Liberty Mutual Insurance Co. v. Black Decker Corp.

Full title: LIBERTY MUTUAL INSURANCE CO., Plaintiff, v. THE BLACK DECKER CORP., BLACK…

Court: United States District Court, D. Massachusetts

Date published: Dec 5, 2003

CIVIL ACTION No. 96-10804-DPW (D. Mass. Dec. 5, 2003)

Opinion

CIVIL ACTION No. 96-10804-DPW.

December 5, 2003

MEMORANDUM AND ORDER REGARDING SUMMARY JUDGMENT

DOUGLAS WOODLOCK, District JudgePage 2

V. SUBSTANTIVE LEGAL PRINCIPLES

In broad terms, whether Black Decker's claims are covered under the Liberty Mutual policies concerns two separate duties. First, Liberty Mutual has a duty to defend Black Decker, under certain circumstances, against environmental and personal injury claims such as those involved here. Second, Liberty Mutual has a duty to indemnify Black Decker for expenses incurred surrounding certain covered events. These two duties are distinct, implicating different legal issues. I will analyze these duties separately under Massachusetts, Connecticut and Maryland law.

A. Duty to Defend

The duty to defend provisions in the various Liberty Mutual policies at issue here are substantially similar in most pertinent respects and have remained relatively unchanged over the several decades during which coverage is alleged.¹ In addition, the wording of these clauses appears to be fairly standardized throughout the insurance industry, thus making judicial decisions in this area readily applicable.

1 As discussed below, the defendants contend that the duty to defend provision contained in Liberty Mutual policies before 1966 did not restrict defense costs to the general monetary coverage limit. The policies after 1966 explicitly state that defense costs associated with the duty to defend will not exceed the policy's general monetary coverage limits. (E.g., 1966 Standard Policy Jacket, Defs.' App. XIII, at 121.)

1. "Suit" Trigger

The operative language of each duty to defend clause states that Liberty Mutual shall "defend any suit against the insured alleging such injury . . . even if such suit is groundless, false or fraudulent." (E.g., 1957 Standard Policy Jacket, Defs.' App. XIII, at 102.)² Thus, a threshold issue is whether there has been a "suit" which would trigger the duty to defend. None of the policies defines the term "suit."

2 Policy language did vary over time. For instance, this provision was rephrased in 1966 as the "duty to defend any suit against the insured seeking damages on account of . . . property damage, even if any of the allegations of the suit are groundless, false or fraudulent." (1966 Standard Policy Jacket, Defs.' App. XIII, at 121.) Except where otherwise noted, such as the switch from "accident" to "occurrence" language, see infra p. 35, such changes in policy language are immaterial to the issues in this case.

a. Massachusetts

The Supreme Judicial Court recently summarized the test of the duty to defend in Massachusetts:

The critical issue is whether the summary judgment record alleges "a liability arising on the face of the complaint and policy.". . . . "[T]he question of the initial duty of a liability insurer to defend third-party actions against the insured is decided by matching the third-party complaint with the policy provisions: if the allegations of the complaint are 'reasonably susceptible' of an interpretation that they state or adumbrate a claim covered by the policy terms, the insurer must undertake the defense." The scope of an insurer's duty to defend is based on "the facts alleged in the complaint and those facts which are known to the insurer." . . . "[T]he underlying complaint need only show, through general allegations, a possibility that the liability claim falls within the insurance coverage. There is no requirement that the facts alleged in the complaint specifically and unequivocally make out a claim within the coverage." However, "when the allegations in the underlying complaint 'lie expressly outside the policy coverage and its purpose, the insurer is relieved of the duty to investigate' or defend the claimant."

Herbert A. Sullivan, Inc. v. Utica Mut. Ins. Co., 439 Mass. 387, 394-95 (2003) (internal citations omitted).

The term "suit" is not strictly confined to lawsuits, but rather includes certain circumstances where no actual complaint has been filed. In Hazen Paper Co. v. United States Fidelity Guaranty Co., 407 Mass. 689, 696 (1990), the Supreme Judicial Court held that a letter from the federal EPA indicating that a company was a potentially responsible party ("PRP") under the Comprehensive Environmental Response and Cleanup Liability Act

("CERCLA"), 42 U.S.C. § 9601-9675, was "substantially equivalent" to a suit for purposes of the duty to defend. The coercive power of CERCLA's statutory regime, the court reasoned, left the insured with no other practical choice but to submit to a pretrial settlement in order to avoid trial. Id. at 697. TheHazen Paper court also found significant that the PRP letter described an actual release of pollutants, not just apotential release. See id. at 695.

On the other hand, the Hazen Paper court held that a letter sent by the state Department of Environmental Protection (DEP)³ pursuant to the Massachusetts Oil and Hazardous Material Release Prevention Act, Mass. Gen. Laws ch. 21E, §§ 1-19 (Massachusetts' version of CERCLA) was not a "suit" that would trigger the policy. Id. The court distinguished DEP's letter, which indicated that DEP was seeking reimbursement for removal costs incurred by the state, because the letter "claimed only a threat of the release of hazardous material" and did not actually "allege the occurrence of any damage that falls within the policy coverage." Id. Thus, Hazen Paper distinguished a PRP letter, which describes existing damage within the policy coverage and requires action, from a letter that merely describes potential future harm. Put differently, if the PRP letter was the functional equivalent to a suit because it alleged damage and required a response, the DEP letter was more like a threat of a future suit where the plaintiff's claim had not yet ripened.

3 DEP was formerly known as the Department of Environmental Quality Engineering. This memorandum uniformly uses the current name for clarity and consistency.

In Zecco, Inc. v. Travelers, Inc., 938 F. Supp. 65, 68-69 (D. Mass. 1996), Judge O'Toole further developed this distinction, and held that a letter from a private party, sent pursuant to Mass. Gen. Laws ch. 21E, § 4A, was not a "suit" for duty to defend purposes. He suggested three guidelines to consider, in light of Hazen Paper, to determine whether a pretrial letter should be considered a suit. Id. at 68. First, "a failure to comply with the letter should itself somehow alter the substantiality of the insured's liability, by making liability more likely or more devastating or by giving rise to some particular penalty." Id. Second, letters from government agencies are more significant than those from private parties, precisely because the consequences are often more severe. Third, the tone of the letter is relevant, and a polite offer to discuss matters is less consequential than an offer the recipient cannot refuse. Id.

With these principles in mind, I now turn to specific recurring examples.

(i) DEP Notice of Responsibility

The Hazen Paper court held that a written DEP "Notice of Responsibility" ("NOR") there did not qualify as a "suit" because it only alleged a threat of future release, not existing damage. However, many NORs allege, more generally, a "release/threat of release." (E.g., Defs.' App. LI, at 1-2.) I find that an NOR using that (or materially equivalent) language is analogous to the "PRP letter" in Hazen Paper.

At first blush, the phrase "release/threat of release" might appear to straddle the line between a letter alleging a release, which qualifies as a lawsuit for insurance purposes, and a letter merely alleging a threat of release, which does not.See Hazen Paper, 407 Mass. at 695. However, these letters typically allege that "there has been a release/threat of release" (emphasis added), which connotes that there actually was a release. Such NORs typically name the recipient as a PRP under Mass. Gen. Laws ch. 21E § 5(a). Section 5(a) defines the liability of PRPs:

[T]he owner or operator of a vessel or a site from or at which there is or has been a release or threat of release of oil or hazardous material; . . . shall be liable, without regard to fault. . . .

Mass. Gen. Laws ch. 21E, § 5(a). In Hazen Paper, the insured's "obligation to respond positively to the EPA letter was strong" because "[t]he prospects of avoiding financial responsibility were minimal because liability is not based on fault and the available defenses are very limited." 407 Mass. at 696-97 (internal citations omitted). The same considerations apply to a Chapter 21E NOR alleging, even in the alternative, past damage.

Furthermore, Chapter 21E is like CERCLA in that failure to respond to a PRP letter subjects the recipient not just to sanctions for the "paperwork" violation, but also to adverse consequences on the merits. Cf. Zecco, 938 F. Supp. at 67 (duty to defend may attach "where an insured's failure to respond adequately to a pre-suit letter would significantly affect the insured's ability to defend itself in a subsequent action arising out of the same subject matter"). If a PRP fails to respond to an order to conduct an assessment, and the court finds that the PRP acted unreasonably or in bad faith, the court may award the state up to two to three times its response costs, plus litigation costs and attorneys' fees. See Mass. Gen. Laws ch. 21E § 5(e). Even if the court finds that the PRP acted reasonably and in good faith in refusing to conduct the assessment, the court must still award the state actual response costs, plus litigation costs and attorneys' fees. See id. As in Hazen Paper, "the opportunity to protect [the insured]'s interests could well have been lost, long before any lawsuit would be brought." See 407 Mass. at 697; see also Zecco, 938 F. Supp. at 68 ("a failure to comply with the letter should itself somehow alter the substantiality of the insured's liability, by making liability more likely or more devastating or by giving rise to some particular penalty").

For these reasons, I conclude that an NOR alleging, even in the alternative, a past release satisfies the "suit" requirement under Liberty Mutual's policies. In so doing, I join several lower courts in Massachusetts that have reached the same conclusion. See, e.g., Am. States Ins. Co. v. Kirsch, 1995 WL 930798, *2 (Mass.Super.Ct. Sept. 21, 1995);Stupp v. Taylor Murphy, Inc., 16 Mass. L. Rptr. 428, 1991 WL 11010341, at *4 (Mass.Super.Ct. Dec. 23, 1991). By contrast, I conclude that an NOR that merely alleges a threat of future damage does not satisfy the suit requirement. Hazen Paper, 407 Mass. at 695-97.

(ii) Oral NOR

It appears to be common practice for a DEP employee to give an oral NOR to a site manager when responding to an incident. The oral NOR is typically accompanied by a one-page incident report and a DEP pamphlet explaining Chapter 21E. (See, e.g., Defs.' App. LI, at 1 (written NOR reciting that pamphlet was given with oral NOR); Defs.' Beverly Ex. 8 (incident report).)

Whether an oral NOR satisfies the suit requirement is a more troublesome question. An oral NOR may lack some of the indicators of coercion. For instance, consider the three factors that Judge O'Toole developed to apply Hazen Paper: the liability risked by noncompliance with the letter's demands, the source of the letter, and the tone of the letter. See Zecco, Inc., 938 F. Supp. at 68-69. The first and third Zecco factors are quite difficult to assess for an oral NOR, especially on summary judgment, because a court is unlikely to know precisely what was said, let alone the tone. At this stage, I leave open the possibility that an oral NOR may satisfy the suit requirement, but the insured must separately prove that each oral NOR was sufficiently coercive, and alleged sufficient existing harm, to qualify as a "suit."

(iii) Private Demand Letter

Black Decker also contends that a non-insured's demand for reimbursement from an insured, pursuant to an indemnity agreement, qualifies as a "suit." However, even under such an agreement, private demand letters are not lawsuits or the functional equivalents thereto.

For an agency letter to qualify as a "suit" for insurance purposes, "a failure to comply with the letter should itself somehow alter the substantiality of the insured's liability, by making liability more likely or more devastating or by giving rise to some particular penalty." Zecco, 938 F. Supp. at 68;see also Hazen Paper, 407 Mass. at 696 (distinguishing EPA PRP letter from a "conventional demand letter"). Furthermore, "letters from governmental entities tend to have more severe consequences than those from private parties." Zecco, 938 F. Supp. at 68. Neither factor applies to a conventional demand letter pursuant to a contractual indemnity agreement.

In fact, the situation would not change with the additional fact that the indemnitee had itself been sued, nor even that the indemnitee actually sued the insured indemnitor. There still would not be a suit alleging "damages because of injury to or destruction of property." (E.g., 1957 Standard Policy Jacket, Defs.' App. XIII, at 102.) Ordinarily, when X and Y agree by contract that X will indemnify Y against certain liabilities, Z subsequently sues Y, and Y demands indemnification from X, the duty of X's insurer to defend X is not triggered. This is because most of the policies explicitly exclude "liability assumed by the insured under any contract or agreement except an incidental contract."⁴ (E.g., 1966 Standard Policy Jacket, Defs.' App. XIII, at 121.) The purpose of this exclusion, generally speaking, is to "'deny the coverage generally assumed by a liability policy in cases in which the insured in a contract with a third party agrees to save harmless or indemnify such third party.'" Commercial Union Ins. Co. v. Basic Am. Med., Inc., 703 F. Supp. 629, 633 (E.D. Mich. 1989) (quoting 12 Couch on Insurance § 44A:35 at 55 (2d ed. 1981), and holding that hold-harmless agreement in stock purchase agreement did not qualify as incidental contract).⁵

4 "Incidental contract" is defined to include leases, certain easements, certain legally required agreements to indemnify a municipality, railroad sidetrack agreements, and elevator maintenance agreements — none of which apply here. (E.g., 1981 PCI CGL Policy, Defs.' App. XII, at 3.)

5 The situations presented in this case generally differ from a typical contractual assumption of liability, which is made by one who, but for the contract, would have no liability at all.See Haugan v. Home Indem. Co., 197 N.W.2d 18, 23 (S.D. 1972) (defining contractual assumption of liability as "an agreement to indemnify or hold another harmless for an obligation not otherwise imposed by law.") At the sites here, Black Decker's environmental liabilities arguably were "otherwise imposed by law" because it could have been impled under CERCLA or similar state statutes. Generally, however, the only methods by which an insured can be dragged into environmental litigation involuntarily are either an action for contribution under the relevant environmental law, or an action for indemnification under the contract. The former was contemplated by the insurance policy; the latter was not, because the liability is solely contractual. Nevertheless, I recognize that this is a closer question than that presented in Smartfoods, Inc. v. Northbrook Prop. Cas. Co., 35 Mass. App. Ct. 239, 241 (1993), a case involving a claim for damage from the loss of a distribution agreement, where the court observed that "it requires a flight of the imagination to suppose that when [the insured] bought general liability insurance it expected that the policy would cover legal expenses incident to what . . . is at its core a breach of contract suit."

The distinction may seem rather fine; one might argue that it is inefficient to require the seller to actually be sued in order to trigger the duty to defend, because this inhibits free transfer of property between and among environmentally liable entities. The economically efficient rule might be to allow a seller, by private indemnity agreement, to, in essence, transfer its insurance coverage to the purchaser. However, this is not how the policies are written. The policies do not extend insurance coverage to the insured's assignees, nor promise to defend anyone other than the insured (or its successors) from a suit. (Cf. PCI 1981 CGL Policy, Defs.' App. XII, at 4 (assignment of interest under policy does not bind insurer except by express consent)). As the Supreme Judicial Court noted in another context, "[a]n insurance policy is not a negotiable instrument." George v. Coolidge Bank Trust Co., 360 Mass. 635, 639 (1971). Liberty Mutual did not contract to defend from suit unrelated companies that acquired property damaged by insureds.

Nor is the duty to defend triggered simply because an entity that acquired property formerly owned or used by an insured has since been sued as a "successor" to earlier parties (i.e., the insured) that were responsible for depositing waste. Until the insured is actually named in an action for contribution, it has not yet been sued. If a plaintiff sues X on the theory that X is liable for what Y did, this does not mean that the plaintiff has sued Y. Indeed, if a third-party complaint against an insured's transferee could, of its own force, somehow make the insured into a defendant, then the insured could successfully move to dismiss on the grounds that it was not served. See Fed.R.Civ.P. 12(b)(5).

In short, Liberty Mutual has no duty to defend any party other than an insured from suit, and no duty to defend any insured that was not itself sued.

(iv) Information request letter

Black Decker suggests that an information request from a state agency to an insured, with a penalty for failure to provide the information sought, triggers the duty to defend. For example, one letter, which appears on its face to be a mass mailing to regulated land disposal units, requests the insured to provide certain information within forty-five days. (See Defs.' App. LXXXIX, at 222-26.) To establish the letter's coercive effect, required under Hazen Paper, see 407 Mass. at 696-97, Black Decker points to a sentence on the fourth page of the letter warning that "[f]ailure to comply with the above request within forty-five (45) days of receipt of this letter may result in an enforcement action by EPA, including the assessment of penalties." (Id. at 225 (emphasis in original)).

The letter, which relies on RCRA § 3007, 42 U.S.C. § 6927, and CERCLA § 104(e), 42 U.S.C. § 9604(e), for statutory authority, warns that "[f]ailure to comply with the above request within forty-five (45) days of receipt of this letter may result in an enforcement action by EPA, including the assessment of penalties." (Id. at 225 (emphasis in original)). The penalties are not stated in the letter, but can be ascertained from the statutes; under both RCRA and CERCLA, the potential penalty for failing to comply with the information request is $25,000 per day. 42 U.S.C. § 6928(g), 9604(e)(5)(B).

The First Circuit considered the penalties for nonresponse to such a letter in United States v. Charles George Trucking Co., 823 F.2d 685 (1st Cir. 1987). There, landfill operators who received a RCRA/CERCLA information request failed to timely answer EPA's questionnaire or explain their silence. After repeated warnings, EPA eventually filed a complaint in the district court, seeking "an order insuring compliance with the information request, and the imposition of penalties under the RCRA, to wit, 42 U.S.C. § 6928(g)." Id. at 686-87. The district court granted partial summary judgment for the government, and the First Circuit affirmed. It rejected the landfill operators' argument that RCRA's penalties do not extend to "purely paperwork offenses." See id. at 687-89.

The procedural history of Charles George Trucking is telling here. When the landfill operators did not comply with EPA's information request, the government filed a civil suit in district court. This is unlike a PRP letter, which places immediate legal consequences upon the recipient. When EPA warns (or threatens) that failure to answer its questions can result in assessment of penalties, it is in essence saying "answer these questions or we'll sue you." However, EPA's request for information is not quite the same as an ordinary demand letter. The government, should it file suit, need not prove or even allege that the recipient did anything "substantively" wrong — it need merely establish that the recipient failed to answer the letter. In essence, EPA's letter means "answer these questions or we'll sue you for not answering these questions."

This illustrates the difference between a request for information, the penalty for nonresponse being punishment for not providing the information, and a suit or functional equivalent thereof, the penalty for nonresponse being an adverse determination of liability on the merits. Cf. Zecco, 938 F. Supp. at 67 (duty to defend may attach "where an insured's failure to respond adequately to a pre-suit letter would significantly affect the insured's ability to defend itself in a subsequent action arising out of the same subject matter" (emphasis added)).

One who receives a civil complaint but does not respond risks a default judgment; one who receives a PRP letter but does not respond risks letting EPA develop a record that assigns liability to him. See Hazen Paper, 407 Mass. at 696-97 n. 4. In contrast, one who receives an information request letter, but does not respond, risks only a penalty for not responding to the letter. The information request letter would only be analogous to a PRP letter if the sanction for noncompliance were an automatic presumption that the recipient's hazardous waste facility was operated illegally. Instead, such a letter is more like the private notice letter in Zecco, where the court noted that "response to receipt of a § 4A(a) notice letter . . . need not be too extensive, and the consequences for failing to respond or negotiate adequately . . . can be imposed only after an actual suit has been filed." 938 F. Supp. at 68.

Analyzing these letters from the perspective of the insurance policy yields the same result. The policies provide, in language phrased slightly differently in each case but fundamentally similar, that Liberty Mutual will defend the insured from a suit seeking damages covered under the policy. (See, e.g., 1956 USM Policy, Pl.'s App. 1A, Tab 3, at 62 ("As respects such insurance as is afforded by the other terms of this policy the company shall (a) defend in its name and behalf any suit against the insured alleging such injury, sickness or disease and seeking damages on account thereof . . .").) To qualify as a "suit," the letter must at the very least allege damage that would be covered under the policy. See Hazen Paper, 407 Mass. at 695 (finding that state agency letter that merely alleged threat of a future release is not functional equivalent of a suit). Therefore, a letter that merely requests information with a threat of penalties for nonresponse cannot qualify as a "suit" since it does not allege any damage under the policy. Cf. Ryan v. Royal Ins. Co. of Am., 916 F.2d 731, 733 n. 2, 741-42 n. 7 (1st Cir. 1990) (under New York law, no duty to defend triggered by correspondence from state agency that threatened potential penalties, because the penalties were merely for "failing to meet documentary requirements, not for neglecting to purge the site" and because the letter lacked "hortatory terminology" such as "demand" or "order").

(v) Settlement

It is certainly not the case, as Liberty Mutual would have it, that a cooperative settlement with a government agency can never trigger the duty to defend. That argument is foreclosed by Employers' Liability Assurance Corp. v. Hoechst Celanese Corp. ("Hoechst Celanese"), 43 Mass. App. Ct. 465, 467-69, 483 (1997), which held that the duty to defend was triggered under Hazen Paper where the state environmental agency, having sent the insured a letter requiring remedial action, entered into a settlement agreement with the insured. As the court put it, "[i]t is hard to see what public interest would be promoted by having an insured deliberately await, or even actively encourage, formal litigation by an environmental agency in order to make sure that the insured's right of indemnification would not be compromised." Id. at 483.

Nor is it the case, as Black Decker might wish, that any exchange of correspondence with an agency leading to a negotiated settlement over remediation liability triggers the duty. Hazen Paper makes clear that the letter that is claimed to be the functional equivalent of a complaint must allege harm that would be covered under the policy, and must display a certain level of coercion.

The logical answer is that, for purpose of ascertaining whether a "suit" exists, the court must focus not on the insured's conduct in disclosing or remediating the violation, but rather on the government agency's communications to the insured. The court analyzes the agency's correspondence under the Zecco factors, and determines whether it was coercive, like the PRP letter in Hazen Paper or the state agency letter inHoechst Celanese, or not, like the DEP letter in Hazen Paper or the private letter in Zecco.

(vi) Actions that makes the property more marketable

At some sites, Liberty Mutual argues that the investigatory and remediation process was initiated by Black Decker to make the site more attractive to potential buyers. Obviously, in the absence of any coercive process, reduction of future environmental liability does not trigger the duty to defend. However, if there is regulatory coercion otherwise sufficient to trigger the duty to defend, then it is irrelevant that Black Decker had the additional motive of making the property more marketable. A similar situation was confronted in Hoechst Celanese, where the insurer "intimate[d] that [the insured] was cleaning the site in order to facilitate the sale of the property and was not responding at all to pressure from [the state environmental agency]." 43 Mass. App. Ct. at 483. The court held that "[a]t most these suggestions would pose questions of fact about the precise confrontation between [the insured and the agency], questions inappropriate for decision on summary judgment." Id. Factual disputes about how much investigation and remediation was required to comply with government demands, and how much was purely preparatory for sale, are for trial.

(vii) Complex sites where the suit alleges at least one covered incident

If an insurer has a duty to defend an insured against one count of a complaint, then it must defend the insured against all counts, even those not within the policy coverage. "That some, or even many, of the underlying claims may fall outside the coverage does not excuse Liberty Mutual from its duty to defend these actions." Simplex Tech., Inc. v. Liberty Mut. Ins. Co., 429 Mass. 196, 199 (1999); Aetna Cas. Sur. Co. v. Cont'l Cas. Co., 413 Mass. 730, 732 n. 1 (1992) ("[T]he weight of authority places the duty to defend all counts on an insurer which has a duty to defend at least one count of a complaint, barring a contrary agreement with the insured.").

It is not immediately clear how to apply this principle to a complex polluted property with five distinct contaminated areas, where there is, technically, no "complaint" with individual "counts" but rather a government-ordered remediation pursuant to a site-wide environmental assessment. At one extreme, a very broad view would be that if any portion of the Site were damaged by "accident" or "occurrence," then the duty to defend applies to the entire Site. At the other extreme, a very narrow view would be that each distinct area of contamination must contain some damage caused by "accident" or "occurrence" in order to trigger the duty to defend as to that area.⁶

6 Liberty Mutual appears to take an even more extreme position: that if some damage at the Site was expected or intended, then none of the damage at the Site qualifies as accidental. This argument turns on its head the principle that an insurer must defend all counts of a complaint if it has to defend one; under Liberty Mutual's theory, if an insurer could prove it did not have to defend one count of a complaint, then it could escape defending other counts that fell within the policy.

