Opinion
No. 02-3147.
MAY 13, 2003.
MEMORANDUM OF DECISION AND ORDER ON PLAINTIFF'S AND DEFENDANTS' CROSS-MOTIONS FOR SUMMARY JUDGMENT
The plaintiff, Preferred Mutual Insurance Company ("Preferred") commenced this action seeking declarations with respect to its rights and liabilities under an insurance policy entered into with the defendants Bernard Gordon ("Mr. Gordon") and Esther Gordon ("Mrs. Gordon") (collectively, "Gordons"). This matter is before the court on Preferred's and the Gordons' cross-motions for summary judgment.
BACKGROUND
The Gordons have lived at 27 or 29 Old Colony Road, Chestnut Hill, Massachusetts, 02402 ("Property"), since 1971. Preferred issued at least one homeowner's policy ("Policy") to the Gordons, insuring the Property for the period of April 1, 1998, through April 1, 1999 ("Policy period).
The Policy provides the Gordons with Liability Coverage. "Coverage L," at issue in this action, provides that Preferred will
"pay up to [its] limit all sums for which an insured is liable by law because of bodily injury or property damage caused by an occurrence to which this coverage applies. [Preferred] will defend a suit seeking damages if the suit resulted from bodily injury or property damage not excluded under this coverage. [Preferred] may make investigations and settle claims or suits that [Preferred] decide[s] are appropriate. [Preferred] do[es] not have to provide a defense after [it has] paid an amount equal to [its] limit as a result of a judgment or written settlement."
(emphasis in original). The Policy defines "occurrence" as "an accident. This includes loss from repeated exposure to similar conditions." The Policy defines "property damage" as "physical injury to tangible property. This includes loss of use." On the Homeowner Declaration page, the Policy states, "[t]his policy applies only to occurrences or losses which happen during the policy period and for which a limit of liability or premium charge is shown." The Policy lists exclusions from this Liability Coverage, including "damage to property owned by an insured."
Within "Liability Coverage," there are "Incidental Liability Coverages" that "are subject to all the terms of Coverage L . . . ." Among the incidental coverages the Policy provides for is "Damage to Property of Others" ("third party coverage"). This coverage provides that, "[r]egardless of an insured's legal liability, [Preferred will] pay for property of others damaged by an insured, or [Preferred will] repair or replace the property, to the extent practical, with property of like kind and quality. [Preferred's] limit for this coverage is $500 per occurrence." (emphasis in original). The Policy notes that the exclusions that apply to Coverage L, quoted above, do not apply to this incidental coverage, however Preferred will "not pay for damage to property . . . owned by an insured. . . ." ("owned property exclusion"). (emphasis in original).
The residence on the Property was built in 1916, and, when the Gordons purchased the Property, there was an existing underground five hundred fifty gallon storage tank for the oil furnace. The Gordons had used that tank to hold fuel until 1993 at which time they converted their heating system to gas. In October 1998, the Gordons hired a contractor, New England Disposal Technologies, Inc. ("NEDT"), to repave the driveway and remove the underground tank. Upon its removal, contaminated soil was observed, and another tank was discovered under the driveway.
Mr. Gordon stated in his affidavit that he and Mrs. Gordon learned of the release of oil on the Property in October 1998 from NEDT during the removal from the Property of what he thought was only one underground storage tank. As stated above, the Gordons had used one of those tanks to hold fuel prior to 1993. The Gordons had never used the second tank that was located under their driveway. The Gordons deny that the oil releases from the two tanks predated April 1, 1998.
On October 22, 1998, the Gordons notified Preferred of the condition on the Property. In her affidavit, Sharon Shackelton ("Shackelton"), a Preferred claims representative, stated that upon receiving notification from the Gordons, Preferred retained CRC Claims Services, Inc. ("CRC"), to assist in the investigation and adjustment of the claim. CRC obtained a written statement from Mr. Gordon on November 2, 1998. In a letter dated November 12, 1998, Preferred denied the Gordons first-party coverage. In this letter, Herbert Weidman ("Weidman"), another Preferred claims representative, explained that certain exclusions applied preventing Preferred from providing coverage. First, Preferred "does not pay for loss which results from . . . contamination. . . ." Second, while Preferred "pay[s] the cost to remove the debris of covered property after an insured loss[,] . . . [t]his coverage does not include costs to . . . extract pollutants from land or water. . . ." Weidman concluded this letter by informing the Gordons that Shackelton was handling the issue of third party coverage resulting from the reported loss causing damage to their neighbors' property.
The Gordons also claim that the Department of Environmental Protection ("DEP") was notified of the oil release on the Property. The DEP forwarded a Notice of Responsibility ("NOR"), dated December 2, 1998, to the Gordons regarding the oil release on the Property. The NOR stated that on October 22, 1998, the DEP received oral notification of the potential oil release on the Property. The NOR further stated that the DEP considered Mr. Gordon to be a Potentially Responsible Party ("PRP") and set forth deadlines for actions mandated by the Massachusetts Contingency Plan, 310 CMR 40.0000 ("MCP"). For example, the MCP required Mr. Gordon, as a PRP, to engage a Licensed Site Professional ("LSP") "to manage, supervise or actually perform the necessary response actions at the subject site . . . [and] to submit to the [DEP] a Response Action Outcome Statement (RAO) . . . upon determining that No Significant Risk already exists or has been achieved. . . ."
