Utica Mut. Ins. Co. v. Hall Equipment, Inc., 97-CV-12392-MEL.
| Decision Date | 28 October 1999 |
| Docket Number | No. 97-CV-12392-MEL.,97-CV-12392-MEL. |
| Citation | 73 F.Supp.2d 83 |
| Parties | UTICA MUTUAL INSURANCE COMPANY, Plaintiff, v. HALL EQUIPMENT, INC., William B. Riddell Elaw Corporation Weathermark Investments, Inc. f/k/a Buckley & Scott Co., Inc., Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Lon A. Berk, Wiley, Rein & Fielding, Washington, DC, Russell F. Conn, Conn, Kavanaugh, Rosenthal, Peisch & Ford, Boston, MA, for Utica Mutual Insurance Company, plaintiff.
Richard D. Paster, Paster, Rice & Castleman, Quincy, MA, Stephen W. Riddell, Troutman Sanders LLP, Atlanta, GA, for Hall Equipment, Inc., defendant.
Richard D. Paster, Paster, Rice & Castleman, Quincy, MA, for William B. Riddell, defendant.
James B. White, Concord, MA, for Elaw Corporation, defendant.
Louis N. Massery, Massery, Gillis & Guiney, Boston, MA, for Weathermark Invest fka Buckley & Scott Co., defendant.
MEMORANDUM AND DECISION
Utica Mutual Insurance Company sues Hall Equipment, Inc., its former principal, William B. Riddell, ELAW Corporation, and Weathermark Investments, Inc., f/k/a Buckley & Scott Co., Inc., for a declaration that it has no duty under the insurance policy it issued to Hall to defend or indemnify Hall and Riddell with respect to claims against them made by ELAW and Weathermark. In the underlying actions, ELAW and Weathermark seek to recover losses they allegedly incurred arising out of Hall's repair of a pumping mechanism on Weathermark's property, which caused a release of fuel oil contaminating both Weathermark's property and ELAW's adjacent property.
Utica now moves for partial summary judgment on the grounds that its insurance contract with Hall contains an "absolute pollution exclusion" which bars coverage for all of ELAW's and Weathermark's claims with the exception of Weathermark's claims seeking payments for damage to its piping system. ELAW countermoves for an order declaring that Utica is obligated under the terms of the policy to cover Hall's and Riddell's liabilities for ELAW's property damages.1 Finally, Hall and Riddell move under Fed.R.Civ.P. 56(f) for an order continuing consideration of Utica's motion until the completion of discovery relating to their claim that Utica is estopped from denying its obligation to indemnify.
Weathermark operates a home heating oil storage and delivery business at 150 West Street in Needham, Massachusetts. In April 1994, Weathermark hired Hall to repair a pumping mechanism used to pump fuel from an aboveground storage tank to the loading rack at this facility. In the course of performing the work Hall allegedly damaged the pumping system. As a result of Hall's alleged negligence, on May 2, 1994, over 3,000 gallons of fuel oil was released onto the Weathermark property and then migrated onto and under ELAW's adjacent property at 400 Hillside Avenue, which contains an occupied office building.
ELAW and Weathermark subsequently brought suits, still pending in the Massachusetts courts, in which claims and third-party claims were asserted against Hall and Riddell, alleging, inter alia, that Hall negligently repaired the pumping mechanism and, as a result, caused the oil spill. In ELAW Corp. v. Weathermark Investments, Inc., No. 95-1405 (Mass.Super.Ct., Norfolk), ELAW claims over $1.3 million in damages, including legal and other professional fees and expenses. In particular, ELAW alleges that as a result of the May 2, 1994 release it incurred substantial costs in connection with assessing, containing and removing the contamination. It also maintains that it sustained "permanent" property damages at 400 Hillside Avenue.
In Weathermark's case, Weathermark Investments, Inc. v. Hall Equipment, Inc., No. 96-00968 (Mass.Super.Ct., Norfolk), it seeks in excess of $900,000 for costs incurred to date in responding to the release caused by Hall's negligence, including "environmental assessment, containment, and removal costs," as well as compensation for future response costs. In addition, Weathermark demands compensation for the potential diminution in the value of the 150 West Street property, loss of rental income, and loss through-put income. Weathermark has asserted the same claims (as cross-claims) against Hall and Riddell in the ELAW suit.
