Peterborough v. Hartford Fire Ins. CV-92-50-SD 04/07/97 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Town of Peterborough
v. Civil No. 92-50-SD
The Hartford Fire Insurance Company, its affiliates; ITT Hartford Insurance Group
O R D E R
In this declaratory judgment action, the Town of
Peterborough seeks coverage under a comprehensive general
liability (CGL) insurance policy for the various costs relating
to the investigation and cleanup of groundwater and surface water
contamination caused by hazardous wastes located at the former
town dump.
Before the court is a motion for summary judgment filed by
Hartford Fire Insurance Company, its affiliates, and ITT Hartford
Insurance Group (collectively, Hartford) , to which plaintiff
objects.1 Hartford argues that plaintiff is not entitled to
indemnification under the CGL policy because (1) the town did not
sustain "damages" within the meaning of the CGL policy and (2)
the damages the town did sustain did not result from an
1The court has also reviewed Hartford's reply memorandum. "occurrence" as defined by the policy. For the reasons that
follow, the court finds and rules that genuine issues of material
fact exist on both questions; therefore, Hartford's motion is
denied.
Background
In 1986 the owners of a large parcel of land ("the northern
parcel") located in Peterborough, New Hampshire, made the unhappy
discovery that their land, surface water, and groundwater were
heavily contaminated with hazardous volatile organic compounds
(VOCs) and dense non-aqueous phase liquids (DNPLs). The source
of the contamination turned out to be the south-side adjacent
parcel of land that had been used as the town burning dump from
1948 to 1970 ("the dump site"). During that period, various
wastes, including liquid industrial solvents, were disposed of at
the site until 1970, when the dump was closed down and capped
with permeable soil.
Soon after the discovery of the contamination at the
northern parcel in the mid-1980s, the owner of the dump site.
Eastern Mountain Sports (EMS),2 contacted ENSR Consulting and
Engineering Company to investigate the contamination on both
2EMS acquired a portion of the site in 1980 from a previous owner.
2 properties and evaluate remedial alternatives. With approval
from the New Hampshire Department of Environmental Services
(NHDES), ENSR then launched into a detailed study of both the
dump site and the northern parcel with the purpose of determining
"the most appropriate remedial action for design and
implementation." ENSR Report, October 1991, at 1-1.
ENSR submitted a final report to NHDES in October of 1991.
In its report, ENSR considered several options, including
installing pump wells to capture groundwater within the till
deposits, but ruled out such options for various technical
reasons. Recognizing the limitations of other means of
remediation, ENSR made a multi-part proposal. First, it
suggested recapping the landfill with a multi-level coverage
system in order to reduce infiltration of precipitation into the
landfill and to reduce the leaching and migration of contaminants
from the landfill materials. ENSR Report at 1-11. It also
proposed that the northern parcel be purchased so that "control
over access and development would be maintained" and that a
groundwater management zone (GMZ) be established. Id. Finally,
ENSR recommended that a long-term groundwater and surface water
monitoring program be established at both sites. In making this
recommendation, ENSR noted that contaminant migration appeared to
be "generally contained" within the site boundaries, but that the
3 proposed monitoring program was necessary to assess changes in
conditions over time. Id. at 1-12. NHDES approved ENSR's
proposals, with some modifications.
For reasons that will be developed infra, the core of the
current dispute between the parties is whether the multi-level
cap proposed by ENSR would function primarily as a "remedial"
measure, to help clean up the contamination, or whether it
instead would function as a "preventive" measure, designed to
contain the contamination and prevent its spread.
In 1991 Peterborough hired Aries Engineering, Inc., to
assist in developing a site closure plan for the site that would
be consistent with ENSR's recommendations and the NHDES's letter
approving ENSR's final report. In addition, the site closure
plan was to be consistent with the complex regulations
promulgated by NHDES relative to landfill closures. Aries
conducted a limited groundwater assessment to determine the
appropriate boundaries of the GMZ and conducted a hydrogeologic
study of the site to determine the direction and limits of the
contamination plume. In 1993 Peterborough purchased the northern
parcel adjacent to the site, in part because the owners of the
property had threatened to sue Peterborough for the contamination
of their property. Another reason behind the purchase was to
give Peterborough the ability to control the entire area
4 comprising the GMZ.
Meanwhile, the lawsuit that triggered the instant action had
begun. In 1990 EMS sued New Hampshire Ball Bearings (NHBB) in
this Court (Loughlin, J.), seeking to recover environmental
response costs related to the site and other relief. NHBB was
alleged to be responsible for depositing a vast amount of
hazardous chemicals at the site. In November 1994 Peterborough,
NHBB, and EMS entered into a Consent Agreement, which was
approved by Judge Loughlin. Under the Agreement, Peterborough
agreed to pay a 39 percent share of the costs relating to the
response action at the site and related investigation costs.