As required by the MCP, the Gordons retained Subsurface Remediation Technologies, Inc. ("SRT"), an environmental consulting firm, to assess the extent and potential transport of oil contamination on the Property. In his affidavit, Timothy Toomey ("Toomey"), an LSP and the president of SRT, stated that he performed on-site investigations of the Property and "collected hydrogeological data regarding direction of groundwater flow." He also reviewed the results from the data samples AMRO Environmental Laboratories, Inc. ("AMRO"), had analyzed.
In her affidavit, Shackelton stated that Preferred knew that the Gordons had hired NEDT to perform work on the Property, and Preferred obtained a copy of NEDT's Immediate Response Action Plan, dated December 28, 1998. In a letter dated January 28, 1999, CRC requested that NEDT provide it with information regarding NEDT's claim that pollution from the Property had possibly contaminated the property of abutters. "Although it was not clear when the loss or losses had occurred, [Preferred] decided to authorize the performance of the work proposed by NEDT" in connection with the possible contamination of abutters' property.
Shackelton further stated that in a June 1999 letter, NEDT informed CRC that it had concluded that the soil on the property of 39 Old Colony Road had not been impacted, but that the soil at 18 Priscilla Road had been impacted by oil, requiring further remediation activities. Based on this finding, NEDT submitted a proposal for work on this property, projecting an amount of $17,692.50 to clean up the Schnee property and an amount of $23,062.00 to remove contaminated soil on the Property. At this time, Preferred hired Environmental Resources Management ("ERM") to review the proposed work. ERM's total estimated cost of remediating the Schnee property was $9,137.50. On September 20, 1999, Preferred informed NEDT of this amount, as well as ERM's several recommendations, in a letter to which NEDT did not respond.
In a letter to Mr. Gordon dated October 21, 1999, Shackelton gave the Gordons a comprehensive explanation of the Policy, noting that third party coverage would be available "if contamination got off the site and thus damaged other people's property. For coverage purposes, ground water under [the P]olicy is not deemed [the Gordons'] property." Further, Shackelton continued, "[a]pplying the liability coverage to this case, any off-site damage or clean-up of off-site property is covered. Ground water clean-up is covered." Moreover, "[t]he most difficult area to access is the clean-up of on-site soil. To the extent remediation is done to protect the ground water, specifically it would be covered. To the extent soil remediation is done [to] remediate . . . [the P]roperty, there would not be coverage." (footnote added). Also in this letter, Shackelton indicated that Preferred had paid NEDT $3,202.50 for testing done at the Schnee's property, and that it had received NEDT's proposal to clean up the Schnee's property.
In his affidavit, Toomey stated that, "based on the hydrogeologic data regarding direction of groundwater flow and the analytical sampling results, . . . the release of oil on the Gordon Property has impacted groundwater and is moving in a northeasterly direction." He further stated that it is his "opinion to a reasonable degree of scientific certainty that, based on this data and [his] determination that a three foot gradient exists across the site, the contamination has migrated northeast, underneath the house located on the property, and continues to migrate in the direction of the intersection of Priscilla Avenue and Old Colony Road."
Toomey attached to his affidavit a site locus map, a groundwater flow map, and a table of data. The maps indicate the various test sites on the Property. The maps show that SRT conducted tests with three test boring/monitoring wells and three geoprobe borings, all of which were on the Property itself. ERM, hired by Preferred, installed one test boring/monitoring well on the Schnee's property. The maps also indicate the locations of the seven hand power auger borings SRT used in testing, and all were on the Property. NEDT's nineteen total geoprobe borings are also on the map; twelve were on the Property, four were on the Schnee's property, and three were on the neighboring Old Colony Road property. The two tables attached to the affidavit indicate that all of the tests were done on soil samples alone, with four exceptions. SRT's three test boring/monitoring wells and one of its geoprobe borings tested both groundwater and soil samples. As mentioned above, all of these SRT tests were conducted on the Property. The tables indicate that only a few of the readings of the soil samples and the groundwater samples were greater than the MCP limits.
Toomey concluded his affidavit by stating, "the contamination has, within a reasonable degree of scientific certainty, already migrated off the Gordon Property and onto abutting property." Toomey based this conclusion "on the most recent sampling results . . ., and more specifically, the detection of oil contamination in monitoring well SRT-8 and soil boring SRT-9. . . ." Both SRT-8 and SRT-9 were geoprobe borings made on the Property itself. Toomey noted that "[g]roundwater could not be collected from SRT-9 due to bedrock that was encountered near the current level of the water table."
On April 9, 2001, the Gordons made a formal demand on Preferred, requesting third party coverage pursuant to the Policy. Specifically, the Gordons requested both defense and indemnity coverage, asking that Preferred pay for all past and future costs associated with the clean-up of the release to prevent further damage to third party properties and the contamination of the groundwater. In this letter, the Gordons alleged that the contamination impacted groundwater and migrated off the Property onto abutting third party properties, including the adjacent Schnee property. The letter also informed Preferred that Mr. Gordon had accepted SRT's proposal to further evaluate and then remediate the contamination that had occurred. The Gordons enclosed with this letter SRT's Scope of Work proposal which projected the cost of SRT's services as $22,211.35.
