Alan Corp. v. International

• Court: Court of Appeals for the First Circuit
• Decided: April 22, 1994
• Docket: 93-1697
• Status: Published

Opinion

USCA1 Opinion

United States Court of Appeals
                            United States Court of Appeals
                                For the First Circuit
                                For the First Circuit
                                 ____________________

        No. 93-1697

                   THE ALAN CORPORATION AND EAST SIDE OIL COMPANY,

                               Plaintiffs, Appellants,

                                          v.

                    INTERNATIONAL SURPLUS LINES INSURANCE COMPANY,

                                 Defendant, Appellee.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                   [Hon. Nathaniel M. Gorton, U.S. District Judge]
                                              ___________________

                                 ____________________

                                        Before

                               Torruella, Circuit Judge,
                                          _____________
                            Aldrich, Senior Circuit Judge,
                                     ____________________
                              and Stahl, Circuit Judge.
                                         _____________

                                 ____________________

            Raymond  J.   Reed  with  whom  Reed  &  Reed  was  on  brief  for
            __________________              _____________
        appellants.

            Donald V. Jernberg,  with whom Thaddeus Murphy, Oppenheimer  Wolff
            __________________             _______________  __________________
        & Donnelly, Keith C. Long, Robert  A. Whitney, and Warner & Stackpole,
        __________  _____________  __________________      __________________
        were on brief for appellee.

____________________

                                    April 22, 1994
                                 ____________________

STAHL,  Circuit Judge.    In this  appeal, we  must
                              _____________

            determine  whether  a  policy  issued  by  defendant-appellee

            International Surplus Lines  Insurance Company (ISLIC) covers

            clean-up  costs which were imposed upon plaintiffs-appellants

            Alan Corporation and East Side Oil Company, Inc. (hereinafter

            "Alan Corp.").   The district  court found that  the clean-up

            costs were  not covered  by the  policy, and entered  summary

            judgment in favor of ISLIC.  We affirm.

                                          I.
                                          I.
                                          __

                       FACTUAL BACKGROUND AND PRIOR PROCEEDINGS
                       FACTUAL BACKGROUND AND PRIOR PROCEEDINGS
                       ________________________________________

                      Alan Corp.  sells fuel  oil to retail  customers in

            central Massachusetts.   As part  of its business,  it stores

            oil in large tanks at several different locations.  On August

            28, 1986,  Alan Corp.  obtained a pollution  liability policy

            ("the  policy")  from  ISLIC   in  order  to  insure  against

            potential  liability arising  from storage  tank leaks.   The

            policy  covered two Alan  Corp. storage sites  located in the

            Massachusetts towns of Leominster and Fitchburg.  

                      The policy  was a  one-year "claims made"  policy,1

____________________

            1.  The  Supreme Court has  explained that "[a]n `occurrence'
            policy protects the  policy holder from liability for any act
            done while the policy  is in effect, whereas a  `claims made'
            policy protects  the holder  only against claims  made during
            the life of the policy."  St. Paul  Fire & Marine Ins. Co. v.
                                      ________________________________
            Barry, 438 U.S. 531,  535 n.3 (1977).   Thus, "`a doctor  who
            _____
            practiced  for only one year,  say 1972, would  need only one
            1972 "occurrence" policy  to be fully  covered, but he  would
            need  several  years of  "claims  made"  policies to  protect
            himself from claims arising  out of his acts in  1972.'"  Id.
                                                                      ___
            (quoting Barry v. St. Paul Fire  & Marine Ins. Co., 555  F.2d
                     _____    ________________________________

                                         -2-
                                          2

in which ISLIC undertook, inter alia, to reimburse Alan Corp.
                                      _____ ____

            for  clean-up costs incurred as a result of government agency

            orders.  In relevant part, the policy stated:

                      The  company  will reimburse  the insured
                      for  reasonable  and  necessary  clean-up
                      costs  incurred  by  the  insured  in the
                      discharge of a  legal obligation  validly
                      imposed through governmental action which
                                                          _____
                      is initiated during the policy period . .
                      __ _________ ______ ___ ______ ______
                      . . 
            (Emphasis  supplied).  The policy ran from August 28, 1986 to

            August 28, 1987.    

