U.S.A. v. Clean Harbors CV-89-109-L 01/17/95
THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
United States of America
v. #C-89-109-L
Clean Harbors of Natick, et al.
ORDER
Presently before the court are the Motion of Chicago
Insurance Company for Partial Summary Judgment (Doc. 515) and
Third-Party Plaintiff's Memorandum of Law in Opposition to
Defendant Chicago Insurance Company's Motion for Partial Summary
Judgment (Doc. 525). For the reasons set forth below, the motion
for summary judgment is granted in part and denied in part.
BACKGROUND
In March 1989 the United States brought suit under the
Comprehensive Environmental Response, Compensation and Liability
Act, commonly known as CERCLA (42 U.S.C. § 9607), for response
costs and damages regarding the Keefe Environmental Services,
Inc. site (Keefe site). The site is located in Epping, New
Hampshire.
Subseguently, the State of New Hampshire filed a companion
action on March 17, 1989 seeking damages against Clean Harbors with relation to the Keefe site.
When the EPA and the State of New Hampshire brought the
first party action in this case, against Clean Harbors, the
complaints specifically alleged that Clean Harbors
is a corporation which generated materials containing hazardous substances that were transported to the Keefe Environmental Services site for storage, treatment or disposal, and/or caused to be transported or transported materials containing hazardous substances to the Keefe site for storage, treatment or disposal.
On April 14, 1989, Clean Harbors filed third-party actions
against its primary and excess general liability insurers,
Atlantic, Chicago Insurance Company (Chicago) and Commercial
Union. The purpose of the third-party suit was to obtain a
declaration of the rights to defense and indemnification for any
settlement or judgment in the Keefe litigation. Atlantic
responded on June 16, 1989 filing an answer and counterclaim
alleging that Clean Harbors made material misrepresentations in
procuring the policies.
Atlantic alleged that Clean Harbors had made material
misrepresentations, which increased the risk to Atlantic, in
procuring the policies of insurance at issue in this action.
Procedurally, the following has transpired. Clean Harbors
moved to dismiss Atlantic's counterclaim alleging fraud and
mistake on July 11, 1989. A ruling was never made on this motion
2 because pursuant to an order of this court entered on May 1, 1990
discovery in the third-party action was effectively stayed
pending disposition of the first-party action.
On December 2, 1992 the first-party action was dismissed
pursuant to a consent decree. Chicago answered Clean Harbors'
third-party complaint on October 28, 1992. This court issued a
discovery order with January 1, 1995 as the date for completion
of discovery.
The third-party defendant, Chicago Insurance Company, now
alleges that under the absolute pollution exclusion endorsement
there is no insurance coverage for the third-party plaintiff.
Clean Harbors of Natick, Inc., under two of the four commercial
umbrella insurance policies (Policy No. 255-C-11440, 3/21/78-
3/21/79 and Policy No. 255-C-12451, 3/21/7 9-3/21/8 0, both with a
policy limit of $1,000,000.). Due to the lack of coverage,
Chicago contends, there are no material facts in dispute
regarding the coverage afforded by the polices, and therefore,
pursuant to Fed. R. Civ. P. 56, summary judgment is appropriate
as a matter of law.
Clean Harbors counters Chicago's allegation by maintaining
that the defendant's motion for summary judgment is not ripe and
therefore should be dismissed or stayed.
3 I. Conflict of Laws
As a threshold matter, the court is obligated to first
determine which state has jurisdiction over this case. Following
the conflict of laws determination, the court may then apply the
governing law of that jurisdiction in resolving the current
motion for summary judgment
In supporting the motion for summary judgment, Chicago avers
that this court is obligated to apply Massachusetts' law in
moving on the motion. Clean Harbors, on the other hand,
maintains New Hampshire law should apply.