Preferred hired LSP John C. Drobinski ("Drobinski"), a principal with ERM, "to determine whether a release of oil from an underground storage tank at Mr. Gordon's home had migrated or threatened to migrate to the neighboring Schnee property." In his affidavit, Drobinski stated that "ERM conducted soil and ground water monitoring in the area of the Gordon/Schnee property[,]" and that Drobinski "reviewed work performed at the Gordon property by N.E.D.T. and SRT, Inc. to answer questions about the nature of the release, the site, and work performed at the site." Drobinski also stated that he believed that, based on the size of the holes in the tanks and the nature of the soil, the oil releases pre-dated April 1, 1998, occurring a minimum of a year before the tanks' removal.
Additionally, based on ERM's soil and groundwater monitoring, "as well as the work performed by N.E.D.T., [Drobinski stated in his affidavit that] there was no evidence of offsite migration or an imminent threat of offsite migration." Moreover, based on NEDT's documents, Drobinski believed that its work on the Property was solely "to remove the underground storage tanks and some contaminated soil[,] . . . [tasks that were] unrelated to preventing offsite migration of contaminants from the property." Drobinski further concluded after reviewing "the work performed by SRT, Inc. and . . . Toomey['s affidavit that] . . . [t]he test results, including the referenced findings in monitoring well SRT-8 and soil boring SRT-9 do not support the conclusion that contamination has migrated off of the Gordon property." Drobinski also monitored the soil and groundwater along the Property's Schnee boundary and found no evidence of off-site migration or any threat thereof. In coming to this conclusion, Drobinski reviewed SRT's work and Toomey's affidavit, neither of which, in Drobinski's judgment, support a finding of migration off the Property. Drobinski also based this conclusion on NEDT's work which, he stated, was unrelated to preventing off-site migration of contaminants from the Property.
On May 1, 2002, Preferred, through its attorney, declined to provide the requested coverage. In this letter, Preferred summarized the history of the Property and the discovery of the oil release, noting that when the tanks were removed, "[h]oles were observed in both tanks and it [wa]s apparent that the tanks had been compromised for a considerable period of time." In making this denial, Preferred relied on ERM's conclusion that there were no adverse impacts to soil quality and groundwater quality along the boundary of the Property and the adjacent Schnee property.
In this letter, Preferred also noted that it had paid for some of the costs associated with the work conducted on the Property's boundaries. Preferred conceded that the releases were discovered during the Policy period, but stated that the occurrence(s) pre-dated the Policy. Preferred further noted that even if the occurrence had taken place within the Policy period, the Policy does not cover "damage to property owned by an insured." Preferred concluded that the Gordons were not entitled to third party coverage because few, if any, of the costs that they had incurred were for remediation or prevention of contamination migration to off-site waterways or properties.
In July 2002, Preferred filed a declaratory action against the Gordons, requesting that the court declare that the Policy does not afford coverage for any claim relating to the alleged release of oil at the Property; that the court determine what amount the Gordons must pay with respect to damage to their "own property" in connection to the occurrence[s] at the Property; and that the court determine the rights of Preferred and the Gordons. The Gordons filed a counterclaim against Preferred, stating claims of breach of contract (Count II), negligence (Count III), and violations of G.L.c. 93A (Count IV). The Gordons also sought declaratory relief (Count I), asking that the court declare that Preferred owes the Gordons both a duty to defend and a duty to indemnify with respect to the oil release on the Property; and that Preferred's denial of coverage is wrongful.
This case is before the court on the Gordons' Partial Motion for Summary Judgment and Preferred's Cross Motion for Summary Judgment. In their motion, the Gordons request that the court hold that an occurrence covered by the Policy caused the damages resulting from the oil release at the Property; that Preferred wrongfully refused to conduct a full, complete, and impartial investigation of the oil release; that Preferred wrongfully failed to provide defense and indemnity coverage for claims arising from the oil release on the Property; and that Preferred must pay the Gordons for all consequential damages they suffered as a result of Preferred's failure to provide coverage. In its cross motion, Preferred asks the court to hold that the material undisputed facts establish that the occurrence or occurrences for which the Gordons assert claims pre-date the Policy; and that Preferred has not committed an unfair or deceptive act or practice.