Neither of these extremes make sense in the context of the duty to defend. Unlike the duty to indemnify, where it is necessary to look at individual invoices for removal of soil from one part of the site as compared to another part of the site, the duty to defend is meant to apply to an entire process. If Liberty Mutual had a duty to defend Black Decker, it was not a duty to defend it from claims arising from this or that portion of the site, but rather from claims arising from the agency investigation. Thus, the proper scope for analyzing the duty to defend is neither the entire property, nor each individual contaminated area, but rather whatever area was placed at issue by the communication (be it complaint, PRP letter, or other substitute) that triggered the duty to defend.

Because it presents a recurring issue, it is important to summarize and clarify the framework for determining whether there is a duty to defend at a particular site; if so, which portions of the site it covers; and, given that, which types of damage or incidents it includes.

The court engages in a two-step process to determine the existence and scope of the duty to defend. The existence of the duty to defend is determined by the charging document'sallegations, while the scope of the duty to defend is determined by the charging document's order. That is, the court first examines the charging document's allegations, which serve a gatekeeper function. If the charging document contains at least one allegation that is "reasonably susceptible" of the interpretation that it states a claim covered by the policy, then the insurer has a duty to defend.

Next, the court must examine the actions required by, or fairly inferrable from, the charging document. Because the insurer must defend the insured against the government agency's (or other complainant's) process, the scope of the duty is the scope of that process. Put differently, the geographic and temporal scope of the duty to defend is limited by any express limitations in the charging document itself. If the document demands a site-wide response, such as a site assessment or any other action that could fairly be interpreted as encompassing the entire site, then the insurer must defend the insured for the full breadth of the insured's response. However, if the charging document limits its focus — for instance, by requiring cleanup or assessment of a particular location on a broader site — then the insurer's duty to defend is no broader than what the agency has demanded from the insured.

Finally, once the duty to defend is triggered and its scope has been determined from the charging document, it includes defense as to damage or incidents that are within the scope of the charging document's demands even if that damage is not otherwise covered under the policy.

(viii) The suit does not allege a covered incident

Black Decker argues that, if an initial coercive regulatory letter charging an uncovered occurrence causes the insured to conduct a site assessment that later reveals covered contamination, then the insured's assessment reports can "amplify" the scope of the initial suit. On this theory, the initial "complaint" will be deemed to have been amended to include the contamination that the insured actually found.

These arguments overextend the case law's generosity to insureds. To state a claim for coverage, the allegations in the charging document must be "'"reasonably susceptible" of an interpretation that they state or adumbrate a claim covered by the policy terms.'" Herbert A. Sullivan, 439 Mass. at 394 (quoting Cont'l Cas. Co. v. Gilbane Bldg. Co., 391 Mass. 143, 146 (1984)). If the agency's allegations "'lie expressly outside the policy coverage and its purpose, the insurer is relieved of the duty to investigate' or defend the claimant." Herbert A. Sullivan, 439 Mass. 387, 394 (quoting Timpson v. Transamerica Ins. Co., 41 Mass. App. Ct. 344, 347 (1996)). Black Decker would read the policy expiration date right out of the policy, and render nearly useless the exercise of "'matching the third-party complaint with the policy provisions,'" Herbert A. Sullivan, 439 Mass. at 394 (quoting Gilbane Bldg. Co., 391 Mass. at 146). The duty to defend does not extend to all contamination eventually discovered at a site, but rather is "based on the facts alleged in the complaint and those facts which are known by the insurer." Boston Symphony Orchestra, Inc. v. Commercial Union Ins. Co., 406 Mass. 7, 11 (1989).

It is helpful to recall the original form of "suit" envisioned by the policy drafters: a civil complaint. If the discovery of contamination covered under the policies prompts the agency to broaden its allegations, then one might analogize to a case where the defendant, having discovered harm beyond that alleged in the complaint, disclosed it to the plaintiff, who then amended his complaint to include it. The problem for Black Decker is that, for several sites, it cannot point to any document by which the agency expanded the scope of its allegations. Instead, therefore, Black Decker argues that once any contamination was alleged by the agency, then all other contamination discovered by the PRP was constructively added to the original charging document. The problem with this argument is apparent when it is transplanted back onto the civil complaint model. Black Decker effectively suggests that if a plaintiff alleges X, which is not covered by the policy, and the defendant, in its own investigation, finds Y, which might be covered by the policy, then the insurer must defend the defendant against Y, even though the plaintiff has not actually asserted this claim.

Black Decker also appears to argue that an insured's statutory liability under CERCLA or Chapter 21E triggers the duty to defend even if the agency has not alleged such liability in a charging document.⁷ One certainly could draft an insurance policy where coverage would be triggered by a legal memorandum from the insured's counsel explaining why its client was in a troublesome legal position. However, Liberty Mutual issued Black Decker and its subsidiaries liability policies, which can only be triggered by actual pursuit of a legal claim by a plaintiff or government agency. The "suit" requirement's purpose is to limit the insurer's duty to those legal liabilitiesactually asserted against the insured, not its far broader set of potential liabilities:

7 Although Black Decker does not rely on it, a brief dictum in Hoechst Celanese supports this theory: "[W]e regularly speak of the existence of legal liabilities although they have not been and are not being established by actual litigation." 43 Mass. App. Ct. at 482. Any force of this brief detour is nullified by the court's actual reasoning, which "assumed that the [policy] envisages third-party compulsion upon the insured." Id.

Even though environmental liability may be strict, it is only when the government actually purposes to enforce the law against a property owner that the latter will bear the consequences of strict liability. If the government decides for any reason (e.g., shortage of funds) not to pursue public rights, the property owner will avoid liability, no matter how dim his prospects on the law and the facts. Thus, absent serious pursuit of the public interest by the agency charged . . . the factual expectancy of liability is too low to satisfy either the principle of indemnity or any plausible construction of the policy language.

Ryan, 916 F.2d at 742. Black Decker argues that Governmental Interinsurance Exchange v. City of Angola, 8 F. Supp.2d 1120, 1122-23, 1130-32 (N.D. Ind. 1998), establishes that the insurer's duty to defend applies to both the contamination identified in the initial agency notice, and any further contamination found during the investigation prompted by the original notice. However, in that case, the initial contamination occurred during the policy period, and the agency's initial communications focused on that covered incident. See id. at 1122-23 (tanks were removed, leaks were discovered, and agency made regulatory demands in 1996; policy was in force until 1997). Where the charging document alleges incidents covered under the policies, then the duty to defend is triggered and covers a wide range of investigation. However, where the "anchor" allegations are limited to incidents not covered under the policies, then no duty exists.

Finally, Black Decker argues that, once an agency has issued a PRP letter or NOR, then the recipient is required by statute and regulations to assess the entire site, during which assessment it may discover additional contamination that it is then legally obliged to remediate. This misses the point. Under Black Decker's approach, once any PRP letter or NOR is issued, if the insured is lucky enough to find even one covered incident, then the insurer has a duty to defend as to the entire site. This means that the "complaint" has no meaningful scope, and its specific allegations are completely irrelevant; the insurer's duty is based not on what the agency complains of, but whatever the insured can find. This is not what the Supreme Judicial Court meant by "'matching the third-party complaint with the policy provisions.'" Herbert A. Sullivan, 439 Mass. at 394.

b. Insert to come re Connecticut law

c. Insert to come re Maryland law

2. Relevant Evidence

1. Massachusetts

The duty to defend a suit under an insurance policy is broader than the duty to indemnify and requires a distinct and independent inquiry. Boston Symphony Orchestra, 406 Mass. at 10. In general, when analyzing whether the duty to defend is implicated, a court must look to the allegations in the complaint, matching them with the policy provisions to determine whether the claim comes within the ambit of the policy's coverage. Herbert A. Sullivan, 439 Mass. at 394 (quotingGilbane Bldg. Co., 391 Mass. at 146). The insurer must provide a defense if the allegations of the complaint are even "reasonably susceptible" to an interpretation which states a claim under the policy. Id. This standard is not strict. In fact, "the underlying complaint need only show, through general allegations, a possibility that the liability claim falls within the insurance coverage. There is no requirement that the facts alleged in the complaint specifically and unequivocally make out a claim within the coverage." Herbert A. Sullivan, 439 Mass. at 394 (quoting Sterilite Corp. v. Cont'l Cas. Co., 17 Mass. App. Ct. 316, 319 (1984), superseded on other grounds, 397 Mass. 837 (1986)). However, the insured must demonstrate that the allegations of the complaint arguably state a claim under the policy terms including any applicable exclusions. See Liberty Mut. Ins. Co. v. SCA Servs., Inc., 412 Mass. 330, 336 (1992) (finding that the complaint did not indicate a possibility of a "sudden" release of pollutants).

To some extent, an insurer's duty to defend can be established through the use of facts known to the insurer, or those that it should have known, at the time the duty was arguably triggered.Boston Symphony Orchestra, 407 Mass. at 10-11. It is unclear precisely how such facts may be demonstrated or what types of evidence are appropriate. In a case cited by the Supreme Judicial Court in a similar context, the Fifth Circuit held that only uncontroverted facts are appropriate. Atl. Mut. Fire Ins. Co. v. Cook, 619 F.2d 553, 555 (5th Cir. 1980); Lumbermens Mut. Cas. Co. v. Belleville Indus., Inc., 407 Mass. 675, 686 (1990) ("Belleville I"). Certainly, facts established, or rulings made, at the trial of the underlying claim, or facts discovered by parties in related litigation, cannot be used in analyzing the duty to defend.Boston Symphony Orchestra, 407 Mass at 10 ("The obligation of an insurer to defend is not and cannot be determined by reference to the facts proven at trial."); Palermo v. Fireman's Fund Ins. Co., 42 Mass. App. Ct. 283, 289 (1997); Sterilite, 17 Mass. App. Ct. at 324. It appears that such additional facts may only be used by the insured to establish a duty to defend — not by an insurer to defeat such a showing. See Millipore Corp. v. Travelers Indem. Co., 115 F.3d 21, 35 (1st Cir. 1997) (if allegations from complaint establish duty to defend, insurer cannot rely on facts outside complaint to justify refusal to defend); Sterilite, 17 Mass. App. Ct. at 319 n. 5, 324 n. 17 ("it is irrelevant that the insurer may get information from the insured, or anyone else, which indicates, or even demonstrates, that the injury is not in fact 'covered.'").

Normally, the insurer may not rely on evidence outside of the complaint to refuse litigation defense. However, where an insured has an especially weak indemnification claim, an insurer may commence a declaratory judgment action to determine the indemnification claim and thus limit its liability on the duty to defend claim. Belleville I, 407 Mass. at 685-86; Sterilite, 17 Mass. App. Ct. at 323-24. Because the declaratory judgment action could severely restrict the rights of the underlying third-party claimant, the insurer must name the claimant as a party in any such action. Id. In Belleville I, the Supreme Judicial Court alluded to an exception to this requirement, envisioning a narrow set of cases where a declaratory judgment action involving only the insured and insurer would be allowed. Id. at 686. Such an action would only be appropriate where "the complaint in the underlying action is so general as to allege a claim arguably falling within the coverage of the policy, but it is apparent from the event that gave rise to the underlying claim that the loss is not covered by the insurance policy." Id.

In duty to defend determinations, Massachusetts courts have been reluctant to find a lack of such duty at the summary judgment stage unless it is clear from the record that the suit lies expressly outside of the coverage terms. Covenant Ins. Co. v. Friday Eng'g, Inc., 742 F. Supp. 708, 712 (D. Mass. 1990);Lusalon, Inc. v. Hartford Accident Indem. Co., 400 Mass. 767, 773 (1987). In addition, evidence or findings by the court that certain policy provisions eliminate recovery on the indemnification claim does not necessarily affect a duty to defend claim that has previously been triggered by allegations in the complaint. See Millipore, 115 F.3d at 35 ("The later determination that Millipore has not met its burden of showing an occurrence during the policy period does not negate the duty to defend which grows out of the allegations in the complaint against the insured.").

If an insurer refuses to defend the insured when requested, Massachusetts courts shift the burden of proof regarding coverage to the insurer in the accompanying action for indemnification.Polaroid Corp. v. Travelers Indem. Co., 414 Mass. 747, 764-65 (1993); Palermo, 42 Mass. App. Ct. at 290. This burden-shifting is appropriate because "the failure to defend might make it more difficult for the insured to prove that the underlying claim falls within the insurance coverage." Highlands Ins. Co. v. Aerovox Inc., 424 Mass. 226, 230 n. 6 (1997).

Finally, in order to satisfy the duty to defend, the insurer must completely defend the insured as to all counts and throughout the duration of the litigation. Simplex Tech., 429 Mass. at 199; Palermo, 42 Mass. App. Ct. at 289-90. Thus, a partial defense, which is alleged in a few claims at issue here, is not sufficient to satisfy the plaintiff's duty. See id.

2. Insert to come re Connecticut law

c. Insert to come re Maryland law

B. Duty to Indemnify

As with the duty to defend, the duty to indemnify contained in the various Liberty Mutual policies has remained, with a few exceptions noted below, essentially unchanged throughout the decades at issue. The pertinent language in these policies provides property damage and bodily injury coverage to the insured for "accidents" or "occurrences" that take place during the policy period and for which the insured is liable under law or contract. Such general policy coverage is often modified through endorsements to the policy that contain coverage exclusions and monetary limits.

The most important exclusion in this case is the pollution exclusion with its exceptions. This endorsement is one area where the Liberty Mutual policies have undergone several key modifications during the years at issue here. As discussed more fully below, the pollution exclusion only came into existence in Liberty Mutual policies in or around 1970. After several years using a pollution exclusion with a few exceptions, the insurance industry generally and Liberty Mutual in particular, adopted an absolute pollution exclusion in the mid-1980s. Finally, Liberty Mutual claims to be freed from coverage obligations here by several other affirmative defenses.

1. Burden of Proof

a. Massachusetts

In Massachusetts, the insured generally has the burden of proving that a loss is within the description of the risks covered by an insurance policy. Highlands, 424 Mass. at 230. This burden only shifts to the insurer if it has breached its duty to defend. Polaroid, 414 Mass. at 264 n. 22.

The issue of who bears the burden of proving exclusions to policy coverage is somewhat more complex. The insured retains the burden of proof as to exclusions in the general coverage clause.Highlands, 424 Mass. at 230. If the exclusion is located in a separate clause or section of the insurance policy, the burden of proving the applicability of the exclusion shifts to the insurer.Id. Thus, in the policies in this case, the insurer bears the burden of proving applicability of any exclusion (e.g., the pollution exclusion, the owned property exclusion, etc.) contained in a separate "exclusions" section of the policy. (See, e.g., 1979 Standard Policy Jacket, Defs.' App. XIII, at 163.) However, the insured bears the burden of proving that any exceptions to exclusions apply. Highlands, 424 Mass. at 231-32. Most salient here, the insured bears the burden of proving that an incident otherwise covered by the pollution exclusion falls within the exception for "sudden and accidental" releases. Id.

In this case, the initial burden of proof (absent a finding of a breach of the duty to defend) rests with Black Decker. This burden shifts to Liberty Mutual to prove the applicability of any exclusion, such as the pollution exclusion at issue here, which is found in a separate clause of the policy. Finally, the burden shifts back to Black Decker to prove the applicability of any exception to the pollution exclusion. See Highlands, 424 Mass. at 230-32.

b. Insert to come re Connecticut law

c. Insert to come re Maryland law

2. Occurrence or Accident

The principal coverage language in the Liberty Mutual policies limits recovery to liability arising from bodily injury or property damage caused by a certain class of events. Based on testimony and policy jackets in the record, it appears that prior to 1966, that class of events was simply referred to as an "accident." (E.g., 1962 Standard Policy Jacket, Defs.' App. XIII, at 115.) After 1966, Liberty Mutual's standard jackets begin to refer to this class of events as an "occurrence." (E.g., id. at 121.) The change from accident to occurrence does not appear to be substantial, given the similarities between interpretations of the terms "accident" and "occurrence." See New Castle County v. Hartford Accident Indem. Co., 933 F.2d 1162, 1196 (3d Cir. 1991) (describing history of coverage terms including shift from "accident" to "occurrence"), cert. denied, 507 U.S. 1030 (1993), and abrogated on other grounds, N. Ins. Co. of N.Y. v. Aardvark Assoc., Inc., 942 F.2d 189 (3d Cir. 1991); Metro. Life Ins. Co. v. Aetna Cas. Sur. Ins. Co., 255 Conn. 295, 306 n. 14 (2001) ("accident" and "occurrence" used interchangeably);Lane v. Worcester Mut. Ins. Co., 13 Mass. App. Ct. 923, 923 (1982) (looking to decisions interpreting "accident" to determine proper interpretation of "occurrence").

Moreover, standard language in occurrence-based policies defines occurrence as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." (E.g., 1966 Standard Policy Jacket, Defs.' App. XIII, at 123.) The term "accident" is generally not defined in the "accident"-based policies. Given these similarities, the cases interpreting occurrence-based coverage policies are also highly probative of earlier accident-based policies.

a. Massachusetts

For an event to be covered as either an "accident" or "occurrence," the damage (as distinguished from the acts that caused the damage) must have been unintended and unexpected by the insured. See Belleville I, 407 Mass. at 679 (occurrence policy); J. D'Amico, Inc. v. City of Boston, 345 Mass. 218, 221-22 (1962) (accident policy); New England Gas Elec. Ass'n v. Ocean Accident Guar. Corp., 330 Mass. 640, 652-53 (1953) (distinguishing between unexpectedness of damage itself and unexpectedness of cause of damage). Accidental damage caused by an intentional act is not excluded; only intended harms are excluded. Preferred Mutual Ins. Co. v. Gamache, 426 Mass. 93, 94 (1997) (construing an intentional conduct exclusion in a homeowners' policy); Belleville I, 407 Mass. at 679 (contrasting sudden and accidental language of pollution exclusion with occurrence requirement where focus of inquiry is on the property damage). The release of pollutants need not be sudden or abrupt to qualify as an occurrence; suddenness and abruptness are relevant only for the exception to the pollution exclusion clause. See SCA Servs., 412 Mass. at 336-337 (distinguishing between accidental and sudden in pollution exclusion context). Thus, the definition of "occurrence" appears to rest almost exclusively on the question of the intentional or unexpected nature of the damage.

(i) Subjective standard for knowledge or intent

Knowledge and intent are tested subjectively, from the standpoint of the insured, not objectively, from the perspective of a hypothetical reasonable insured. See Polaroid, 414 Mass. at 752. This is mandated by policy language requiring that any damage must be "neither expected nor intended from the standpoint of the insured." (1966-1982 Standard Policy Jackets, Defs.' App. XIII, at 121-175 (emphasis added).) To show that an injury was expected or intended, the insurer must prove that the result "was actually, not constructively, intended, i.e. more than recklessness." Quincy Mut. Fire Ins. Co. v. Abernathy, 393 Mass. 81, 86 (1984); see also Smartfoods, 35 Mass. App. Ct. at 242 (harm to distributor resulting from termination of distribution contract, including loss of profits, was "inevitable" result of calculated business decision thereby placing harm within policy's exclusion of intended or expected damage). "[T]he resulting injury which ensues from the volitional act of an insured is still an 'accident' within the meaning of an insurance policy if the insured does not specifically intend to cause the resulting harm or is not substantially certain that such harm will occur." Quincy Mut., 393 Mass. at 84. Therefore, an insurer may not demonstrate that damage was non-accidental merely by showing that the insured should have expected damage, i.e., was negligent, nor even that the insured knew of a risk of damage and disregarded it, i.e., was reckless. Whether the insured actually intended or knew of the damage with the necessary degree of scienter is ordinarily a question of fact reserved for the jury.Nashua Corp. v. First State Ins. Co., 420 Mass. 196, 204 (1995).

To be sure, there are some apparent inconsistencies in the Massachusetts case law. In Utica Mutual Insurance Co. v. Hamel, 46 Mass. App. Ct. 622, 625 (1999), for example, the Appeals Court purported to apply an objective "knew or should have known" test. However, this decision is of questionable minimal value. First, the Utica Mutual court quoted Quincy Mutual rather misleadingly, as follows: "Rather, the question is whether 'the insured knew or should have known that there was a "substantial probability" that certain results would ensue.'" Utica Mut., 46 Mass. App. Ct. at 625 (quoting Quincy Mut., 393 Mass. at 85). The full quote from Quincy Mutual is: "Other courts have interpreted the word 'expected' in insurance policy subclauses to mean that the insured knew or should have known that there was a 'substantial probability' that certain results would ensue." 393 Mass. at 85 (emphases added).⁸ In other words, to the degree it adopted an objective test, Utica Mutual appears to be incorrect as a matter of Massachusetts law. Second, the Utica Mutual court actually based its decision on a subjective determination — its factual finding that the insured in fact "knew to a substantial certainty" that its spills would cause damage.

8 Quincy Mutual then proceeded to reject the rationales of those "[o]ther courts." Id. at 85-86.

More difficult to reconcile are Travelers Insurance Co. v. Waltham Industrial Laboratories Corp., 883 F.2d 1092 (1st Cir. 1989), and City of Newton v. Krasnigor, 404 Mass. 682 (1989). In Waltham Industrial Laboratories, the First Circuit, applying Massachusetts law to a pollution exclusion clause that excluded damage "either expected or intended," found that the defendant's CEO, a chemical engineer, "must have known of the corrosive effect" of his company's wastes, and that "even if he was ignorant, he was put on notice repeatedly and frequently of what was happening." 883 F.3d at 1099. It also relied on Krasnigor, which held as a matter of law that a youth who set fires inside a school building must have "intended, or expected, to cause some property damage." 404 Mass. at 688. These cases contain language somewhat at odds with Quincy Mutual, but they are not inconsistent with it because, in each case, the court concluded that the insured actually did expect or intend harm. 883 F.3d at 1099; 404 Mass. at 687-88.

Liberty Mutual makes a different argument. It extrapolates from the Supreme Judicial Court's determination in Gamache andQuincy Mutual that the "substantial certainty" of harm precludes liability coverage to the more general proposition that Massachusetts courts apply an objective test of intent. Liberty Mutual cites Quincy Mutual, properly, for the proposition that a "substantial certainty" test applies to the harm caused by an intentional act. However, Liberty Mutual oversteps by suggesting that the substantial certainty standard mandates use of an objective test such that "where an insured knew or should have known that there was a substantial probability that certain consequences will result from his actions" coverage will be denied. Am. Mut. Liab. Ins. Co. v. Neville Chem. Co., 650 F. Supp. 929, 932 (W.D. Pa. 1987).

Liberty Mutual's argument has two primary flaws. First, Liberty Mutual appears to misstate the difference between an objective and subjective test, as its quotation from American Mutual reveals. An objective test of the harm in this case would require that a reasonable insured believe that his actions were not harmful. A subjective test, on the contrary, requires that a particular insured had no such belief. The "substantial certainty" test addresses the level of knowledge required, not who is required to have it.

The fact that the substantial certainty test does not implicate, let alone require, an objective standard of intent reveals the second flaw in Liberty Mutual's argument: its misinterpretation of the cases it cites. For example, the quotation from American Mutual that Liberty Mutual offers simply does not stand for the proposition that an objective test applies here, but rather confirms that a subjective test of the insured's intent must apply. See Am. Mut., 650 F. Supp. at 932. The American Mutual court referred to the insured's knowledge of the result of "his actions" and not, as one might expect in an objective inquiry, the knowledge of a reasonable person's actions. See id.; but see City of Carter Lake v. Aetna Cas. Sur. Co., 604 F.2d 1052 (8th Cir. 1979) (holding insurer of city liable to indemnify for first incident, but not subsequent incidents, of failing sewer pipes, reasoning that city was on notice of problem after first incident). The American Mutual court refused to hold the insurer liable for damage resulting from the insured's waste disposal practices, inferring the insured's subjective knowledge because the insured had been notified years before of the polluting effect of its operations, yet continued to pollute. See 650 F. Supp. at 933. The court based its decision not on an objective test, but on its finding that the insured had actual knowledge of the polluting nature of his conduct. See id.

