Dryden Oil Co. of New England, Inc. v. Travelers Indem. Co.

Citation91 F.3d 278
Decision Date05 October 1995
Docket NumberNo. 95-1608,95-1608
Parties26 Envtl. L. Rep. 21,623 DRYDEN OIL COMPANY OF NEW ENGLAND, INC., Dryden Oil Company, Inc., and Dryden Oil Company of Pennsylvania, Inc., Plaintiffs, Appellants, v. The TRAVELERS INDEMNITY COMPANY, the Travelers Indemnity Company of Illinois, and American Manufacturers Mutual Insurance Company, Defendants, Appellees. . Heard
CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)

Darragh K. Kasakoff, Worcester, MA, with whom Seder & Chandler was on brief, for appellants.

John A. Nadas, Boston, MA, with whom Bret A. Fausett, Elizabeth M. McCarron and Choate, Hall & Stewart were on brief, for appellees Travelers Indemnity Company and Travelers Indemnity Company of Illinois.

Karl S. Vasiloff, Waltham, MA, with whom Catherine M. Colinvaux and Zelle & Larson were on brief, for appellee American Manufacturers Mutual Insurance Company.

Before CYR, Circuit Judge, BOWNES, Senior Circuit Judge, and BOUDIN, Circuit Judge.

CYR, Circuit Judge.

Plaintiffs-appellants Dryden Oil Company of New England, Dryden Oil Company, and Dryden Oil Company of Pennsylvania (collectively: "Dryden") challenge a district court ruling rejecting their claim that defendants-appellees, The Travelers Indemnity Company, The Travelers Indemnity Company of Illinois (collectively: "Travelers") and American Manufacturers Mutual Insurance Company ("American Mutual"), are obligated to defend and indemnify Dryden in connection with a lawsuit brought against Dryden by Raymond King, trustee of the 150 Worcester Center Boulevard Trust ("Worcester Trust"), Dryden's former landlord. We affirm in part, and reverse and remand in part.

A. The Historical Facts

For the period July 30, 1986, to July 30, 1987, defendant-appellee Travelers issued Dryden (i) a primary comprehensive general liability insurance policy ("primary liability policy"), which included "property damage" and "personal injury" coverage, and (ii) a catastrophic umbrella liability policy ("umbrella policy"). For the period December 31, 1986, to December 31, 1987, Travelers issued Dryden a property and inland marine insurance policy ("property insurance policy") as well, affording coverage "against all risks of direct physical loss or damage." Travelers provided Dryden with similar primary and umbrella liability coverage to July 30, 1988. Defendant-appellee American Mutual provided primary comprehensive liability coverage to Dryden from July 31, 1988, to December 1, 1989.

On December 29, 1986, Dryden had leased 150 Worcester Center Boulevard (the "Property") from White & Bagley Company ("White & Bagley"). Thereafter, Dryden used the Property for mixing and manufacturing industrial lubricants and oils, as White & Bagley had done for many years. On December 30, 1986, Dryden listed the Property both in its primary and its umbrella liability policies with Travelers. Later, Dryden listed the Property in its property insurance policy with Travelers and its comprehensive liability policies with American Mutual as well. 1

On December 31, 1986, White & Bagley conveyed the Property to the White & Bagley Liquidation Trust. On August 28, 1987, the White & Bagley Liquidation Trust sold the Property to Worcester Trust, together

                with an assignment of the Dryden lease.  The latter transfer occurred after Worcester Trust had learned the results of an environmental assessment of the Property conducted pursuant to Mass.  Gen. L. ch.  21E ("Massachusetts Oil and Hazardous Material Release Prevention and Response Act"), which indicated "limited contamination" requiring "minimal remediation."   Dryden continued to lease the Property until December 31, 1988
B. The Litigation

In August 1990, Worcester Trust brought suit in Massachusetts Superior Court against, inter alios, White & Bagley, the White & Bagley Liquidation Trust, Dryden and Prescott Bagley, President of Dryden Oil of New England (collectively: "Owners/ Operators"), alleging, among other things, that there had been "spills or releases of oil, industrial lubricants and/or hazardous material during the transfer, storing, mixing and manufacturing process" throughout the time White & Bagley owned the Property, which continued while Dryden occupied the Property under its lease with White & Bagley and resulted in severe contamination from "oil and/or hazardous material."

After the pleadings were closed, three counts remained against, inter alios, the Owners/Operators, including Dryden. Counts I and II charged Dryden with liability for past and future response costs imposed upon Worcester Trust, pursuant to Mass. Gen. L. ch. 21E, for damage to real and personal property, and for related attorney fees, incurred in connection with alleged "releases" at the Property. Count III charged Dryden with liability for damages sustained by Worcester Trust due to the "improper, unsafe and otherwise negligent manner" in which Dryden, inter alios, "stored oil, industrial lubricants and/or hazardous materials." Five additional counts, directed against Dryden alone, demanded damages for past and future losses caused Worcester Trust due to Dryden's breaches of its lease, 2 various forms of "waste" committed on the Property, 3 conversion of personal property, and engaging in unfair and deceptive acts or practices in its leasehold relationship with Worcester Trust in violation of Mass. Gen. L. ch. 93A, §§ 2 and 11.