                      On  or about  August 25,  1987, just  prior to  the

            expiration  of  the  policy,   Alan  Corp.  became  aware  of

            potential  contamination  at  its  Fitchburg  and  Leominster

            facilities.   In apparent partial compliance  with state fire

            regulations,2  David White,  an  Alan Corp.  employee, phoned

            the  Leominster  Fire  Department  and  notified  it  of  the

            potential  contamination  at the  Leominster  site.   A  Fire

            Department   employee   told    White   to   determine   what

            contamination,  if  any,  existed  and  to  report  any  such

            contamination    to    the   Massachusetts    Department   of

            Environmental   Quality  Engineering,   now   known  as   the

____________________

            3, 5 n.1 (1st Cir. 1977)).

            2.  The Massachusetts Board  of Fire Prevention  Regulations,
            Mass. Regs. Code tit.  527,   9.19(1)(b) (1986) provided,  in
            relevant part, "In  the event of a  leak . .  . the owner  or
            operator shall immediately notify the head  of the local fire
            department and [the Massachusetts Department of Environmental
            Protection]."

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                                          3

Massachusetts Department of Environmental Protection ("DEP").

            No   governmental  agency  was   notified  of  the  potential

            contamination of the Fitchburg site at this time.

                      Alan  Corp. also  submitted "Loss Notice"  forms to

            ISLIC.  These  forms, dated  August 28, 1987,  stated that  a

            "[p]reliminary survey shows a  pollution problem" at both the

            Leominster and Fitchburg sites.

                      Alan  Corp.  alleges that  on  an  unspecified date

            after  the initial  report to  ISLIC of contamination  at the

            Leominster  and  Fitchburg   sites,  an  unidentified   ISLIC

            employee told Alan Corp.  to "lay low" with respect  to those

            two  sites until the clean-up  of a third  Alan Corp. storage

            site, located in Worcester, was completed.  (It appears  that

            an entirely separate policy issued by ISLIC provided coverage

            for  the Worcester site, that there  was contamination at the

            Worcester site, and  that during late  August of 1987,  ISLIC

            was involved with clean-up at the Worcester site).  That same

            unidentified employee allegedly assured Alan Corp. that ISLIC

            also would provide coverage for any necessary clean-up of the

            Leominster  and  Fitchburg  sites   upon  completion  of  the

            Worcester site clean-up.3

____________________

            3.  Alan   Corp.'s  president,  Joel  Robbins,  swore  in  an
            affidavit  that the  "lay low"  comment and  the accompanying
            promise to provide coverage occurred.  He did not specify any
            individual at ISLIC who  may have made the comments,  nor did
            he  specify any individual at  Alan Corp. who  may have heard
            them,  nor any time or  date when the  comments may have been
            made.   The district court characterized  Alan Corp.'s claims

                                         -4-
                                          4

In  addition, ISLIC  assigned  an  investigator  to

            assess the  contamination  at the  Leominster  and  Fitchburg

            sites.    Toward  that  same end,  Alan  Corp.  hired  Lycott

            Environmental   Research   Company,   Inc.    ("Lycott")   to

            investigate both sites.

                      About two months after these initial responses, the

            Lycott  investigation revealed  contamination at  both sites.

            On July 12, 1988, approximately  eight months after the  date

            of  the Lycott  report  and nearly  eleven  months after  the

            expiration   of  the   policy,   Alan  Corp.   reported   the

            contamination  of the Leominster site to DEP.  On January 11,

            1989,  nearly eighteen  months  after the  expiration of  the

            policy,  DEP ordered the clean-up of the Leominster site.  On

            March 30,  1989, DEP issued  a "notice of  responsibility" to

            Alan  Corp. for the Leominster site.   Thereafter, Alan Corp.

            conducted remedial efforts  as required by  DEP.  The  record

            does  not  reveal  when  Alan  Corp.  notified   DEP  of  the

            contamination at  the Fitchburg site, but on August 13, 1991,

            DEP ordered clean-up at that site and Alan Corp. complied.

____________________

            with  regard to these  comments as  "tenuous," Alan  Corp. v.
                                                           ___________
            International Surplus Lines Ins. Co., 823 F. Supp. 33, 42 (D.
            ____________________________________
            Mass  1993),  and  we  further  note  that  these  statements
            probably do not  satisfy Fed. R. Civ.  P. 56(e)'s requirement
            that affidavits "set forth such facts  as would be admissible
            in  evidence."   Nonetheless,  like  the  district court,  we
            assume for the  purposes of this opinion that  the statements
            were made.

