OneBeacon Am. Ins. Co. v. Narragansett Elec. Co.

• Decision Date: 03 June 2015
• Docket Number: No. 13–P–1240.,13–P–1240.
• Parties: ONEBEACON AMERICA INSURANCE COMPANY v. NARRAGANSETT ELECTRIC COMPANY; American Home Assurance Company & others, third-party defendants (No. 1).
• Court: Appeals Court of Massachusetts

87 Mass.App.Ct. 417

31 N.E.3d 1143

ONEBEACON AMERICA INSURANCE COMPANY

v.NARRAGANSETT ELECTRIC COMPANY; American Home Assurance Company & others¹ third-party defendants (No. 1).

No. 13–P–1240.

Appeals Court of Massachusetts, Suffolk.

Argued June 3, 2014.

Decided June 3, 2015.

Jay T. Smith, of the District of Columbia (A. Hether Cahill with him) for Narragansett Electric Company.

Kevin J. O'Connor, Boston, for OneBeacon America Insurance Company.

David B. Chaffin, Boston, for Century Indemnity Company.

Eileen T. McCabe, of New York, & John T. Harding, Boston, for Certain Underwriters at Lloyd's, London, & others, were present but did not argue.

Michael F. Aylward, Boston, for American Home Assurance Company & others, was present but did not argue.

Present: KANTROWITZ, HANLON, & CARHART, JJ.

Opinion

KANTROWITZ

, J.

To put this rather dense environmental case in perspective, pollution in some of the affected areas started in the mid–1800s, and the first of several insurance policies at issue was written in 1945. Today, we are asked to rule on the propriety of the allowance of numerous summary judgment motions and the verdicts in three separate, lengthy jury trials.²

I. Background. The plaintiff, OneBeacon America Insurance Company (OneBeacon), brought this declaratory judgment action in July, 2005, against its insured, Narragansett Electric Company (NEC), seeking a determination that OneBeacon had no duty to defend or indemnify NEC for damages associated with environmental contamination at several sites, formerly utilized by NEC's predecessors for manufactured gas plant operations and waste

disposal. NEC counterclaimed for breach of contract and declaratory relief, adding other insurers that had issued primary and excess liability insurance policies to NEC for the years in question.

The majority of NEC's claims were dismissed on summary judgment as either time-barred or as not covered under the policies. NEC appeals from those dismissals. In the three jury trials, NEC prevailed on its remaining claims, against Century Indemnity Company (Century) and Certain Underwriters at Lloyd's, London and Certain London Market Insurance Companies (collectively, London), who cross-appeal. We affirm in part and reverse in part.

The issues before us are numerous and complex, involving Massachusetts procedure and Rhode Island substantive law. The substantive aspects of the appeal and cross appeals are fact-intensive and involve Rhode Island law. We address them by way of an unpublished memorandum and order pursuant to our rule 1:28, which accompanies this opinion.³ Our discussion here focuses principally on NEC's appeal from the denial of certain claims as untimely under Massachusetts law. We consider the issue of timeliness and the accrual of claims in the context of insurance coverage for environmental contamination.⁴

A. The parties and policies. NEC is a Rhode Island utility company with its principal place of business in Providence. It is successor to the Blackstone Valley Electric Company (BVEC), and the Blackstone Valley Gas & Electric Company.⁵ The sites involved in this case were used by NEC's predecessors for manufactured gas plants and electric operations, and for waste disposal, from the mid–1800s until the 1980s. Soil and groundwater contamination were eventually discovered at those sites, prompting governmental and private actions against NEC. NEC sought defense costs and indemnification from a number of insurers that issued primary and excess policies to NEC for policy periods between 1945 and 1986.

OneBeacon, through its predecessors, issued thirteen primary comprehensive general liability policies to NEC, covering the

period of October, 1972, to January 1, 1985. These policies provided for defense costs and indemnification for property damage in actions brought against the insured by third parties.

Predecessors of Century issued both primary and excess coverage to NEC. The primary policy was for January 1, 1985, to January 1, 1986, and similarly provided for defense costs and indemnification. The excess policies were for July 8, 1949, to May 1, 1965, and provided indemnification coverage in excess of retained limits as specified in the policies. Excess policies were also issued by American Home Assurance Company (American Home), for June 1, 1973, to June 1, 1985,⁶ and by London, for March 1, 1945, to June 1, 1968.

B. The sites, response actions, and notices. Of the eight involved sites, seven are located in Rhode Island; the remaining site is located in Massachusetts and Rhode Island.⁷ A Superior Court judge (first judge) divided the sites into two phases for litigation purposes.⁸

1. Phase I. The parties jointly stipulated to the selection of the “Tidewater” and “Lawn Street” sites for Phase I.⁹

a. Tidewater. The Tidewater site is located in Pawtucket, Rhode Island, and was formerly used as a manufactured gas plant and power plant. On October 28, 1986, the Rhode Island Department of Environmental Management (RIDEM) notified NEC that contaminated waste materials had been found at the site and requested that NEC construct a barrier to prevent public access to the contaminated area pending investigation. In 1987, NEC forwarded the RIDEM correspondence to National Union Fire Insurance Company of Pittsburgh, PA (National Union), and Century.

