Energynorth Natural Gas, Inc. v. Certain Underwriters at Lloyd's

• Decision Date: 18 October 2007
• Docket Number: No. 2006–745.,2006–745.
• Citation: 156 N.H. 333,934 A.2d 517
• Court: New Hampshire Supreme Court
• Parties: ENERGYNORTH NATURAL GAS, INC. v. CERTAIN UNDERWRITERS AT LLOYD'S and another.

156 N.H. 333

934 A.2d 517

ENERGYNORTH NATURAL GAS, INC.

v.CERTAIN UNDERWRITERS AT LLOYD'S and another.

No. 2006–745.

Supreme Court of New Hampshire.

Argued: May 9, 2007.

Opinion Issued: Oct. 18, 2007.

McLane, Graf, Raulerson & Middleton, P.A., of Manchester (Bruce W. Felmly and another, on the brief, and Mr. Felmly orally), for the plaintiff.

Boutin & Altieri, P.L.L.C., of Londonderry (Edmund J. Boutin, on the brief), and Bates & Carey, L.L.P., of Chicago, IL (Mark G. Sheridan and David M. Alt, on the brief, and Mr. Sheridan orally), for defendantAmerican ReInsurance Company.

Boutin & Altieri, P.L.L.C., of Londonderry (Edmund J. Boutin, on the brief), for Century Indemnity Company, as amicus curiae.

McNeill, Taylor & Gallo, P.A., of Dover (Stephen H. Roberts, on the brief), for Complex Insurance Claims Litigation Association, as amicus curiae.

DUGGAN, J.

The United States District Court for the District of New Hampshire(Barbadoro, J.) certified the following questions of law, seeSup.Ct. R. 34 :

1.When an insurance policy is triggered by the continuous migration of toxic waste that began before coverage commenced and continued after coverage ended, and the evidence will not permit a determination as to when specific property damage occurred, is the insurer jointly and severa[l]ly liable for all of the resulting property damage up to the limits of the policy?

2.If the answer to question 1 is no, how should the insurer's share of any liability be determined?

3.If the answer to question 1 is yes, what is the effect of prior settlements with other insurers?

4.Does a policy holder become immediately entitled to an award of costs and reasonable attorneys' fees under RSA [ ]491:22–b by obtaining rulings against an excess insurer that will require the insurer to indemnify the policy holder if it incurs enough recoverable costs in the future to reach the coverage provided by the excess insurer?

We adopt the parties' joint statement of relevant facts as well as the district court's recitation of facts.This is an environmental insurance coverage case.The plaintiff, EnergyNorth Natural Gas, Inc.(EnergyNorth), is the successor to a company that operated a manufactured gas plant (MGP) in Manchester.The MGP began operating in 1852 and ceased operations in or about 1952.On March 13, 2000, the New Hampshire Department of Environmental Services notified EnergyNorth of pollution damage at the Manchester site and required it to undertake investigative and remedial action, which is ongoing.

EnergyNorth brought this declaratory judgment and breach of contract action against various insurance companies to recover costs that it incurred in the past and expects to incur in the future to respond to the environmental damage caused by the MGP's operations.The various policies issued by these insurance companies first became effective as early as 1939 and continued until 1986.EnergyNorth settled its claims with all of the insurers except defendantAmerican Re–Insurance Company(American Re).Some or all of the settlements into which EnergyNorth entered with the other insurers are broader than the Manchester site cleanup at issue in this action.

American Re provided third-level excess liability insurance coverage to one of EnergyNorth's predecessors from January 1, 1972, until January 1, 1973.The American Re policy contains a limit of liability of $2,000,000 in excess of $3,000,000 of underlying excess coverage.It is an indemnity-only policy that does not contain a duty to defend.The American Re policy applied "only to accidents or occurrences" happening between January 1, 1972, and January 1, 1973.The policy required American Re to indemnify EnergyNorth "against ultimate net loss in excess of and arising out of the hazards covered and as defined and in excess of the underlying insurance ... but only up to an amount not exceeding the limit(s) shown in Item 5 of the Declarations."Item 5 of the Declarations set forth limits of: "$2,000,000 each occurrence and annual aggregate where applicable in excess of $3,000,000 and underlying insurance as shown in Item4(a) and (b) above."Under the American Re policy, American Re's "obligation to pay any ultimate net loss and costs with respect to any accident or occurrence falling within the terms of this Certificate shall not attach until the amount of the applicable underlying limit has been paid by or on behalf of the Insured on account of such accident or occurrence."The term "ultimate net loss" was defined as "the sums paid in settlement of losses for which the Insured is liable after making deductions for all recoveries, salvages and other insurances ... whether recoverable or not, and shall exclude all ‘Costs.’ "