DISCUSSION
Summary judgment is granted where there are no genuine issues of material fact and where the moving party is entitled to judgment as a matter of law. Mass.R.Civ.P. 56(c); Cassesso v. Commissioner of Correction, 390 Mass. 419, 422 (1983); Community Nat'l Bank v. Dawes, 369 Mass. 550, 553 (1976). The moving party bears the burden of affirmatively demonstrating the absence of a triable issue, and that the summary judgment record entitles the moving party to judgment as a matter of law. Pederson v. Time, Inc., 404 Mass. 14, 16-17 (1989). The moving party may satisfy this burden either by submitting affirmative evidence negating an essential element of the opposing party's case or by demonstrating that the opposing party has no reasonable expectation of proving an essential element of its case at trial. Flesner v. Technical Communications Corp., 410 Mass. 805, 809 (1991); Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716 (1991). Where "'motive, intent, or other state of mind questions are at issue, summary judgment is often inappropriate[,]'" but not always. Brunner v. Stone Webster Eng'g Corp., 413 Mass. 698, 705 (1992), quoting Flesner v. Technical Communication Corp., 410 Mass. 805, 809 (1991); McKenzie v. Brigham Women's Hosp., 405 Mass. 432, 438 (1989). The opposing party cannot rest on his or her pleadings and mere assertions of disputed facts to defeat the motion for summary judgment. LaLonde v. Eissner, 405 Mass. 207, 209 (1989).
I. Duty to Defend
An insurer "has the duty to defend third-party actions against an insured if the allegations in the third-party complaint are reasonably susceptible of an interpretation that they state or adumbrate a claim covered by the policy terms." Trustees of Tufts Univ. v. Commercial Union Ins. Co., 415 Mass. 844, 847 (1993) (citations omitted) (emphasis added). This process "'is one of envisaging what kinds of losses may be proved as lying within the range of the allegations of the complaint, and then seeing whether any such loss fits the expectation of protective insurance reasonably generated by the terms of the policy.'" Id. at 847, n. 3, quoting Continental Cas. Co. v. Gilbane Bldg. Co., 391 Mass. 143, 147 (1984).
An insurer's duty to defend is not only "broader than its duty to indemnify[, but it is also] . . . antecedent to, and independent of, the duty to indemnify." Id. at 855 n. 10, quoting Boston Symphony Orchestra, Inc. v. Commercial Union Ins. Co., 406 Mass. 7, 10 (1989); Shapiro v.Public Serv. Mut. Ins. Co., 19 Mass. App. Ct. 648, 653 (1985) (noting that insurer's "contractual obligation to defend [insured] against third-party claims is 'distinct from and of broader scope than the further obligation to indemnify the insured against judgments obtained against it within the policy coverage.'" quoting Sterilite Corp. v.Continental Cas. Co., 17 Mass. App. Ct. 316, 318 n. 4 (1983)). This duty is broader than the duty to indemnify because, as discussed more fully below, the courts will find the insurer owes its insured a duty to defend even in the absence of off-site contamination, as long as the allegations against the insured are reasonably susceptible of an interpretation that they state a claim covered by the policy. SeeRubenstein v. Royal Ins. Co. of America, 44 Mass. App. Ct. 842, 847 (1998), aff'd on other grounds, 429 Mass. 355 (1999); see Simplex Techs., Inc. v. Liberty Mut. Ins. Co., 429 Mass. 196, 199 (1999) (noting that it "'is well settled in this jurisdiction that a liability insurer owes a broad duty to defend its insured against any claims that create a potential for indemnity.'" (emphasis in original) quoting Doe v. Liberty Mut. Ins. Co., 423 Mass. 366, 368 (1996)).
The courts are willing to err on the side of finding a duty to defend in this context because "it 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."Id. Thus, the allegations against the insured must only be reasonably susceptible of an interpretation that they state a claim covered by the policy; a factual dispute as to whether there was actual off-site contamination will not prevent the court from finding the insurer owes its insured a duty to defend.
A. The Policy
The Policy provides the Gordons with Preferred's duty to "defend a suit seeking damages if the suit resulted from . . . property damage not excluded under this coverage." (emphasis in original) This duty extends to damage to the property of others, not damage to the Gordons' own property. Although the language of the Policy does not expressly state that the property damage triggering Preferred's duty to defend be caused by an occurrence, the Gordons and Preferred (and this court) read this requirement into the language.
B. Suit
In order for Preferred to owe the Gordons a duty to defend, a suit must be brought against them. The Gordons argue that the NOR they received from the DEP satisfies this requirement. The court in Hazen Paper Co. v.United States Fidelity Guar. Co. resolved a similar issue in the insured's favor. 407 Mass. 689, 696. The United States Environmental Protection Agency ("EPA") notified the plaintiff in that case that it was a PRP with respect to the release of hazardous substances at a hazardous waste facility. Id. at 690. Three years later, the Massachusetts Department of Environmental Quality Engineering ("DEQE") (now the DEP) notified the plaintiff that it was seeking reimbursement for the costs of removing one hundred fifteen drums of hazardous material from the site.Id. at 690.
The court held that the "consequences of the receipt of the EPA letter were so substantially equivalent to the commencement of a lawsuit that a duty to defend arose immediately." Id. at 696. The letter from the DEQE, however, was "not the equivalent of a suit." Id. at 695. The DEQE's letter was distinguishable from the EPA's letter because, while the EPA letter spoke of "actual releases," the DEQE letter claimed "only a threat of the release of hazardous material from certain 'overpacked drums' temporarily stored on the . . . site." Id. Moreover, the DEQE letter did "not allege the occurrence of any damage that falls within the policy coverage." Id.