At the outset, it is interesting to note that in response to
the court's guestion as to what difference, if any, there is
between New Hampshire and Massachusetts law with regard to the
instant issue, neither counsel could inform or provide to the
court any difference. The court circumspectly wonders whether
this disagreement over an issue of which the parties themselves
are unable to provide distinguishing or enlightening arguments,
should be regarded as merely unwarranted contrapositions. After
all, the current interpretations of New Hampshire and
Massachusetts law, relative to this motion for summary judgment,
is such that neither party would be disadvantaged if one choice
of law governed as opposed to the other. This court said it best
in our holding that
4 [t]he law of Massachusetts and New Hampshire appears to be identical regarding the interpretation of the policy language . . thereby making this "choice of laws" issue potentially moot.
K.J. Quinn & Co. v. Continental Casualty, 806 F. Supp. 1037, 1040 (D.N.H. 1992).
Nevertheless and for the sake of mapping a course for the
parties, in moving on the conflict of laws issue presented, this
court is obligated to apply the substantive law as that which
would be applied were the case in a state court. Erie R.R. v.
Tompkins, 304 U.S. 64, 77-78 (1938). "A contract is to be
governed, both as to validity and performance, by the law of the
state within which the contract has its most significant
relationship." Ellis v. Royal Insurance Co., 129 N.H. 326, 331
(1987). Further, absent an express choice of law validly made by
the parties, the place where the policy is issued will ordinarily
govern. Glowski v. Allstate Ins. Co., 134 N.H. 196 (1991).
Consistent with Glowski, this court recently held in K.J.
Quinn & C o ., 806 F. Supp. at 1041, that in view of the fact that
policies were negotiated and issued in Massachusetts, it is far
more likely that the parties intend the consistent application of
Massachusetts law to any controversies arising under the
contracts.
In light of Glowski and K.J. Quinn & C o ., the court opines
Massachusetts law shall apply.
5 As a brief aside. Clean Harbors' argument that New Hampshire
law should apply because the court has already ruled on the issue
in denying Clean Harbors' motion to stay the action pending
resolution of a more comprehensive New Jersey action borders on
the disingenuous. As between New Jersey and New Hampshire law,
under the facts of this case, naturally New Hampshire law would
apply. After all, what possible interest does New Jersey have in
litigation involving pollution in New Hampshire and a contractual
relationship originating in the Commonwealth of Massachusetts?
Having come to a conclusion on the choice of law issue, the
next task for the court involves a consideration of Chicago's
motion for partial summary judgment.
II. Summary judgment on the terms of the policy
The law is apodictic that summary judgment under Fed. R.
Civ. P. 56(c) is proper only if, viewing the record in the light
most favorable to the non-moving party, the documents on file
disclose no genuine issue of material fact and the moving party
is entitled to judgment as a matter of law. Oliver v. Digital
Equipment Corp., 846 F.2d 103, 105 (1st Cir. 1988). "Only
disputes over facts that might affect the outcome of the suit"
are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A dispute over a material fact is genuine "if the
6 evidence is such that a reasonable jury could return a verdict
for the non-moving party." .Id.; Oliver, 846 F.2d at 105. The
moving party initially must "demonstrate the absence of a genuine
issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317,
322 (1986). Once the moving party has made the reguired showing,
the adverse party must "go beyond the pleadings" and designate
specific facts to demonstrate the existence of a genuine issue
for trial. Fed. R. Civ. P. 56(e); Oliver, 846 F.2d at 105.
According to Massachusetts law, if third party complaints are
reasonably susceptible of an interpretation that the allegations
therein fit the policy, the insurer has a duty to defend and
summary judgment is not appropriate. See Sterilite Corporation
v. Continental Casualty Company, 17 Mass. Ap p . C t . 316, 318
(1983), review denied, 391 Mass. 1102 (1984).
In interpreting the construction of a contract, the
Commonwealth of Massachusetts has adopted a policy which may be
characterized as the ambiguity rule. Specifically, in Manning v.
Fireman's Fund American Insurance Companies, 489 N.E. 700, 701
(Mass. 1986), the court stated that it must construe the words of
a policy according to "the fair meaning of the language used, as
applied to the subject matter." Additionally, where the terms of
an exclusionary clause are plain and free from ambiguity, a court
may not construe them strictly against an insurer, but rather
7 must construe the terms in their usual and ordinary sense. See
Barnstable County Mutual Fire Insurance Company v. Lallv, 37 3
N.E. 2d 966 (1978); Slater v. United States Fidelity & Guarantee
C o ., 379 Mass. 801, 803 (1980).