More importantly, the posture of Quincy Mutual casts further doubt on the validity of Liberty Mutual's objective intent theory. In that case, the Supreme Judicial Court vacated the trial court's grant of summary judgment because the record did not adequately establish the insured's state of mind at the time of the accident. See Quincy Mut., 393 Mass. at 87. The Supreme Judicial Court discounted the persuasiveness of the parties' factual stipulation at summary judgment because "the [stipulation] tells us nothing about [the insured's] state of mind at the time." See id. The Supreme Judicial Court's method of evaluating the substantial certainty of harm in Quincy Mutual casts doubt on Liberty Mutual's suggestions either that Massachusetts law requires an objective test, or that the "substantial certainty" determination in any way implicates an objective test. See id.; see also Rideout v. Crum Forster Commercial Ins. Co., 417 Mass. 757, 763 (1994) (no covered occurrence where court found evidence that defendant-employer knew or was substantially certain of harm of adverse employment actions and retaliation).

Only two cases that Liberty Mutual cites expressly adopt the objective test of intent under an occurrence or accident policy.See Mottolo v. Fireman's Fund Ins. Co., 43 F.3d 723, 727, 728 n. 5 (1st Cir. 1995) (New Hampshire law); Bituminous Cas. Corp. v. Tonka Corp., 9 F.3d 51, 53-54 (8th Cir. 1993) (Minnesota law). In Mottolo, the First Circuit applied New Hampshire law in holding that an intentional act would not be deemed an "accident" where the nature of the act was "inherently injurious." See Mottolo, 43 F.3d at 727; see also Fisher v. Fitchburg Mut. Ins. Co., 131 N.H. 769, 773 (1989). TheMottolo court described the inherently injurious test as "an objective inquiry for which the [insured's] intent to injure is irrelevant." 43 F.3d at 727. Similarly, in Bituminous Casualty Corp., the Eighth Circuit held that Minnesota law applied an "objective standard [that] turns upon whether the damage 'should have been expected' by the insured." 9 F.3d at 53 (quotingBituminous Cas. Corp. v. Bartlett, 240 N.W.2d 310, 313 (Minn. 1976)).

This objective test of intent appears to represent the minority view among states. See, e.g., Morton Int'l Inc. v. Gen. Accident Ins. Co. of Am., 134 N.J. 1, 83-84 (1993) (New Jersey applies subjective intent test to determine intent to injure absent "exceptional circumstances" or particularly reprehensible conduct such as child-sexual abuse); see also 7A J.A. Appleman, Insurance Law Practice § 4523, at 144-47 (2003) (noting disagreement of courts over whether to apply subjective or objective test but stating majority of courts hold that the test is subjective, focusing on the insured's actual intent and expectations); but see Ostrager Newman, Handbook on Insurance Coverage Disputes § 8.03(c) (9th ed. 1998) (stating that "expectation and intendment are judged by an objective reasonable man' standard," but noting substantial authority for subjective standard).

I conclude that, while there is some tension in the cases, Massachusetts law applies a subjective analysis to the intent to cause harm. The Supreme Judicial Court is willing to conclude, as a matter of law, that particular insureds must have expected damage from their activities. But a true objective test would hold an insured liable even if it was undisputed that the insured did not expect damage, on the basis that he should have expected it. In short, inferring that an insured "must have known" is different from holding him liable despite his not knowing. I see no reason to diverge from that principle here.

(ii) Damage from repeated or continuous exposure

An accident or occurrence may arise from "continuous or repeated exposure to conditions." This is explicitly specified in policies from 1966 onwards. Even before 1966, however, I find that damage from repeated or continuous exposure can qualify as an "accident."

Before 1956, many Liberty Mutual CGL policies did not cover property damage, only "bodily injury, sickness or disease."⁹ (E.g., 1952 USM Policy, Pl.'s App. 1A, Tab 1; 1953 USM Policy, Tab 2; 1955 USM Policy, Tab 3.) Property damage coverage was typically added to the 1955-56 policies by endorsement. (E.g., Pl.'s App. 1A, Tab 3, at 86). Policies thereafter covered both bodily harm and "injury to or destruction of property, including loss of use thereof, caused by accident." (E.g., Pl.'s App. 1A, Tab 4, at 112; Defs.' App. V, at 96.)

9 Liberty Mutual did offer CGL policies covering property damage, as evidenced by standard policy jackets and specimens dating to the 1940s. (E.g., Standard Policy Jackets, Defs.' App. XIII, at 7, 11, 14, 19.)

While these early policies covering injury to property do not define "accident" for property damage purposes, they do define "accident" for bodily injury purposes, and define it to include "continuous or repeated exposure to conditions." (E.g., Pl.'s App. 1A, Tab 3, at 78.) Even though this definition is limited by its terms to bodily injury, it is still helpful in construing "accident" under the property damage clause.

This definition of "accident" for bodily injury purposes appeared in Liberty Mutual's policies at least as early as November 1952. (Pl.'s App. 1A, Tab 1, at 15.) Therefore, by the time of the 1956 endorsement adding property damage coverage, this definition had been known to the parties for at least three and a half years, and therefore sheds light on the parties' contemporaneous understanding of the term "accident."¹⁰

10 I say "known to the parties" and not "continuously in force" because the record does not make clear whether this definition was included in any insured's 1954 policy. (See Pl.'s App. 1A, Tab 2.) It was certainly not in any of the specimen policies. (See, e.g., 1954 Standard Policy Jacket, Defs.' App. XIII, at 81-83.)

This history suggests that the parties were at the very least familiar with the concept of an accident as including "continuous or repeated exposure" when they executed the 1956 endorsement or the 1957-65 policies. This then raises the question of why, if Liberty Mutual did not intend to cover such exposures for property damage, it did not so specify before 1966. Put differently, if Liberty Mutual wanted a property damage "accident" to be narrower than a bodily injury "accident," it easily could have said so.¹¹

11 To the extent that "accident" is ambiguous in the property damage coverage because it is not defined, that ambiguity must be construed in favor of the insured. Gamache, 42 Mass. App. Ct. at 198. I note that the insured's objective reasonable expectation would be that "accident" has one meaning throughout the policy. Otherwise, if a slow leak contaminated groundwater that fed a well, there would be coverage for the person who became sick from drinking the contaminated groundwater, because the leak was an accident, but not for the contamination of the groundwater itself, because the leak was not an accident.

Furthermore, other courts have consistently interpreted the accident language at issue to include coverage for gradual pollution. See, e.g., CPC Int'l, Inc., v. Northbrook Excess Surplus Ins. Co., 962 F.2d 77, 94 n. 45 (1st Cir. 1992) (quoting New Castle County, 933 F.2d at 1196-98; Moffat v. Metro. Cas. Ins. Co., 238 F. Supp. 165, 172-73 (W.D. Pa. 1964);see also Note, The Pollution Exclusion Clause Through the Looking Glass, 74 Geo. L.J. 1237, 1246-47 (1986). Liberty Mutual was aware of this trend at the time. A memo issued to Liberty Mutual's Business Lines Underwriters by E.W. Getchell on April 25, 1966 explained that broadened coverage was necessitated, in part, by court decisions interpreting the "caused by accident" formulation in earlier policies to provide coverage for both sudden and gradual injuries, "saying that the accident was the insured's negligent act or omission." (Defs.' App. XXVI, at 125.)

These three factors — the pre-existing definition of accident as "continuous or repeated exposure to conditions" under the bodily injury coverage, the consistent judicial construction of the term "accident" as including such gradual exposures given identical policy language, and Liberty Mutual's contemporaneous knowledge of these judicial constructions — combine to persuade me that the parties intended the term "accident" to include "continuous or repeated exposure to conditions" under the property damage policy as well.

There is no doubt that repeated or continuous exposures are covered under policies issued between 1957 and 1971, because Liberty Mutual changed the definition of "accident" to include the gradual exposure to conditions precisely in order to provide liability coverage for the types of circumstances presented in this case. For example, one early document written by Liberty Mutual to explain its revisions to the 1966 CGL policy language, including the switch to "occurrence" based language, explained the term "caused by accident" as follows:

An accident has frequently been interpreted by the courts as a sudden unexpected event, identifiable as to time and place of occurrence. The insuring clauses cover injury or damage "caused by accident[."] The pollution of a stream resulting from waste materials being discharged into it, definitely does not occur suddenly — no accident is involved — no coverage under a "caused by accident" policy. Other similar examples are: damage caused by smoke emitted continuously or regularly from a stack. . . . Coverage for such occurrences can be obtained in either of two ways: An "accident defined" endorsement extends the meaning of accident to include repeated exposure (removes the need for suddenness from the definition of accident.) This endorsement leaves no words undefined. An "occurrence" endorsement substitutes the word "occurrence" for "accident[."] This will also include coverage for repeated exposure.

(Defs.' App. XVII, at 82.) However, either term "appears to provide the desired coverage for Bodily Injury or Property Damage." (Id.)

An internal memorandum prepared by Gilbert Bean, Liberty Mutual's chief underwriter, to describe the 1966 CGL revisions, was titled "Summary of Broadened Coverage under new GL policies with new necessary limitations to make this possible." (Defs.' App. XVII, at 135.) This memorandum echoed other documents describing the 1966 revision, stating that the "broadened coverage" included coverage, among other things, for gradual bodily injury or property damage "resulting over a period of time from exposure to the insured's waste disposal." (Id. § II, ¶ C.) A memo issued to Liberty Mutual's Business Lines Underwriters by E.W. Getchell on April 25, 1966 explained that the broadened coverage was necessitated, in part, by court decisions interpreting the "caused by accident" formulation in earlier policies to provide coverage for both sudden and gradual injuries. (Defs.' App. XXVI, at 125.) Taken together, this evidence makes clear that Liberty Mutual meant exactly what it said by agreeing to cover "continuous or repeated exposure to conditions which results in injury during the policy period."

(iii) Landfills

Liberty Mutual asserts that the damage at landfills cannot possibly qualify for coverage because, as a matter of law, transporting waste to a landfill is not an "accident" or "unexpected" occurrence. This argument is foreclosed by Nashua Corp. v. First State Insurance Co., 420 Mass. 196 (1995). InNashua, a manufacturer shipped wastes to two recycling facilities which were later designated as Superfund sites. Id. at 197. The manufacturer was named as a PRP, and tendered a claim to its insurers, including Liberty Mutual. Id. The insurers refused to pay, claiming, inter alia, that "the property damage was intended as a matter of law, and therefore, cannot constitute an 'occurrence' as defined in the policies." Id. at 203-04. The Supreme Judicial Court disagreed and reversed the trial court's grant of summary judgment for the insurers, explaining that "we cannot say that the plaintiff's conduct of transporting waste materials to licensed reclamation facilities is akin to the type of wrongful conduct where we precluded coverage automatically as a matter of law." Id. at 204.

b. Insert to come re Connecticut law

c. Insert to come re Maryland law

3. Pollution Exclusion

Liberty Mutual policies in effect after 1971 contain some form of endorsement excluding certain types of pollution from coverage. The so-called standard pollution exclusion clause limits coverage under the given policy for damage resulting from

the discharge, disposal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

(1982 Standard Policy Jacket, Defs.' App. XIII, at 152.)¹² In addition, Liberty Mutual contends that CGL and EL policies issued to MITE during 1986-1988 contain an "absolute" or "total" pollution exclusion which completely bars recovery for any environmental claims under these policies. This contention does not appear to be disputed by Black Decker.

12 In Millipore, the First Circuit recognized that this "standard" pollution exclusion was generally in effect in the insurance industry from 1970 to 1985, 115 F.2d at 27.

Given the broad language of the standard pollution exclusion, analysis tends to focus on its exceptions. Thus, while the insurer bears the burden of proving that the exclusion applies, this task is usually simple. See Highlands, 424 Mass. at 230. The burden of proof then shifts to the insured to show that an exception applies. Id. The first and primary exception is for discharges that are "sudden and accidental."

a. Massachusetts

The insurer bears the burden of showing that the exclusion applies. See Highlands, 424 Mass. at 230. Upon such a showing by the insurer, the burden shifts back to the insured to show that the alleged contamination was caused by a "sudden and accidental" release within the terms of the exception to the exclusion. See id. at 231.

(i) Sudden

The word "sudden," as used in the exception to the pollution exclusion, has a "temporal element" so that the release of pollutants must be both abrupt and accidental. See id. "If the word 'sudden' is to have any meaning or value in the exception to the pollution exclusion clause, only an abrupt discharge or release of pollutants falls within the exception."Belleville I, 407 Mass. at 681. Therefore, "a discharge continuing over an extended period of time would likely cease to be sudden." See Millipore, 115 F.3d at 33.

(ii) Accidental

The analyses of "occurrences" and the "sudden and accidental" pollution exclusion, despite their apparent similarities, differ significantly. "If the underlying complaint does not allege a 'sudden and accidental' discharge, the resulting damage is eliminated from coverage by the exclusion clause, even though the discharge might qualify as an 'occurrence' within the policy terms." SCA Servs., 412 Mass. at 335. While the determination of whether an event constitutes an "accident" or "occurrence" depends on an examination of the damage caused, the applicability of the pollution exclusion turns on whether the "discharge, dispersal, release or escape" was accidental. "The sudden event to which the exception in the pollution exclusion applies concerns neither the cause of the release of a pollutant nor the damage caused by the release. It is the release of pollutants itself that must have occurred suddenly, if the exception is to apply so as to provide coverage." Belleville I, 407 Mass. at 679; see also Millipore, 115 F.3d at 33.

Unlike the inquiry surrounding the term "occurrence," the unexpected/unintended analysis under the exception to the pollution exclusion clause does not center on the perspective of the insured. Polaroid, 414 Mass. at 752. Even if the actions that cause the discharge are performed by a third party, such as a waste transporter or owner of a landfill, without the knowledge of the insured and thus unexpected from its point of view, "[i]f [that] third person who discharged a pollutant did so intentionally, the pollution exclusion denies coverage, even to an innocent insured." Id. However, intent or expectation is not established merely by the insured's involvement with a pollution prone industry, such as a landfill or waste disposal facility.See Nashua, 420 Mass. at 204.

(iii) Regular business practices

An insured's release of pollutants conducted as an ordinary part of its business operations could rarely, if ever, be considered "sudden." Lumbermens Mut. Cas. Co. v. Belleville Indus., Inc., 938 F.2d 1423, 1430 (1st Cir. 1991) ("Belleville II"), cert. denied, 502 U.S. 1073 (1992); SCA Servs., 412 Mass. at 332-36 (transport of pollutants to an "open dump" landfill constituted "continuous waste disposal practices occurring over a protracted period of time as a concomitant part of a regular business activity," and was not "sudden" even though actual release of pollutants was by abrupt crushing of each barrel in a ditch by a bulldozer). However, the mere fact that "the discharge of pollutants occurred over a lengthy period of time does not automatically mean that the suddenness element has not been met." Goodman v. Aetna Cas. Sur. Co., 412 Mass. 807, 813 (1992).

(iv) Sites involving both excluded and unexcluded contamination.

In complicated environmental litigation, applying the "sudden" and "accidental" prongs is rarely straightforward. Relevant activities at a site often span several decades and involve numerous discharges or releases of pollutants. At such sites, the pollution exclusion does not automatically prohibit coverage simply because some discharges failed to fit the "sudden and accidental" exception, or because the industry was pollution prone. See Highlands, 424 Mass. at 233.¹³ Rather, the insured can prove the applicability of the exception if it can demonstrate that discharges which fit within the language of the "sudden and accidental" exception caused "an appreciable amount of the damage for which it is being held liable." Id. at 234; Nashua, 420 Mass. at 203 (holding that a fire and tank bursting could be sudden and accidental events even in pollution prone industry). If, however, "the damage caused by the releases is so slight in comparison to the rest of the damage as to be de minimis, summary judgment is appropriate."Highlands, 424 Mass. at 235. In Highlands, the waste site at issue was a disposal facility which apparently had discharged waste as part of its normal operations in addition to an arguably sudden and accidental explosion or fire at the facility. 424 Mass. at 234-35.

13 While the Supreme Judicial Court distinguished the First Circuit's holding in Belleville II, it appears that the Supreme Judicial Court, unlike the First Circuit, would allow discharges from pollution prone industries to fall under the "sudden and accidental" exception. Highlands, 424 Mass. at 234; see also Nashua, 420 Mass. at 203 (holding that a fire and tank bursting could be sudden and accidental events even in pollution prone industry).

b. Insert to come re Connecticut law

c. Insert to come re Maryland law

4. Deletion Endorsement

The standard pollution exclusion clause is often modified by an additional endorsement which eliminates the applicability of this exclusion for "operations or occurrences" in certain jurisdictions, such as Maryland, New Hampshire, Puerto Rico, North Carolina, and Vermont. (See, e.g., 1974-79 USM CGL Policies, Pl.'s App. 1D, Tabs 1-5; 1971-78 Black Decker CGL Policies, Pl.'s App. 2A, Tabs 2-7.) Many of the Liberty Mutual policies issued to Black Decker or its predecessors contain this "deletion endorsement." Several deleted jurisdictions are home to waste sites at issue here.

Black Decker contends that the deletion endorsement precludes application of the pollution exclusion clause to claims involving waste produced in a "deleted" state, regardless of whether the release of the environmental contaminants occurred in that state. Liberty Mutual argues that the release of the pollutants must take place in one of the specified states in order for the deletion to apply.

Massachusetts law is clear on this point. In Nashua, the Supreme Judicial Court addressed the question of whether "the term 'operations' contained within the deletion endorsement refers to the operations that produced the waste or to the operations that actually caused the releases." 420 Mass. at 199. Finding the terms of the deletion endorsement unambiguous, the court held that "operations" refers to those that caused the releases. Id. at 200-01. Reading "occurrences" and "operations" together, the court reasoned that the purpose of the deletion endorsement was to cover releases of pollutants that occurred in the listed states. Id. at 201. "[T]he endorsement does not apply, and . . . the pollution exclusion clause remains in effect as to the releases" that occur outside of the state. Id.; see also Great N. Indus., Inc. v. Hartford Accident Indem. Co., 40 Mass. App. Ct. 686 (1996).

The cases that Black Decker cites do not support its interpretation. Quaker State Minit-Lube, Inc. v. Fireman's Fund Insurance Co., 868 F. Supp. 1278, 1333 (D. Utah 1994), aff'd, 52 F.3d 1522 (10th Cir. 1995), merely defines "operations" in the context of garage operations to include the disposal of fuel waste by a third party. It does not address the relevant question of where such operations are said to occur. Under Nashua, the operation is located in the state where the waste is deposited, not where it was created. Alcolac, Inc. v. St. Paul Fire Marine Insurance Co., 716 F. Supp. 1541 (D. Md. 1989), is inapposite because that court construed a materially different deletion endorsement. That endorsement provided that "the waiver of the pollution exclusion was applicable in the states of Maryland, New Hampshire, North Carolina, and Vermont.'" Id. at 1545 (quoting endorsement). The court found the provision ambiguous as to whether it applied to policies issued in Maryland or only to "acts of pollution" that occurred in Maryland Id. Nor does the passing reference to the deletion of the pollution exclusion found in Morrisville Water Light Department v. United States Fidelity Guaranty Co., 775 F. Supp. 718, 733-34 (D. Vt. 1991), provide any guidance, because there is no indication as to the wording of the exclusion at issue there. Thus, I find that under Massachusetts law, the deletion endorsement does not apply to claims involving waste that is deposited outside of a listed state.

5. Trigger/damage during policy period

The damages, events and actions by the insured must be sufficiently related temporally to the periods of policy coverage. Black Decker argues generally that the relevant damage "triggered" the coverage of the policies, while Liberty Mutual argues that there was not a sufficient connection between the defendants' actions and damage to the particular sites during the policy period.¹⁴

14 This issue is distinct from whether the charging document properly alleges damage within the policy period. It must, in order to meet the requirement of a suit "alleging such injury" or "on account of such . . . injury or property damage." (Standard Policy Jackets, Defs.' App. XIII, at 102, 121.) See supra Part V.A.1.

The accident-based policies provide that the "policy applies only to accidents which occur during the policy period." (E.g., 1966 Standard Policy Jacket, Defs.' App. XIII, at 122.) For these policies there is no additional definition of "damages" or "property damages." Occurrence-based policies, which apparently were first made available in 1966, provide that the "policy applies only to bodily injury or property damage which occurs during the policy period." (Id. at 123.) These policies define an occurrence as "an accident, including injurious exposure to conditions which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured." (Id.) The plain language of these two sets of policies demonstrates that in the accident-based policies the accident itself must occur during the policy period, while in the occurrence-based policies the damage must occur during the policy period.

a. Massachusetts

The Supreme Judicial Court has rejected the proposition that property damage in an environmental insurance claim is only covered if it manifests itself during the policy period. InTrustees of Tufts University v. Commercial Union Insurance Co., 415 Mass. 844, 853 (1993), the Supreme Judicial Court, in a similar occurrence-based policy case, rejected the "manifestation trigger" theory and held that the very nature of an insurance contract "is to provide coverage for property damage that occurred during the policy period whenever that liability is imposed" or whenever the damage is discovered. The court briefly listed trigger theories in use in other states but did not adopt any particular theory, stating instead that "[a]ny of the other trigger theories would raise a duty to defend." Id. at 854. Liberty Mutual does not appear to dispute this holding, but relies on an unpublished Massachusetts Superior Court case that adopts the "injury in fact" trigger. See United Tech. Corp. v. Liberty Mut. Ins. Co., 1993 WL 818913 (Mass.Super. Aug. 3, 1993). This theory states that coverage under the policies only ripens if the date of the injury itself coincides with the period of coverage. See id. at *19 (citing United States v. Conservation Chem. Co., 653 F. Supp. 152, 197 (W.D. Mo. 1986)). This decision neither conflicts with Tufts (which left courts free to apply any trigger theory other than manifestation) nor governs this case.

Liberty Mutual also contends that, for many of the sites at issue, the defendants have not demonstrated a sufficient connection or nexus with the site during the policy period. Liberty Mutual argues that there is no coverage under policies that expired before the insured conducted any activities at the site, even if an insured is held statutorily liable for the actions of another party.

This question does not appear to have been addressed directly by the Supreme Judicial Court. The underlying plaintiff does not have to have an interest in the property during the insured's policy period. Yet the property damage must occur during that time. Tufts, 415 Mass. at 848-49 (damage occurred during insured's tenure on land and policy period, but underlying plaintiff acquired land after policy expired). In other words, as long as property damage occurs during the insured's tenure and policy, it is irrelevant when the underlying plaintiff (against whose claim the insured seeks defense) came to own the property.

An insured may be entitled to coverage for damage that it concededly could not have caused, if the statute creating liability imposes liability without regard to causation. In Highlands, the Supreme Judicial Court rejected an argument by the insurer that coverage could not attach as the result of damage from an allegedly "sudden and accidental" fire that occurred long before the insured actually shipped any waste to the site. 424 Mass. at 234.¹⁵ The court focused on CERCLA's retroactive strict liability scheme, under which PRPs are allocated a percentage of liability based on various factors, and are then asked to pay that percentage of the total response cost at the site. See id. Thus, some fraction of the damages that the insured was required to pay could have resulted from the fire, and the insurer would have the duty to defend if the insured could prove that the fire caused "more than a de minimis amount of the damages" that the insured was forced to pay. Id. at 234-35.¹⁶ In other words, because a retroactive strict liability statute can make an insured liable for damage that happened before the insured was even involved with the site, the insured is entitled to coverage if it can show that an occurrence that would fall within the policy was responsible for an appreciable portion of the damages the insured was required to pay. This is true even if the insured's activities at the site could not possibly have had any factual connection to the incident; the focus is on how the statute assigns liability, not what actually happened at the site.

15 The court did not specify whether the insured held a policy at the time of the fire.

16 The insured could not so prove, and so summary judgment for the insurer was upheld. Id.

Several courts have held that if the relevant insurance policies expire before the insured is involved in the site, there is no coverage. See Total Waste Mgmt. Corp. v. Commercial Union Ins. Co., 857 F. Supp. 140, 150 (D.N.H. 1994); Upjohn Co. v. Aetna Cas. Sur. Co., 1991 WL 490026 at *5 (W.D. Mich. 1991); Arco Indus. Corp. v. Travelers Ins. Co., 730 F. Supp. 59, 63 (W.D. Mich. 1989); FMC Corp. v. Plaisted Co., 72 Cal.Rptr.2d 467, 480 (1998); A.C. Label Co. v. Transamerica Ins. Co., 56 Cal.Rptr.2d 207, 210 (Cal.App. 1996); United Tech., 1993 WL 818913 at *8-10. Under these cases, this remains true even if there was some property damage that occurred during the policy period. See Upjohn, 1991 WL 490026 at *5. These holdings are based on concerns such as fairness and the expectation of the parties. See Total Waste Mgmt., 857 F. Supp. at 147; Upjohn, 1991 WL 490026 at *5; United Tech., 1993 WL 818913 at *5.