The American Re policy provided that its coverage "shall follow the insuring agreements, conditions and exclusions of the underlying insurance ... immediately preceding the layer of coverage provided by this [policy]," except "as may be inconsistent with this [policy]."The policy immediately underlying the American Re policy was a Home Insurance Company policy.The Home policy's coverage provision stated:

The Company hereby agrees, subject to the limitations, terms and conditions hereinafter mentioned, to indemni[f]y the Insured for all sums which the Insured shall be obligated to pay by reason of the liability ... imposed upon the Insured by Law, ... for damages, direct or consequential, and expenses, all as more fully defined by the term "ultimate net loss" on account of ... Property Damage ... caused by or arising out of each occurrence or happening anywhere in the world.

The Home policy defined "occurrence" as:

The term "occurrence" wherever used herein shall mean an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage or advertising liability during the policy period.All such exposure to substantially the same general conditions arising at or emanating from one premises location shall be deemed one occurrence.

Additionally, the Home policy contained an "other insurance" clause that provided:

If other valid and collectible insurance with any other insurer is available to the insured covering a loss also covered by this Policy, other than Insurance that is in excess of the Insurance afforded by this Policy, the Insurance afforded by this Policy shall be in excess of and shall not contribute with such other Insurance, either as double Insurance or otherwise.Nothing herein shall be construed to make this Policy subject to the terms, conditions, and limitations of other Insurance.

EnergyNorth has asserted, and American Re does not contest, that the pollution damage, which EnergyNorth has been required to investigate and clean up, was caused predominately by inadvertent leaks and spills during all the years of MGP operations at the site, particularly from gas holders and associated piping.EnergyNorth has also asserted, and American Re does not contest, that tar, which is now considered to be a "hazardous waste," was discharged and continuously migrated through soil and groundwater at the site, causing continuous property damage as it moved.EnergyNorth and American Re agree that property damage was continuous, beginning with the commencement of operations at the Manchester site, and that the evidence does not permit a determination of precisely when specific property damage took place.

In light of our decision in EnergyNorth Natural Gas v. Underwriters at Lloyd's,150 N.H. 828, 835–36, 838, 840–41, 848 A.2d 715(2004)(EnergyNorth I ), in which we held that the continuous migration of toxic waste can trigger coverage under multiple insurance policies covering different periods if the policies include certain coverage terms, EnergyNorth and American Re agree that: (1) the costs that EnergyNorth is seeking to recover in the instant case were incurred in responding to the continuous migration of toxic waste that was ongoing while the American Re policy was in effect; (2) the American Re policy uses language that can result in coverage being triggered by the migration of toxic waste during the policy period; and (3) the contamination at or emanating from the Manchester site was caused by fortuitous events and, therefore, arose from an "occurrence" within the meaning of the American Re insurance policy.

A

The questions certified to the court in this case derive from our decision in EnergyNorth I, in which we defined the " ‘trigger-of-coverage’ standard" that "should be applied under New Hampshire law to determine the point at which an ‘accident’ or ‘occurrence’ causing ‘property damage’ took place," where the damage at issue consisted of toxic wastes that discharged into the environment and continuously migrated through soil and groundwater at various MGP sites.EnergyNorth I,150 N.H. at 829–30, 848 A.2d 715(quotations omitted).In that case, after describing the four general approaches to determining how coverage under an insurance policy is triggered in such cases, we examined the policies at issue.

Id. at 831–32, 848 A.2d 715.With respect to three of the occurrence-based policies, we concluded that their language "embodie[d] an ‘injury-in-fact’ trigger, and where the alleged contamination and property damage are continuing, ‘injuries-in-fact’ triggering coverage are also continuing."Id. at 835–36, 848 A.2d 715.With respect to another occurrence-based policy and the accident-based policies at issue, we concluded that their language embodied "an exposure trigger, and where the alleged migration of toxic wastes is continuing, multiple exposures triggering coverage are also continuing."Id. at 838, 840–41, 848 A.2d 715.

The instant case asks us to address issues related to allocation of damages among multiple triggered insurance policies in a long-term environmental pollution case.These are issues of first impression.

B

"As a framework for our discussion, we take...