Peterborough also agreed to perform future activities that
included groundwater and surface water monitoring, cap
maintenance, and site inspections. At the time, the total
response costs were estimated to be $2,500,000, with
Peterborough's responsibility totaling $975,000.
In the present action, filed in 1992, Peterborough seeks
coverage under several CGL policies issued by Hartford for
Peterborough's share of the responsibility for the response
action. In a previous order, this court entered judgment in
Hartford's favor with respect to all of the policies except
Policies Nos. 08SMP 905678 and 08 SMP 100151. See Order of June
9, 1993, (Devine, J.). Both of these remaining policies provide
5 standard CGL coverage for property damage caused by an
occurrence.
Since the initiation of this lawsuit, certain other
developments have occurred. In January of 1995, Aries submitted
a Landfill Closure Design to NHDES on behalf of Peterborough; the
Design was subseguently approved, with some modifications, in May
of 1996. Under the Design, the proposed remedy for the site
consists of covering the landfill with a synthetic cap, along
with several other layers of material. In addition, the Design
reguires the town to take certain other measures to close the
site, including erosion and sedimentation control measures,
preliminary site development, stormwater management, and post
closure monitoring.
Discussion
1. Summary Judgment Standard
Summary judgment is appropriate when there is no genuine
issue of material fact and the moving party is entitled to a
judgment as a matter of law. Rule 56(c), Fed. R. Civ. P.; Lehman
v. Prudential Ins. Co. of Am., 74 F.3d 323, 327 (1st Cir. 1996) .
Since the purpose of summary judgment is issue finding, not issue
determination, the court's function at this stage "'is not [] to
weigh the evidence and determine the truth of the matter but to
6 determine whether there is a genuine issue for trial.'" Stone &
Michaud Ins., Inc. v. Bank Five for Savings, 785 F. Supp. 1065,
1068 (D.N.H. 1992) (quoting Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 249 (1986)).
When the non-moving party bears the burden of persuasion at
trial, to avoid summary judgment he must make a "showing
sufficient to establish the existence of [the] element[s]
essential to [his] case." Celotex Corp. v. Catrett,, 477 U.S.
317, 322-23 (1986). It is not sufficient to "'rest upon mere
allegation[s] or denials of his pleading.'" LeBlanc v. Great Am.
Ins. C o ., 6 F.3d 836, 841 (1st Cir. 1993) (quoting Anderson,
supra, 477 U.S. at 256), cert, denied, ___ U.S. ___, 114 S. C t .
1398 (1994). Rather, to establish a trial-worthy issue, there
must be enough competent evidence "to enable a finding favorable
to the non-moving party." Id. at 842 (citations omitted).
In determining whether summary judgment is appropriate, the
court construes the evidence and draws all justifiable inferences
in the non-moving party's favor. Anderson, supra, 477 U.S. at
255. Nevertheless, "[e]ven in cases where elusive concepts such
as motive or intent are at issue, summary judgment may be
appropriate if the non-moving party rests merely upon conclusory
allegations, improbable inferences, and unsupported speculation."
Medina-Munoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st
7 Cir. 1990) (citations omitted).
2. The Merits
Plaintiff Peterborough seeks coverage under the CGL policies
for costs resulting from the contamination at the former dump
site, including the costs of constructing the landfill cap, all
related systems, and all related investigation costs. The CGL
policies provide coverage to the town with respect to "all sums
which [it] shall become legally obligated to pay as damages
because of bodily injury or property damage . . . caused by an
occurrence." See Policies Nos. 08 SMP 905678 and 08 SMP 100151
(attached to defendant's motion for summary judgment). The
parties' first dispute focuses on whether the interpretation of
"damages" could extend to the various response actions taken, or
planned to be taken, by Peterborough.
Both sides rely on Coaklev v. Maine Bonding & Cas. Co., 136
N.H. 402, 419, 618 A.2d 777, 787-88 (1992), which held that
remedial response costs imposed by the Environmental Protection
Agency (EPA) and by NHDES, including the costs of complying with
a cleanup injunction and reimbursing EPA for related
investigatory costs, are "damages" within the meaning of CGL
policies. In contrast, the court held that predominantly
preventive measures and related investigatory costs would not
gualify as "damages." Id. at 411, 618 A.2d at 782-83. In drawing this distinction, the court observed that "the cost of
cleaning up the contamination, including related investigatory
costs, is directly related 'to the amount of damages which might
result' to the groundwater if the groundwater is not cleaned up."