Other courts, on the other hand, have held that "coverage is provided under a CGL policy if the damage occurred within the policy period, but the insured purchased the property after the policy period." In re K F Dairies, Inc. Affiliates, 224 F.3d 922, 925 (9th Cir. 2000) (applying California law and disagreeing with intermediate California appellate courts);Weyerhaeuser Co. v. Commercial Union Ins. Co., 15 P.3d 115, 127-30 (Wash. 2000). The Ninth Circuit based its decision on the unambiguous language of the policy, apparently identical to the policies here, providing coverage for an occurrence "during the policy period," and refused to find an implicit exclusion for after-acquired property. In re K F Dairies, 224 F.3d at 925-28. The Washington Supreme Court cited In re K F Dairies with approval, noted that "[t]he triggering event is an 'occurrence,' which is not limited to an act by [the insured]," and added that "[i]f there is unfairness it is the statute [CERCLA and the Washington version of it] which creates the liability, not the insured which attempts to insure against it." Weyerhauser, 15 P.3d at 129-30. I predict that the Supreme Judicial Court would join with those courts holding that the policies extend to occurrences during the policy period but before the insured was involved with the site. First, the unambiguous language of the policies covers damage "caused by an occurrence," where an "occurrence" is "an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage." (E.g., 1966 Standard Policy Jacket, Defs.' App. XIII, at 121, 123.) If language in an insurance policy is unambiguous, then it must be construed according to plain meaning. Jacobs v. United States Fid. Guar. Co., 417 Mass. 75, 76-77 (1994). The policy language quoted unambiguously does not contain an exclusion for occurrences preceding the insured's involvement with the site; all that is required is an accident that results in damage during the policy period. Thus, the discussion in United Technologies about the nature of underwriting risk is beside the point; these public policy considerations are irrelevant when the language is clear. Furthermore, even if it were not clear, the language would be construed against the insurer, in favor of the insured.Gamache, 42 Mass. App. Ct. at 198.

Second, to the extent that it is even permissible to analyze public policy considerations in construing unambiguous language, those considerations here favor the insured. It is not surprising that courts are troubled by the prospect of an insurer being forced to cover the liability of a stranger to the insurance contract; it marks a radical change in the idea of insurance coverage. But so do CERCLA and Chapter 21E. Put differently, it is no more unfair to require the insurer to pay for damage preceding the insured's involvement with a site than to require the insured to pay for that damage. The unfairness springs from the statutory regime, not from applying the plain language of the policy to liability created by that statute.

I therefore conclude that, if that the complaint or other charging document alleges at least one covered occurrence during the policy period, then the insurer must defend the insured even if the insured was not involved with the site during the policy period, and even if all of the damage occurred before the insured's involvement.

b. Insert to come re Connecticut law

c. Insert to come re Maryland law

C. Defenses ¹⁷

17 While I refer to this next collection of issues as "defenses" for organizational convenience, not all of the questions concern policy exclusions located in separate clauses of the insurance contract for which Liberty Mutual has the burden of proof. For each distinct issue I will identify where the burden of proof or production lies.

1. Late Notice

With respect to several of the waste sites, Liberty Mutual contends that it is relieved of its obligations because Black Decker failed to give timely notice of occurrences or claims as required by the policies. Black Decker argues that it gave timely notice, and that even if notice was late, Liberty Mutual has not shown prejudice from the delay.

The policies in this case require notice of accidents "as soon as practicable," and notice of a claim or suit against the insured "immediately." (E.g., 1964 USM Policy, Defs.' App. VI, ¶¶ 6-7, at 5.) Liberty Mutual claims that Black Decker breached both provisions.

a. Massachusetts

The insurer has the burden of proving that the insured has not met its notice obligations. Darcy v. Hartford Ins. Co., 407 Mass. 481, 484-85 (1990); Hoechst Celanese, 43 Mass. App. Ct. at 472. Whether the notice was timely is a question of reasonableness, left to the trier of fact. See Fireman's Fund Ins. Co. v. Valley Manufactured Prod. Co., Inc., 765 F. Supp. 1121, 1123 (D. Mass. 1991), aff'd, 960 F.2d 143 (1992) (unpublished table decision); Hoechst Celanese, 43 Mass. App. Ct. at 472-73.

Whether late notice alone forfeits coverage, or whether actual prejudice is required, depends on when the obligation to give notice arose. Before 1977, the common law rule was that untimely notice always forfeited coverage. See, e.g., Segal v. Aetna Cas. Sur. Co., 337 Mass. 185, 187-89 (1958). Effective October 16, 1977, the Massachusetts Legislature amended the law to state that an insurer may not deny a claim on the grounds of late notice unless the insurer has been prejudiced by the delay. Mass. Gen. Laws ch. 175, § 112.

The amendment requiring prejudice applies prospectively only.See Spooner v. Gen. Accident Fire Life Assur. Corp., 379 Mass. 377, 379-80 (1979). The controlling date is not when the policy was executed, or when the occurrence happened, but rather when the insured became obligated to give notice. Liberty Mut. Ins. Co. v. Gibbs, 773 F.2d 15, 18 (1st Cir. 1985); Valley Manufactured Prod. Co., 765 F. Supp. at 1124. Thus, if the insured's duty to notify was triggered after October 16, 1977, then the insurer must show prejudice from a late-notified occurrence or claim.

The insurer always bears the burden of proving that it was actually prejudiced by the delay, even where the delay was "extreme." Darcy, 407 Mass. at 484-85, 486-87; Hoechst Celanese, 43 Mass. App. Ct. at 478. The length of delay is one "relevant factor to be considered" in assessing prejudice, but the insurer must show actual harm to its interests, such as loss of critical evidence or testimony from material witnesses, or other evidence that demonstrates insurer is in a "substantially less favorable position than it would have been in had timely notice been provided." Darcy, 407 Mass. at 486. However, general assertions concerning the detrimental impact of delay on trial preparation, such as speculation that memories of witnesses would be less fresh, or that statutes of limitations might have run, are insufficient. Id. at 487 n. 5.

In the field of environmental remediation, even alteration of site conditions does not constitute prejudice without evidence of material impairment of the insurer's investigation or defense.Hoechst Celanese, 43 Mass. App. Ct. at 476-77. Furthermore, the cases appear to distinguish sudden releases, in which the insurer may be prejudiced by delayed notice, from gradual or continuous pollution, in which case delay matters less because the investigation typically involves historical reconstruction of circumstances. In Hoechst Celanese, which involved gradual pollution at several industrial sites, the court recognized that a strict application of the notice requirement was unrealistic, explaining that "[t]he nature and causes of environmental threats may not be instantly apparent. The contemplated costs of cleanup may vary as findings are progressively made and technical analysis proceeds. The unexpected regularly obtrudes. The attitudes and requirements of regulatory agencies are not constant and the changes and variations must affect the estimates." 43 Mass. App. Ct. at 474. On the other hand, in Valley Manufactured Products Co., the court found that delay was prejudicial where the insured failed to notify the insurer after a "specific and sudden accident (i.e., a 500-gallon underground tank leak of a toxic chemical)" that occurred within a 48-hour window of time. 765 F. Supp. at 1123, 1126.

b. Insert to come re Connecticut law

c. Insert to come re Maryland law

2. Response Costs as "Damages because of Property Damage"

Black Decker contends that remediation and other environmental cleanup costs constitute "property damage" compensable under the Liberty Mutual policies. The relevant policy language, found in the primary coverage section, states that Liberty Mutual will pay all sums that "the insured shall become legally obligated to pay as damages because of . . . property damage." (E.g., 1966 Standard Policy Jacket, Defs.' App. XIII, at 121.) Liberty Mutual argues that remediation costs are not "damages because of . . . property damage," but rather equitable remedial measures required by the court.

a. Massachusetts

In Hazen Paper, the Supreme Judicial Court addressed the question of remediation costs in environmental cleanup cases as damages under similar insurance policies. Finding the term "damages" ambiguous as used in the policies, the court held that the insured was entitled to the reading of the policy that was most favorable to it. 407 Mass. at 700.

While the court held that contamination of soil or groundwater by hazardous materials clearly fell within the definition of "property damage", it further asked whether remediation costs could be considered "damages because of property damage." Id. Remediation costs would constitute such damages, the court stated, so long as there was also some property damage associated with the discharge of pollutants such as groundwater or soil contamination. Id. at 699-701. The essential point for theHazen Paper court was that the insurer was obligated to pay all damages for which the insured was legally required to pay as a result of the property damage, whether these damages were considered remedial costs, natural resource damages or the prevention of further damage. See id. at 701. However, in the absence of any recognizable property damage, costs associated with complying with an injunction or court order dealing with damage prevention or costs incurred with complying with the law are not covered. Id. at 698.

For at least one site, a substantial portion of Black Decker's claim derives from a discounted sale price for the contaminated parcel. Black Decker explains that the sale price was reduced by the anticipated amount of environmental remediation expense that the buyer would need to undertake. According to Black Decker, this is an "indirect" way of paying for remediation, more efficient than selling the land for full price and then having Black Decker pay for remediation on the buyer's land Liberty Mutual argues, however, that these "lost profits" are a purely economic injury, not recoverable under a liability policy that requires "damages because of property damage."

Black Decker analogizes to a transaction wherein it received full price for the property, then itself used some of the proceeds to pay for remediation. This type of claim is so far removed from the core model of civil damages that it undermines the insurer's intent in writing liability (as opposed to property) insurance in the first place. As the First Circuit explained in Ryan, liability insurance differs from property insurance in several important ways. The property insurer's exposure is limited to the value of the property, and "the underlying asset limits and defines the insurer's obligation and serves to prevent the insured from claiming more than was lost." 916 F.2d at 740. In contrast, the liability insurer's exposure is not bound by any limit other than the policy limit itself. "Because the opportunities for wagering and fraud are, therefore, correspondingly great, public policy suggests that liability insurance contracts be interpreted in such a way as to neutralize, or at least minimize, these concerns." Id. This is why liability insurance policies are written to require a suit, to give the insurer the right (not just the duty) to assume the defense, and to limit payment to damages that the insured is "legally obligated" to pay.

By converting a potential liability into a property loss, an insured undermines this scheme. When an insured sells its property to a buyer at a reduced price (with the discount supposedly reflecting the required amount of remediation work)¹⁸ the insurer loses the ability to protect its interests. It cannot defend against the claim, nor challenge the amount deducted. Black Decker dismisses fears that it might have obtained a profit because the remediation increased the value of the property by more than the remediation costs, citing Hazen Paper for the proposition that remediation costs are recoverable even then. But the liability insurer is not disturbed if the insured makes a profit on a property sale. Rather, the liability insurer in this situation is concerned that the bargaining process between the insured and the thirdparty buyer will over-estimate the cost of remediation, for reasons specific to a real estate transaction which would not arise if the insured paid remediation costs itself.¹⁹ Furthermore, the buyer might argue for the discount, purchase the property "as is," and then rationally elect not to remediate, but rather take its chances with the government. In that case, under Black Decker's theory, the liability insurer could be forced to reimburse the insured seller for remediation that never actually occurred — rather, it would be for pure property loss.

18 The law has long recognized that diminution in land value is often substantially different from cost of repair. See, e.g., Peevyhouse v. Garland Coal Mining Co., 382 P.2d 109 (Okla. 1963).

19 Such reasons could include, inter alia: the insured seller is in a cash crunch and would rather take a lower sale price now, get cash, and seek the difference from the insurer; the buyer disagrees with the insured's estimate of the remediation costs, and insists on a higher figure; or the buyer intends to use the property for a "higher" purpose, and will thus require more expensive remediation than if the seller were to clean up the land itself.

Black Decker relies on Coakley v. Maine, 618 A.2d 777, 784 (N.H. 1993), but the case is not on point. There, the New Hampshire Supreme Court refused to distinguish, for insurance purposes, between a cleanup performed by a PRP under an EPA order or court injunction, and a cleanup performed by a government agency that then sought reimbursement from the PRP. The court confronted New Hampshire precedent that "costs of complying with [an] injunction did not constitute 'damages.'" Id. at 782. TheCoakley court, concerned that such a policy would "encourage parties . . . to ignore EPA cleanup demands and court injunctions," rejected "as specious [the] distinction between direct and indirect payment." Id. The "specious" distinction the court rejected was simply whether "the engineering firms hired to clean up the polluted groundwater receive their money from the [PRP] or from the federal or State government." Id. In either case, the insured has either a cleanup bill or a court judgment in hand Here, the insured's claim is founded on testimony about how a land sale price was calculated, and handwritten estimates of how much a cleanup might cost. The distance from "damages" is too great.

In short, diminution in land value is not an acceptable proxy for environmental remediation, and Black Decker cannot recover for the amount by which it discounted the sale price, even if it calculated that discount based on a good faith estimate of remediation costs. Nor may it engage in an extended counterfactual to recover the costs that it would have incurred had it performed the remediation itself, or for the actual costs expended by the third party buyer. These are not "damages" imposed on Black Decker by law, and cannot accurately measure what would have been recoverable had events unfolded otherwise.See supra note 19.

b. Insert to come re Connecticut law

c. Insert to come re Maryland law

3. Owned Property Exclusion

Liberty Mutual contends that the "owned property" exclusion bars coverage for contamination on property actually owned or leased by the insured. This clause, contained in all the policies, expressly excludes "property damage to . . . property owned or occupied by or rented to the insured . . . property used by the insured, or property in the care, custody or control of the insured or as to which the insured is for any purpose exercising physical control." (E.g., 1966 Standard Policy Jacket, Defs.' App. XIII, at 121.)

a. Massachusetts

Although the owned property exclusion superficially appears to exclude all costs of remediation on the insured's property, the Massachusetts courts have construed it more narrowly. While it is true that "[c]osts incurred for the sole purpose of remediating the [insured's] property are barred by the owned property exclusion of the policy," Hakim v. Massachusetts Insurers' Insolvency Fund, 424 Mass. 275, 282 (1997), two important exceptions apply.

First, if adjacent property is actually contaminated by migration from the insured's properly, then the owned property exclusion does not apply to cleanup on the insured's land "if the cleanup is designed to remediate, to prevent or to abate further migration of contaminants to the off-site property." Id. at 279. Second, if adjacent property is threatened by contamination from the insured's property, then the owned property exclusion does not apply "even if the contaminating substances are solely on the insured's land" Rubenstein v. Royal Ins. Co. of Am., 44 Mass. App. Ct. 842, 854 (1998), aff'd on other grounds, 429 Mass. 355 (1999); see also Allstate Ins. Co. v. Quinn Constr. Co., 713 F. Supp. 35, 41 (D. Mass. 1989) (exclusion inapplicable if contamination presents "a demonstrated danger to the property of another"), vacated as a result of settlement, 784 F. Supp. 927 (D. Mass. 1990);Wasserman v. Commerce Ins. Co., 2002 WL 31187681, at *8 (Mass.Super.Ct. 2002) (exclusion inapplicable if "there is a significant threat of off-site migration"), clarified on other grounds, 2002 WL 31188440 (Mass.Super.Ct. 2002). The reasoning is that "[i]t would serve 'no legitimate purpose to assert that soil and groundwater pollution must be allowed to spread over boundary lines before they can be said to have caused the damage to other people's property which liability insurance is intended to indemnify.'" Rubenstein, 44 Mass. App. Ct. at 848 (quotingAllstate, 713 F. Supp. at 41). This latter exception can be satisfied simply by an allegation in the charging document that there is a threat of contamination from the site to other property.

Black Decker argues that even where there is no risk of off-site contamination, contamination of groundwater suffices to defeat the owned property exclusion, because a landowner does not own the groundwater under his property, at least for purposes of this provision. Black Decker acknowledges that Massachusetts law is contrary to its position, but points to a trend in Massachusetts' lower courts away from the traditional doctrine that a landowner owns the groundwater under his property.

The traditional doctrine was most recently expounded by the Supreme Judicial Court in Gamer v. Town of Milton, 346 Mass. 617, 620 (1964), a negligence case involving houses that settled as a result of improper excavation. The Supreme Judicial Court explained that it was "settled in this Commonwealth that a landowner has absolute ownership in the subsurface percolating water in his land" Id. It relied on two much older cases,Greenleaf v. Francis, 35 Mass. (18 Pick.) 117 (1836), andDavis v. Spaulding, 157 Mass. 431 (1892).

Greenleaf involved a cistern dug on the defendant's land that reduced the flow of water into the plaintiff's well. The court explained that "by the common law the owner of the soil may lawfully occupy the space . . . below the surface, to any extent which he pleases." 35 Mass. at 121. It held that the owner "may consult his own convenience in his operations above or below the surface of his ground. He may . . . cut off the springs of water below the surface. . . ." Id. at 123. Davis, decided in 1892, construed a deed granting the grantee the right to draw water from a pipe connected to the grantor's well. The court, finding that this right did not require there to be any water actually in the grantor's well, explained that groundwater "is in law a part of the land itself, in the same sense that earth, gravel, stones, or minerals of any kind are constituent parts of the land, and is the absolute property of the owner of the land" 157 Mass. at 435.

These cases stated the traditional rule upon which Gamer relied. Indeed, I addressed this question in Allstate, where the insured posited the same argument that Black Decker offers here. See 713 F. Supp. at 40 n. 7. I rejected that argument, citing Gamer. Since Allstate, however, several lower court decisions have indicated a trend away from the traditional rule.²⁰ In 1993, Judge Murphy of the Superior Court noted that Davis, Greenleaf, and Gamer could not really stand for absolute ownership of groundwater, because that would mean that the landowner could "contaminate or damage the quality of the groundwater" as he pleased. United Tech., 1993 WL 818913, at *11. Judge Murphy concluded that "[w]ith current knowledge of the migration of groundwater and the ability to measure and determine the speed and direction of flow, it is not likely that the Massachusetts appellate courts would apply the owned-property exclusion to contaminated groundwater." Id. ²¹ Another Superior Court judge noted, while not relying on this theory, that "the longstanding rule in Massachusetts of absolute ownership of groundwater is being closely reexamined in cases pertaining to hazardous contamination." Marks v. Lumbermens Mut. Cas. Co., 1995 WL 502231, at *4 (Mass.Super.Ct. 1995) (Cratsley, J.). Judge Cratsley pointed out that Gamer "did not relate to the issue of pollution containment [and] . . . was decided over thirty [now almost forty] years ago, before many current understandings of environmental interdependence had surfaced." Id. at *4 n. 7.

20 Even when Allstate was decided, there was indication of a change in the flow of the case law. Three years earlier, the Supreme Judicial Court had declined to reach the absolute ownership rule, but offered that "[i]n another case, [it] might be inclined to reexamine the doctrine which gives the owner of the overlying land absolute control over subsurface water on such land" Prince v. Stockdell, 397 Mass. 843, 845 (1986).

21 The reference to "current knowledge" alludes to theDavis court, which observed that it was "impossible to know in what direction percolating water finds its way into a well" because it was governed by "obscure natural causes." 157 Mass. at 437.

These lower court opinions make clear that the tides of change are rising. However, on questions of state law, a federal court may not ride the crest of the wave. A federal court is "absolutely bound by a current interpretation of that law formulated by the state's highest tribunal." Daigle v. Maine Med. Ctr., Inc., 14 F.3d 684, 689 (1st Cir. 1994). This is true even when that interpretation is stagnant and its foundation has begun to disintegrate. "If we are unwilling to stretch state precedents to reach new frontiers, a litigant like [Black Decker], who deliberately 'chose to reject a state-court forum in favor of a federal forum . . . is in a perilously poor position to grumble' about our stodginess."Porter v. Nutter, 913 F.2d 37, 40-41 (1st Cir. 1990) (quotingKassel v. Gannett Co., 875 F.2d 935, 950 (1st Cir. 1989)).²²

22 Black Decker chose to remove this case from the state Superior Court to this court.

At this stage in the proceedings, it does not yet appear that this question will be outcome-determinative. If it becomes so, then I will entertain a motion to certify a suitably framed question to the Supreme Judicial Court. See Mass. Sup. Jud. Ct. R. 1:03.

b. Insert to come re Connecticut law

c. Insert to come re Maryland law

4. MITE and the Merger Succession Rule

Liberty Mutual argues that Black Decker cannot succeed to the rights of MITE under the Liberty Mutual policies because MITE became a subsidiary of Emhart through a stock purchase, not a merger. While an entity that gains control of a company through a merger can succeed to rights under the acquired company's insurance policies pursuant to the socalled "merger succession" rule, an acquisition through a stock purchase does not implicate the merger succession rule and thus the acquiring entity cannot succeed to rights under the acquired entity's insurance policies. Compare Imperial Enter. Inc. v. Fireman's Fund Ins. Co., 535 F.2d 287, 291 (5th Cir. 1976) (merger succession), Total Waste Mgmt., 857 F. Supp. at 152 (same), and Md. Cas. Co. v. W.R. Grace, 794 F. Supp. 1206, 1233-34 (S.D.N.Y. 1991) (same) with Long John Silver's v. Arch Eng'g, 520 F. Supp. 753, 758-59 (W.D.Pa. 1981) (stock purchase) and SCA Disposal Serv. v. Cent. Nat'l Ins. Co., 1994 WL 879689 at **6 (Mass.Super.Ct. 1994) (same).

It does not appear that this argument remains pertinent. Black Decker has since shown that, after the stock purchase of MITE, Emhart legally merged with it and thereby succeeded to all of MITE's rights under its Liberty Mutual policies. Black Decker provides the second affidavit of Theodore Lutkus, which states that MITE merged with and into Emhart effective December 31, 1986. (See Lutkus Aff., Defs.' App. XCVIII, ¶ 2.) Attached to the second Lutkus affidavit are the relevant articles of merger, plan of merger and certificate of merger. (See id., Ex. A-C.) Given this evidence, Liberty Mutual's argument appears now without any foundation.

5. Voluntary Payments

Liberty Mutual contends that several of the payments made by Black Decker in the course of settling underlying actions were done voluntarily without the assumption or expectation of coverage by Liberty Mutual. The standard CGL policies generally provide that "[t]he insured shall not, except at its own cost, voluntarily make any payment, assume any obligation or incur any expense" other than immediate medical treatment at the time of the accident. (E.g., 1964 USM Policy, Defs.' App. VI, ¶ 8, at 5.)

a. Massachusetts

Under Massachusetts law, "voluntary" has its ordinary, dictionary meaning of "by an act of choice," "not constrained, impelled, or influenced by another," and "acting or done of one's own free will." Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 121-22 (1991). In Augat, which involved policy language virtually identical to that here, the insured settled a Chapter 21E complaint with DEP, and entered into a consent decree by which it assumed civil penalties and the full cost of decontaminating the site, without informing its insurer, Liberty Mutual. See id. at 118-19 n. 3. The Supreme Judicial Court recognized the difficult position of the insured, which risked treble damages if it did not settle, but held that the decision to settle was voluntary because the insured "had an alternative — it had the right to demand that Liberty Mutual defend the claim and assume the obligation to pay for the cleanup." Id. at 122.

Generally, the insurer "must prove material prejudice resulting from its policyholder's violation of a consent-to-settlement provision in order to rely on that violation as an affirmative defense to a claim." MacInnis v. Aetna Life Cas. Co., 403 Mass. 220, 223 (1988); Atlas Tack Corp. v. Liberty Mut. Ins. Co., 48 Mass App. Ct. 378, 383 (1999). The policy behind this rule is that the purpose of a consent-to-settlement provision is essentially the same as that of a notice-of-claim provision: to give the insurer an opportunity to protect its interests. See id. Since an insurer must prove material prejudice in order to rely on late notice as a defense, the Supreme Judicial Court has concluded that the same requirement should apply to voluntary payments. MacInnis, 403 Mass. at 223.

However, if the insured actually makes payments before notifying the insurer, prejudice may be presumed in certain extreme circumstances. An insured that fully pays a voluntary settlement before notifying the insurer may undermine the purpose of the notice provision — to enable the insurer to protect its interests — so completely that it can establish prejudice as a matter of law:

After Augat agreed to a settlement, entered into a consent judgment, assumed the obligation to pay the entire cost of the cleanup, and in fact paid a portion of that cost, it was too late for the insurer to act to protect its interests. There was nothing left for the insurer to do but issue a check. We conclude, therefore, that no showing of prejudice is required in this case. . . .