Synthesizing the Manning and Barnstable cases, in reviewing
terms of any insurance policy in the context of a motion for
summary judgment, a court is obligated to first evaluate the
presence of any ambiguity. If there are terms of a policy which
are unambiguous, a court should be extremely reluctant to accord
the language any meaning other than its natural and ordinary
meaning. Contrastingly, where the language is ambiguous, and one
possible interpretation favors coverage, resolution of the
ambiguity should fall in favor of the insured.
At issue in the instant motion for summary judgment are two
endorsements, within insurance policies, which concern
contamination or pollution liability. The first endorsement
provides:
This endorsement modifies the provision of the policy relating to Personal Injury or Property Damage Liability, but is inapplicable in the States of Maryland, New Hampshire and Vermont.
________ Exclusion of Contamination or Pollution It is agreed that such insurance as is afforded by this policy shall not apply to personal injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.
The second endorsement, entitled "Contamination and
Pollution Endorsement Absolute", provides:
This policy shall not apply to personal injury or property damage arising out of the discharge, dispersal, release or escape of:
(1) smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liguids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water;1
(2) oil or other petroleum substance or derivative (including any oil refuse or oil mixed with wastes) into or upon watercourse or body of water.
In the case at hand, Chicago alleges that it is "entitled to
summary judgment as a matter of law because there are no material
facts in dispute regarding the lack of coverage afforded by these
policies to [Clean Harbors] in connection with the underlying
policies." Doc. 515. Succinctly, Chicago maintains that "[t]he
plain and clear language of the absolute pollution exclusion
endorsement contained in the Chicago policies specifically
precludes coverage for personal injury or property damage claims
asserted against the Third-Party Plaintiff in connection with the
1 Additionally, Clean Harbors alleges that, with respect to policy number 255-C-11440, there is a handwritten legend on the absolute endorsement providing "unless sudden or accidental." Keefe site." Doc. 515.
For purposes of acting on the instant motion for summary
judgment, the court will review the issues and documents in a
manner amenable to the non-moving party. Clean Harbors. Oliver,
846 F.2d at 105.
Clean Harbors represents that the motion for summary
judgment is fundamentally flawed in that Chicago, in arguing the
unambiguous nature of the policy, relies on only one (the
Contamination and Pollution Endorsement Absolute) endorsement for
interpretation and fails to appropriately consider, construe or
compare this lone endorsement within the context of the entire
language of the policies. In support of this assertion. Clean
Harbors contends that the language of these two endorsements,
when considered together, create a patent ambiguity relative to
contamination and pollution coverage. Succinctly, according to
Clean Harbors' argument, when both endorsements are read
together, there is ambiguity in that both endorsements,
purporting to provide similar "limiting coverage", differ as to
when and where liability will occur. As stated by Clean Harbors,
"one of these exclusions excludes property damage arising out of
the discharge or release of contaminants unless: (a) such
releases are 'sudden and accidental1 or (b) occur in the state of
New Hampshire." Doc. 525, page 4. On the other hand, the second
10 endorsement merely excludes property damage arising out of the
discharge, dispersal, release or escape of contaminants. Within
this second endorsement there is no language indicating
applicability to certain states, nor is there typed language
pertaining to "sudden or accidental" release. Clean Harbors
contends that two endorsements are intended to be read together
if both endorsements relate to identical, or at least similar,
areas of coverage - namely release of contamination or pollution.
Clean Harbors' argument that two endorsements within the
same policy, like the endorsements and policies presented here,
should be read or considered together in evaluating the extent of
insurance coverage is misplaced. Upon reviewing both
endorsements presented in policies submitted by Clean Harbors,
there are significant and substantial indications that the
endorsements are not intended to collectively relate to identical
areas of coverage. Rather, the first endorsement appears,
according to titles or headnotes, intending to relate solely to
nuclear energy liability and nuclear contamination and pollution,
whereas the second endorsement is far broader in that it
encompasses a wider or unlimited range of contamination and
pollution.
