Invensys Systems, Inc. v. Centennial Ins. Co.

• Decision Date: 17 January 2007
• Docket Number: Civil Action No. 05-11589-WGY.
• Citation: 473 F.Supp.2d 211
• Parties: INVENSYS SYSTEMS, INC., Plaintiff, v. CENTENNIAL INSURANCE CO., Defendant.
• Court: U.S. District Court — District of Massachusetts

473 F.Supp.2d 211

INVENSYS SYSTEMS, INC., Plaintiff, v. CENTENNIAL INSURANCE CO., Defendant.

Civil Action No. 05-11589-WGY.

United States District Court, D. Massachusetts.

January 17, 2007.

Michael F. Aylward, John T. Harding, Morrison Mahoney LLP, Boston, MA, for Defendant.

Robert J. Gilbert, Gilbert & Renton, LLC, Andover, MA, for Plaintiff.

MEMORANDUM AND ORDER

YOUNG, District Judge.

I. Introduction

Invensys Systems, Inc. ("Invensys") here sues its excess insurer Centennial Insurance Company ("Centennial") for denying a claim. The claim arose from a final judgment in an underlying lawsuit holding Invensys liable for environmental damage to a parcel of land previously owned by it, as well as for the ongoing costs of remediation. While Centennial does not dispute coverage, it defends based on alleged breaches of the excess policy. Specifically, Centennial asserts that Invensys breached the notice provision and the voluntary payments provision.

A. Procedural Posture

Invensys brought suit in the Massachusetts Superior Court sitting in and for the County of Norfolk on or about July 1, 2005. Def.'s Centennial Ins. Co.'s Notice of Removal to the U.S. Dist. Court [Doc. No. 1] ("Notice of Removal") at 2. Centennial removed the case to federal court on or about July 29, 2005. See id. at 1. After the parties both moved for summary judgment, they consented to have their case heard as a case stated on November 13, 2006. Transcript of Oral Argument [Doc. No. 31] ("Tr.") at 2:16-3:6.

B. Findings of Fact¹

I. The Underlying Claim

The plaintiff Invensys is a successor in interest to a company known as Trans-Sonics, Inc. ("Trans-Sonics"). Separate Statement of Undisp. Mat. Facts in Support of Pl.'s Mot. for Summ. Judgment [Doc. No. 23] ("Pl.'s Statement") ¶ 3; Def. Centennial Ins. Co.'s Statement of Undisp. Mat. Facts in Support of Mot. for Summ. Judgement [Doc. No. 20] ("Def.'s Statement") ¶ 1. In 1974, Trans-Sonics sold its assets to The Foxboro Company ("Foxboro"). Id. In 2001, Foxboro changed its name to Invensys. Pl.'s Statement ¶ 3.

In 1956, Invensys (then Trans-Sonics) built a factory on an undeveloped site located at 200 Wheeler Road in Burlington, Massachusetts (the "Site"). Pl.'s Statement ¶¶ 4, 6; Def.'s Statement ¶ 1. Invensys (through its predecessors) owned and operated a manufacturing facility at the Site until 1978. Pl.'s Statement ¶ 7; Def.'s Statement ¶ 2. In 1978, Invensys (then Foxboro) sold the Site to Blanton Wiggin and moved its operations to a new location in Burlington, Massachusetts. Pl.'s Statement ¶ 7. In 1982, Wiggin sold the Site to One Wheeler Road Associates. Pl.'s Statement ¶ 8.

When owned and operated by Invensys (through its predecessors), the Site facility manufactured electronic instruments and systems using trichloroethylene ("TCE") and perchloroethylene ("PCE") in the process. See Pl.'s Statement ¶¶ 11, 14; "Def.'s Statement ¶ 3. In 1984, the Town of Burlington Board of Health discovered TCE and PCE, amongst other hazardous chemicals, in a leaching basin at the Site. Pl.'s Statement ¶ 15; Def.'s Statement ¶ 4. In 1985, the Massachusetts Department of Environmental Quality Engineering (now the Massachusetts Department of Environmental Protection) issued a Notice of Responsibility ordering "immediate remedial actions" at the Site, including the rer-outing of the drainage system and removal of any liquid residues from the leaching basin. Pl.'s. Statement ¶ 24; Def.'s Statement ¶ 5.

In 1990, One Wheeler Road Associates and its general partner, The Gutierrez Company, filed suit (the "Wheeler Road Lawsuit") against Invensys in federal court pursuant to the Comprehensive Environmental Response and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq., and Mass. Gen. Laws ch. 21E. Pl.'s Statement ¶ 30; Def.'s Statement ¶¶ 8-9. One Wheeler Road Associates sought recovery for response and remediation costs, including "damage to the value of the [Site] and the cost of their investigative and remedial measures." Pl.'s Statement ¶ 30; Def.'s Statement ¶¶ 8-9.