In this case, the NOR informed Mr. Gordon that he is a PRP with respect to the "release/threat of release of oil/hazardous material at the subject location." The NOR also required Mr. Gordon to take certain actions such as employing an LSP to "perform the necessary response actions at the subject site." Additionally, there were several "submittals required by the MCP which are related to release notification and/or response actions that may be conducted at the subject site . . . that . . . must be provided to DEP within specific regulatory timeframes." (emphasis in original). Like the EPA letter the plaintiff inHazen Paper Co. received, "[i]t would be naive to characterize the . . . letter as a request for voluntary action. [The Gordons] had no practical choice other than to respond actively to the letter." 407 Mass. at 697. Thus, the Policy's requirement of a suit is satisfied because the consequences of receiving the NOR "were so substantially equivalent to the commencement of a lawsuit. . . ." Id. at 696.
C. Occurrence Causing Property Damage
For Preferred's duty to defend to arise, the suit must result from property damage that must, in turn, be the result of an occurrence. This occurrence must happen during the Policy period. As in Trustees of Tufts Univ., however, "[n]othing in the language of the polic[y] requires that the claimed property damage be discovered or manifested during the policy period . . . [C]overage may be triggered before discovery or manifestation of the damage." 415 Mass. at 853-854.
An occurrence, under the terms of this Policy, is an accident, a meaning that "includes loss from repeated exposure to similar conditions." Policy, page 2. The Gordons interpret this language as requiring a finding that the Property's repeated exposure to the released oil constitutes an occurrence. Mr. Gordon stated in his affidavit that he and Mrs. Gordon learned of this repeated exposure during the Policy period. Preferred asserts that while the Gordons established that the occurrence was within the description of risk covered by the Policy, they did not establish that the occurrence happened during the Policy period. Moreover, Drobinski asserted in his affidavit "that the releases of petroleum from the two abandoned underground storage tanks removed from the Gordon property pre-dated April 1, 1998."
The court in Trustees of Tufts Univ. faced a similar conflict. Id. at 853. The plaintiffs brought an action against the defendants, two insurers, seeking a declaration that the defendants had a duty to defend them in connection with the suit brought against it by Jacksonville Electric Authority ("Jacksonville"). Id. at 846. This underlying action that Jacksonville brought against the plaintiffs and two other parties in a Florida federal court related to land Jacksonville had acquired from the plaintiffs' subsidiary. Id. at 845. Jacksonville sought "to recover cleanup and response costs for environmental damage to the land under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA). . . ." Id. at 846. Jacksonville's complaint essentially alleged that there were leaks on the property while the plaintiffs and other parties owned it, and that Jacksonville had incurred costs for remedial actions that Jacksonville had to take pursuant to its consent order with Florida's Department of Environmental Regulation. Id.
The plaintiffs' policies with the defendants covered the periods of July 1, 1968, through November 7, 1972, and November 7, 1972, through July 1, 1975. Id. at 845. Jacksonville acquired the land in 1977 and sued the plaintiffs in 1989. Id. at 845, 846. The defendants argued that they had "no duty to defend . . . because . . . Jacksonville did not become the owner of the property until 1977, and thus could not possibly have sustained property damage in relation to this property until two years after the end of the latest policy period." Id. at 846-847.
This argument, however, ignored the policy language requiring the defendants to defend "where there is an 'occurrence,' including injurious exposure to conditions, that results, during the policy period[,] in 'property damage,' a term defined as injury to, or destruction of, property." Id. at 853. The court found that the "occurrence" in this case was the injurious exposure to hazardous materials during the policy periods and that the "property damage" was "the continued contamination of soil and groundwater on the site during the policy periods caused by the release of the hazardous material." Id. at 848. The plain language of the policies, therefore, indicated that both of the defendants had a duty to defend the plaintiffs with respect to the Jacksonville action. Id.
Similarly, in this case, the occurrence was the exposure to the released oil during the Policy period, regardless of when the release occurred, and the property damage was the contamination of soil and groundwater during the Policy period. See Hazen Paper Co., 407 Mass. at 698 (following majority of other jurisdictions in holding that clean-up costs incurred in response to property damage are considered "damages"). Moreover, even if Preferred's interpretation of the Policy (to the effect that an occurrence takes place upon the initial release of the contaminant) is rational, if "'there are two rational interpretations of the policy language, the insured [here, the Gordons,] is entitled to the benefit of the one that is more favorable to it.'" Trustees of Tufts Univ., 415 Mass. at 849, quoting Hazen Paper Co., 407 Mass. at 700. As further support for the Gordons' interpretation, "it is also appropriate 'to consider what an objectively reasonable insured, reading the relevant policy language, would expect to be covered.'" Id., quoting Hazen Paper Co., 407 Mass. at 700. Here, a reasonable policyholder reading the Policy "would expect coverage under these circumstances." Id.
D. Damage to the Property of Another
Preferred also relies on the owned property exclusion for its argument that it has no duty to defend the Gordons. As Shackelton informed the Gordons in her October 21, 1999, letter, the third party coverage they sought would only be available "if contamination got off the site and thus damaged other people's property." Preferred argues that the Gordons have not established that there is any damage, or imminent threat of damage, to property not owned or controlled by them.