Although Clean Harbors is correct in that there are
instances where the terms of an exclusion must be read in
11 conjunction with or under the entire purview of a contract,
(Jefferson Ins. Co. v. Holyoke, 23 Mass. App. C t . 472, 474-475
(1987)("Words that are clear and unambiguous, by themselves, may
be ambiguous when read in the context of the entire insurance
contract."), such is not the case here. Fundamentally, the court
reads the second endorsement as ineluctably yexclusive and
potentially superior to the nuclear contaminant (first)
endorsement. The second endorsement uneguivocally and
unambiguously is entitled "Contamination and Pollution
Endorsement Absolute." Emphasis added. The American Heritage
Dictionary defines "absolute" as "perfect in guality or nature;
complete. . . . Not limited by restrictions or exceptions;
unconditional. . . . Unrelated to and independent of anything
else . . . ." Black's Law Dictionary parrots this definition by
defining "absolute" as "Complete; perfect; final; without any
condition or incumbrance; . . . without relation to or dependence
on other things or persons." With these definitions in mind, it
is difficult for the court to define absolute in terms other than
all encompassing and superseding all others. To provide life to
Clean Harbors' contention that both endorsements are intended to
be read together would give dramatic and inappropriate
construction to the definition of absolute. See Hyfer v.
Metropolitan Life Ins. Co., 318 Mass. 175, 178 (1945) ("A policy
12 of insurance whose provisions are plainly and definitely
expressed in appropriate language must be enforced in accordance
with its terms." Stankus v. New York Life Ins. Co., 312 Mass.
366, 369 (1942) ) .
The inference that both endorsements should be read together
and applied together also runs afoul to the established principal
that where an endorsement follows a policy, the language within
the endorsement must be construed in such a manner as superseding
any preceding inconsistent or irreconcilable language within the
policy. Couch on Insurance (Rev. ed.) § 4:36 (1984 and 1993
supp.); 13A Appleman, Insurance law and Practice, § 7537; See
Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118 (2d Cir.
1990). As Chicago correctly points out, where the words
contained in a policy are plain and unambiguous, the words must
be accorded their plain and ordinary meaning. Manning v.
Fireman's Fund American Ins. Cos., 397 Mass. 38 (1986). Further,
words do not become ambiguous simply because the parties strive
for different meanings. See Computer Systems of America, Inc. v.
W. Reserve Life Assurance Co., 19 Mass. App. C t . 430, 433-34 n. 5
(1985) .
In continuing to address the "absolute" aspect of the second
endorsement. Clean Harbors maintains the absolute exclusion is
contrary to the reasonable expectation of coverage, and thus this
13 court should refuse to enforce such a provision. After all.
Clean Harbors contends, what possible policyholder would
subscribe to a policy that, in essence, covers nothing intended
by the policyholder? While this argument has some appeal,
unfortunately the law provides for a divergent resolution. As
this court has alluded to previously, where terms of an
instrument are unambiguous, a court, in construing terms, is not
provided the opportunity or leeway to consider the reasonable
expectations of the parties. See Johnson Controls, Inc. v.
Bowes, 381 Mass. 278 (1980). In fact, other courts, in reviewing
and construing absolute endorsement provisions similar to the one
currently under review by this court, have strictly enforced the
provisions according to the absolute terms. Essex Ins. Co. v.
Tritown Corp., C.A. 92-12661-WGY (D.Mass., July 20, 1994); United
States Liability Insurance Co. v. Bourbeau, C.A. No. 93-10606-MAP
(D.Mass. July 20, 1994); Mark D. Plevin, Basics of Insurance
Coverage Litigation III Environmental Litigation, 1165, 1173
(ALI-ABA, 1994).
In carefully reviewing absolute exclusions and striving to
provide some justification and merit to Clean Harbors' arguments,
the court, nonetheless, is repeatedly drawn to the conclusion
that there is no uncertainty as to the meaning and provided
coverage of the Contamination and Pollution Endorsement Absolute.