Augat, 410 Mass. at 122-23. Similarly, in Atlas Tack, the insured agreed to a final consent judgment on a five-day-old lawsuit, and began making payments pursuant to that consent judgment, over a year before notifying the insurer that there was even a claim. 48 Mass. App. Ct. at 380-81. The court found the situation exactly analogous to Augat and held that the insured forfeited coverage by reason of its voluntary payments, without requiring a showing of specific prejudice. Id. at 383-84. See also E. Prods. Corp. v. Cont'l Cas. Co., 58 Mass. App. Ct. 16, 19-20, 24-26 (2003) (no showing of prejudice needed where insured entered into a "binding agreement with the Commonwealth to clean up the property at [the insured's] own expense" before notifying insurer of the existence of a problem).

However, these cases do not stand for the simplistic proposition that a voluntary payment implies prejudice as a matter of law. In Sarnafil, Inc. v. Peerless Ins. Co., 418 Mass. 295, 305 (1994), the Supreme Judicial Court emphasized that actual prejudice must be shown even where the insured has settled in violation of the voluntary payment provisions, and cited Augat for that very point. Furthermore, prejudice must generally be established at trial, not on summary judgment. See id. at 306 ("It may very well be that Peerless will prevail at trial based on Sarnafil's breaches, a showing of prejudice by Peerless. . . . These questions . . . are in controversy, and their proper resolution requires the determination of factual matters by a fact finder."); see also Hoechst Celanese, 43 Mass. App. Ct. at 481 (explaining that Augat was based on its facts, and Sarnafil confirms that voluntary payments do not establish prejudice). Augat, Eastern Products, and Atlas Tack appear to be limited to a breach of both the notice and voluntary payment provisions, where the insurer does not even know of the claim until after it has already settled.

(i) Site assessments

Often an agency's first demand on a PRP is simply to study the site to determine whether cleanup is needed. If an insured agrees to comply with a Chapter 21E NOR that merely requires it to "engage consultants and prepare so-called Phase I and Phase II reports," but does not require it to "undertake any actual cleanup operations," then there may remain a "genuine issue of fact about the extent of the commitment [the insured] made to the [agency] in response to" the NOR or PRP letter. MSM Indus., Inc. v. Zurich Am. Ins. Co., 1997 WL 260059, *8 (D. Mass. 1997) (Gertner, J., adopting the order of Karol, M.J.), aff'd, 125 F.3d 841 (1st Cir. 1997) (published table decision). That is, the insured's voluntary compliance with an order to prepare assessments violates the voluntary payments provision only as to the cost of preparing the assessments, not as to the ultimate cleanup costs. See id. at *9 n. 11.

Even "voluntary" performance of site assessments does not forfeit coverage unless there has been prejudice to the insurer. Prejudice could result if, for example, the insurer used an unnecessarily expensive contractor, or one that found a little "too much" contamination, or if there was a reasonable prospect that by resisting the agency process, the insured might have avoided conducting a site assessment altogether. While delay alone is a "relevant factor" in assessing prejudice, see Darcy, 407 Mass. at 486, the insurer will generally need to provide more concrete evidence to establish that it was prejudiced by "voluntarily" conducted site assessments.

(ii) Cleanup

It is a much closer question whether the voluntary payments provision relieves the insurer of the duty to defend the insured from a government agency's actual cleanup orders. An NOR, which generally just requires assessments, is distinct from an eventual order requiring expensive remediation. See MSM Indus., 1997 WL 260059, at *8-9; Mass. Code Regs., ch. 310, §§ 40.0480-0486 (requirements for a Phase I assessment), 40.0832-0840 (requirements for a Phase II assessment). The point at which the agency turns its attention from assessment to cleanup is an opportune time for the insurer to have inserted itself into the process; perhaps it could then protect its interests by dealing with the agency more adversarially.

The insurer's evidence of prejudice is strongest in cases where the voluntary payments are made before the insurer is notified of the dispute, and therefore both the notice and the voluntary payment provisions are implicated. Prejudice from late notice can be inferred from the fact that (at least some) money had already been spent before the insurer first learned of the claim; prejudice from voluntary payments can be inferred from the fact that the insurer did not even have notice of the claim when the earliest payments were made. In such circumstances, the facts will more closely resemble Augat, where the insurer was brought in when there was "nothing left for the insurer to do but issue a check," 410 Mass. at 123, than the cases that distinguishAugat, such as New England Extrusion, Inc. v. American Alliance Insurance Co., 874 F. Supp. 467, 468-69 (D. Mass. 1995), where the insured notified the insurer of the claim before settling but the insurer did not respond at all until the claim had already settled, or MSM Industries, 1997 WL 260059, where the insured sought payment fairly soon after the assessments had been completed.

b. Insert to come re Connecticut law

c. Insert to come re Maryland law

VI. APPLICATION OF LEGAL PRINCIPLES FOR PROVEN POLICIES TO INDIVIDUAL SITES A. Under Massachusetts Law

In accordance with the choice of law determinations made in Section III supra, the issues regarding the sites in this subsection are governed by Massachusetts law.

1. Bostik Middleton, MA Site

a. Facts

(i) Corporate history

Over the course of the years 1918 through 1929, USM (then United Shoe Machinery) acquired a controlling interest in, and eventually purchased all the assets of, Boston Blacking Co., a Maine corporation. (Lutkus Aff. ¶ 31, Defs.' App. XCIV, Tab 4.) Boston Blacking Co., after several intermediate names, changed its name to Bostik in the 1960s. (Id. ¶¶ 11, 31.)

In March 1989, Black Decker Corporation, through subsidiaries, purchased Emhart. (Id. ¶ 6.) In September 1989, the Bostik Division of USM was transferred to a wholly-owned subsidiary of EII known as Bostik, Inc. (Defs.' Answer Counterclaim, Counterclaim ¶ 121, Pl.'s App. 7, Tab 2, at 68.) In October 1989, Black Decker entered into an agreement with Adhesive Acquisition Corporation and Orkem S.A. (Adhesive's parent), in which Black Decker sold Bostik, Inc., including the Site, to Adhesive. (See Purchase and Sale Agreement, Pl.'s App. 15, Tab 1; Lutkus Aff. ¶ 33, Defs.' App. XCIV, Tab 4.) The sale agreement provided that Adhesive would assume the first five million dollars of environmental liability arising from the Bostik operations, but that Black Decker would indemnify Adhesive against environmental liabilities in excess of five million dollars, to a maximum of ten million dollars. (Id. § 1.29(k).) The sale was consummated in January 1990. (Defs.' App. XXI, at 60.) Sometime later, in circumstances not entirely clear from the record but not crucial here, Total, Inc. ("Total"), came to own Bostik, Inc., perhaps by acquiring Adhesive. (See id. at 53, 60.)

(ii) Site history Overview. The Site contains approximately 69 acres, of which about half have been developed for industrial purposes. (Defs.' App. XXI, at 53.) Since 1930, when USM acquired the property, it has been used to produce solvent-based adhesives, latex adhesives, hot melt adhesives, solvent cements, polyurethane sealants, shoe and industrial finishes, polymers, and curing agents. (Lutkus Aff. ¶ 15, Defs.' App. XCIV, Tab 4; Defs.' App. XXI, at 53.) Activities at the Site incidental to polymer and adhesive manufacturing have included storing, in underground tanks, various chemicals such as fuel oil, other petroleum products, solvents, and manufacturing byproducts such as polyester distillate. (Defs.' App. XXI, at 53.)

The Site has experienced spills, leaks, and other releases, including spillage of fuel oil resulting from overfilling underground tanks, spillage of raw materials at loading docks, spillage of byproduct materials in manufacturing areas and ruptures of and releases from underground tanks and piping. (Id.) Consequently, the Site is now contaminated with substances including volatile organic compounds ("VOCs"), petroleum hydrocarbons, and polychlorinated biphenyls ("PCBs"). (Id. at 54.) These contaminants have been found in soil, groundwater, and surface waters, including the Ipswich River, which borders the Site. (Id.) Contamination at the site is most concentrated in five distinct areas, which are discussed individually below.

Pilot Plant Area. The pilot plant was used to manufacture experimental adhesives. (Defs.' App. XII, at 56.) Two reactor vessels were heated by circulating oil. At one time, the oil contained PCBs. (Id.) The pumps were designed to leak a certain quantity of oil in order to lubricate the seals. (Molberg Aff. ¶ 6, Defs.' App. LIII, at 12.) Consequently, oil leaked onto the floor. (Beaulier Aff. ¶ 13, Defs.' App. LIII, at 14.) There were also at least two occasions where the pump seals actually burst, causing oil to spill and drain outside into the soil. (Mansurian Aff. ¶¶ 5-6, Defs.' App. LIII, at 19-20.) Various portions of the pilot plant, adjacent and subjacent soil and pavement, and groundwater in the vicinity have been found to contain PCBs, VOCs, and other chemicals. (Defs.' App. LII, at 6.)

Old Tank Farm. When USM acquired the Site in 1930, it contained a small underground tank farm, consisting of four tanks containing gasoline, benzol, and naphtha. By 1963, the tank farm had expanded to over twenty tanks, storing a wide range of chemicals, including toluene, methyl ethyl ketone ("MEK"), naphtha, and others. (Defs.' App. LII, at 33.) Several of the tanks were actually old railroad cars. (Molberg Aff., Defs.' App. LIII, at 11.)

In approximately 1966, a tank leaked solvent. A Bostik employee found a liquid, probably toluene or MEK, weeping through the Ipswich River bank and into the river. He later determined it had originated from one of the tanks. (Mansurian Aff. ¶ 13, Defs.' App. LIII, at 22.) That same employee also regularly witnessed, and in many cases repaired, spillage from solvent hoses, leaks from aboveground solvent pipes, leaks from inlet valves, and leaks in a solvent pipe trench. (Id. ¶¶ 10-15, Defs.' App. LII, at 20-23.)

In the spring of 1986, Bostik stopped using the tank farm, and contracted to remove the tanks. On March 19, 1986, Bostik's contractor began removing tanks, and quickly noted a solvent odor in the soil. Bostik notified the Massachusetts DEP immediately. DEP ordered water sampling, which revealed significant levels of VOCs, particularly toluene and MEK. (Defs.' App. LII, at 33.)

Waste Pit. From the late 1940s until the mid-1960s, wastes, including glass, metal scraps, cans, adhesives, solvents, and brick, were disposed of by open burning in an outdoor pit. (Defs.' App. XXI, at 5; Defs.' App. LII, at 6; Defs.' App. LIII, at 15-16.) Often, solvent such as MEK or toluene was used as a lighter fluid to ignite trash. (Mansurian Aff. ¶ 16, Defs.' App. LIII, at 23.) Soil and groundwater are now contaminated with, among others, VOCs, PCBs, and petroleum hydrocarbons. (Defs.' App. XXI, at 5; Defs.' App. LII, at 6.)

Building 9 Area. The underground solvent pipe trench traversed the area northwest of Building 9. The trench leaked often, resulting in a steady drip of chemicals that saturated the soil. (Mansurian Aff. ¶ 15, Defs.' App. LIII, at 22-23.) Soil and groundwater are contaminated with chemicals including VOCs and PCBs. (Defs.' App. LII, at 6-7.)

Building 1 Area. The area near Building 1 is contaminated with a variety of substances including VOCs and petroleum hydrocarbons. A monitoring well in the area contains petroleum product believed to have resulted from spills. (Defs.' App. LII, at 7.)

b. Relevant Policies

Because USM owned and operated the Site for the entire relevant period of time, only USM's policies are implicated. Given my resolution of Liberty Mutual's motion for partial summary judgment as applied to specific policy periods, the policies at issue for this Site are USM's accident-based CGL policies issued from 1957-69; its occurrence-based CGL policies issued from 1971 onwards; and its excess liability policies issued from 1966-68 and 1972-79. (See generally supra Part IV (insurance policy history).)

c. Procedural History

(i) DEP Action

On March 19, 1986, after noticing a solvent odor in the soil near an underground tank, Bostik contacted DEP. (Defs.' App. LII, at 33.) On March 20, a DEP employee inspected the site and ordered water sampling. (See Molberg Letter, Ex. A to Second Molberg Affidavit, Defs.' 4/14/1998 Motion to Supplement Record, reprinted in Defs.' Compendium Vol. 2, Tab E.) On November 4, 1986, DEP issued a Notice of Responsibility ("NOR") to Bostik. (Defs.' App. LI, at 1-2.) The NOR stated that DEP believed there was a "release/threat of release" of toluene, naphtha, and other solvents from the Site's underground tanks. It requested a site assessment in accordance with Mass. Gen. Laws ch. 21E. (Id. at 1-2.)

A Phase I environmental site assessment was completed on March 14, 1988. (See Defs.' App. LI, at 16-250.) A Phase II assessment was proposed in July 1988, and a final revised Phase II assessment proposal was submitted in October 1988. (See Chalpin Letter, Defs.' App. LI, at 6.) In December 1988, DEP approved the final revised Phase II proposal, after making some further changes. (Id.) In June 1990, DEP approved a proposed PCB remediation plan, again after making modifications. (Davis Letter, Defs.' App. LI, at 8-10.)

(ii) Demand from Total

On November 22, 1993, Total, on behalf of Bostik, Inc. and as successor to Orkem, having spent more than five million dollars on environmental costs arising from damage that occurred before the sale, demanded reimbursement from Black Decker under the agreement. Total demanded that Black Decker reimburse it for environmental remediation costs. (See Defs.' Resp. to Int., Tier I Apx., Defs.' App. XII, at 60.) Apparently, Total sent further demand letters to Black Decker in November 1993, January 1995, February 1995, June 1995, October 1995, December 1995, March 1996, May 1996, and September 1996.²³

23 I say "apparently" because the only mention of these letters that is cited to in either party's brief comes from Black Decker's response to interrogatories. (See Defs.' Resp. to Int., Tier I Apx., Defs.' App. XII, at 60.) Black Decker does not cite any portion of the record that actually contains the letters, and I am therefore unable to inspect them or even verify their existence. Since Liberty Mutual does not dispute the letters' existence, I will assume, for purposes of Liberty Mutual's motion, that the letters exist and have the approximate terms adumbrated by Black Decker in its response to interrogatories. I will not, however, consider them for purposes of Black Decker's motion.

(iii) Presentment of claims

It is somewhat difficult to discern when Black Decker first notified Liberty Mutual of either the DEP NOR or of Total's demand for reimbursement. Black Decker states that it first notified Liberty Mutual of claims arising from the Site by letter dated November 3, 1994. (See Mahaley Letter, Defs.' App. LI, at 12-15.) On the other hand, Liberty Mutual twice states that Black Decker notified it of the claims in 1991. (See Pl.'s Opp. at 53-54.)

In the November 1994 letter, a settlement offer in a Massachusetts declaratory judgment action by Emhart that preceded this litigation, Emhart summarized its "known environmental exposure involving its former subsidiary, USM Corporation" in a grid listing seventeen sites, including the Middleton Site. (Mahaley Letter, Defs.' App. LI, at 12, 14.) For each site, the letter provided the years of operation or disposal, the costs already expended, projected costs in very round numbers, and total costs (derived from adding the last two numbers). (See id.) The record does not appear to contain any formal denial of coverage by Liberty Mutual.

d. Analysis

(i) Suit

Liberty Mutual argues that it had no duty to defend Black Decker from either the DEP-supervised remediation, or the reimbursement request from Total, because there was no "suit." According to Liberty Mutual, payments made in both cases were entirely voluntary and no suits, or their functional equivalents, were involved.

I find that DEP's November 1986 letter entitled "Written Confirmation of Notice of Responsibility/Summary of Response Actions Taken/Request for Information" satisfies the suit requirement. (See Chalpin Letter, Defs.' App. LI, at 1-2.) The letter stated, in pertinent part:

there has been a release/threat of release of Toluene, Naptha and other solvents from your underground storage tanks. . . . The Department has reason to believe based on available information that you are, under the provisions of M.G.L. Chapter 21E, Section 5(a), responsible for the occurrence of such release/threat of release.

(Id. at 1.) The allegation that "there has been a release/threat of release," combined with the invocation of Chapter 21E's strict liability regime, suffices for the suit requirement. (See generally supra Part V.A.1.a.i.)

The factual context of the letter further proves this point. On March 19, 1986, while Bostik was in the process of abandoning an underground storage tank, it detected a solvent odor in the soil and immediately contacted DEP. (See Molberg Letter, Ex. A to Second Molberg Affidavit, Defs.' 4/14/1998 Motion to Supplement Record, reprinted in Defs.' Comp. Vol. 2, Tab E.) A DEP employee inspected the site the next morning, and the November NOR ultimately resulted from that investigation. (See id.) In this context, it is clear that DEP's letter concerned an actual past release, not just threats of future release, and thus alleged damage within the policy coverage. As further confirmation, an internal DEP memorandum written in May 1988 explained that "[t]he NOR was issued following the release of hazardous materials on the site." (Defs.' App. LI, at 3.)²⁴

24 Given this resolution, it is unnecessary to address whether Total's claim for reimbursement would also satisfy the suit requirement. That said, it would not. A private demand letter pursuant to a contractual indemnity agreement does not qualify as a suit. (See supra Part V.A.1.a.iii.)

(ii) Accident/occurrence

Liberty Mutual argues that the damage to the Site was, if not intended, then at least expected, and therefore not within the definition of "accident" or "occurrence."

Because this is a complex site with several distinct areas, the proper scope for analyzing the duty to defend is neither the entire property, nor each individual contaminated area, but rather the area that was placed at issue by the document that triggered the duty to defend. (See supra Part V.A.1.a.vii.) If the area described in the document experienced a covered occurrence, then Liberty Mutual had the duty to defend Black Decker not just from damage from that occurrence, but from the entire process ordered by the agency.

Here, the process against which Black Decker claims defense protection was the DEP-ordered site assessment and preparation of a remediation plan. The initial NOR referred only to the underground storage tanks. (NOR, Defs.' App. LI, at 1.) While the NOR ordered a Chapter 21E site assessment that was not facially limited to the tank farm area, and further contamination was discovered, the NOR itself only alleged damage from the underground storage tanks. (Id. at 2, 6-9, 33-36.) Because the allegations were limited to one portion of the Site, but the "defense" actions that Black Decker was required to perform in response to the allegations was site-wide, Liberty Mutual's duty to defend will cover the entire site assessment process if the NOR is "reasonably susceptible" to the interpretation that it alleges an accident or occurrence at the tank farm. (See supra Part V.A.1.a.vii.)

The circumstances surrounding the solvent leak from the tank farm make it clear that there is, at the very least, a triable issue of fact on the question of whether the damage was expected or intended. Liberty Mutual asserts that Black Decker "must necessarily have understood" that the practice of burying waste in underground tanks "would result in some environmental harm." In response, Black Decker offers the statement of Michael Bonchonsky. Bonchonsky stated that the practice of storing solvents, PCBs, and other hydrocarbons in underground tanks "was not uncommon," and was largely unregulated until the 1980s. (Defs.' App. XCIX, at 17.) In his opinion, the use of, and leakage from, the underground tanks at the Site were not "any indication that Black Decker and predecessor companies expected or intended damage to the environment to occur." (Id.) Two Bostik employees testified that Bostik's practices, which sound obviously harmful to the modern ear, were "ordinary in the industry and not known to be injurious" at the time. (Millewski Aff. ¶ 9, Defs.' App. LIII, at 17A-18; Mansurian Aff. ¶ 18, Defs.' App. LIII, at 24.)

Because Liberty Mutual has offered no evidence that any Bostik employees expected or intended the tanks to leak solvent (let alone that such leakage would damage the environment), it cannot establish that the damage was not caused by "accident" or "occurrence."

(iii) Pollution exclusion

The record contains little evidence of specific releases occurring after 1971. The only evidence concerning the tank farm leak is that, when the first leakage was discovered in approximately 1966, only one tank had leaked, but by 1986, "a few" appeared to have degraded to the point where liquid would have leaked. (Mansurian Aff. ¶ 13, Defs.' App. LIII, at 22; Molberg Aff. ¶ 3, Defs.' App. LIII, at 11.) This does not suffice to pinpoint any tank farm release, let alone a "sudden and accidental" one, after 1971.

The releases specifically alleged to have occurred after 1971 appear to be: the regular, continuous leakage of PCB-laden oil from the heat circulating pumps in the pilot plant; solvent adhesive leaking from the churn pit room onto the floor; and employeeinitiated burning of the churn stacks and a solvent, used as lighter fluid, in the waste pit. (See Molberg Aff. ¶¶ 6-7, Defs.' App. LIII, at 2; Millewski Aff. ¶¶ 6, 9, Defs.' App. LIII, at 17-17A.) The leaks were nearly continuous, and the waste burning was a regular practice. These do not meet the temporal quality of "sudden," and consequently do not qualify for the exception from the pollution exclusion. (See supra Part V.B.3.a.i.) Therefore, I conclude that any damage caused by post-1971 releases was excluded from coverage.

(iv) Late notice/voluntary payments

Though late notice and voluntary payments are legally distinct issues, Liberty Mutual's arguments concerning them are so factually intertwined that I will analyze them together. First, Liberty Mutual argues that Black Decker's notice to Liberty Mutual of the claims arising from the Site was prejudicially late, and that this constitutes a breach absolving Liberty Mutual of any duty of defense or indemnity. Second, Liberty Mutual argues that Black Decker's expenditures, both as part of the initial DEP-supervised remediation and as payments to Total under the 1990 sale agreement, were voluntary and therefore excluded from coverage by the terms of the agreement.

Liberty Mutual first objects to Black Decker's ready compliance with DEP's instructions in 1986, when the initial tank leak was discovered. The chronology indicates that Bostik immediately notified DEP upon discovering a solvent odor in the soil on March 19, 1986. The next day, a DEP employee inspected the site, ordered water and soil sampling, and instructed Bostik to install potential recovery wells. (See Molberg Letter, Ex. A to Second Molberg Affidavit, Defs.' 4/14/1998 Motion to Supplement Record, reprinted in Defs.' Comp. Vol. 2, Tab E.)

According to Black Decker, Bostik complied with these instructions, but did not acknowledge any legal responsibility under Chapter 21E, in part because the subject was not raised by DEP. See id. The NOR, however, states that:

[DEP] personnel verbally notified you of your responsibility for such release/threat of release and gave you . . . [a] "Brief Synopsis of M.G.L. Chapter 21E. . . ." You accepted such responsibility at that time. Your acceptance of responsibility for such release means that you have entered into a contract with [a] cleanup contractor, approved by the Department . . . to take all necessary remedial actions (i.e. assessment, containment and/or removal actions) relative to such release and to pay for all response costs incurred by the Department due to such release.

(NOR, Defs.' App. LI, at 1 (emphases added).)

In other words, there is a dispute as to what happened before November 4, 1986. Black Decker contends that it notified DEP of the release, and complied with DEP's sampling instructions, but did not accept responsibility under Chapter 21E. Indeed, Bostik's response to the NOR said that DEP's "recent letter [came] as a surprise to Bostik." (Molberg Letter, Defs.' Comp. Vol. 2, Tab E.) Liberty Mutual contends, based on DEP's reconstruction of the events, that Black Decker accepted responsibility for the release and even selected a DEP-approved cleanup contractor. Based on these competing versions of the events preceding November 4, 1986, I find there to be a genuine issue of material fact as to whether Bostik had already accepted responsibility before receiving the NOR.²⁵ Site assessment. Once Black Decker received the NOR, it appears to have complied without protest, and begun the process of site assessment. As MSM Industries noted, Augat forecloses the argument that agreeing to prepare site reports after receiving an NOR was involuntary. See 1997 WL 260059, at *9 n. 11. Black Decker had "the right to demand that Liberty Mutual defend the claim." Augat, 410 Mass. at 122. (See supra Part V.C.5.a.i.)

25 Furthermore, as a matter of public policy, I am inclined to view Bostik's conduct on March 19, 1986 as favorably as possible. A policyholder that immediately notifies the appropriate regulatory agency upon discovering possible contamination should not be penalized by its insurer for initiating contact.

