W.R. Grace & Co. v. Maryland Cas. Co.

• Decision Date: 01 December 1992
• Docket Number: No. 91-P-493,91-P-493
• Citation: W.R. Grace & Co. v. Maryland Cas. Co., 600 N.E.2d 176, 33 Mass.App.Ct. 358 (Mass. App. 1992)
• Parties: W.R. GRACE & CO. v. MARYLAND CASUALTY COMPANY et al. 1
• Court: Appeals Court of Massachusetts

Page 176

600 N.E.2d 176

33 Mass.App.Ct. 358

W.R. GRACE & CO. v. MARYLAND CASUALTY COMPANY et al. ¹

No. 91-P-493.

Appeals Court of Massachusetts Middlesex.

Argued May 21, 1992.

Decided Sept. 30, 1992.

Further Appellate Review Denied Dec. 1, 1992.

Charles R. Dougherty, Boston (Mark E. Klein, New York City, with him), for plaintiff.

Marilyn E. Kerst, District of Columbia (Jo Anne B. Hennigan, District of Columbia, & Michael R. Coppock, Boston, with her), for Maryland Cas. Co.

William J. Bowman, District of Columbia (John P. Ryan, Boston, with him), for Hartford Acc. and Indem. Co.

Alice E. Richmond, Boston, for Gibraltar Cas. Co.

Before DREBEN, GILLERMAN and PORADA, JJ.

PORADA, Justice.

W.R. Grace & Co. (Grace) brought an action in the Superior Court for declaratory relief and for damages against four of its insurers--Maryland Casualty Company (Maryland), Continental Casualty Company (Continental), Hartford Accident and Indemnity Company (Hartford) and Gibraltar Casualty Company (Gibraltar)--based on their failure to defend or pay defense costs and to indemnify Grace for the settlement of a law suit filed against Grace in the United States District Court in Massachusetts. Each of the insurers denied coverage under its policy or claimed that another insurer should pay before its policy could be reached.

Grace filed motions for summary judgment against Hartford and Gibraltar on the grounds that they had no defense to the action as matter of law and that Grace had the right to select which insurer should pay its defense and settlement costs. Hartford and Gibraltar filed cross motions for summary judgment in which they contended that Grace had failed to make and report the claim during their policy periods and, consequently, that there was no coverage under their claims-made policies. Maryland moved for summary judgment against Grace on the grounds that the specific risk insurers--Hartford, Continental, and Gibraltar--should respond before coverage under its policy could be triggered and that Grace was judicially estopped from claiming coverage under Maryland's policy because in the Federal suit Grace had defended on the theory that it could not have caused the injuries in question until after 1979, which was six years after the last Maryland policy had expired.

The judge denied Grace's and Hartford's motions but allowed Gibraltar's and Maryland's motions. The judge then stayed all proceedings in the trial court and under Mass.R.Civ.P. 64, 365 Mass. 831 (1974), reported to this court her disposition of these motions and her ruling establishing the order of priority among these insurers should they be held liable. We affirm the judge's denial of Grace's motions for summary judgment and the allowance of Gibraltar's motion for summary judgment. We reverse the judge's allowance of Maryland's motion for summary judgment and the denial of Hartford's motion for summary judgment. For the reasons set forth in this opinion, we decline to rule on the order establishing priority among these insurers.

We summarize those facts which are not in dispute. In May, 1982, several individuals sued Grace in the Superior Court in Middlesex County for injuries resulting from exposure to chemicals disposed of by Cryovac, a division of Grace, in East Woburn between 1964 and 1979. That action, entitled Anne Anderson et al. vs. W.R. Grace et al., was removed to the United States District Court for Massachusetts. On July 28, 1986, a Federal jury, in answer to special questions, determined that Grace, at its Cryovac plant, had negligently disposed of two chemicals which contaminated the ground water supply of the city of Woburn by 1979. However, the jury was unable to determine when the contamination began. As a result, the Federal District Court judge allowed Grace's motion for a new trial. In September, 1986, Grace settled this suit for $8,000,000.

Maryland and Continental were required under their CGL policies to defend and to pay in full the costs of defense in all bodily injury lawsuits brought against Grace and to indemnify Grace fully for the amount Grace paid in settling or satisfying any judgment for any such suit if any portion of the alleged bodily injury occurred or could have occurred during their policy periods. ² Continental, Hartford, and Gibraltar were required under their EIL policies with Grace to provide either a defense or pay in full the costs of defense and to indemnify Grace for the amount paid in settling or satisfying any judgment in any action for bodily injuries arising out of an environmental hazard, if the claim was made and reported during the policy period. Under the CGL policies, defense costs were not charged against the limits of liability but they were under the EIL policies.

