Emhart Industries, Inc. v. Home Ins. Co., C.A. No. 02-53 S.

Decision Date26 September 2007
Docket NumberC.A. No. 02-53 S.
PartiesEMHART INDUSTRIES, INC., Plaintiff, v. HOME INSURANCE COMPANY, Insurance Company of North America, Liberty Mutual Insurance Company, North River Insurance Company, One-Beacon America Insurance Company, and United States Fire Insurance Company, Defendants.
CourtU.S. District Court — District of Rhode Island

Gerald J. Petros, Esq., Hinckley, Allen & Snyder LLP, Providence, RI, Jack R. Pirozzolo, Esq., Richard L. Binder, Esq., Foley Hoag LLP, Boston, MA, for Plaintiff.

Mark T. Nugent, Esq., Michael T. Farley, Esq., Morrison Mahoney, LLP, Providence, RI, Lawrence A. Nathanson, E sq., Scott E. Levens, Esq., Siegal Napierkowski & Park, Mt. Laurel, NJ, John T. Harding, Esq., Morrison Mahoney LLP, Boston, MA, Peter C. Netburn, Esq., Kevin J. O'Connor, Esq., Hermes, Netburn, O'Connor & Spearing, Boston, MA, for Defendants.


WILLIAM E. SMITH, District Judge.

In this diversity action, Emhart Industries, Inc. ("Emhart") seeks a defense and indemnity from several of its insurance carriers related to the remediation of environmental contamination at the Centredale Manor Superfund Site (the "Superfund Site" or "Site") in North Providence, Rhode Island. All six insurers named in this action have at some point refused to defend or indemnify Emhart under one or more applicable insurance policies. Three of them, Home Insurance Company, Liberty Mutual Insurance Company, and United States Fire Company, were dismissed before trial for one reason or another. The other three, Century Indemnity Company ("Century"),1 OneBeacon America Insurance Company ("OneBeacon"), and North River Insurance Company ("North River"), proceeded to trial, ultimately obtaining a favorable jury verdict on their respective duties to indemnify. The principal players at this stage of the proceedings are Emhart and Century; OneBeacon and North River play only minor roles in this insurance drama. This opinion addresses various pre- and post-trial motions involving primarily the carriers' obligation to defend Emhart under three "occurrence" policies issued to Emhart's predecessor in the late 1960s. Together, these policies provide three layers of coverage for the period in question, ranging from general liability to excess umbrella, with a limit of $5.1 million.

For all the reasons that follow, Emhart's Renewed Motion for Judgment as a Matter of Law Regarding the Duty to Defend under the Century Primary Policy (the latest embodiment of an argument Emhart has been making for some time) is GRANTED; this ruling applies to the Century Excess Policy as well, but not the OneBeacon Umbrella Policy (or, because of Emhart's decision not to pursue the matter, the North River Policy). The Court also finds that Century breached its duty to defend Emhart under both of its policies, and fixes damages in the manner prescribed below. All of Emhart's remaining motions are DENIED.


The Superfund Site, which totals approximately ten acres, occupies two parcels of land on Smith Street in North Providence. On the western boundary, the Woonasquatucket River flows and extends south to a ten-year floodplain and, ultimately, the Allendale Dam. On the eastern boundary, there is a drainage swale (or "tailrace") that empties into a wooded wetland to the south. From an altitude, these watery boundaries resemble a Mason's compass, giving the southern portion of the Site a wider base. Presently, the Site boasts two residential buildings; for many years, however, it was dedicated to the manufacture of industrial chemicals, particularly, hexachlorophene, an antiseptic agent used in soaps. As will be explained in greater detail below, Emhart is the corporate successor to the chemical companies that operated at the Site at the time in question.