The Gordons claim that the owned property exclusion does not apply even if the oil release has not affected the third party property because the contamination is moving in a northeasterly direction based on the three foot gradient across the site, thereby constituting a threat to third party property. The Gordons assert that the contamination to the groundwater is damage to third party property as well. In section 2 of chapter 21E of the General Laws of Massachusetts, the legislature included groundwater in the definition of "[w]aters of the commonwealth." Any contamination to this groundwater, the Gordons argue, is contamination of the Commonwealth's water, and, in turn, damage to the property of another.
In Rubenstein, the defendant argued that its duty to defend the plaintiffs "under the policy [wa]s not triggered in the absence of a claim by a third party for damages based on injury to the third party's property." 44 Mass. App. Ct. at 847. The court noted that the third party's allegations "did not identify contamination on any property other than that sold by the [plaintiffs], nor did [the third party] seek to recover any cleanup costs relating to off-site contamination." Id. at 847-848 (footnote omitted). Often however, in soil contamination situations, only the insured's property is contaminated at the time of clean-up, and "[d]isposing of hazardous materials is often undertaken at least partially to prevent damage to adjoining property." Id. at 848.
The court held that the defendant had a duty to defend the plaintiffs because "[d]iscouraging cleanups by the property owner . . . by precluding . . . insurance coverage until contamination has migrated or flowed on to someone else's property runs afoul of the general preference within environmental statutes toward preventative action." Id. In finding the defendant owed a duty to defend, the court's focus was on the complaint and the clean-up, both of which only established damage to the plaintiff's property. See id. at 847-848. Moreover, "it 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." Id. at 848 (quotation omitted) (emphasis added).
The court impliedly held that the fact that the parties eventually discovered actual damage to the neighbors' property was not relevant to the duty to defend analysis because the allegations against the insured need only be reasonably susceptible of being interpreted as stating a claim covered by the terms of the policy. See id. at 848. Rather than wait until the Gordons have definitively proven third party damage, therefore, under Rubenstein, Preferred owes the Gordons a duty to defend based on the fact that there is soil contamination to the Gordons' property, the clean-up of which was "undertaken at least partially to prevent damage to adjoining property." Id. Rubenstein also suggests that actual third party property damage, or a substantial threat thereof, is an issue to be raised with respect to Preferred's duty to indemnify, a narrower duty than the duty to defend. See id.
As noted above, the Policy provides that Preferred "will defend a suit [brought against the Gordons] seeking damages if the suit resulted from bodily injury or property damage not excluded under this coverage." (emphasis in original). The undisputed facts therefore support a finding that Preferred owes the Gordons a duty to defend because the allegations in the NOR are reasonably susceptible of an interpretation that they state a claim under the Policy terms. This duty to defend extends to assessment costs related to Toomey's work and the attorney's fees the Gordons incurred in defending themselves against the NOR. Wasserman v.Commerce Ins. Co., Civil No. 010916B *7 (Middlesex Super. Ct. July 9, 2002) (Sanders, J.). The Gordons are also entitled to the attorney's fees and costs they incurred in this action establishing Preferred's duty to defend under the Policy. Rubenstein, 429 Mass. at 360.
II. Duty to Indemnify
As noted above, an insurer's duty to defend is broader than its duty to indemnify. Boston Symphony Orchestra, Inc., 406 Mass. at 10. "An obligation to indemnify does not automatically follow from the existence of a duty to defend." Polaroid Corp. v. The Travelers Indemnity Co., 414 Mass. 747, 762 n. 19 (1993). "An insurer must indemnify its insured when a judgment within the policy coverage is rendered against the insured." Boston Symphony Orchestra, Inc., 406 Mass. at 10.
A. The Policy
The Policy indicates that Preferred will "pay up to [its] limit all sums for which an insured is liable by law because of . . . property damage caused by an occurrence to which this coverage applies." (Emphasis in original). This duty to indemnify is also subject to the owned property exclusion. As concluded above, there was an occurrence during the Policy period that resulted in property damage that was the subject of the NOR that the DEP sent to the Gordons. The only issue remaining that the court must resolve with respect to Preferred's duty to indemnify the Gordons is whether the owned property exclusion bars their recovery.
B. The Owned Property Exclusion
1. Abutters' Property
The Policy expressly excludes from coverage "damage to the property of an insured." Preferred argues that summary judgment in favor of the Gordons is inappropriate because the Gordons have presented evidence that the claimed damages were to their own property only. The Gordons assert that this exclusion does not apply because, even if the record does not support a finding of damage to third party property, the threat of third party damage is enough to trigger an insurer's duty to indemnify.
In Hakim v. Massachusetts Insurers' Insolvency Fund, the Court considered the question of whether the owned property exclusion in the plaintiffs' policy barred coverage for the costs they incurred for clean-up of an oil spill on their property. 424 Mass. 275, 276 (1997). InHakim, the plaintiffs received an NOR from the DEP after the fire department had determined that there was a leak in the underground fuel line that led from an above ground oil storage tank in the plaintiffs' basement to the furnace. Id. "About one hundred gallons of home heating oil had contaminated the [plaintiffs'] property" as well as a stream "about ninety feet from the [plaintiffs'] residence." Id. The plaintiffs retained a licensed environmental engineering firm to perform assessment and related remedial work, and they filed a timely notice of claim with the defendant's predecessor in interest, "seeking reimbursement for all the assessment and cleanup." Id. at 277-278.