Continental agreed to pay Grace's costs of defending the Anderson suit and Maryland agreed to share these costs with Continental subject to certain conditions. In March of 1986, Continental advised Grace that it had charged the defense costs in the Anderson action to its EIL primary policy and its policy limits of $3,000,000 were about to be exhausted. At that time, Maryland had made only one payment of $122,522 for the legal costs of the Anderson action and had refused to make any other payments. Grace then asked Hartford to pay Grace's continuing defense costs in the Anderson action. Hartford refused and stated that those costs should be borne by Continental and Maryland under the CGL policies sold to Grace. Grace then asked Continental to continue to pay the defense costs under its CGL policy. Continental refused on the ground that Hartford was obligated to pay defense costs under its excess EIL policies. As a result, Grace undertook its own defense and expended in excess of $3,598,267.17 in defense costs. Grace now seeks to recover from the defendants this amount, together with the sum of $8,000,000 which it paid to settle the Anderson litigation.

The initial question presented in this appeal is whether New York or Massachusetts law should govern the substantive law issues presented. The motion judge determined that New York law should apply. We agree. The insurers doing business in New York sold the relevant policies to Grace, a New York based conglomerate, after negotiating coverage with Grace's New York insurance broker, Marsh and McLennan, in that State. On the very same facts, the Supreme Judicial Court in W.R. Grace & Co. v. Hartford Acc. & Indem. Co., 407 Mass. 572, 584-585, 555 N.E.2d 214 (1990), held that New York law would govern questions concerning coverage under Grace's comprehensive general liability policies for asbestos related claims. In doing so, the court noted:

"Whether ... there is a duty to defend or to indemnify under a nationwide comprehensive general liability policy ... should not depend on the law of the jurisdiction governing that particular claim but rather should be determined by the law governing the interpretation of the insurance policy and its issuance. Such a result produces coherent interstate insurance coverage; appears to conform to justified expectations; offers the prospect of certainty, predictability, and uniformity of result; provides relative ease in the determination and application of the governing law; and looks to the law of the State which, as to the legal issues involved, has the most significant relationship with the transaction and the parties. See Bushkin Assocs. v. Raytheon Co., 393 Mass. 622, 631-634 [473 N.E.2d 662] (1985)."

Id. 407 Mass. at 586, 555 N.E.2d 214. The same rationale applies to the EIL policies at issue. Since New York had the most significant relationship with the parties and the transaction, its law should control.

We now address each of the judge's orders reported to us for our review.

1. Maryland's motion for summary judgment. The judge allowed Maryland's motion on the ground that Grace failed to controvert Maryland's verified allegations that none of the injuries of the Anderson claimants occurred during Maryland's policy periods of 1963 to 1973. Mass.R.Civ.P. 56(e), 365 Mass. 825 (1974). Madsen v. Erwin, 395 Mass. 715, 719, 481 N.E.2d 1160 (1985). Maryland had contended that Grace was judicially estopped from claiming that the Anderson plaintiffs' injuries occurred in the period from 1963 to 1973 because Grace had claimed in the Federal suit that none of the chemicals disposed at its Cryovac plant could have reached the wells until after they were closed in 1979, which was six years after the last Maryland policy expired. While the judge intimated that Grace would be estopped from asserting a different position in the State court, she determined that Grace had not done so, because it had failed to controvert Maryland's assertion that the Anderson claimants' injuries did not occur during the Maryland's policy periods. The judge concluded that since Grace had the burden of proving coverage under the Maryland policies and had not done so, Maryland was entitled to summary judgment as matter of law. Kourouvacilis v. General Motors Corp., 410 Mass. 706, 711-716, 575 N.E.2d 734 (1991). We do not agree.

Contrary to the judge's assertion that Grace had not controverted Maryland's allegations, Grace had filed a memorandum in opposition to Maryland's motion for summary judgment to which were attached a number of documents including a copy of the fourth amended complaint in the Anderson action and the verdict slip. That complaint alleged that as early as 1965 Grace deposited contaminants at a site adjacent to two wells which provided the plaintiffs with their domestic water supply between 1964 and 1979; that the contaminants migrated into the aquifer which supplied these wells; and that the ingestion of the contaminated water caused the plaintiffs or their decedents to develop leukemia, the injuries for which the plaintiffs sought recovery against Grace. Of the plaintiffs named in the complaint, three were alleged to have been born and...