                                         -5-
                                          5

Based  on  the foregoing  facts, Alan  Corp. sought

            reimbursement from  ISLIC for clean-up costs  incurred at the

            Leominster and  Fitchburg sites.   ISLIC denied  coverage and

            Alan Corp.  brought suit.  ISLIC moved  for summary judgment,

            arguing that no governmental action had been initiated within

            the  policy period, as required  by the terms  of the policy.

            The district  court granted summary judgment,  reasoning that

            the call  to the Leominster Fire  Department, standing alone,

            did  not amount  to "governmental  action which  is initiated

            during the policy period" and that therefore coverage was not

            afforded under the  policy.  See Alan Corp.  v. International
                                         ___ __________     _____________

            Surplus Lines Ins. Co., 823 F. Supp. 33 (D. Mass. 1993).  
            ______________________

                                         II.
                                         II.
                                         ___

                                      DISCUSSION
                                      DISCUSSION
                                      __________

            A.  Standard of Review
            ______________________

                      Our review  of a district court's  grant of summary

            judgment  is plenary.  Bird  v. Centennial Ins.  Co., 11 F.3d
                                   ____     ____________________

            228, 231 (1st  Cir. 1993).  We read  the record indulging all

            inferences in a light most favorable to the non-moving party.

            Levy  v. FDIC, 7  F.3d 1054, 1056  (1st Cir.  1993).  Summary
            ____     ____

            judgment  is appropriate only if there is no genuine issue as

            to  any material  fact and  the moving  party is  entitled to

            judgment as a matter of law.  Id.  
                                          ___

                      Moreover,  where, as  here,  the facts  upon  which

            liability is claimed  or denied under an insurance policy are

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                                          6

undisputed and  the existence or amount  of liability depends

            solely  upon  a  construction  of the  policy,  the  question

            presented  is one of law.   Atlas Pallet,  Inc. v. Gallagher,
                                        ___________________    _________

            725 F.2d  131, 134 (1st Cir. 1984).   As with other questions

            of  law,  we  owe  no   deference  to  the  district  court's

            interpretation of  the policy.   Id.  Finally,  neither party
                                             ___

            disputes that Massachusetts law applies.

            B.  The Call to the Fire Department
            ___________________________________

                      Alan Corp.  argues that  because its phone  call to

            the Leominster Fire Department took place within the policy's

            claims period, the  clean-up costs, which were incurred  as a

            result  of  the order  by DEP  some  twenty months  after the

            expiration of  the policy, were nonetheless  "validly imposed

            through governmental action which  [was] initiated during the

            policy  period."  In essence, Alan Corp. argues that the call

            to the Leominster Fire Department was the first of many steps

            that  led to DEP's  clean-up mandate, and  that, because this

            first  step  was  taken  within  the  policy  period,  timely

            "governmental  action" had  therefore been  "initiated."   We

            disagree.

                        We begin by noting that neither the phone call to

            the Leominster Fire  Department nor any information  conveyed

            during the phone call, imposed any obligation upon Alan Corp.

            At  best, David  White  was informed  by the  Leominster Fire

            Department  that  Alan Corp.  had  a  duty  to  determine  if

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                                          7

contamination  existed and that it  had a duty  to report any

            such  contamination to  DEP.   These duties  existed entirely

            independently of the phone call.   See Mass. Gen. L. ch. 21E,
                                               ___

               7 (stating that an owner of  an oil storage site, "as soon

            as he  has knowledge of a release or threat of release of oil

            material,  shall immediately  notify  [DEP] thereof");  Mass.

            Regs. Code tit.  527,   9.19(1)(b) (1986) (stating that "[i]n

            the event  of  a leak  .  . .  the  owner or  operator  shall

            immediately notify  the head of the local fire department and
                                                                      ___

            [DEP]")  (emphasis  supplied).   Thus,  even  under the  most

            generous   reading  of  the  policy,  the  Fire  Department's

            recitation  to David  White of  Alan Corp.'s  duty to  report

            contamination to  DEP, without more, does  not constitute the

            imposition of any legal obligation. 