Id. at 412, 618 A.2d at 783 (guoting Desrochers v. Casualty Co.,
99 N.H. 129, 133, 106 A.2d 196, 199 (1954)) (emphasis added).
The court further reasoned that when damage has already been done
to a particular area, the costs of cleaning it up would likely be
the same as the amount of "damages." Id. However, the costs of
preventive measures would not correlate as closely to the amount
of "damages" incurred. Therefore, "containment costs, including
related investigatory costs, do not fit the definition because
they are not compensation or satisfaction imposed by law for a
wrong or injury caused by a violation of a legal right." Id. at
416, 618 A.2d at 785 (guotation omitted).
In Coaklev, the court was faced with the issue of whether
environmental response costs imposed by or likely to be imposed
by EPA and NHDES pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. § 9601, et
seg. (CERCLA) and comparable state statutes would gualify as
"damages" under CGL policies. There, a landfill containing
hazardous waste had to be closed when NHDES discovered that
groundwater and wells in neighboring areas were contaminated. Applying the remedial/preventive distinction outlined above,
the court held that the cost of cleaning up the contaminated
groundwater was remedial rather than preventive, as was
reimbursement of EPA's investigatory costs related to the
cleanup. Id. at 411, 618 A.2d at 782-83. The court also found
that it appeared that a containment cap proposed for the landfill
was a "predominantly preventive measure," as were the related
investigatory costs. Id. Although the court left the ultimate
decision of what constitutes "damages" to the superior court to
be resolved in the first instance, id. at 419, 618 A.2d at 787-
88, it did note that the hazardous waste sought to be contained
in the landfill had not yet injured the groundwater, and
therefore the containment plan was essentially "preventive," id.
at 416, 618 A.2d at 785.
Following Coaklev, this court's task is to apply the
remedial/preventive distinction to the facts in the case at bar.
The response costs for the former town dump site recommended in
the Landfill Closure Design and associated investigatory costs
can be divided into four categories: (1) the costs of
constructing a new landfill cap and related costs and the costs
related to establishing a groundwater management zone (GMZ); (2)
the costs associated with the post-closure monitoring plan; and
(3) the amount paid by Peterborough to purchase the northern
10 parcel.
Seizing on the apparent similarities between the facts of
this case and those of Coaklev, Hartford argues that the costs
related to the construction of a new landfill cap are essentially
preventive in nature and therefore not covered as "damages" under
the CGL policies. The basic fact that the cap is intended to
keep in or contain contaminants in the landfill is very strong
evidence that it serves a predominantly preventive function.
However, Peterborough has submitted evidence sufficient to create
a genuine issue of material fact as to whether, in this case,
aside from its preventive function, the cap aided in the cleanup
of the groundwater and surface water already contaminated by the
migration of substances from the dump.
The record reveals that ENSR, the environmental consulting
firm hired to investigate and propose a response plan, considered
several options for cleaning up the contaminated groundwater and
surface water at the dump site and the adjacent northern
property. For various technical reasons, ENSR determined that
more active cleanup mechanisms such as pumping and treating the
water or installing a trench to extract shallow groundwater for
treatment were not feasible or practical. See Affidavit of Peter
J. McGlew at 55 33-35 (attached to Peterborough's objection).
For example, one factor cited by ENSR was worker safety. ENSR
11 Report at 3-16. Instead, ENSR proposed and NHDES approved a
multi-layer low permeability cap at the site in order to
eliminate existing leachate seeps and to clean up the surface
water contamination. See McGlew Affidavit at 5 25.3 It appears
that the "prevention" of such seepage also would have the
remedial effect of aiding the process of natural attenuation of
the groundwater and surface water. Natural attenuation refers to
processes such as biodegradation, dispersion, and dilution. Once
the dissolved DNPLs reach the Contoocook River near the site, the
DNPLs are further degraded by such natural processes as aeration,
volatilization, and photolysis. Id. at 5 39. Furthermore,
Aries, ENSR and NHDES agreed that a more passive remedial action such as capping the landfill and establishing a GMZ for the attenuation of DNAPL constituents was appropriate here, especially in light of the potential adverse impacts to the environment and the infeasibility of implementing a Site ground water pump and treat remediation plan.
Id. at 5 41. Apparently, the cap would create conditions that
would facilitate the natural degradation of the contamination.
It follows that the landfill cap may have had both
preventive and remedial functions. See, e.g., M. Mooney Corp. v.
USF&G, 136 N.H. 463, 467-68, 618 A.2d 793, 796 (1992)
31he cap would function, in part, by preventing the infiltration of precipitation into the landfill, thereby reducing the leaching of the contaminants from the soil. ENSR Report at 1- 1 1 .