At the time Hall performed the repair work for Weathermark, Hall was insured by Utica.2 The policy consisted of a Commercial General Liability Coverage Part (the "CGL coverage") and a Commercial Property Coverage Part (the "property coverage"). The CGL coverage includes "those sums that the insured becomes legally obligated to pay as damages because of `bodily injury' or `property damage' to which this insurance applies." CGL Coverage Form, § I.A.1.a. It also contains a pollution exclusion provision that specifies that there is no coverage for:
Any loss, cost or expense arising out of any:
(a) Request, demand or order that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of pollutants.
* * * * * *
Pollutant means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
Utica seeks a declaration that it has no duty under the policy to defend or indemnify Hall and Riddell in connection with the claims asserted by Weathermark and ELAW in the underlying suits. As indicated above, Utica moves for partial summary judgment that subsection f.(2) bars coverage for all of ELAW's and Weathermark's claims, except to the extent that those claims seek payments for damage to Weathermark's piping system.3
Utica's motion is allowed to the extent of declaring that subsection f.(2) relieves Utica of its duty to indemnify Hall and Riddell for Weathermark's and ELAW's claims for reimbursement for any "loss, cost or expense" incurred for remedial action taken in response to the May 1994 release of fuel oil at the 150 West Street and 400 Hillside Avenue locations including, but not limited to, the costs of assessment, containment and removal of pollutants as well as related legal and other professional fees (i.e., environmental "response" costs or "remediation" expenses). However, Utica's motion is otherwise denied because subsection f.(2) does not preclude coverage for Weathermark's and ELAW's claims for damages, which are separate and distinct from the costs of assessing, containing and removing the contamination, such as "permanent" property damages, diminution in the fair market value of the Weathermark and ELAW properties, loss of rental income, throughput income losses, and related legal and professional fees (i.e., "non-remediation damages"). ELAW's "request" for a declaration that coverage exists for its "property damage" claims against Hall and Riddell is denied. Hall's and Riddell's Rule 56(f) motion is denied.
Utica contends that subsection f.(2) relieves it of its duty to indemnify Hall and Riddell against all of Weathermark's and ELAW's claims arising out of the May 1994 oil spill except Weathermark's claim for compensation for damages to its piping system.4 To repeat, subsection f.(2) excludes coverage for:
Any loss, cost or expense arising out of any:
(a) Request, demand or order that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of pollutants....
CGL Coverage Form, § I.A.2.f.(2). Utica relies on the language which specifies that the policy does not cover losses that arise out of "any request, demand or order" that any person "in any way respond to ... the effects of pollutants." Id. (emphasis added). It argues that because Weathermark's and ELAW's claims against Hall and Riddell arise out of the May 1994 oil spill, those claims constitute "requests" or "demands" that Hall and Riddell "respond to ... the effects of pollutants." It follows, according to Utica, that subsection f.(2) excludes coverage not only for Weathermark's and ELAW's claims for reimbursement for the costs of assessing, containing and removing the oil contamination but also for their claims for related nonremediation damages at the 150 West Street and 400 Hillside Avenue sites resulting from the oil spill.
Weathermark and ELAW respond that even if the clause on its face excludes coverage for their claims, Utica is liable under the so-called "train of events" test articulated in Jussim v. Massachusetts Bay Ins. Co., 415 Mass. 24, 610 N.E.2d 954 (1993). That test provides that if an otherwise covered act of an insured sets in motion a "train" or "chain" of events resulting in damage otherwise excluded by the policy, recovery may nevertheless be had if the covered act was the direct and proximate cause of the excluded damage. Jussim, 415 Mass. at 27, 610 N.E.2d 954. Applying Jussim, Weathermark and ELAW allege that the direct and proximate cause of the oil release giving rise to their damages was Hall's negligence, which is a covered risk under the policy. Therefore, they contend that Utica is obligated under Jussim to indemnify Hall and Riddell even if the resulting damage is otherwise excluded from coverage by the pollution exclusion.
Weathermark and ELAW also make convoluted arguments that, in any event, a review of the language of subsection f. as a whole — comparing subsection f.(1) with subsection f.(2) — compels the conclusion that their claims against Hall and Riddell are not excluded by the terms of the policy. Subsection f.(1) precludes coverage for:
"Bodily injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants....
CGL Coverage Form, § I.A.2.f.(1). However, it only applies to "bodily injury" or "property...
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