                      Nor was any further governmental action "initiated"

            through  the phone  call to  the Leominster  Fire Department.

            The Fire Department made no record of the phone call; it sent

            no  representatives to  the  site;  it  made  no  attempt  to

            determine whether  Alan Corp. had investigated  the spill; it

            made  no attempt to determine whether Alan Corp. had reported

            any contamination to DEP; and it never communicated with DEP,

            directly  or  otherwise,  about  the  spill  in  any  manner.

            Rather, all clean-up  costs in this case  were imposed solely

            and independently by DEP,  whose involvement, by Alan Corp.'s

            own admission, began well after the policy had expired. 

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                                          8

In  sum,  the phone  call  to  the Leominster  Fire

            Department  neither  amounted  to,  nor  did  it  "initiate,"

            governmental action for purposes of  the policy.  Rather, all

            governmental action resulting  in the imposition  of clean-up

            costs  was  initiated by  and  through  DEP.   Because  DEP's

            actions were initiated well after the expiration date  of the

            policy, Alan Corp.  was afforded no coverage for its incurred

            clean-up costs.

            C.  Other Issues
            ________________

                      As  noted above,  an  unidentified  ISLIC  employee

            allegedly told Alan  Corp. to  "lay low" with  regard to  the

            contamination and went on to  assure Alan Corp. that expenses

            for the  clean-up of both the Leominster  and Fitchburg sites

            would be covered by  ISLIC.  Based on these  statements, Alan

            Corp. argues  that the doctrines  of waiver and  estoppel bar

            ISLIC from denying coverage.  

                      In the  context of insurance claims,  waiver is the

            voluntary  and intentional  relinquishment of a  known right.

            Merrimack Mut. Fire Ins.  Co. v. Nonoka, 606 N.E.2d  904, 906
            _____________________________    ______

            (Mass.  1993).   It is  well  established that,  whatever the

            scope  of waiver in insurance law, "it does not extend to the

            broadening of coverage, so as to make the policy cover a risk

            not within  its terms."   Palumbo  v. Metropolitan  Life Ins.
                                      _______     _______________________

            Co., 199 N.E. 335, 336 (Mass. 1935).  
            ___

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                                          9

The policy at issue here covers, inter alia, claims
                                                       _____ ____

            made against the insured  which are initiated by governmental

            action during the policy  period.  As pointed out  above, the
                   ______

            governmental  action at  issue here  was initiated  after the
                                                                _____

            expiration of the  policy.   In sum, the  doctrine of  waiver

            does not operate in  this case to lengthen the period  of the

            policy so as to  include the clean-up costs assessed  by DEP.

            Accordingly, Alan Corp.'s waiver argument fails.

                      Alan   Corp.'s   estoppel   argument   is   equally

            unavailing.   Estoppel in the  insurance context  necessarily

            implies some reasonable,  good-faith reliance by  the insured

            upon some act,  conduct or  inaction of the  insurer, to  the

            detriment  of the insured.  See, e.g., O'Blenes v. Zoning Bd.
                                        ___  _____ ________    __________

            of Appeals, 492  N.E.2d 354, 356 (Mass. 1986).   As a general
            __________

            matter, estoppel,  like waiver,  does not extend,  broaden or

            enlarge coverage so  as to include  risks not covered  within

            the terms of the policy.  Cf. Nieves v. Intercontinental Life
                                      ___ ______    _____________________

            Ins.  Co., 964  F.2d 60,  66 (1st  Cir. 1992)  (holding that,
            _________

            under Puerto Rico law, an insurance policy cannot be extended

            by waiver or estoppel).
                      __

                      Alan Corp. argues that  it would have contacted DEP

            within  the  claims  period  (and  thus,  presumably,  timely

            governmental  action  would  have  been  initiated), but  for

            ISLIC's advice to "lay low."  Alan Corp.'s argument leaves us

            to conclude that it was aware, or reasonably should have been

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                                          10

aware, of  its statutory and regulatory  obligation to report

            potential contamination to DEP.  See Mass. Gen. L. ch. 21E,  
                                             ___

            7; Mass. Regs. Code tit. 527,   9.19(1)(b) (1986).  Moreover,

            according to  Alan Corp.'s own evidence,  the Leominster Fire

            Department instructed Alan Corp.  to report contamination  to
                       __________

            DEP.  We agree with the district  court that reliance upon an

            insurance company's  advice not  to report  contamination, in

            the  face of both a  statutory and regulatory  duty to report

            such contamination and advice from a local fire department to
                               ___

            do  so, can be neither reasonable nor  in good faith.  In the

            absence of  good faith  or reasonable reliance,  Alan Corp.'s

            estoppel argument fails.