12 (recognizing that implementing remedial measures may, at times,
incidentally prevent future harm). While capping the landfill
would serve to prevent the spread of contamination, it also
appears that the cap may have had the primary purpose of aiding
in the cleanup of the contaminated groundwater and surface water
at the site and at the adjoining northern property. Thus, the
trier of fact should decide whether the cap, including all of the
costs associated with its construction, is covered by CGL
policies.4
The court's decision to leave the "preventive vs. remedial"
determination to the jury in this instance is also supported by
policy concerns. The record reveals that ENSR recommended the
cap to aid in the cleanup of a nearby groundwater and surface
water after carefully investigating several other remedial
options. It ruled out these alternatives primarily because of
considerations of feasibility, practicality, cost effectiveness,
and worker safety. If a court were to decide that landfill caps
were always "preventive" and therefore not covered by the
standard CGL policy as a matter of law, Peterborough would be
4Ihe court's decision applies as well to the "related closure systems" at the dump site, mentioned by Hartford in its motion at page 9. These measures include the stormwater management system designed to remove surface water over the cap, and erosion and sedimentation control measures used in preparation for the installation of the cap.
13 discouraged from choosing the most feasible, practical, and safe
means of cleanup.
Hartford also argues that the groundwater management zone
and the post-closure monitoring plan are essentially preventive
in nature and therefore not covered by the CGL policies. ENSR
recommended the GMZ in order to "regulate the use of contaminated
groundwater following initial remediation actions such as source
control." ENSR Report at 3-17. Under the plan, the groundwater
and surface water within the GMZ would be monitored for the
presence of VOCs. Id. Having reviewed the evidence, the court
finds that a genuine issue of fact exists as to whether the GMZ
and the post-closure monitoring plans have the remedial function
of aiding in the cleanup of the groundwater and surface water,
rather than of simply ensuring that further contamination of
these areas would be prevented.
Similarly, a genuine issue of material fact exists as to
whether the purchase of the northern parcel was related to the
cleanup of the contaminated groundwater and surface water.
Peterborough purchased the northern parcel for $140,000, in part
because the owners threatened to bring suit against the town for
the total diminution in value of their property caused by the
contamination. ENSR also recommended the purchase of the
northern parcel in order to permit the extension of the GMZ. See
14 id. After careful review of the record, the court finds and
rules that a genuine issue of fact exists concerning whether such
costs constituted "damages" to property under the CGL policy.
Accordingly, for the above-stated reasons, the court denies
defendants' motion for summary judgment on the issue of whether
certain costs and related investigatory costs constituted
"damages" under the CGL policy.
Hartford next argues that the costs of closing the landfill
are not covered under the policies because they are not caused by
an "occurrence." Hartford argues that Peterborough seeks costs
incurred pursuant to the standard closure of a municipal
landfill, implemented pursuant to New Hampshire law reguiring the
closure of all landfills. Hartford notes that the Landfill
Closure design states that its purpose is to close the landfill
consistent with the applicable NHDES rules pertaining to the
closure of landfills, "specifically, DES WMD Solid Waste Rules
Env-Wm 312 'Universal Closure Standards', Env-Wm 2507 'Landfill
Closure and Post Closure Standards' adopted July 1, 1991, and the
May 1990 DES 'Guidance Document For The Closure Of Solid Waste
Landfills In New Hampshire.'" Defendants' Motion at 20.
According to defendant, the costs potentially incurred by
Peterborough are costs that would have been incurred even if the
site did not contain hazardous substances.
15 Although defendants' argument is not without merit, the
court finds and rules that a material issue of fact exists.5
Again, it appears that the landfill cap may have served dual
purposes. This type of cap may have been reguired by the
relevant administrative rules. But the record reveals that the
cap may also have been established to aid in the cleanup of
contamination which resulted from the dumping of hazardous waste
at the dump site. The court further notes that defendants have
not argued that from Peterborough's perspective the dumping
itself was not an "occurrence." Instead, Hartford concedes that
"there are genuine issues of material fact as to whether an
'occurrence' has taken place at the Site and whether the Town
'expected' or 'intended' property damage at the Site."
Defendants' Motion at 21. Accordingly, the court finds and rules
that the issue is best decided by the trier of fact.
Conclusion
For the above-stated reasons, the court denies defendants'
motion for summary judgment (document 85) in its entirety and
5Plaintiff argues that the closure is governed by another set of regulations. As it is unnecessary to decide this dispute in order to rule on defendants' motion for summary judgment, the court declines to give an opinion on the subject.
16 grants defendants' motion to file a reply document (document 88).
SO ORDERED.
Shane Devine, Senior Judge United States District Court
April 7, 1997
cc: David W. Hess, Esg. Kevin M. Fitzgerald, Esg. Elizabeth M. Rice, Esg.