However, Liberty Mutual has not produced any evidence that it was prejudiced by this compliance with the NOR. I find it unlikely that, had Liberty Mutual been able to assume Black Decker's defense, it could have contrived a way to avoid conducting Phase I and II assessments. If there was such a way, I cannot speculate as to it in Liberty Mutual's favor for purpose of Liberty Mutual's summary judgment motion. See Sarnafil, 418 Mass. at 305, 306; Hoechst Celanese, 43 Mass. App. Ct. at 481.

Cleanup orders. As I read the record, the first discussion of actual cleanup came in a document prepared by Bostik's consultant and submitted to DEP on November 6, 1989, when Bostik offered to perform "Short Term Measure[s]" cleaning up the tank farm and the pilot plant. (See Davis Letter, Defs.' App. LI, at 8; Phase II Assessment, Defs.' App. LII, at 20.) The record is not completely clear about when the remaining cleanup was ordered, and is devoid of evidence that Black Decker "defended" itself against that order at all.

The interrelation between the notice provision and the voluntary payment provision is especially evident here. The insurer's prejudice is strongest in cases where voluntary payments are made before the insurer is notified of the dispute, and therefore both the notice and the voluntary payment provisions are implicated. (See supra Part V.C.5.a.) The prejudice caused by the late notice is evidenced by the fact that (at least some) money had already been spent when Liberty Mutual first learned of the claim; the prejudice caused by the voluntary payments is evidenced by the fact that Liberty Mutual did not even have notice of the claim when the earliest payments were made.

While, for purposes of Liberty Mutual's motion, I must view the facts in the light most favorable to Black Decker, and draw all reasonable inferences in its favor, I need not drawunreasonable inferences in its favor. The record contains absolutely no evidence suggesting that Black Decker resisted DEP's cleanup order. The fact that Black Decker has produced no evidence suggesting anything other than voluntary compliance raises the unrefuted inference that it did not contest the issue, either administratively or in court, in a manner that Liberty Mutual could have defended it. I find that Liberty Mutual is entitled to partial summary judgment declaring that the remediation monies already spent by November 1994 (when Liberty Mutual received notice of the claim) were voluntarily paid in a manner prejudicial to Liberty Mutual, and that those costs were therefore not covered.²⁶ In other words, Black Decker's claims for indemnification for pre-November 1994 remediation are not recoverable. However, as for any remediation monies that Black Decker had not yet performed by the date of its notice, I find that Liberty Mutual has not shown (and probably cannot show) prejudice. It could have immediately asserted a vigorous defense against both Total and DEP, and protected Black Decker from needing to pay anything. To the extent that it did not, it cannot claim prejudice.

26 My judgment at this stage is necessarily painted in broad strokes, so the upshot of this finding is somewhat unclear for the purpose of the duty to defend (as against the duty to indemnify). In addition to the pre-November 1994 remediation costs, which are excluded, Black Decker's defense costs (if any) that can be specifically attributed to defending against the DEP cleanup order are also not recoverable.

Purchase agreement. Though Black Decker entered into the 1990 purchase agreement voluntarily, it did not "assume any obligation" that it did not already have. Under Chapter 21E, Black Decker would have remained jointly and severally liable for remediation costs even if its sale agreement to Adhesive did not include this provision. See Mass. Gen. Laws ch. 21E, § 5A. If anything, the agreement limited Black Decker's likely obligations by obliging Total to pay for the first five million dollars and all sums in excess of fifteen million dollars. Therefore, this agreement (while not qualifying as a suit in its own right) does not of its own force make Black Decker's expenditures voluntary.

Summary. In this section, I have found that: the Phase I and II site assessments were voluntary payments, but Liberty Mutual has not established prejudice; payments made (whether for defense or remediation) in response to the DEP cleanup order before November 3, 1994 were voluntary, and the combination of late notice and voluntary payments suffices to establish prejudice; no prejudice has been shown from voluntary payments made after November 3, 1994; and the purchase agreement's retention of environmental liability was neither a voluntary payment nor prejudicial to Liberty Mutual.

e. Partial Summary Judgment Decision

Liberty Mutual's motion is GRANTED as to damage occurring during or after the 1971 policy period, and DENIED as to damage occurring during the 1957-69 policy periods. Liberty Mutual's motion is DENIED as to the costs of preparing the site assessments required by the Notice of Responsibility. Liberty Mutual's motion is GRANTED as to defense and remediation costs attributable to DEP's remediation orders and expended before November 3, 1994, and DENIED as to such costs expended on or after November 3, 1994.

2. Whitman, MA Site

a. Facts

The Whitman site is a rectangular parcel of land, comprising approximately 2.5 acres, located at 98 Myrtle Avenue in Whitman, Massachusetts. (Haley Aldrich Limited Site Investigation, Defs.' App. LVII, at 15.) Industrial operations, including metal working, were conducted at the Site as early as 1878. (Id.) In 1920, USM purchased the Site and facilities. (Id.)

USM's activities at the Site, through its Whitman Metal Products division, included metals machining: tool and die work, and cleaning and degreasing of metal parts. (Defs.' App. LVII, at 15.) Workers at the Site machined metal parts from coils, strips, and plates of brass, aluminum, steel and copper. (Id. at 16.) Metal parts produced at the Site included shoe shanks, and parts used in the assembly of products such as lawn mowers, drills and airplanes. (Linn Dep., Defs.' App. LVII, at 13.)

Metals were first shaped on a punch press, then further shaped by processes including forming, tapping, notching, grinding, drilling or tumbling. (Id.) These processes produced industrial waste in the form of cutting oils and degreasing solvents, including 1,1,1 trichlorethane ("TCA"), trichloroethene ("TCE"), and methylene chloride, metal residues and waste water contaminated with caustic detergents and other pollutants. (Id.) Manufacturing operations at the Whitman site were terminated in 1987. (Defs.' App. LVII, at 16.)

Degreasing operations. The bulk of pollution at the Whitman site occurred as a part of the metal degreasing and cleaning processes. (Id.) Throughout the history of the Site's metal machining operations, different degreasing methods and solvents were employed. (See id.) Most of these cleaning and degreasing operations took place in the "tumbler room" or machine shop. (Id. at 16, 26.) The floor of this room had floor drains leading to three settling chambers located under ground beneath the facility's east parking lot. (Id.) These floor drains contained screens that trapped the larger metal chips generated in the course of the machining and cleaning operation. (Id.) The screens were cleaned periodically, and metal chips were removed and stored in barrels before being removed from the Site. (Id.)

The three settling chambers beneath the east parking lot were constructed between 1958 and 1965. (Id. at 17.) The settling chambers were cylindrical, concrete block structures approximately two and a half feet wide at the top, four feet wide at the bottom, and five to six feet in depth. (Id.) The concrete blocks forming the walls of the chambers had gaps as wide as a sixteenth of an inch between them. (Id. at 44.) The base of the chambers was lined with crushed stone. (Id.) Each chamber had an inflow pipe approximately two feet below the surface, and a lower outflow pipe on the other side of the chamber. (Id.)

The chambers were designed to allow suspended metal particles from the cleaning operation to settle before waste water passed into the municipal storm water system. (Id.)²⁷ Metal residue and coolant sludge were removed from the chambers and hauled off site approximately every six to seven years. (Id.)

27 Discharge into the storm sewers was authorized under a National Pollutant Discharge Elimination System permit. (Defs.' App. LVII, at 17.)

In the 1960s-70s, metal parts were cleaned by immersion in 55-gallon drums filled with solvent. (Id.) After some time, the parts would be removed from the drum and allowed to drain onto the floor. During this process, excess solvent and oil residues would flow into the settling chambers through the floor drains. (Id. at 17, 23, 25, 28.) When the solvent in the drums became too dirty, workers would dump the used solvent directly into floor drains so that the solvent and residues would flow to the settling chambers. (Id.) Occasionally, these solvent wastes were spread on the parking lot as a dust abatement measure. (See id.) Workers occasionally disposed of excess or waste lubricating oil, as well as methyl chloroform (a degreasing solvent) from the "oil room" by pouring it into the tumbler room drains leading to the settling chambers. (Id. at 28, 39.)

The facility also used a tumbling process to remove burrs, produce specific finishes, and clean oil from metal parts. (See id.) In this process, parts were loaded into a tumbler filled with water, alkaline soap, and a finishing agent, and then spun or vibrated. (Id. at 27.) No degreasing solvents were used in the tumblers. (Id. at 17.) However, like the solvent drums, at the conclusion of a cleaning cycle, the tumblers were emptied onto the floor of the tumbler room, and the waste water would pass through the floor drains and into the settling chambers. (Id.)

In the mid-1970s, the facility began to employ a vapordegreasing machine to clean metal parts. (Id. at 18.) The vapor degreaser was a self-contained unit that removed oils from machined parts by heating solvent to a vapor and causing it to condense on the metal parts; the dripping of the solvent condensate removed oils from the surface of the parts. (Id.) At this same time, the facility switched from disposing of its solvent wastes on site to off-site disposal by contractors. (Id.)

Other operations. The floors of the facility were concrete. (Id. at 18.) Occasional small oil spills on these floors were cleaned up by the application of a product called "Speedi-Dry" which would absorb the spill. (Id.) Since the early 1980s, the Speedi-Dry was swept up and put into 55gallon drums before being removed from the site by a disposal contractor. (Id.) Before this time, however, the oil-laden Speedi-Dry was disposed with the facility's other wastes. (Id.)

The Site also contained a number of underground oil storage tanks, including 8,100 gallon and 10,000 gallon storage tanks for No. 4 fuel oil, and a 15,000 gallon underground quenching oil tank. (Id.) The quenching tank was apparently removed during site renovations in the late 1960s. (Id. at 18-19.)

Haley and Aldrich report. A site investigation report by Haley and Aldrich, an environmental consulting firm eventually retained by Emhart, concluded that a release of volatile organic compounds (VOCs) and petroleum hydrocarbons characteristic of No. 4 fuel oil and cutting and lubricating oils had occurred at the Site. (Defs.' App. LVII, at 37.) The report tentatively identified the source of the release to be the three settling chambers located beneath the facility's east parking lot. (Id.) However, the report also noted the possibility of unspecified discharges or spills of these compounds in the northeast portion of the parking lot. (See id.)

Haley and Aldrich found petroleum hydrocarbon contamination in the sediment in the settling chambers and in groundwater samples taken from test borings and monitoring wells. (Id.) Noting that the investigation had not indicated contamination of groundwater wells located down-gradient from the settling chambers, Haley and Aldrich concluded that contamination by petroleum hydrocarbons was limited to the area immediately surrounding the three settling chambers. (See id.)

The Haley and Aldrich investigation found a number of volatile organic compounds, including DCE, DCA, TCA, TCE, PCE and xylenes in soils from a number of test borings in and around the site's east parking lot. (Id. at 36.). Soil samples contained high concentrations of contaminants, including TCA, 1,1-dichloroethane and 1,1,1-trichloroethane. (Id.)

These site investigations revealed the presence of a "plume" of 1,1,1-trichlorethane underneath the east parking lot of the facility that is migrating off-site. The soil of the east parking lot is also contaminated with oil. (Defs.' App. XXI, at 73.) Contaminants, including oil and solvents from the settling chambers, have apparently migrated from the site, polluting abutting soil, groundwater and bedrock. (Defs.' App. LVII, at 27-34; Steinberg Aff., Defs.' Comp. Vol. 12, Tab D, ¶ 4.)

b. Relevant Policies

Because USM owned the Site for the entire time period relevant to this case, only USM policies need be examined. Given my resolution of Liberty Mutual's motion for partial summary judgment as applied to specific policy periods, the policies at issue for this Site are USM's accident-based CGL policies issued from 1957-69; its occurrence-based CGL policies issued from 1971 onwards; and its excess liability policies issued from 1966-68 and 1972-79. (See generally supra Part IV (insurance policy history).)

c. Procedural History

By letter dated March 6, 1987, Emhart notified the Massachusetts Department of Environmental Protection ("DEP")²⁸ that "there exists a threat of release and there may have been a release of oil or other hazardous materials" at the Whitman site. (Pl.'s App. 24, Tab 8.) On May 10, 1989 DEP sent a written NOR to Emhart pursuant to Mass. Gen. Laws ch. 21E. The NOR warned that if Emhart failed to undertake remediation of the Site, DEP would perform the work with Emhart bearing responsibility for all costs incurred. (Pl.'s App. 24, Tab 8.) DEP further ordered Emhart to prepare a site inspection and investigation, or else DEP would do so at Emhart's expense. (Id.)

28 DEP was formerly known as the Department of Environmental Quality Engineering. For simplicity, I refer to it as DEP throughout this memorandum.

On November 3, 1994 Black and Decker notified Liberty Mutual of its intention to seek coverage for losses sustained at the Whitman site, including costs of responding to DEP's NOR. (Pl.'s App. 24, Tab 8.)

d. Analysis

Liberty Mutual's principal contentions at the Whitman site are that (1) the damage is not covered because the pollution did not arise from an "accident" or "occurrence," and (2) damage occurring after 1971 was neither "sudden" nor "accidental," and did not therefore fall within the exception to the pollution exclusion in the post-1971 policies.

(i) Accident/occurrence

Liberty Mutual argues that the routine and systematic dumping of wastes at the Whitman site cannot be considered an accident or occurrence under the policies. The principles governing the determination of an "accident" or "occurrence" have been analyzed exhaustively above at Part V.B.2.a ("accident" and "occurrence" in Massachusetts). Briefly, both terms cover pollution where the damage was subjectively unintended and unexpected, even if the acts that caused the damage were intentional, and even if the damage was caused by gradual exposure to conditions rather than a discrete event. (See supra Part V.B.2.a.ii.)

Applying these principles to the facts and circumstances of the pollution at the Whitman site, it simply cannot be doubted that the entirety of the pollution was caused by USM's deliberate and routine practice of disposing of its waste water, used solvents, and waste oils into the three unlined settling chambers on the property. There is abundant evidence in the record describing the construction of the settling chambers, their use, and USM's waste handling practices generally, none of which, it goes without saying, would be acceptable today. However, as the law of Massachusetts makes clear, it is not the intent to perform the action which is relevant to the duty to defend, but the intent to do harm. The question which must be asked is whether USM was substantially certain, during the period covered by Liberty Mutual's policies, that the harm alleged in the DEP letter — namely the "release and continuing threat of release of oil and other hazardous materials at and from the site" (Pl.'s App. 24, Tab 9 (emphasis added)) — would result from its disposal practices.

Liberty Mutual points to the deposition testimony of one USM employee, George Hills. (Hills Dep., Defs.' App. LVII, at 63-64, 77.) Hills testified that during his employment at the Whitman facility he wore gloves and goggles, particularly when handling waste water containing caustic soda, which would burn when it came into contact with skin. (Id. at 64.)

This testimony is insufficient to establish that USM had subjective knowledge of the likelihood of environmental harm caused by its disposal practices. First and most obviously, the pollution alleged in the DEP NOR was based on findings of chlorinated solvents and oil in the soil, groundwater and bedrock — not the presence of caustic soda. Second, and more generally illuminating, nothing in the record indicates that Hill'soccupational precautions regarding caustic soda in any way reflect USM's understanding of the environmental harm its waste disposal practices could cause.

Countering the implication which Liberty Mutual attempts to draw from Hills' testimony, Black Decker offers the affidavit of Michael Bonchonsky, an expert in hazardous waste disposal practices. (Bonchonsky Aff., Defs.' App. XCIX, reprinted in Defs.' Comp. Vol. 1.) Bonchonsky specifically challenges Liberty Mutual's claim that Hills' use of goggles and gloves suggests any awareness of the polluting characteristics of chlorinated solvents in use at the site during this period. (Id. ¶ 7, at 18.) Indeed, according to Bonchonsky, imputing knowledge of the environmental dangers to USM based on Hills's conduct is misguided because USM's practices were in line with the "state of the art" at the time. (Id.) Bonchonsky stated that, until approximately the mid 1980s, the fate and transport of chlorinated solvents, such as TCE and TCA, in soil and groundwater were little understood. (Id. at 8.) Institutions such as the American Insurance Association and the American Society for Testing Materials recommended disposing of chlorinated solvents by dumping the solvent sludges on dry land in the expectation that the solvents would "air dry and rapidly dissipate into the air." (Id. ¶ 2, at 16.)

Moreover, Bonchonsky stated, to the extent that these institutions had any concerns about the handling and disposal of these wastes — as reflected in manuals such as the 1962 Handbook of Vapor Degreasing published by the American Society for Testing Materials — their concerns were directed to the need to avoid contact with solvent vapor and to minimize the risk of fire. Thus, the American Insurance Association's 1967 Chemical Hazards Bulletin explained that disposal of chlorinated hydrocarbon wastes should not be "discharged into drains or sewers where there is a danger that the vapor may be ignited." (Chemical Hazards Bulletin at 41, Defs.' App. XCIX, Ex. (emphasis added.)) It recommended instead that wastes should be "poured onto dry sand, earth, or ashes, then cautiously ignited." (Id.) The Handbook of Vapor Degreasing describes essentially the same concern, and technique, for minimizing risk of fire. (Handbook of Vapor Degreasing at 32-33, Defs.' App. XCIX, Ex.) Similarly, the 1954 National Safety Council's Data Sheet: Cleaning Machinery and Electric Motors reiterates these fire concerns and states that nonflammable "strong chemical solutions should preferably be disposed of in a dump where they will sink into the earth. . . . If disposed of in a sewer, they should be diluted in large amounts of water and then rinsed down with a continuous stream of water so that the chemicals will be diluted." (Pl.'s App. 30, Tab 25, at 6 ¶ 47.)²⁹

29 The National Safety Council Data Sheet was included in a 1954 letter from a Council employee to a Farrel-Birmingham Co. employee in response to the latter's inquiry about the use of carbon tetrachloride in cleaning machinery at Farrel sites in Connecticut. (Pl.'s App. 30, Tab 25, at 1.) Carbon tetrachloride was not used at the Whitman site at any time, but the excerpt nevertheless illustrates the state of knowledge of, and advice dispensed by, responsible and independent safety-minded experts in the area of solvent disposal.

I conclude that the evidence in the record before me does not show that USM knew to a "substantial certainty" that its practice of disposing of its used solvent and wastewater into the unlined settling chambers would harm the environment. USM's practices, admittedly benighted, were in conformance with the prevailing industry standards and knowledge regarding the handling and disposal of these wastes. Liberty Mutual has not offered evidence that anyone at USM, except perhaps employee Hill, knew of the likely deleterious consequences of their actions, and Hill speaks only to concern for occupational hazards.

The damage from the seepage of solvents and wastewater from the Whitman settling chambers qualifies as an "accident" under the rubric of "continuous or repeated exposure to conditions." The damage to the soil, bedrock, and groundwater of the Site, as well as off-site property, occurred over time, likely dating to the construction of the settling chambers in the mid to late 1950s. The alleged "plume" of hydrochlorinated solvent which now threatens adjoining property accumulated over years of releases. In this respect, the Whitman site and adjacent property can be said to be injured by repeated exposure to conditions resulting from the disposal of the solvent and other wastes into the settling chambers.

Based on these determinations, I conclude that Liberty Mutual had a duty to defend Black Decker under the CGL policies covering the years 1957-69.³⁰

30 The owned property exclusion does not apply to the Whitman site. The NOR described "release and continuing threat of release of oil and other hazardous materials at and from the site." (emphases added). This avoids the owned property exclusion because it alleges contamination of property other than that owned by USM. (See supra Part V.C.3.a.)

(ii) Pollution exclusion

Although the damage was an "accident" for purposes of the primary coverage clause, it was not "sudden and accidental" for purposes of the exception to the pollution exclusion. I find that USM's routine operational practice of discharging wastes into the unlined settling chambers was precisely the sort of risk that the insurance industry wished to avoid in drafting the pollution exclusion clause, and that it fell entirely within the scope of that clause in the Liberty Mutual policies. Perhaps recognizing this problem, Black Decker has neither argued nor offered evidence to suggest that the post-1971 pollution at the Whitman site was sudden and accidental, and I conclude as a matter of law that it was neither.³¹

31 Black Decker argues that, even if the pollution exclusion eliminates Liberty Mutual's duty to defend USM on the post-1971 policies, summary judgment should not issue because the presence of the pollution exclusion in these latter policies raises the question of Liberty Mutual's ability to allocate its duty to indemnify Black Decker across a number of policies. I do not see how this can be so: if the pollution exclusion excludes coverage for the damage after 1971, then a duty to indemnify does not arise from these policies. Consequently, any allocation of the duty to indemnify (if any) would not encompass coverage from these policies.

e. Partial Summary Judgment Decision

Black Decker's motion is GRANTED as to damage occurring during the 1957-69 policy years. Liberty Mutual's motion is GRANTED as to damage occurring during the post-1971 policy years.

3. W.W. Cross Jaffrey, N.H. Site

a. Facts

(i) Corporate history

W.W. Cross, Inc., a New Hampshire-based company located in Jaffrey, New Hampshire, was a manufacturer of metal tacks, nails, and staples. Between approximately 1920 and June 1956, W.W. Cross was a division of USM. (Lutkus Aff. ¶ 23, Defs.' App. XCIV, Tab 4.)

Effective June 15, 1956, USM sold W.W. Cross to Plymouth Cordage Company, a predecessor to PCI. (Lutkus Aff. ¶ 20, Pl.'s App. 9, Tab 1, at 8.) In 1966, Plymouth Cordage Co. merged with Emhart Corporation in 1966, resulting in W.W. Cross becoming a division of Emhart. (Id. ¶ 21.)

In 1975, pursuant to a purchase agreement, Emhart sold to PCI, among other assets, its W.W. Cross division. (Id. ¶ 22.) PCI was a Massachusetts corporation, with its primary offices in New Bedford, Massachusetts. (PCI CGL Policy, Pl.'s App. 3, Tab 1.) During the relevant time period, PCI was in the business of manufacturing shoe machinery and industrial eyelets, including shoe tacks, nails and staples.

W.W. Cross remained a subsidiary of PCI and was covered under its policies until 1982, when USM purchased all of PCI's outstanding stock and capital, thus regaining ownership of W.W. Cross. (Lutkus Aff. ¶ 23.) In 1987, after USM's merger into EII, EII sold all of the assets and business of the former PCI, including the W.W. Cross division, to a new corporation, also named PCI Group, Inc. ("New PCI Group"). (Id. ¶ 28.) The sale agreement provided that EII would retain environmental liabilities pertaining to (among others) the W.W. Cross site, and indemnify New PCI Group against liabilities arising from shipment of hazardous materials from the W.W. Cross site to other sites. (Id. ¶ 28). In 1991, New PCI Group sold W.W. Cross to D.D. Bean Sons Co. ("D.D. Bean"). (Defs.' App. LIX, at 004.)

(ii) Site history

The W.W. Cross facility generated wastes from cyanideelectroplating, steel finishing, and other manufacturing operations. These wastes included wastewater, sludges, spent solvents, pickle liquor, and waste tacks. The Site's environmental contamination emanated from two sources: a pile of discarded metal ("the tack pile") about 150 feet by 100 feet by three feet, and an unlined disposal lagoon about 100 feet by 40 feet by three feet. (Defs.' Resp. to Int., Tier I Apx., Pl.'s App. 8, Tab 1, at 53, 60.)

The tack pile was used from the early part of the century until the mid 1970s, at first mainly for scrap tacks and nails. Later, electroplating waste, spent kerosene, cyanide-contaminated sludges, and other plant waste were deposited on the pile. During winter months, a pipe carrying wastewater to the lagoon often froze and ruptured, discharging cyanide-contaminated wastewater into the tack pile. The main contaminant in the tack pile is cyanide. (Id. at 53-54; Morton Dep., Pl.'s App. 16, Tab 2, at 73-78.)