Following a bench trial, Judge Stearns ruled on that Invensys, as the owner and operator of the Site facility from 1954 to 1978, was responsible for TCE contamination of the groundwater in the northeastern area of the Site. Pl.'s Statement ¶ 31; Def.'s Statement ¶ 3. Judge Stearns did not find Invensys liable for soil contamination at the Site. See Pl.'s Statement ¶¶ 33-34; Def.'s Statement ¶ 13. The final judgment against Invensys amounted to $1,144,523.79 ($335,515.00 in damages; $217,082.79 in interest; $504,249.00 in attorneys' fees and costs; and $87,677.00 in experts' fees and costs). Pl.'s Statement ¶ 39; Def.'s Statement ¶ 14. Furthermore, the final judgment included a declaration that Invensys would be responsible for certain ongoing remediation at the Site. Id. Judge Stearns assigned responsibility for soil contamination at the Site to One Wheeler Road Associates and Gutierrez Associates. Pl.'s Statement ¶ 35.

Both sides having partly prevailed at trial, the parties to the Wheeler Road Lawsuit agreed in October 1996 to waive their respective rights of appeal. Pl.'s Statement ¶ 41. On October 8, 1996, Invensys satisfied Judge Stearns' judgment by paying the amount ordered plus accrued interest, for a total payment of $1,187,202.90. Id; Def.'s Statement ¶ 15. In addition, the parties' respective future remediation obligations were formally set forth in a February 2000 Settlement Agreement and Release ("Settlement Agreement"). Pl.'s Statement ¶ 42. Pursuant to the Settlement Agreement, Invensys has paid a total of $506,286.34 to One Wheeler Road Associates as of September 22, 2006. Id. Invensys has claimed their total loss as of September 22, 2006 to be $2,069,397.52.² Id. at 44.

II. The Primary Insurance Policies

Liberty Mutual provided primary insurance coverage to Invensys (or its predecessors) in two different capacities over two periods of time. First, Liberty Mutual issued primary insurance to Invensys (then Trans-Sonics) in a series of three one-year policies for the years 1972, 1973, and 1974 ("the Liberty Mutual primary property damage policies"). Pl.'s Statement ¶ 56. Other than a schedule of insurance prepared in connection with the Trans-Sonics/Foxboro merger, no one has ever located the actual language of Trans-Sonics' primary coverage issued by Liberty Mutual during this three year time period. Id. ¶ 57; Def.'s Statement ¶ 46.

During these three years, Liberty Mutual provided property damage with limits of $100,000 per occurrence. Pl.'s Statement ¶ 58. Invensys was unaware of the existence of this Liberty Mutual coverage until 1999, when it discovered the schedule of insurance prepared in connection, with the 1974 merger. Id. ¶ 61.

In addition, Liberty Mutual issued Invensys a "claims-made" Pollution Legal Liability policy (the "Liberty Mutual claims-made policy") that was in "effect at all times from the date of the 1974 merger through the date upon which the Wheeler Road Lawsuit claim was received in 1990. Pl.'s Statement ¶¶ 62-63. There was no relevant coverage under this policy, however, because it contained a "retroactive date" that barred coverage for releases commencing prior to June 1982. Id.

III. The Excess Insurance Policy

Centennial issued to Invensys (then Trans-Sonics) a single three-year excess liability policy in effect for the period January 1, 1972 through January 1, 1975. See Pl.'s Statement¶ 45; Def.'s Statement ¶ 38. The Centennial excess policy provided limits as to property damage liability in the amount of $5,000,000 per occurrence in excess of the underlying Liberty Mutual property damage policies, which had corresponding limits of $100,000.³ Pl.'s Statement ¶ 46; Def.'s Statement ¶ 39.⁴ Centennial also provided umbrella coverage to Invensys (then Trans-Sonics) during this time period, but because the Wheeler Road Lawsuit was covered by the Liberty Mutual primary property damage insurance policies, only the excess coverage (which obligates Centennial to pay the "ultimate net loss" incurred by the insured) was triggered thereby. See Pl.'s Statement ¶¶ 47-50; Def.'s Statement ¶ 42.

Section E of the Centennial policy entitled "Insured's Duties in the Event of Occurrence, Claim or Suit" is relevant here. Section E provides:

(a) In the event of an occurrence, which appears reasonably likely to involve such insurance as is afforded by this policy, written notice containing particulars sufficient to identify the insured and also reasonably attainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable.

(b) If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.

(c) The insured shall cooperate with the company and, upon the company's request, assist in making settlements, in the conduct of suits and in enforcing any right of contribution or indemnity against any person or organization who may be liable to the insured because of personal injury or property damage or advertising offense with respect to which insurance is afforded, under this policy; and the insured shall attend hearings and trials and assist in securing and giving evidence and obtaining the attendance of witnesses. The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense; however, in the event that the amount of ultimate net loss becomes certain either through trial court judgment or agreement among the insured, the claimant and the company, then, the insured may pay the amount of ultimate net, loss to the claimant to effect settlement and, upon submission of due proof thereof, the company shall indemnify the insured for...