In due course, after Travelers and American Mutual declined to defend or indemnify, Dryden brought a state court action for declaratory relief, breach of contract, and for alleged violations of Mass. Gen. L. ch. 93A & ch. 176D. Once Travelers and American Mutual removed the action to federal district court pursuant to 28 U.S.C. §§ 1332, 1441, Dryden sought summary judgment on its claim for declaratory relief relating to the alleged duty to defend. The defendant insurers responded with cross-motions for summary judgment on all three counts. The district court ultimately adopted the report of a magistrate judge and entered summary judgment for Travelers and American Mutual on all counts. Dryden appealed.


Under Massachusetts law, a liability insurance carrier must defend an action against its insured if the allegations "are 'reasonably susceptible' of an interpretation that they state or adumbrate a claim covered by the policy terms...." GRE Ins. Group v. Metropolitan Boston Hous. Partnership, Inc., 61 F.3d 79, 81 (1st Cir.1995) (quoting Liberty Mut. Ins. Co. v. SCA Servs. Inc., 412 Mass. 330, 588 N.E.2d 1346, 1347 (1992)). The "complaint need only show, through general allegations, a possibility that the liability claim falls within the insurance coverage." SCA Servs., Inc. v. Transportation Ins. Co., 419 Mass. 528, 646 N.E.2d 394, 397 (1995). The duty to indemnify is defined less generously, see Travelers Ins. Co. v. Waltham Indus. Labs. Corp., 883 F.2d 1092, 1099 (1st Cir.1989) (citing Sterilite Corp. v. Continental Cas. Co., 17 Mass.App.Ct. 316, 458 N.E.2d 338, 341 n. 4 (1983), rev. denied, 391 Mass. 1102, 459 N.E.2d 826 (1984)), as it depends on the evidence, rather than an expansive view of the complaint, id. (citing Newell-Blais Post # 443 v. Shelby Mut. Ins. Co., 396 Mass. 633, 487 N.E.2d 1371, 1374 (1986)).

We interpret the relevant policy language with a view to whether " 'an objectively reasonable insured ... would expect to be covered.' " GRE Ins. Group, 61 F.3d at 81 (quoting Trustees of Tufts Univ. v. Commercial Union Ins. Co., 415 Mass. 844, 616 N.E.2d 68, 72 (1993)). Unambiguous terms are given their plain meaning, High Voltage Eng'g Corp. v. Federal Ins. Co., 981 F.2d 596, 600 (1st Cir.1992) (citing Stankus v. New York Life Ins. Co., 312 Mass. 366, 44 N.E.2d 687, 689 (1942)), and ambiguous terms are construed against the insurer. Id. (citing August A. Busch & Co. of Mass. v. Liberty Mut. Ins. Co., 339 Mass. 239, 158 N.E.2d 351, 353 (1959)). Once an insured establishes that a claim comes within the terms of coverage, the insurer must demonstrate "the applicability of any exclusion." GRE Ins. Group, 61 F.3d at 81 (citing Camp Dresser & McKee, Inc. v. Home Ins. Co., 30 Mass.App.Ct. 318, 568 N.E.2d, 631, 633 (1991)).

A. Property Damage Liability Coverage

The Travelers primary liability policies included, inter alia, a comprehensive general liability ("CGL") Form and a Broad Form CGL Endorsement. The CGL Form obligated Travelers to pay "all sums [for] which the [i]nsured shall become legally obligated ... because of ... property damage to which [the policy] applies, caused by an occurrence...." The CGL Form likewise imposed "[a] duty to defend any suit against the [i]nsured seeking damages on account of ... property damage...." 5

Among the relevant property damage exclusions in the CGL Form are (i) a "Contractual Liability Exclusion" for "liability assumed by the [i]nsured under any contract or agreement except an incidental contract " (emphasis added), which includes any written lease of premises, and (ii) exclusion (f) relating to the "emission, discharge, seepage, release or escape of any liquid, solid, gaseous or thermal waste or pollutant...." In the primary liability policies, exclusion (f) is replaced by an "Absolute Pollution Exclusion" for "property damage arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants ... at or from premises the named [i]nsured owns, rents or occupies...." Under the Absolute Pollution Exclusion, "[p]ollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes The CGL Form also contains an exclusion (k), the Owned or Leased Premises Exclusion, which bars coverage for damage to:

acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed."

"(1) property owned or occupied by or rented to the [i]nsured, (2) property used by the [i]nsured, or (3) property in the care, custody...

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