New Hampshire Ball Bearings v. Aetna Cas. and Sur. Co., s. 94-1540

• Decision Date: 03 October 1994
• Docket Number: Nos. 94-1540,94-1544 and 94-1545,s. 94-1540
• Citation: 43 F.3d 749
• Parties: NEW HAMPSHIRE BALL BEARINGS, Plaintiff-Appellee, v. AETNA CASUALTY AND SURETY COMPANY, Defendant-Appellant. NEW HAMPSHIRE BALL BEARINGS INC., Plaintiff-Appellant, v. AETNA CASUALTY AND SURETY COMPANY, and American Motorists Insurance Company, Defendants-Appellees. NEW HAMPSHIRE BALL BEARINGS INC., Plaintiff-Appellee, v. AETNA CASUALTY AND SURETY COMPANY, Defendant-Appellee. American Motorists Insurance Company, Defendant-Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 749

43 F.3d 749

40 ERC 1114

NEW HAMPSHIRE BALL BEARINGS, Plaintiff-Appellee, v. AETNA CASUALTY AND SURETY COMPANY, Defendant-Appellant.

NEW HAMPSHIRE BALL BEARINGS INC., Plaintiff-Appellant, v. AETNA CASUALTY AND SURETY COMPANY, and American Motorists

Insurance Company, Defendants-Appellees.

NEW HAMPSHIRE BALL BEARINGS INC., Plaintiff-Appellee, v. AETNA CASUALTY AND SURETY COMPANY, Defendant-Appellee.

American Motorists Insurance Company, Defendant-Appellant.

Nos. 94-1540, 94-1544 and 94-1545.

United States Court of Appeals First Circuit.

Heard Oct. 3, 1994.

Decided Jan. 5, 1995.

Stephen H. Roberts, with whom Ouellette, Hallisey, Dibble & Tanguay, P.A., Dover, NH, Allan B. Taylor and Dan, Berry & Howard, Hartford, CT, were on brief for Aetna Cas. and Sur. Co.

James M. Sweet, with whom Susan M. Kennedy, Drinker Biddle & Reath, DC, Richard C. Nelson and Nelson, Kinder, Mosseau & Gordon, Manchester, NH, were on brief, for American Motorists Ins. Co.

Michael C. Harvell, with whom John E. Peltonen, Thomas S. Burack, Thomas M. Closson and Sheehan, Phinney, Bass & Green Professional Association, Portsmouth, NH, were on brief, for New Hampshire Ball Bearings.

Before TORRUELLA, Chief Judge, BOWNES, Senior Circuit Judge, and CYR, Circuit Judge.

TORRUELLA, Chief Judge.

This is the second of two insurance coverage, declaratory judgment actions to come before the court in recent months on appeal from the United States District Court for the District of New Hampshire. See Mottolo v. Fireman's Fund Ins. Co., 43 F.3d 723 (1st Cir.1995). Both cases raise similar issues. The question we decide on this appeal is whether a general liability insurance policy which provides coverage for property damage that results from an "occurrence" applies to the intentional dumping of hazardous waste. We conclude that, as a matter of New Hampshire law, the "occurrence" provision does not apply to the facts of this case and that, therefore, the defendant insurance companies are not obligated to indemnify the plaintiff-appellee. Because we conclude that the district court decision to the contrary must be reversed, and judgment entered in favor of the defendants-appellants, we need not reach the issue of what triggers coverage under the policies, nor need we interpret the

owned property exclusion. Likewise, the damages questions decided below are not necessary to our conclusion.

I. BACKGROUND

New Hampshire Ball Bearings, Inc. ("NHBB"), manufactures precision ball bearings for use in the aerospace industry. It has operated a manufacturing facility ("the plant") located approximately one-quarter mile west of the South Municipal Well ("the South Well") in Peterborough, New Hampshire since 1957. NHBB relies heavily on the use of solvents for essential degreasing and cleaning functions during the manufacturing process. These solvents include the volatile organic compounds ("VOCs") trichloroethylene ("TCE") and 1,1,1-trichloroethane ("TCA").

Contamination of the South Well was discovered in 1982 during the first routine sampling of the Peterborough water supply for VOCs. This contamination was traced to NHBB. No other potential responsible parties have been identified. In May of 1983, the United States Environmental Protection Agency ("EPA") put the South Well and contiguous areas on the National Priorities List, making them eligible for funding under the Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Secs. 9601-75, amended by the Superfund Amendments and Reauthorization Act of 1986, Pub.L. No. 99-499, 100 Stat. 1613 (1986).

NHBB is required to clean up hazardous waste contamination at the South Municipal Well in Peterborough, New Hampshire ("the South Well") pursuant to a 1986 consent order entered into with the EPA and an Administrative Order issued by EPA on June 19, 1990. A feasibility study has indicated that cleanup of the South Well will take 19 to 32 years.

In 1987, NHBB brought this action against Aetna Casualty & Surety Company ("Aetna") and American Motorists Insurance Company ("AMICO"), seeking a declaration that Aetna and AMICO are obligated to indemnify NHBB for its environmental cleanup costs at the South Well. Following a fourteen-day bench trial, which included an evidentiary view of the NHBB plant and the South Well, the district court issued a 34-page Order containing detailed findings with respect to NHBB's use and disposal of solvents at the NHBB plant. The district court concluded that NHBB's practice for disposing of solvents led to pervasive leaking, overflowing and intentional discharging of solvents onto the ground, leading to contamination of the South Well through the groundwater.