14 According to the fair meaning of the language used in this
endorsement, the court opines that an objective insured reading
the exclusionary language of such an endorsement would reasonably
interpret the language in a way which would not provide coverage
in a manner Clean Harbors is now alleging. Atlantic Mutual
Insurance Co. v. McFadden, 413 Mass. 90, 92 (1992). Fundamental
to this conclusion, in reading absolute endorsements like the one
presented here, it is guite clear that the underlying purpose of
the language is to supersede any other related provisions of a
policy. It is also clear the such an endorsement renounces
coverage for all damages deriving from the discharge of
pollutants.
A) Coverage under policy number 255-C-12451.
Based on the aforementioned review concerning supersession
and applicability of certain endorsements, this court opines that
the language of the "Contamination and Pollution Endorsement
Absolute" contained within policy number 255-C-12451
unambiguously supersedes all other related provisions of the
policy. The terms of the policy specifically and uneguivocally
exclude coverage in instances where certain forms of pollution
cause personal injury or property damage. As such, the personal
injury and property damage claims in which Clean Harbors seeks
15 defense costs and indemnification are specifically excluded from
coverage by the language of absolute endorsement provision of the
policy. The documents on file, relative to coverage under policy
number 255-C-12451, do not disclose any genuine issue of material
fact, and thus, with respect to this policy summary judgment is
properly granted.
B) Coverage under policy number 255-C-11440.
With respect to coverage under policy number 255-C-11440,
the analysis concerning coverage would be identical to the
aforementioned discussion, if not for the presence of an
important twist. Succinctly, upon the absolute contamination and
pollution exclusion within policy number 255-C-11440, there is
handwritten language, albeit partially unascertainable by the
court given the photocopied nature of the document, which
according to Clean Harbors purportedly states "unless sudden or
accidental."
If the court considers this handwritten legend in a light
most hospitable to Clean Harbors, including all reasonable
inferences, the court reasonably comes to the conclusion that the
absolute exclusion is limited, by a condition, in its reach and
application. Succinctly, the possibility that the handwritten
legend could, by negating or modifying the absolute aspect of the
16 endorsement, provide for indemnification or impart liability by
or on Chicago is enough to warrant a conclusion that there is an
issue of material fact needy of review and determination.
Goodman v. Aetna Casualty and Surety Company, 412 Mass. 807
(1992). Chicago's inference that, relative to policy number 255-
C-11440, there is no ambiguity because policy number 255-C-11440
should be afforded an identical interpretation, without regard to
the alleged handwritten legend, as policy number 255-C-12451 has
little merit. After all, is it axiomatic that separately
negotiated and added terms in a contract are entitled to greater
weight than standardized terms. See Carriqq v. Cordeiro, 26
Mass. App. C t . 611 (1988). Thus, although the typed portion of
the endorsement indicates absolute application, thereby relieving
Chicago of liability for indemnification, the added written
terms, if interpreted in a manner consistent with Clean Harbors'
reading, could certainly impart degrees of liability on Chicago
if contamination or pollution were of the sudden or accidental
nature. See New Hampshire Ball Bearings v. Aetna Casualty and
Surety Company, No. 94-1540 (1st Cir. January 5, 1995). As
Chicago itself points out, where there is a conflict or
inconsistency between a printed or standard provision and one
that is compiled and inserted by the parties, the later insert by
the parties should prevail in resolution of construction issues.
17 Id. Accordingly, summary judgment, with respect to policy number
255-C-11440, is denied.
CONCLUSION
In light of the above, viewing the record in the light most
favorable to Clean Harbors, this court opines that the documents
on file and presented to the court do not disclose any issue of
material fact concerning the coverage and insurance liability
under policy number 255-C-12451. As there is no ambiguity
relative to this policy, Chicago's motion for summary judgment,
relating to this policy number 255-C-12451 is granted. Further,
as the documents on file and presented to the court do disclose
very real and substantial issues of material fact concerning
coverage and insurance liability under policy number 255-C-11440,
summary judgment with respect to this policy is denied.
January 17, 1995
Martin F. Loughlin Senior Judge John M. Edwards, Esg. Stsanley N. Wallerstein, Esg. Richard J. Riley, Esg. Vincent Wenners, Esg.