                      Finally, Alan Corp. argues  that ISLIC was unfairly

            dilatory  in  making  its  determination that  it  would  not

            provide coverage  and that this  delay amounted to  an unfair

            trade practice under Mass. Gen. L. ch. 93A    2, 11 and Mass.

            Gen. L. ch. 176D,    3(9)(a-f) and (n).  In order to make out

            a  claim  under  these  statutes, however,  a  claimant  must

            establish  both that  an unfair  trade practice  occurred and
                       ____                                           ___

            that  the unfair practice resulted in a loss to the claimant.

            See, e.g., Kerlinsky  v. Fidelity  & Dep. Co.,  690 F.  Supp.
            ___  ____  _________     ____________________

            1112, 1120  (D. Mass. 1987).   In arguing that it  suffered a

            loss due to  delay, Alan Corp. focuses  almost exclusively on

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                                          11

the  costs  of  meeting DEP's  clean-up  orders.4   We  note,

            moreover, that regardless  of any delay by ISLIC,  Alan Corp.

            bore the initial liability for the clean-up costs assessed by

            DEP.  Moreover,  Alan Corp. has  not argued, nor could  it on

            the  record before  us, that  ISLIC's alleged  delay had  any

            effect on the  cost of the  clean-up ordered  by DEP.   Thus,

            even  assuming that  there was  undue delay,  Alan  Corp. has

            failed to offer proof that it was harmed by this delay.  

                      To the  extent  that Alan  Corp.  challenges  other

            aspects  of  the district  court's ruling,  it  does so  in a

            perfunctory   manner,  without   any  attempt   at  developed

            argumentation.5  Such  arguments may be deemed  waived.  See,
                                                                     ___

            e.g., Romero  Lama v. Borras, 16 F.3d 473, 481 n.12 (1st Cir.
            ____  ____________    ______

____________________

            4.  In its brief, Alan Corp.  adverts in a perfunctory manner
            to  the fact that the  cost of remedial  work increased while
            ISLIC delayed  its decision.   We have  often warned  parties
            that issues raised in  a perfunctory manner, unaccompanied by
            some effort at developed argumentation, may be deemed waived.
            See,  e.g., FDIC  v. World Univ.  Inc., 978 F.2d  10, 15 (1st
            ___   ____  ____     _________________
            Cir.  1992).  Moreover, Alan Corp. made  no offer of proof to
            support this line of argument.

            5.  For example, Alan  Corp. argues without  elaboration that
            Section I.A., the "property  damage" provision of the policy,
            applies in this case.  It also argues that a policy extension
            which it purchased applies to lengthen the relevant reporting
            period.  The district court offered a thorough, well-reasoned
            discussion which  concluded:  1)  that Section I.A.  does not
            apply  to the claims  at issue in  this case and  2) that the
            extension  purchased  by   Alan  Corp.  only   lengthens  the
            reporting period  for claims  under Section  I.A.   See  Alan
                                                                ___  ____
            Corp., 823 F.  Supp. at 40-41; see also, Wolf  Bros. Oil Co.,
            _____                          ___ ____  ____________________
            Inc. v. International  Surplus Lines Ins.  Co., 718 F.  Supp.
            ____    ______________________________________
            839,  43-45  (W.D.  Wa. 1989)  (interpreting  same  insurance
            contract in a similar  manner).  Even were we  to reach these
            issues, we find no error in the district court's reasoning.

                                         -12-
                                          12

1994); FDIC  v. World Univ.  Inc., 978 F.2d 10,  15 (1st Cir.
                   ____     _________________

            1992).

                                         III.
                                         III.
                                         ____

                                      CONCLUSION
                                      CONCLUSION
                                      __________

                      For  the   foregoing  reasons,  the  order  of  the

            district court granting summary judgment in favor of ISLIC is

                      Affirmed.  Costs to appellees.
                      ________   _____ __ _________

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