Among the pertinent findings by the district court are the following. NHBB used tanker trailers to dispose of waste liquids from the plant. The original trailer had a capacity of 250 gallons while subsequent trailers had capacities of 500 to 750 gallons. When the trailer filled up, the normal practice was for NHBB employee's to dump its contents at the town dump. The district court found, however, that "about twice a year because of inclement weather, solvents and waste were discharged on the NHBB premises which subsequently went into the groundwater." The district court concluded that "[t]hese discharges were not accidental."

The court also noted that on other occasions tanks would accidentally overflow, discharging solvents onto the ground at the plant. This overflowing continued, notwithstanding some efforts by NHBB to curtail it. In each year between 1957 and 1983, solvents were spilled onto the ground at the plant. A tumble sump used to store waste occasionally overflowed, causing solvents in free phase and dissolved form to spill onto the ground and flow through a discharge pipe into a nearby brook. In 1982, a roof tank with a capacity of 275 gallons leaked TCA through a ruptured pipe onto the ground at the plant.

The court also found that wastes were discharged from sinks, floor drains and roof drains at the plant onto the ground and wetlands of the plant, and into the town sewer and a nearby brook. Some of the wastes flowed into the wetland area of the plant while others flowed into a brook near the plant. The court found that NHBB was still discharging volatile compounds from its outfalls in late 1982.

In conclusion, the district court made the following findings of fact:

1. During the 1950's, 1960's and early 1970's, the public and industry were not generally aware of the threat which hazardous wastes posed to the environment in general and groundwater in particular.

2. NHBB intentionally discharged solvents onto the soil and top surface.

3. NHBB's contamination of the soil and wetlands was intentional, not fortuitous.

4. At the time of its intentional discharge, NHBB did not understand the effect its discharge of solvents would have on the groundwater.

5. NHBB's contamination of the groundwater was unintentional.

Based on these findings, the district court held that NHBB is entitled to indemnification from Aetna for expenses related to the investigation and cleanup up of the groundwater at the South Well, but not the soil or wetlands, pursuant to Aetna's general liability insurance policy in effect for the period July 1, 1982 to July 1, 1983. ¹ The court ordered Aetna to reimburse NHBB in the amount of $14,213,199.94 and ordered Aetna to defend NHBB in any related suits. 848 F.Supp. 1082.

II. STANDARD OF REVIEW

We review determinations of state law made in a bench trial of a diversity action de novo. Williams v. Poulos, 11 F.3d 271, 278 (1st Cir.1993); Blanchard v. Peerless Ins. Co., 958 F.2d 483, 487 (1st Cir.1992). The district court's findings of fact will be upheld in the absence of clear error. Fed.R.Civ.P. 52(a); Williams, 11 F.3d at 278. In other words, we will defer to the district court's findings of fact unless we form " 'a strong, unyielding belief that a mistake has been made.' " Cumpiano v. Banco Santander Puerto Rico, 902 F.2d 148, 152 (1st Cir.1990).

The clearly erroneous standard also ordinarily applies when we review a trial court's resolution of mixed questions of fact and law. See In re Extradition of Howard, 996 F.2d 1320, 1328 (1st Cir.1993) ("the more fact dominated the question, the more likely it is that the trier's resolution of it will be accepted unless shown to be clearly erroneous"). If a trial court "bases its findings upon a mistaken impression of applicable legal principles," however, we are not bound by the clearly erroneous standard. LoVuolo v. Gunning, 925 F.2d 22, 25 (1st Cir.1991) (quoting Inwood Laboratories v. Ives Laboratories, 456 U.S. 844, 855 n. 15, 102 S.Ct. 2182, 2189 n. 15, 72 L.Ed.2d 606 (1982)).

In addition, we note that the district court properly found that, because there is no underlying state court lawsuit in this case, the burden shifting framework of New Hampshire's declaratory judgment act, N.H.Rev.Stat.Ann. Sec. 491:22, does not apply and the burden of establishing coverage remains with the plaintiff, NHBB. See Town of Allenstown v. National Casualty Co., 36 F.3d 229, 232 (1st Cir.1994).

III. DISCUSSION

Aetna is required to indemnify NHBB for monies it is legally obligated to pay because of property damage caused by "an occurrence." The policy defines "occurrence" as "an accident ... which results in ... property damage neither expected nor intended from the standpoint of the insured." The district court found that NHBB intentionally contaminated the soil and wetlands but did not realize the effect its pollution would have on the groundwater. The narrow issue we decide in this case is whether NHBB's contamination of groundwater with hazardous waste is an "occurrence" or an "accident" under those circumstances.

In Mottolo v. Fireman's Fund Ins. Co., 43 F.3d 723 (1st Cir.1995), we analyzed the law In Providence Mutual Fire Insurance Co. v. Scanlon, 138 N.H. 301, 638 A.2d 1246 (1994), the Court...