In 1998, the United States Environmental Protection Agency ("EPA") detected elevated levels of 2, 3, 7, 8-Tetracholordibenzo-p-Dioxin ("Dioxin") in soil and sediments at the Site, as well as in the further reaches of the Woonasquatucket River.3 Even at very low levels, Dioxin poses significant risks to human and ecological health. On June 17, 1999, the EPA issued a request for information to Emhart's parent corporation, Black & Decker, pursuant to Section 104(e) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"). See 42 U.S.C. §§ 9601-9675. Emhart responded with information about its relationship to several chemical companies formerly operating at the Site, including Crown Metro, Inc. ("Crown Metro"). Based in part on this information, the EPA sent Emhart a Notice of Potential Liability (the "PRP Letter") on February 28, 2000. The PRP Letter informed Emhart that, under CERCLA § 107(a), it was a potentially responsible party ("PRP") based on its status as "a successor to the liability of a chemical company which operated at the Site." The PRP Letter also invited Emhart to participate in the clean-up activities at the Site.4 Shortly thereafter, on April 12, 2000, the EPA issued a Unilateral Administrative Order for Removal Action (the "First Administrative Order"), which identified certain time-critical removal actions that Emhart was required to undertake.5 Among other things, the First Administrative Order made a finding of fact that "[h]azardous substances [i.e., dioxin] were disposed of at the Site as part of the former operations of several chemical companies," and observed that "Emhart is ... a successor to liability of several chemical companies which operated at the Site from approximately 1943 to approximately 1971."

Almost immediately, Emhart began a dialog with the carriers that, as far as it could ascertain, had provided insurance coverage to one or more of its predecessor chemical companies. Although the full extent of that dialog is unclear, it appears that Emhart did not have a great deal of success convincing them to take up the defense. For example, Emhart's investigation into the extent of its insurance coverage revealed an Excess Blanket Catastrophe Liability Policy XBC 46961 (the "Excess Policy") that INA (now Century) issued to Crown Metro (now Emhart) at some point in the late 1960s. The Excess Policy provided coverage from December 1, 1968, to February 15, 1970, with a $1 million limit of liability and a deductible equal to the (unidentified) "Underlying Insurance." Emhart forwarded Century the Excess Policy as an attachment to a November 22, 2000 letter, along with the PRP Letter and the First Administrative Order. In the letter, Emhart demanded that Century provide it with a defense in the administrative action and pay the EPA (or indemnify Emhart) for remediation activities. Also, Emhart asked Century to "immediately conduct a review of your records regarding this confirmed coverage and any additional insurance coverage INA provided to [Crown Metro]," with the understanding that its demand for a defense/coverage would extend to "any other policies your investigation identifies."

Century's claims representative, Alexandra Zajac, responded to Emhart's demand on December 12, 2000. In her letter, Zajac advised Emhart that the Excess Policy did not provide coverage for its claim because Emhart was neither a named insured nor a corporate successor to Crown Metro. Emhart replied on January 3, 2001, urging Century to reconsider its position on successorship and reminding Century that, in the November 22, 2000 letter, it had requested an investigation into the "`confirmed coverage and any additional insurance coverage' INA provided to Crown Metro." (Emphasis in original.) On January 11, 2001, Zajac told Emhart that, upon reevaluation, Century agreed that Emhart may have succeeded to Crown Metro's insurance policies, but that the Excess Policy

provides coverage for liabilities in excess of primary and/or underlying limits of liability. If you wish to pursue coverage under this policy, you must provide proof that all applicable primary and/or underlying limits have been completely and properly exhausted. At this time, we have no information to indicate that underlying coverage has been exhausted or that this claim will reach our layer of insurance. Therefore, notwithstanding the pollution exclusion in the policy, we are not presently obligated either to provide a defense or to indemnify Emhart in this matter.

Although not referenced in the January 11, 2001 letter, the record reveals that Century had initiated a search for additional Crown Metro policies, but had failed to find any.

On January 25, 2002, Emhart brought the instant action against Century and the other named defendants. For reasons that are not entirely clear, on August 29, 2002, Zajac requested a second search for additional policies that INA had issued to Crown Metro. Four months later, the search generated a General Liability-Automobile Policy GAL 36597 (the "Primary Policy") with a coverage period from February 15, 1969, to February 15, 1970,6 and a $100,000 limit of liability. Although there is no record of transmittal, it appears that the Primary Policy was forwarded (to Zajac, presumably) on January 7, 2003. However, Zajac did not see the Primary Policy until July 2, 2003, when she happened upon it while reviewing the case file. Zajac immediately faxed a copy of the Primary Policy to Century's outside counsel, who, eight days later, forwarded it to Emhart. Several months later, after Emhart reminded Century that claims under "any other policies your investigation identifies" were still outstanding, Century denied coverage under the Primary Policy. The basis for the denial, as Zajac's January 29, 2004 letter makes clear, was a familiar one: Emhart was not a named insured and had not proven successorship.7 On February 25, 2004, Century filed a counterclaim against Emhart, seeking a declaratory judgment that it did not have a duty to defend or indemnify Emhart under the Primary Policy. Thereafter, Emhart filed a response...

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