a further analysis of the site and to investigate additional responsible parties. Later that year, Northwestern informed CPC and Northbrook that primary coverage under its policy was exhausted. Northbrook subsequently refused to provide excess coverage for costs incurred in the well closure and cleanup of the area.
In July of 1987, CPC filed suit against Northbrook in New Jersey State Court for a declaration that Northbrook must indemnify it for cleanup costs and other damages arising from the town of Lincoln settlement and the EPA order in respect to the aquifer east of the Blackstone River. The case was removed on the basis of diversity jurisdiction to the United States District Court for the District of New Jersey. In 1989 the case was transferred to the United States District Court for the District of Rhode Island where it was tried, and judgment as a matter of law was entered in favor of Northbrook.
An examination of the record before the District Court would justify a trier of fact in finding the following chronological events. Between 1963 and the late 1970s, Peterson/Puritan employees routinely dumped chemicals, including volatile organic compounds (VOCs), into the drains and septic systems of the Peterson/Puritan plant. The contamination of the wells was discovered by state investigators from the Rhode Island Department of Health in October 1979 during the Northbrook policy period. Following the discovery of the contamination, the wells were determined to be unusable and were closed.
CPC's theory of the case at trial was that prior to the perc spill, the VOCs and other chemicals already in the soil had been trapped there by silt and clay, where they would have remained indefinitely. The perc spill, however, picked up the trapped chemicals as it flowed underground to the Quinnville wells, which it reached in 1979. CPC argued that discovery of the well-field contamination in October 1979 triggered coverage under the Northbrook policy. Northbrook's theory at trial was that the contamination of the well fields was caused by Peterson/Puritan's continuous dumping of chemicals at the plant and not by the perc spill. Northbrook argued in the alternative that even if the perc spill had caused the contamination, the spill either polluted the ground water in 1974 or reached the well fields after the 1979-80 policy period, and thus that coverage under the policy was never triggered.
The District Court granted Northbrook's motion for judgment as a matter of law, holding that under "general principles of insurance law," the appropriate trigger of coverage was the point at which the aquifer was actually damaged. The court determined that the damage took place at either the time of the perc spill in 1974 or at the time the perc-led plume of chemicals reached the well field and that neither could have taken place during the policy period. CPC appealed the decision to the First Circuit Court of Appeals.
The Court of Appeals attempted to resolve the trigger-of-coverage issue under Rhode Island law, which it noted is determinative of the appeal, but concluded that Rhode Island case law is unclear on the issue. We agree that no prior opinion of this court provides any guidance in answering the...
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