The lagoon was used from the 1940s until December 1982 for the plant's liquid manufacturing wastes, collected from floor drains. Suspended solids accumulated at the bottom of the lagoon, which was at times filled with water and at times dry. After the late 1970s, some, but not all, of the cyanide from brass plating wastes was neutralized before discharge into the lagoon. The groundwater in the area is now contaminated by cyanide, solvents, and other pollutants. (Defs.' Resp. to Int., Tier I Apx., Pl.'s App. 8, Tab 1, at 60; Morton Dep., Pl.'s App. 16, Tab 2, at 86, 107-08.)

b. Relevant Policies

W.W. Cross was covered by USM policies from 1930-56, and PCI policies from 1975-81. Given my resolution of Liberty Mutual's motion for partial summary judgment as applied to specific policy periods, the policies at issue for this Site are USM's accident-based CGL policy in effect from May 18, 1956 (when property damage was added to USM's policy) to June 15, 1956 (when USM divested itself of W.W. Cross); PCI's 1981 CGL policy; and PCI's excess liability policies from 1979-81. (See generally supra Part IV (insurance policy history).) The pollution exclusion in PCI's 1981 policy does not apply in New Hampshire. (Deletion Endorsement, Defs.' App. XII, at 13.)

c. Procedural History

(i) The lagoon

W.W. Cross closed the lagoon as part of a voluntary agreement with the State of New Hampshire. Shortly after Emhart acquired PCI (and with it, W.W. Cross) in 1982, Emhart contracted with an environmental consulting firm to study the W.W. Cross site. Emhart became aware that the site was not in compliance with RCRA, because it had not implemented a groundwater monitoring program. (Defs.' Int. Resp., Tier I Apx., Pl.'s App. 8, Tab 1 at 64.) Emhart immediately notified the New Hampshire Office of Waste Management that the site was not in compliance. Emhart and the State entered into negotiations that culminated in the State issuing a letter setting forth terms and conditions of a compliance and closure plan. (Id.) W.W. Cross stopped discharging hazardous waste into the lagoon in December 1982, and in April 1983 Emhart and the State reached agreement on a closure plan. (Id. at 60, 64; Defs.' App. LXXXIX, at 257.)

(ii) The tack pile

W.W. Cross remediated the tack pile in response to an order by the State of New Hampshire requiring remediation and against the background of PRP liability. In 1985, EPA sent W.W. Cross an apparently routine request for information concerning solid waste management units on the property. (Hohman Letter, Defs.' App. LXXXIX, at 222-26.) Emhart (W.W. Cross's parent company at the time) responded by letter and identified two solid waste management units, one of which was the tack pile. (Blatz Letter, Defs.' App. LXXXIX, at 242-46.)

Approximately eight years later, the New Hampshire Department of Environmental Services ("NHDES"), the successor to the state Office of Waste Management, began an investigation of the tack pile based on W.W. Cross's responses to EPA's queries. In December 1993, NHDES informed W.W. Cross (no longer owned by any defendant in this case) that the tack pile had the potential to "contaminate groundwater or pose other unacceptable risks to human health and the environment," and required submission of a work plan to study the tack pile's waste characteristics. (Zeppieri Letter, Defs.' App. LXXXIX, at 44.) W.W. Cross's then-current corporate owner, D.D. Bean, advised EII of the NHDES letter, and demanded that EII (now under Black Decker's ultimate ownership) assume responsibility under the 1987 sale agreement. (Defs.' Int. Resp., Tier I Apx., Pl.'s App. 8, Tab 1, at 59.)

In April 1994, NHDES informed Black Decker that it was a PRP under the New Hampshire version of CERCLA. (Defs.' App. LXXXIX, at 47-48; Defs.' App. LXXXIX, at 44-46.) In December 1994, NHDES ordered Black Decker to remediate the tack pile. (Defs.' App. LXXXIX, at 151-53.)

There is some dispute about when Black Decker (or its subsidiaries) first presented a claim for coverage for costs arising from the W.W. Cross site. An internal Liberty Mutual document indicates that, on January 27, 1995, Liberty Mutual received notice on a claim under PCI's 1981 policy.³² (Defs.' App. LXXXIX at 297.) On the other hand, Black Decker elsewhere states that it presented its claim in September 1995. (Defs.' Answer Counterclaim, Pl.'s App. 7, Tab 2, at 83.)

32 Black Decker also asserts that a November 1994 letter to Liberty Mutual described the claim, but does not provide a citation to the record by which such a letter can be found. Consequently, this assertion will be ignored.

d. Analysis

(i) Suit The lagoon. Liberty Mutual argues that it had no duty to defend W.W. Cross with respect to the lagoon closure because there was no "suit" as the policy requires. According to Liberty Mutual, the lagoon closure process was entirely voluntary and no suit, or the functional equivalent of one, was involved.

The W.W. Cross lagoon closure was not initiated in response to a PRP letter or other coercive letter from a government agency. In fact, the insureds initiated the communication with the State. (Defs.' Int. Resp., Tier I Apx., Defs.' App. 8, Tab 1 at 64.) However, I must focus not on W.W. Cross's original communication to NHDES disclosing the violation, but rather on NHDES's subsequent communications to W.W. Cross. (See supra Part V.A.1.a.v (applying suit requirement to settlements, and emphasizing that court must analyze government's communication to insured to determine whether it was coercive).)

Unfortunately, these communications do not appear to be part of the record; Black Decker describes these communications in its response to interrogatories (see Defs.' Int. Resp., Tier I Apx., Defs.' App. 8, Tab 1 at 64) but does not cite any portion of the record containing the actual letters. Without these letters, nor any secondary evidence sufficient under the best evidence rule to prove their contents, I cannot know whether the letters were polite requests or coercive orders. Even viewing the facts in the light most favorable to Black Decker, as I must for purposes of Liberty Mutual's motion for summary judgment, there is simply no evidence that NHDES's letters contained any element of coercion.³³

33 Other than the response to Liberty Mutual's interrogatory, I have not found any portion of the record where Black Decker makes any representations about the contents of its correspondence with NHDES concerning the lagoon. If there is such a representation somewhere in the record, it appears neither in Black Decker's Statement of Material Facts under D. Mass. R. 56.1, nor in any of Black Decker's briefs.

Black Decker also suggests that a 1985 information request letter from EPA to W.W. Cross triggered the duty to defend with respect to the lagoon. (See Hohman Letter, Defs.' App. LXXXIX, at 222-26.) The letter, which appears on its face to be a mass mailing to regulated land disposal units, requested W.W. Cross to provide certain information within forty-five days. To establish the letter's coercive effect, Black Decker points to a sentence on the fourth page of the letter warning that "[f]ailure to comply with the above request within forty-five (45) days of receipt of this letter may result in an enforcement action by EPA, including the assessment of penalties." (Id. at 225 (emphasis in original)).

I find that this is a paradigmatic "information request" letter. (See supra Part V.A.1.a.iv.) It does not qualify as a "suit" because it merely requests information with a threat of penalties for nonresponse, and does not allege any damage under the policy. Since Black Decker, as the insured, has the burden of proving that it met the elements of coverage required by the policy, Black Decker must establish that there was a "suit," or the functional equivalent of one. Because there is insufficient evidence to raise a genuine dispute of material fact as to whether NHDES's letters triggered the duty to defend under theHazen Paper line of cases, Black Decker has not met the burden of production, let alone persuasion. I therefore find that Black Decker has failed to establish the existence of a "suit" regarding the lagoon.³⁴ The tack pile. The correspondence regarding the tack pile establishes a suit. NHDES's April 1994 letter informed Black Decker that it was a PRP under the New Hampshire version of CERCLA with respect to damage from the tack pile. (Defs.' App. LXXXIX, at 44-48.) NHDES's December 21, 1994 letter alleged an existing release of cyanide from the tack pile and ordered remediation. (See Zeppieri Letter, Defs.' App. LXXXIX, at 151-53.) This correspondence therefore satisfies the suit requirement.

34 The "suit" (PRP letter) regarding the tack pile did not extend to the lagoon, because the letter specifically limited its remedial focus to the tack pile. (See Zeppieri Letter, Defs.' App. LXXXIX, at 151-53.)

(ii) Accident/occurrence

The question is whether there is evidence supporting the proposition that W.W. Cross knew to a "substantial certainty" that its waste disposal practices would damage its own property and adjacent property. In support of this theory, Liberty Mutual points to testimony by John Morton, a W.W. Cross employee and former plant engineer, concerning occupational safety precautions taken by W.W. Cross employees.

Morton testified that employees in the zinc and brass plating processes wore "lightweight chemical suits, gloves and face shields" pursuant to a plant safety rule to avoid contact with acid and cyanide. (Morton Dep., Pls.' App. 16, Tab 2, at 33, 43.) Morton also testified that he understood at the time that "[i]ngestion [of cyanide] could be fatal." (Id. at 44.) He also testified that there was a "bluish" sludge on the surface of the lagoon when it was dry, and that rust and soil staining were evident on the ground near the tack pile. (Id. at 86, 93.) Another W.W. Cross employee, Arthur Christian, who retired in 1975, testified that he wore gloves in the pickling room to protect his hands from acid. (Christian Dep., Defs.' App. LXXXIX, at 16, 20.)

This does not demonstrate that W.W. Cross had subjective knowledge of the likelihood of environmental harm caused by its disposal practices. Nothing in the record indicates that the plant's occupational precautions in any way reflect W.W. Cross's understanding of the harm its waste disposal practices could cause to the environment. Mr. Christian's concern about wearing gloves in the pickling room centered on the risks of developing a fungal infection. (Christian Dep., Defs.' App. LXXXIX at 20.) Furthermore, Mr. Morton, who did testify as to the visible effects of the company's waste disposal, did not begin working at W.W. Cross until 1974. (Morton Dep., Defs'. App. LIX, at 230.) Liberty Mutual has not offered any evidence to suggest that what Mr. Morton knew about cyanide in the 1970s was known to W.W. Cross in the 1950s, or that the sludge, rust, and soil staining that he observed in the 1970s were visible in the 1950s. Finally, Mr. Morton testified that, before Emhart acquired W.W. Cross in 1982, there was "no concern" at W.W. Cross that the lagoon would overflow with sludge, or that liquid effluent would seep into groundwater. (Id. at 298-99.) Even then, W.W. Cross apparently did not realize the environmental risks of these practices, only that they were subject to environmental laws. (Id. at 296-97, 298-99.) The evidence in the record does not show that W.W. Cross knew to a substantial certainty that its practice of disposing of its tacks, nails, spent kerosene, and other waste into the tack pile would harm the environment. Liberty Mutual has not offered evidence that anyone at W.W. Cross knew of the likely environmental consequences of their actions.

Turning to the PCI policy period, I will set forth a brief timeline of events so that PCI's coverage may be compared to the dates of any alleged "occurrences." PCI acquired W.W. Cross on July 1, 1975. (Lutkus Aff. ¶ 22, Pl.'s App. 9, Tab 1, at 9.) Liberty Mutual's CGL coverage of PCI began possibly as early as October 1, 1979, but in any event no later than October 1, 1981. The question is whether any covered "occurrence" at W.W. Cross happened during a period of insurance coverage.

The record indicates that disposal of hazardous wastes into the tack pile started sometime around World War I, and concluded in 1982. According to W.W. Cross employees, waste tacks, nails, and other scrap metal were deposited onto the pile until either the "mid or late 1970's" (Sands Aff. ¶ 9, Defs.' App. LXXXIX, at 8), or 1974 (Morton Dep., Pl.'s App. 16, Tab 1, at 73.) Spent kerosene continued to be deposited onto the tack pile until some point between 1974 and 1980. (Morton Dep., Pl.'s App. 16, Tab 1, at 74.) Finally, plant effluent, including plating, metal cleaning, and pickling wastes, spilled out onto the tack pile area during wintertime for every year from the winter of 1974-75 until use of the lagoon was discontinued in December 1982. (Id. at 75-76; Defs.' Int. Resp., Pl.'s App. 8, Tab 1, at 60, 64; Defs.' App. LXXXIX, at 257.) Although all of these statements were made by current or former W.W. Cross employees, Liberty Mutual does not dispute any of them, and can be deemed to have admitted them. See generally D. Mass. R. 56.1.

Mr. Morton's uncontradicted testimony was specific enough to establish that spillage from the plant's discharge pipe into the tack pile or soil around it occurred every winter from the 1970s until the lagoon was closed in December 1982. Thus, damage caused by metal plating wastes, pickling wastes, and other plant effluents would fall under the entire period of PCI's CGL coverage with Liberty Mutual, both the disputed 1979 and 1980 policy periods and the undisputed 1981 policy period. Therefore, I find, first, that Black Decker has adduced enough evidence to avoid summary judgment on the question of coverage for spilled plant effluent between October 1, 1979 and October 1, 1981; and, second, that Black Decker has provided enough evidence to establish as a matter of law that plant effluent was spilled between October 1, 1981 and October 1, 1982.

I must now compare these facts to the definition of "occurrence" under the policy. I find that the NHDES PRP letter concerning the tack pile set forth allegations that suffice to state a claim within PCI's 1981 CGL policy coverage. The allegations in the letter are "reasonably susceptible," SCA Servs., 419 Mass. at 532, to an interpretation that states a claim under the policy. The letter raises "a possibility that the liability claim falls within the insurance coverage," id. (quoting Sterilite, 17 Mass. App. Ct. at 319). Thus, I find that Liberty Mutual had a duty to defend PCI from claims arising from damage occurring during the 1981 policy period.

(iii) Notice

Because of my dispositions of claims arising from the lagoon, I need only address whether notice of the W.W. Cross tack pile pollution and claims arising from it were prejudicially late.³⁵ In this case, there are two contractual duties dealing with notice, one for occurrences and one for suits or claims filed against the insured. Notice of occurrences must be "as soon as practicable," and notice of suits must be "immediate." (1956 USM Policy, Pl.'s App. 1A, Tab 3, at 65; 1981 PCI Policy, Defs.' App. XII, at 4.)

35 I do note that EII and the State of New Hampshire agreed on a closure plan for the lagoon in 1983, yet no claim was made for W.W. Cross-related coverage until 1995. Were the duty to defend Black Decker from lagoon-related proceedings still at issue, Liberty Mutual might have a persuasive argument that, had it been informed during (rather than twelve years after) negotiations, it could have reduced the expenses of both the defense and the remediation costs.

To review, the release of wastes to the tack pile stopped in three phases between the 1970s and 1982. Sometime before 1974, W.W. Cross stopped discarding scrap tacks and other metal onto the pile. Sometime between 1974 and 1980, W.W. Cross stopped dumping spent kerosene onto the pile. There is some evidence that this practice was stopped at the instigation of Emhart attorneys and engineers, perhaps recognizing environmental risks. (See Morton Dep., Defs.' App. LIX, at 289-90.) Finally, the release of liquid plant wastes from the lagoon discharge pipe ended when the plant stopped discharging into the lagoon, in 1982. This, too, was suggested by Emhart. (Id. at 296-97, 298-99.)

Regulatory correspondence began in 1985 with an apparently routine request from the EPA. The record does not indicate that anything relevant happened from 1985 until December 1993, when NHDES sent W.W. Cross a letter warning it that the tack pile had the potential to "contaminate groundwater or pose other unacceptable risks to human health and the environment," and requiring a work plan to study the tack pile's waste characteristics. In April 1994, NHDES informed Black Decker that it was a PRP, and in December 1994, NHDES ordered Black Decker to remediate the tack pile. Black Decker presented an insurance claim possibly as early as January 1995, and undisputedly by September 1995.

Thus, the record as it stands shows that the insureds werepossibly aware of the environmental damage arising from the tack pile as early as 1980 (by which point kerosene dumping ceased), more likely by 1982 (when discharges through the pipe to the lagoon ceased), and certainly by 1993, when NHDES correspondence on the tack pile began. A claim for insurance was tendered in either January or September 1995.

I find the language from Hoechst Celanese particularly apposite here: "The nature and causes of environmental threats may not be instantly apparent. The contemplated costs of cleanup may vary as findings are progressively made. . . . The attitudes and requirements of regulatory agencies are not constant and the changes and variations must affect the estimates." 43 Mass. App. Ct. at 474. The evidence here indicates a gradual escalation of the problem in W.W. Cross's eyes. In the 1970s, it seemed sufficient simply to stop deliberately dumping waste on the tack pile; in the 1980s, closing the lagoon seemed sufficient. Only in late 1993, after an apparent eight year silence from EPA and NHDES, did it become apparent that a costly cleanup would be involved. Furthermore, Liberty Mutual has presented virtually no evidence of actual prejudice in the form of lost evidence, forgetful witnesses, or the like. Under these circumstances, I cannot say that the delay was unreasonable as a matter of law,

As to the "suit" (actually a PRP designation), the insureds apparently became aware in April 1994. A claim for insurance was tendered in either January or September 1995. Measured against the standard of "immediately" notifying Liberty Mutual, as required by the policy, this seems like a long delay. Again, however, Liberty Mutual has shown no actual prejudice. Here, too, I cannot say as a matter of law that the delay was unreasonable.

e. Partial Summary Judgment Decision

As to the lagoon, Liberty Mutual's motion for summary judgment is GRANTED.

As to the tack pile, Black Decker's motion for summary judgment is GRANTED as to the USM CGL policy in effect from May 18, 1956 to June 15, 1956, and PCI's 1981 policy.

4. Jaffrey, NH Landfill Site

a. Facts

The Jaffrey, New Hampshire Sanitary Landfill is an approximately twenty-four acre facility, owned by the Town of Jaffrey, that operated from sometime before 1960 until 1991, when it was closed. (Olson Letter, Defs.' App. LIX, at 188.)

W.W. Cross deposited waste at the landfill from the mid-1970s until its closure. (Morton Dep., Pl.'s App. 26, Tab I4 at 37-38; Maki Dep., Defs.' App. LIX, at 199; Olson Letter, Defs.' App. LIX, at 188.) In some instances, waste was transported from the W.W. Cross site to the landfill by outside contractors; in other instances, W.W. Cross employees took waste directly to the landfill. The primary outside hauler was Monadnock Disposal, which transported sawdust from W.W. Cross to the landfill. (See Morton Dep., Pl.'s App. 26, Tab I4, at 37-39.) On other occasions, W.W. Cross employees came to the landfill with trash including metal (such as tacks and staples) and other undetermined wastes. (Defs.' App. LIX, at 198.)

In 1983, NHDES began to inspect the landfill, and in January 1985, it discovered high levels of volatile organic compounds in groundwater. (Id. at 188.) In November 1991, the landfill was closed after NHDES refused to renew its permit. (Id. at 189).

b. Relevant Policies

Because W.W. Cross began to deposit waste at the landfill in the 1970s, and given my resolution of Liberty Mutual's motion for partial summary judgment as applied to the 1979-80 PCI policies, the only policy at issue on summary judgment is PCI's 1981 CGL policy.

To be sure, the record contains some ambiguity as to whether USM or PCI policies are involved, or both. W.W. Cross deposited waste at the landfill from the mid-1970s until its closure in 1991. (Morton Dep., Pls.' App. 26, Tab I4, at 37-38; Maki Dep., Defs.' App. LIX, at 199; Olson Letter, Defs.' App. LIX, at 188.) This would suggest that PCI is the relevant insured, because this interval does not contain a period when USM both owned W.W. Cross and also was insured by Liberty Mutual. (See Olson Letter, Defs.' App. LIX, at 184.)³⁶

36 However, there is also evidence that EII pursued its claim under USM's policies. (Id. at 189-90.) I do not view USM's policies to be relevant, since USM did not not come to re-own W.W. Cross until 1982, when it was not insured by Liberty Mutual. It did not become insured by Liberty Mutual again until 1988, when it had already sold W.W. Cross to New PCI Group.

c. Procedural History

Emhart assumed liability for hazardous waste disposal at the Jaffrey Landfill in response to a cross-complaint by another potentially responsible party. In 1993, the Town of Jaffrey sued New Hampshire Ball Bearing ("NHBB"), a company not apparently related to any party in this case, for costs incurred as a result of NHBB's disposal of hazardous wastes in the landfill. (See Complaint, Town of Jaffrey v. New Hampshire Ball Bearing, Civ. No. 93-49-JD (D.N.H.), ¶ 9, Pl.'s App. 26, Tab I1).

NHBB impled W.W. Cross, alleging that W.W. Cross had disposed of hazardous waste at the landfill between 1975 and 1990. (Third Party Complaint, Town of Jaffrey v. Town of Fitzwilliam, Civ. No. 93-49-JD (D.N.H.), Pl.'s App. 26, Tab I2). W.W. Cross sought indemnity from New PCI Group (Defs.' Resp. to Int., Tier II Apx., Pl.'s App. 8, Tab 1, at 31), which no longer owned Cross, having sold it to D.D. Bean in 1991. (Defs.' App. LIX, at 4.)

However, New PCI Group claimed to be subject to potential liability in the CERCLA action. (PCI Demand Letter, Defs.' App. LIX, at 1-2.) New PCI Group sought indemnity from EII. (Defs.' Resp. to Int., Tier II Apx., Pl.'s App. 8, Tab 1, at 31). EII agreed to defend W.W. Cross, and eventually settled the third-party complaint for $4,500, which EII paid. (Id. at 31-32.)

In January 1995, apparently before settling the third-party complaint, EII presented a claim to Liberty Mutual for both defense costs and any damages from the underlying litigation, based on USM's coverage. (Defs.' App. LIX, at 163-82.) In August 1995, by which time the third-party complaint had settled, Liberty Mutual denied the claim on a variety of grounds, most of which it asserts in this action and which are discussed below. (Id. at 188-92.)

d. Analysis

(i) Suit

The proceedings involving W.W. Cross at the Jaffrey Landfill do not satisfy the suit requirement. The Town of Jaffrey's underlying complaint was filed against NHBB, D.D. Bean, and three New Hampshire towns. (See Consolidated Complaint, Town of Jaffrey v. Town of Fitzwilliam, Civ. No. 93-49-JD (D.N.H.), Defs.' App. LIX, at 63.) In 1993, D.D. Bean owned W.W. Cross. W.W. Cross formally entered the litigation at that time when NHBB impled it. (See Third-Party Complaint, Town of Jaffrey v. Town of Fitzwilliam, Civ. No. 93-49-JD (D.N.H.), Defs.' App. LIX, at 36-48.) It is worth repeating that neither USM, PCI, Emhart, EII, or New PCI Group were named as defendants to any aspect of this action.

The problem lies in the chain of liability. It will be helpful to recall that the December 1987 agreement between EII and New PCI Group, in which EII sold W.W. Cross to New PCI Group, also created a duty in EII to indemnify New PCI Group against environmental liabilities on the W.W. Cross site. (Lutkus Aff. ¶ 28; Tames Letter, Defs.' App. LIX, at 1.) It will also be helpful to recall that, in 1991, as part of New PCI Group's sale of W.W. Cross to D.D. Bean, New PCI Group assigned "certain indemnity obligations" from EII to D.D. Bean, and EII consented to this assignment. (Bell Letter, Defs.' App. LIX, at 4.) Thus, by 1991, EII owed a duty of indemnification to D.D. Bean for environmental liabilities at the W.W. Cross site that originated before the sale of W.W. Cross to New PCI Group in 1987.

The record contains a letter to EII from counsel for New PCI Group, which was not a defendant, giving notice under certain paragraphs of an agreement that has not apparently been included in the record. There is no evidence in the record to show whether any claim had been made against New PCI Group; indeed, New PCI Group's letter simply referred to a "potential claim." (Tames Letter, Defs.' App. LIX, at 1 (emphasis added).) This does not establish a suit. (See supra Part V.A.1.a.iii.)

Black Decker argues in the alternative that the first party complaint in the underlying action satisfies the "suit" requirement. No defendant in the first party complaint was ever insured by Liberty Mutual, although D.D. Bean owned W.W. Cross at the time of the suit, having purchased it from New PCI Group in 1991. The Town alleged that defendants D.D. Bean and NHBB had deposited hazardous waste at the landfill from approximately 1975 to 1990. (See Tames letter ¶¶ 15-16, Defs.' App. LIX, at 66.)

In NHBB's third party complaint, it impled W.W. Cross, alleging that W.W. Cross had disposed of hazardous waste at the landfill between 1975 and 1990. (Third Party Complaint, Town of Jaffrey v. Town of Fitzwilliam, Civ. No. 93-49-JD (D.N.H.), Defs.' App. LIX, at 36.) In particular, NHBB alleged that W.W. Cross is a "person or successor to persons" liable under CERCLA for transporting waste to the landfill. (Third Party Complaint, Town of Jaffrey v. Town of Fitzwilliam, Civ. No. 93-49-JD (D.N.H.), Defs.' App. LIX, ¶ 41, at 44.) Black Decker argues that this phrase essentially implicates PCI for the period of its insurance coverage. In other words, since the third-party complaint alleges that W.W. Cross is a "successor to persons" who, by the terms of the first-party complaint, deposited waste at the landfill between 1975 and 1990, and since PCI was one of those persons, it is as if PCI (or, more precisely, EII or Black Decker, which have succeeded to all of PCI's rights) were sued. This is incorrect; if NHBB's third-party complaint had, of its own force, somehow made EII (or Black Decker) into a defendant, then EII could have successfully moved to dismiss the ersatz "suit" for lack of service. See Fed.R.Civ.P. 12(b)(5). The third party complaint alleged that W.W. Cross might be a successor to a liable generator of hazardous waste, but did not actually state any claim against W.W. Cross's predecessors.