The defendant paid "for the costs incurred for all the assessment work and for the containment and cleaning of the waterways located near the [plaintiffs'] property[, but it] . . . refused . . . to pay for the costs of the excavation and removal of the contaminated soil from [the plaintiffs'] property." Id. at 278. The Court held that where "there was contamination of adjacent property, the costs of remedial efforts to prevent further contamination of that property are not excluded from coverage by the owned property clause." Id. at 280 (footnote omitted). The defendant was therefore under a duty to indemnify the plaintiffs, but "[c]osts incurred for the sole purpose of remediating the [plaintiffs'] property [we]re barred by the owned property exclusion of the policy."Id. at 282 (footnote omitted).
In this case, there is a dispute over whether the contamination has migrated from the Property's soil to the soil of the neighboring property. In his affidavit, Toomey stated that, based on the results from two geoprobe borings, "the contamination has, within a reasonable degree of scientific certainty, already migrated off the Gordon property." (emphasis added). Drobinski, however, upon reviewing the same results on which Toomey relied, concluded that "[t]he test results . . . do not support the conclusion that contamination has migrated off of the Gordon property." (emphasis added). In Hakim, the Court's holding was based, in part, on the fact that "there was contamination of adjacent property. . . ." 424 Mass. at 280 (emphasis added). The Court noted, however, that it "need not . . . consider whether the owned property exclusion bars coverage if there is an immediate threat of, but no actual contamination of, the property of another." Id. at 280 n. 8 (emphasis added).
In Wasserman, the Superior Court (Sanders, J.) read Hakim andRubenstein together and concluded that, even in the absence of actual contamination, "they stand for the proposition that an insurer will be liable not only to defend an insured against an NOR but also to indemnify the insured for all cleanup costs even with an 'owned property' exclusion, so long as there is a significant threat of migration." Civil No. 010916B *7 (emphasis added). Judge Sanders concluded that "the insurer's liability is triggered 'even if the contaminating substances are solely on the insured's land.'" Id. at *6, quoting Rubenstein, 44 Mass. App. Ct. at 854. In Rubenstein, there was a substantial threat of contamination migrating beyond the boundaries of the insured's property. 44 Mass. App. Ct. at 853, 854; Wasserman, Civil No. 010916B *2-3, 7. In Wasserman, the plaintiff's expert, the defendant's expert, and the facts the judge found supported a finding that "there was (and is) a substantial threat that the fuel oil which leaked onto [the plaintiff's] Property will migrate (or has already begun to migrate) off-site." Civil No. 010916B *2-3, 7.
This court agrees with Judge Sanders' reading of Hakim and Rubenstein. While this court recognizes that an insurer's duty to indemnify is narrower than its duty to defend, the language in Rubenstein regarding the latter duty applies to the former as well. See 44 Mass. App. Ct. at 848; Wasserman, Civil No. 010916B *6-7. "[I]t would serve no legitimate purpose to assert that soil . . . pollution must be allowed to spread over boundary lines before [it] can be said to have caused the damage to the other people's property. . . ." Rubenstein, 44 Mass. App. Ct. at 848. Thus, if the evidence establishes that actual migration or a substantial threat of migration exists, then Preferred's duty to indemnify the Gordons will be triggered. As discussed above, there is a dispute of fact in this case as to whether such a threat exists. Summary judgment in favor of the Gordons is therefore inappropriate at this time.
2. Groundwater
The Gordons also argue that the groundwater is "[w]ater of the commonwealth[,]" as defined by section 2 of chapter 21E of the General Laws of Massachusetts. Thus, they claim, contamination of the groundwater is contamination of the property of a third party. In Preferred's October 21, 1999, letter to the Gordons regarding third party coverage, Shackelton informed them that "[t]he most difficult area to access is the clean-up of on-site soil. To the extent remediation is done to protect the groundwater, specifically it would be covered." Neither party alludes to this letter, however, and Preferred contends that the owner of the property owns the groundwater. For this argument, Preferred relies on the case of Gamer v. Milton, in which the Court held that it is "settled in this Commonwealth that a landowner has absolute ownership in the subsurface percolating water in his land." 346 Mass. 617, 620 (1964).
In United Techs. Corp. v. Liberty Mut. Ins. Co., the insurer also relied on Gamer for its argument that the policy's owned property exclusion barred coverage because contamination of the groundwater was not third party property damage. Civil No. 877172 *12 (Mass.Super.Ct. Aug. 3, 1993) (Murphy, J.). The court held that Gamer and a case it cited "do not stand for the proposition that a landowner may contaminate or damage the quality of the groundwater." Id. In fact, "[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 could apply the owned-property exclusion to contaminated groundwater." Id. (footnote omitted). The court then looked to G.L.c. 21E as support for its conclusion that "[i]t is clear from the statutory provisions that water resources include groundwater."Id.