On September 12, 1995,¹⁰ RIDEM issued a “Letter of Responsibility” (LOR) to NEC, asserting that NEC was a responsible party for alleged releases of certain contaminants and demanding that NEC undertake a remedial investigative work plan at its own expense. The LOR set forth enforcement actions and penalties for failure to comply. NEC agreed to the LOR on September 22, 1995, and on April 17, 1996, NEC submitted a draft of the requisite plan to RIDEM.

On October 5, 1995, NEC notified OneBeacon, American Home, Century, and London of the Tidewater LOR and demanded defense costs and indemnification. On November 15, 1995, Century notified NEC that it could not find the 1985 policy and was reserving its rights. On December 27, 1996, American Home disclaimed coverage as to its excess policies that did not provide coverage for pollution legal liability (PLL). On June 14, 2001, American Home disclaimed coverage as to its PLL policies as well. On March 18, 1996, and again on October 14, 1998, OneBeacon disclaimed coverage, and on March 25, 1996, London disclaimed as to its duty to defend as an excess carrier, and reserved its rights as to indemnification.

b. Lawn Street. The second site selected, Lawn Street, is located partially in Attleboro, Massachusetts, and partially in Cumberland, Rhode Island, and was formerly a sand and gravel pit owned by a third party. NEC disposed sulfur-containing oxide box wastes from Tidewater at Lawn Street. On November 21, 1986, the Massachusetts Department of Environmental Quality Engineering (DEQE)¹¹ sent NEC a “Notice of Responsibility” (NOR) pursuant to G.L. c. 21E, for the presence of contaminants at Lawn Street. In April, 1987, NEC notified OneBeacon of the NOR regarding Lawn Street. On October 23, 1987, NEC entered into an administrative consent order with DEQE that required NEC to prepare and implement site investigation plans. Subsequently, on September 13, 1996, NEC entered into an amended administrative consent order, agreeing to comply with the requirements of the Department of Environmental Protection (DEP) for remediating the site.

On February 29, 1996, NEC demanded coverage from American Home. On December 27, 1996, American Home disclaimed coverage as to its non-PLL policies and reserved its rights as to

the PLL policies; on June 14, 2001, American Home disclaimed coverage under the PLL policies as well. On May 27, 1998, NEC notified OneBeacon of the amended administrative consent order for Lawn Street, and on October 14, 1998, OneBeacon disclaimed coverage.¹²

2. Phase II. The Phase II sites are the Pawtucket water supply board (PWSB), Hamlet Avenue, J.M. Mills, High Street, Pond Street, and Exchange Street.¹³

a. PWSB. The PWSB site, located in Cumberland, Rhode Island, was a waste disposal site that received sulfur-containing oxide box waste from NEC that allegedly caused a release of hazardous substances. On September 12, 1995, RIDEM sent NEC an LOR and demanded reimbursement of $296,381.70 for remediation. On September 22, 1995, NEC agreed to comply by remitting the costs to RIDEM, pursuant to an escrow agreement whereby the funds were held pending resolution of related litigation.¹⁴ On October 5, 1995, NEC notified OneBeacon, American Home, Century, and London of RIDEM's claims and sought defense costs and indemnification for responding to the LOR. On November 15, 1995, Century issued a reservation of rights, stating that it was trying to locate the relevant policies. OneBeacon disclaimed coverage on March 18, 1996, and again on October 14, 1998. On March 25, 1996, London notified NEC that it had no duty to defend under the excess policies, and reserved its rights as to any indemnification obligations. On December 27, 1996, American Home denied coverage based on its policy's “pollution exclusion” provision, and again declined coverage on June 14, 2001.

b. Hamlet Avenue. The Hamlet Avenue site, located in Woonsocket, Rhode Island, was used by NEC as a manufactured

gas plant and power plant. Soil and groundwater contamination were found at the site, and on February 11, 1997, RIDEM issued an LOR to NEC, directing NEC to develop a site investigation plan. On February 21, 1997, NEC notified OneBeacon, American Home, Century, and London, and sought defense costs and indemnification. On February 25, 1997, NEC settled with RIDEM, agreeing to pay for the work specified in the LOR, but did not notify the insurers. Century responded on April 7, 1997, reserving its rights. Also on April 7, 1997, London informed NEC that it had no duty to defend under the excess policies and reserved its rights as to any obligation to indemnify. On October 14, 1998, OneBeacon...