Black Decker's final theory is that, because of its agreement to indemnify and hold harmless New PCI Group, and later D.D. Bean, it "stood in the shoes" of D.D. Bean, and was the "real party in interest" in NHBB's action against D.D. Bean. However, an indemnity agreement cannot create a "suit" against the insured where none would otherwise exist. (See supra Part V.A.1.a.iii.) By the terms of the policy, Liberty Mutual is only obliged to defend suits "against the insured." (1981 PCI CGL Policy, Defs.' App. XII, at 1.) No party that can fairly claim to be a Liberty Mutual insured — USM, Emhart, EII, PCI, or Black Decker — was sued by anyone in this action. The suit named W.W. Cross and D.D. Bean. Neither W.W. Cross nor D.D. Bean impled any insured.

Black Decker argues that it was not necessary for W.W. Cross or D.D. Bean actually to sue it, because it had an obligation (which it fulfilled) to indemnify and hold harmless D.D. Bean from liability for environmental harms arising from conduct preceding the sale of W.W. Cross to New PCI Group. However, PCI's policy explicitlyexcludes "liability assumed by the insured under any contract or agreement except an incidental contract." (Id.) I conclude that Liberty Mutual had no duty to defend any party other than an insured from suit, and no duty to defend any insured that was not itself sued.

(ii) Occurrence

My disposition of this matter makes unnecessary an inquiry into whether the claims in NHBB's suit are reasonably susceptible of an interpretation that they state a claim under the coverage of the policy. That said, it appears that they do, and to the extent that it will aid the parties in understanding the principles of law that I will apply in this case, I provide my analysis.

First, Liberty Mutual argues that there is no coverage for the Jaffrey Landfill because the "property damage" at the landfill could not possibly have been connected to the wastes deposited there by W.W. Cross during the period in which it fell under PCI's policy. Liberty Mutual compares the Town of Jaffrey's complaint in the underlying litigation, which alleges harm primarily (though not exclusively) from "oils, solvents, [and] other hazardous waste," to a deposition of a W.W. Cross executive, John Morton, who testified that the only waste that W.W. Cross shipped to the Jaffrey Landfill via its hauler, Monadnock Disposal, was sawdust. (See Morton Dep., Pl.'s App. 26, Tab I4, at 39, 97-98.)

Liberty Mutual mischaracterizes the record by ignoring wastes that were transported directly to the landfill by W.W. Cross employees, rather than by Monadnock Disposal. Indeed, Liberty Mutual's counsel carefully couched his questions to Mr. Morton by only asking about wastes "hauled by Monadnock Disposal." (See Pl.'s App. 26, Tab I4, at 38-39.) Richard Maki, an occasional employee of the landfill, testified that W.W. Cross employees "came in quite frequently" with trash including metal (such as tacks and staples) and other undetermined wastes. (Defs.' App. LIX, at 198.) Therefore, were there a suit under the policies, there would be a genuine issue of material fact as to whether W.W. Cross deposited hazardous wastes at the Jaffrey Landfill during a policy coverage period.

Liberty Mutual also asserts that the damage at the Jaffrey Landfill could not possibly qualify for coverage because, as a matter of law, transporting waste to a landfill is not an "accident" or "unexpected" occurrence. This argument is foreclosed by Nashua, 420 Mass. at 196. (See supra Part V.B.2.a.iii.) While W.W. Cross's conduct in transporting wastes to the Jaffrey Landfill was surely intentional, Liberty Mutual has advanced no evidence that the damage caused to the environment in and around the landfill was "expected from the standpoint of the insured." Perhaps Liberty Mutual could establish at trial that W.W. Cross expected damage to the environment from depositing wastes at the landfill, but, as inNashua, Liberty Mutual is not entitled to summary judgment on this point.

e. Partial Summary Judgment Decision

Liberty Mutual's motion is GRANTED as to the Jaffrey landfill.

5. Beverly, MA Site

a. Facts

The Beverly site is a ninety-five acre parcel in Beverly, Massachusetts, adjoining the Bass River. (Pl.'s Bev. Ex. 1, at 787.)³⁷ USM manufactured shoe machinery at the Site from approximately 1905 to 1987. (Id.) The Site contained eighteen buildings, including a drop forge, chip grind shed, and a chip storage shed. (Pl.'s Bev. Ex. 1, at 787-89.)

37 Because not all the Beverly exhibits were originally pagenumbered, I refer to them by the numbers assigned by the parties, even where a particular page does have an original page number.

The chip sheds. The chip grind shed and chip storage shed were used to clean and store metal "chips" created as a byproduct of the facility's machining operations. These chips were coated with the coolants used in the machining process. (Pl.'s Bev. Ex. 10, at 1635; Defs.' Ex. 3, at 95, 102-03.) Starting around 1942, steel chips were taken to the chip grind shed for recycling. (Pl.'s Bev. Ex. 10, at 1635; Defs.' Ex. 2, at 64.) The steel chips were typically first transported in tanks from their points of origin to the chip storage shed. (Pl.'s Bev. Ex. 10, at 1635.) Later, the steel chips were moved to the chip grind shed, and placed directly onto the floor. (Defs.' Ex. 1, at 87; Defs.' Ex. 3, at 64-66.) The floor was slanted to permit the liquid residue to drain off and collect in a tank for reuse. (Id.)

After treatment, the steel chips were taken to the chip storage shed, and loaded into hoppers that hung outside, above ground. (Pl.'s Bev. Ex. 5, at 99-101.) Non-steel chips were not processed at the chip grind shed, but were rather taken directly to the chip storage shed. (Id. at 98-100.) These hoppers typically dripped oil onto the ground; collectors were placed underneath them, to catch the drip, but failed to catch all of the dripping liquids. (Id.) This problem was not fixed until the 1970s. (Id. at 100-01; Pl.'s Bev. Ex. 10, at 1636.)

The shed itself, and the soil nearby, became contaminated by the dripping oil. (Pl.'s Bev. Ex. 7, at 3071; Pl.'s Bev. Ex. 8, at 348.) PCBs were later found under and near the chip sheds. (Pl.'s Bev. Ex. 5, at 108.) The drop forge. At the drop forge building, mechanical parts, tools, blades, and chain cutters were forged. (Pl.'s Bev. Ex. 10, at 1639.) It contained two underground oil storage tanks used to store fuel for the forge's operations. (Id.; Defs.' Ex. 3, at 58-59.) At some indeterminate point in the past — possibly in the late 1960s, but perhaps in the 1940s — approximately 10,000 gallons of fuel oil intended for the storage tanks were misdelivered into a nearby manhole. (Steinberg Aff., Ex. B, at 4, 6; Defs.' Ex. 3, at 65-68; Defs.' Ex. 5, at 124-27; Pl.'s Bev. Ex. 26, at 63; Pl.'s Bev. Ex. 27.) An abandoned electric conduit that was connected to the manhole where the oil was misdelivered was later found to contain oily liquid, as were three other manholes connected to that manhole by electric conduits. (Steinberg Aff., Ex. B, at 6; Defs.' Bev. Ex. 5, at 124-27.)

Initial environmental investigation. In October 1985, a water main break at the Site led to the discovery of oil contamination in soil near the underground storage tanks at the drop forge. (Pl.'s Bev. Ex. 10, at 1620; Defs.' Bev. Ex. 3, at 59-60.) Emhart hired an environmental contractor to remove those tanks. (Pl.'s Bev. Ex. 24, at 31737.) After the removal, some fuel oil was found in the area, and Emhart contacted DEP pursuant to Chapter 21E, § 7. (Id.) Emhart then retained another environmental contractor, Haley Aldrich, to study oil contamination in this area and at an athletic field elsewhere on the Site. (Pl.'s Bev. Ex. 10, at 1620.) The purpose of this investigation was to assess Emhart's Chapter 21E liability, in preparation for selling the Site, which Emhart no longer needed. (Pl.'s Bev. Ex. 5, at 44-46.) Haley Aldrich investigated those portions of the Site in January 1986, but apparently found only de minimis contamination. (Id.; Pl.'s Bev. Ex. 25.)

On May 7, 1986, a truck owned by one of Emhart's shipping contractors spilled approximately 1000 gallons of #6 oil while filling a tank near the Site's power plant. (Defs.' Bev. Ex. 12, at 175.) Emhart immediately contacted both a cleanup contractor and DEP. The cleanup contractor vacuumed the spilled oil, and otherwise cleaned the area. (Id. at 176.) DEP viewed the scene, and made minor requests regarding the cleanup process. (Id.)

On September 29, 1986, a fuel oil delivery truck backed into a guard rail on the Site, and spilled approximately 100 gallons of diesel oil. (Defs.' Bev. Ex. 11; Defs.' Bev. Ex. 12, at 177.) Again, Emhart immediately notified DEP. (Defs.' Bev. Ex. 12, at 177.) The DEP representative who responded to the notification issued an oral Notice of Responsibility ("NOR") under Chapter 21E to Emhart. (Defs.' Bev. Ex. 8.)

On September 30, 1986, Emhart submitted to DEP a report on the May 1986 spill of #6 oil, and requested that DEP issue a "no action" letter due to the low level of contamination found. (Pl.'s Bev. Ex. 25.) DEP did not respond to this request. On a followup visit, another DEP representative instructed Emhart to take additional soil samples. (Defs.' Bev. Ex. 10; Defs.' Bev. Ex. 12, at 178.) This further testing revealed that the soil was contaminated with other substances, unrelated to the recent spills. (Defs.' Bev. Ex. 11; Defs.' Bev. Ex. 12, at 178.)

Further environmental investigation. Emhart again hired Haley Aldrich to investigate the scope of contamination, in preparation for future sale. (Pl.'s Bev. Ex. 15, at 19.) In May 1987, Haley Aldrich began a comprehensive, site-wide investigation to assess the risk of contamination under the scope of Chapter 21E, in contemplation of preparing the Site for sale to a potential purchaser that would wish to redevelop the property. (Defs.' Bev. Ex. 11; Pl.'s Bev. Ex. 13, at 31721.) In November 1987, Emhart notified DEP that the early results from Haley Aldrich showed contamination at various locations on the Site, and that a full report would soon be forthcoming. (Pl.'s Bev. Ex. 13, at 31722.) In April 1988, DEP issued a written NOR covering both the May 7 and September 29 oil spills. (Pl.'s Bev. Ex. 23.)

In June 1988, Haley Aldrich issued a preliminary evaluation, concluding that the Site contained contamination under the jurisdiction of Chapter 21E, and that further investigation should be conducted, in accordance with the then-draft Massachusetts Contingency Plan ("MCP"). (Pl.'s Bev. Ex. 7, at 3086-87.) The MCP, which became effective in October 1988, outlined a six-phase process for assessment and remediation. See 310 C.M.R. §§ 40.006(1), 40.532 (1988), reprinted in Defs.' Bev. Ex. 7. Emhart submitted Haley Aldrich's preliminary evaluation as a Phase I report in January 1989, and began a Phase II assessment. (Defs.' Bev. Ex. 19; Pl.'s Bev. Ex. 1, at 790.) In January 1990, DEP listed the Site as a "Confirmed Disposal Site" under Chapter 21E. (Defs.' Bev. Ex. 20, at 1014-15.)

Black Decker, as successor to Emhart, developed a Phase III Final Remedial Response Plan in 1992, again with eventual sale of the property as the ultimate goal. (Defs.' Bev. Ex. 21, at 1203.) This plan concluded that eight locations at the Site were likely to require remediation under the MCP criteria. Two such locations were the chip shed area and the drop forge area, both of which contained elevated total petroleum hydrocarbons. (Defs.' Bev. Ex. 21, at 1113-15; Steinberg Aff., Ex. B, at 3-4.) Contaminated groundwater was found to be flowing from the Site, but the contaminant levels were below those requiring remediation under the MCP. (Defs.' Bev. Ex. 4, at 63-64.)

Remediation and sale. Unable to sell the Site as a single property, Black Decker eventually divided it and found separate buyers for the portions known as the North and South Parcels. (Pl.'s Bev. Ex. 2, at 6.)³⁸ The chip sheds were located on the North Parcel, and the drop forge was located on the South Parcel. (Steinberg Aff., Ex. B, at 5.) For the North Parcel, Black Decker agreed to complete the remediation required by the MCPafter the sale. (Id.) However, the buyer for the South Parcel, Stop Shop, requested greater remediation because it intended to use the parcel for a higher use, and also intended to place a building over the most environmentally sensitive portion of the parcel. (Defs.' Bev. Ex. 40; Pl.'s Bev. Ex. 15, at 102.) Black Decker therefore negotiated a sale of the South Parcel "as is," with the price discounted to reflect the estimated cost of remediation required by the MCP. (Defs.' Bev. Ex. 41, at 2353, 2360; Defs.' Bev. Ex. 42, at 2260, 2264-66; Steinberg Aff., Ex. B, at 4.)

38 Several smaller lots within these parcels, requiring no remediation, were sold separately and do not appear to be at issue here. (Id.; Steinberg Aff., Ex. B, at 5.)

Both parcels were sold to their respective buyers in April 1996. (Pl.'s Bev. Ex. 2, at 6-7.) Final remediation took place in 1996 and 1997. The major remedial efforts were directed at the drop forge in the South Parcel, and the chip sheds in the North Parcel. (Steinberg Aff., Ex. B, at 6-7.) Contaminated groundwater and soil were removed from both sites. (Id. at 7; id. Ex. C, at 1-2; Defs.' Bev. Ex. 5, at 131-32.)

b. Relevant Policies

Because USM owned the Site for the entire time period relevant to this case, only USM policies need be examined. Given my resolution of Liberty Mutual's motion for partial summary judgment as applied to specific policy periods, the policies at issue for this Site are USM's accident-based CGL policies issued from 1957-69; its occurrence-based CGL policies issued from 1971 onwards; and its excess liability policies issued from 1966-68 and 1972-79. (See generally supra Part IV (insurance policy history).)

c. Procedural History

Emhart first notified Liberty Mutual of its claim on January 25, 1988. (Pl.'s Bev. Ex. 20.) Emhart's notice included documents describing Haley Aldrich's preliminary investigation, and promised the full report by mid-1988. (Id. at 31755-57.)

In February 1988, Liberty Mutual acknowledged receipt of Emhart's letter, and promised to investigate the claim. (Defs.' Bev. Ex. 27.) On April 25, 1989, Liberty Mutual denied coverage, on the grounds that: no damage had manifested until 1985, after the policies expired; the pollution exclusion applied; the owned property exclusion applied; notice was prejudicially late; and that all payments were voluntary. (Pl.'s Bev. Ex. 21.)

d. Analysis

(i) Suit

Liberty Mutual argues that there was no "suit." Black Decker contends that the "suit" requirement is met by some amalgam of various agency communications. I find that the "suit" requirement is satisfied by the April 4, 1988 written NOR.³⁹ (See Pl.'s Bev. Ex. 23; see also supra Part V.A.1.a.i.)

39 Black Decker also offers evidence of a September 1986 oral NOR, which would at least create a triable issue of fact as to the existence of a suit on that date. (See Defs.' Bev. Ex. 8; supra Part V.A.1.a.ii.) This turns out not to matter, given my disposition of other issues. I also note that the hodgepodge of other documents that Black Decker advances as potentially satisfying the "suit" requirement are worthless for this purpose. Black Decker offers, as "suit" proxies, the fact that it requested a "no action" letter (Pl.'s Bev. Ex. 25), but did not receive one; an internal DEP memorandum recommending soil screening after the diesel spill (Defs.' Bev. Ex. 10); a letterfrom Emhart to DEP referring to DEP's oral request to conduct post-spill soil testing (Defs.' Bev. Ex. 12); a letter by which DEP informed USM that the Site was listed as a Confirmed Disposal Site, and in which the only "demand" was to refrain from remedial action without approval (Defs.' Bev. Ex. 20); and, most creatively, a letter from the Office of the Secretary of Environmental Affairs, sent in response to Black Decker's own Environmental Notification Form after Black Decker decided to remediate the Site, requiring an Environmental Impact Report that examined the threat of certain contaminants as a condition of issuing a permit for Black Decker's proposed work (Defs.' Bev. Ex. 18, at 794-95.) None of these are coercive or adversarial documents threatening liability.

Liberty Mutual also argues that the entire investigatory and remediation process was initiated by Black Decker to make the Site more attractive to potential buyers. The record contains ample evidence that Black Decker had at least one eye, if not both, on remediating the property in anticipation of sale. (See, e.g., Stimpson Dep., Pl.'s Bev. Ex. 15, at 19; Haley Aldrich Report, Pl.'s Bev. Ex. 9, at 989; Connors Letter, Pl.'s Bev. Ex. 13; Haley Aldrich Phase III Report, Pl.'s Bev. Ex. 1, at 867.) However, this does not negate the fact that there was, in fact, a NOR. For purposes of the suit requirement, it is irrelevant that Black Decker had a second motive besides responding to the DEP NOR. (See supra Part V.A.1.a.vi.)

(ii) Accident/occurrence

The NOR covers the May 1986 and September 1986 oil spills, not anything earlier. The written NOR opens quite plainly with the assertion that "[o]n May 8 and September 29, 1986, [DEP] personnel investigated reports concerning the release/threat of release of #6 oil and diesel oil respectively." (Pl.'s Bev. Ex. 23, at 104.) It explains that "[s]uch incident is governed by Chapter 21E." (Id. (emphasis added).)⁴⁰ The formal allegation is that "release or threat of release of #6 oil/diesel has occurred" at the Site. (Id. (emphasis added).) DEP's demands for information are limited to information concerning the circumstances of "such release," actions taken to remediate "such releases," an estimate of "the quantity of oil released," waste manifests "for the oil released," and samples of soil and water "impacted by the release." (Id. at 104-05.) DEP advises that USM promptly "demonstrat[e] that appropriate response actions relative to these releases of oil have been conducted." (Id. at 105 (emphasis added)). In sum, the scope of the NOR is limited to the two 1986 oil spill incidents. By contrast, most of the costs of remediation relate to the chip recycling operations and the misdelivery of oil in the drop forge area. (Steinberg Aff., Ex. B, at 5-6.)

40 Use of the singular ("such incident is") instead of the plural ("such incidents are") may be a typographical error, but the focus is clearly on the incidents referred to in the previous sentence: the May 8 and September 29 oil spills.

These incidents happened well after the expiration of USM's coverage in 1979, and Black Decker does not dispute that damage from these incidents themselves are outside the policy. Rather, Black Decker argues first, that these spills prompted it to conduct the investigations that detected the pre-1979 contamination; second, that the NOR's scope should be read more broadly, i.e., that "contamination requiring remediation under Chapter 21E existed at the site"; third, that "the charging documents are amplified by the Haley and Aldrich reports," which reported more extensive contamination; and fourth, that the January 1990 letter by which DEP informed USM that the Site was listed as a Confirmed Disposal Site directed Black Decker to perform assessment and remediation.

Despite some factual variations, all of Black Decker's arguments appear to reduce to a common theme: the law (Chapter 21E and the Massachusetts Contingency Plan) required Black Decker to assess and remediate its property, and therefore Liberty Mutual must pay. But the requirements of the law and the requirements of the insurer do not perfectly overlap. The duty to defend — implicated here by analogy to a civil lawsuit — requires a charging document that is both sufficiently coercive to meet the suit requirement, and that alleges an accident or occurrence that would be covered by the policy. This serves a gatekeeping function: the insurer may inspect the charging documents and, if the documents fail to meet these requirements, determine that there is no duty to defend. Thus, some activity that is required by law will not be covered by CGL policies. Black Decker's arguments are not irrational, but they stretch the policy language, and the analogy to a civil lawsuit, too far. (See supra Part V.A.1.a.vii.)

In short, Black Decker's claim founders on the requirement that the allegations in the charging document be "'"reasonably susceptible" of an interpretation that they state or adumbrate a claim covered by the policy terms.'" Herbert A. Sullivan, 439 Mass. at 394 (quoting Gilbane Bldg. Co., 391 Mass. at 146). Rather, DEP's allegations "'lie expressly outside the policy coverage and its purpose, [so] the insurer is relieved of the duty to investigate' or defend the claimant." Id. at 394 (quoting Timpson v. Transamerica Ins. Co., 41 Mass. App. Ct. 344, 347 (1996)). For these reasons, I find that DEP did not allege an accident or occurrence within the policy coverage.

(iii) Other issues

My disposition of this site makes unnecessary an inquiry into two other issues: whether the owned property exclusion applies to this site, and whether a discount applied to the Site's sale price to reflect the costs of remediation is recoverable as "damages." That said, to the extent that it will aid the parties in understanding the principles of law that I will apply in this case, I provide my analysis.

Liberty Mutual has not provided sufficient evidence, on summary judgment, that the owned property exclusion applies at the Beverly site. If adjacent property is threatened by contamination from the insured's property, then the owned property exclusion does not apply. (See supra Part V.C.3.a.) Liberty Mutual argues, relying largely on the Phase III Report, that groundwater migration was not a "focus" of the cleanup at the Site, and that the actual cleanup work was directed at soil, which is part of the "owned property." (See Defs.' Bev. Ex. 21, at 1114-16, 1144, 1176.01, 1197.) Black Decker offers countervailing evidence that there was a risk of offsite migration of contaminants, and that controlling this risk was part of the remediation. Elliot Steinberg, an executive at Haley Aldrich, testified that remediation of the storm drain system near the Chip Grind Shed was done specifically to prevent off-site contamination of the Bass River. (Defs.' Bev. Ex. 5, at 143-44.) Steinberg also testified that contaminated soil and gravel, if not remediated, could have migrated off-site. (Id. at 130-31.) Finally, the Phase III Report itself suggests that groundwater migration was at least of concern. (Pl.'s Bev. Ex. 1, at 841, 863.) There is a genuine issue of material fact sufficient to defeat summary judgment on this point. I would not, however, rely on Black Decker's argument that Massachusetts courts would be likely to hold that damage to groundwater defeats the owned property exclusion, even in the absence of a threat of migration, on the asserted grounds that groundwater is not "owned property." (See supra Part V.C.3.a.)

I also find that Black Decker would not be able to recover for the amount by which it discounted the sale price, even if it calculated that discount based on a good faith estimate of remediation costs, because that amount is neither "damages" nor an acceptable proxy thereto. (See supra Part V.C.2.a.)

e. Partial Summary Judgment Decision

Liberty Mutual's motion is GRANTED as to the Beverly site.

B. Under Connecticut Law [insert to come] C. Under Maryland law [insert to come] D. Conclusions

For the reasons more fully set forth above, I rule as follows:

1. As to the Bostik (Middleton, MA) site: Liberty Mutual's motion is GRANTED as to damage occurring during or after the 1971 policy period, and DENIED as to damage occurring during the 1957-69 policy periods. Liberty Mutual's motion is DENIED as to the costs of preparing the site assessments required by the Notice of Responsibility. Liberty Mutual's motion is GRANTED as to defense and remediation costs attributable to DEP's remediation orders and expended before November 3, 1994, and DENIED as to such costs expended on or after November 3, 1994.

2. As to the Whitman, MA site: Black Decker's motion is GRANTED as to damage occurring during the 1957-69 policy years. Liberty Mutual's motion is GRANTED as to damage occurring during the post-1971 policy years.

3. As to the W.W. Cross (Jaffrey, NH) site: as to the lagoon, Liberty Mutual's motion for summary judgment is GRANTED. As to the tack pile, Black Decker's motion for summary judgment is GRANTED as to the USM CGL policy in effect from May 18, 1956 to June 15, 1956, and PCI's 1981 policy.

4. As to the Jaffrey Landfill (Jaffrey, NH) site: Liberty Mutual's motion is GRANTED.

5. As to the Beverly, MA site: Liberty Mutual's motion is GRANTED.