The court further concluded that the "owned-property exclusion will not bar coverage of cleanup costs undertaken on plaintiff's property where there is actual or threatened damage to third party property, including groundwater beneath the insured's property." Id. (emphasis added). The court held that "to the extent that all or a portion of cleanup relates solely to damage to insured's property and does not relate to prevention of off-site contamination, the owned-property exclusion clearly applies, and such damage is not within the coverage provided." Id. at 13, citingHazen Paper Co., 407 Mass. at 698. These statements suggest that contamination to the groundwater alone, even if it is on the insured's property, is sufficient to trigger the insurer's duty to indemnify. Seeid. at 12.
This court is again in agreement with Judge Sanders' holding inWasserman, and declines to base this decision on real property ownership issues with respect to groundwater. Civil No. 010916B *7. As long as there is a significant threat of the contaminated groundwater's migrating off the Property, then Preferred's duty to indemnify the Gordons is triggered. As stated above, "it would serve no legitimate purpose to assert that . . . groundwater pollution must be allowed to spread over boundary lines before [it] can be said to have caused the damage to the other people's property. . . ." Rubenstein, 44 Mass. App. Ct. at 848.
Preferred urges, however, that there is no dispute as to whether the groundwater is even contaminated, as Toomey merely states in his affidavit "that the release of oil on the Gordon Property . . . impacted the groundwater. . . ." (emphasis added). The table attached to Toomey's affidavit appears to indicate that at least one reading from a groundwater sample was greater than the MCP limits. The Gordons have therefore presented some evidence that the groundwater on the Property is contaminated.
Summary judgment at this time is not proper because of the dispute not only as to whether there is migration or a substantial threat thereof of off-site groundwater contamination, but also as to whether the groundwater is contaminated at all. If the Gordons can establish that the groundwater is contaminated and either that it has actually migrated across the Property's boundaries or that there is a substantial threat of such migration, then Preferred has a duty to indemnify the Gordons for the clean-up. That indemnification would extend to the costs of cleaning up the Property itself, as long as such clean-up is to prevent further migration. See Rubenstein, 44 Mass. App. Ct. at 854 (holding owned property exclusion does not relieve "'the insurer of all liability for response costs incurred by the cleanup of the policyholder's own property . . . if the cleanup is designed to remediate, to prevent, or to abate further migration of contaminants to the off-site property.'" (quotingHakim, 424 Mass. at 279) (ellipses in original)).
III. Chapter 93A Violations
A. Discussion
Preferred also seeks summary judgment on the Gordons' G.L.c. 93A counterclaim. Under G.L.c. 93A, "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are . . . unlawful." G.L.c. 93A, § 2(a). "Whether a given practice is unfair or deceptive under G.L.c. 93A must be determined from the circumstances of each case." Noyes v. Quincy Mut. Fire Ins. Co., 7 Mass. App. Ct. 723, 726 (1979). "A cause of action sounding in G.L.c. 93A is an appropriate matter for summary judgment under rule 56 only if there is no genuine issue of material fact." Id. at 725. The Gordons' claim that Preferred knowingly and willfully violated G.L.c. 93A is based on their allegations that Preferred breached its duty to the Gordons to conduct a full, impartial, and reasonable investigation of the release of oil on the Property, and that Preferred failed to provide them with defense and indemnity coverages. Preferred asserts that it has not engaged in unfair or deceptive acts or practices.
If, after a third party claim has been advanced against an insured, "an insurer could reasonably have concluded that no aspect of the . . . claim was within the scope of its coverage and that . . . no duty to defend" arose, there is no G.L.c. 93A violation "even if [the insurer's refusal is] ultimately determined to be wrong. . . ." Polaroid Corp., 414 Mass. at 754. In her affidavit, Shackelton stated that even though Preferred's duty to provide coverage was uncertain because "it was not clear when the loss or losses had occurred, [Preferred] decided to authorize the performance of the work proposed by NEDT" with respect to the possible contamination of neighboring property. In her October 21, 1999, letter to the Gordons, Shackelton noted that Preferred had already paid $3,202.50 to NEDT for the testing it had done at the Schnee's property.
Preferred also hired Drobinski, its own LSP, to investigate further the issue of the contamination's migration. Additionally, ERM, with whom Drobinski was a principal, tested the Schnee's property with a test boring/monitoring well. At the March 17, 2003, hearing on these motions, the Gordons acknowledged this single well, but argued that three wells are required to determine which way groundwater flows. Preferred did not undertake its investigation in good faith, the Gordons asserted, thereby violating G.L.c. 93A.
There remains an issue of fact as to whether Preferred acted in an unfair or deceptive way in denying that it owed the Gordons a duty to defend and a duty to indemnify. The undisputed facts demonstrate that Preferred paid NEDT for part of its work, and that Preferred hired its own LSP to review the work of the Gordons' LSP. Preferred also had its LSP conduct his own tests to ascertain whether there was any migration, or a substantial threat of migration, of the contamination. The Gordons, however, have raised the issue of the sufficiency of those actions, specifically the number of wells the situation required. Preferred is therefore not entitled to summary judgment on the Gordons' G.L.c. 93A counterclaim.
ORDER
For the foregoing reasons, the Gordons' motion for summary judgment on Count I of its counterclaim is ALLOWED IN PART and a declaratory judgment shall enter as follows: Preferred owes the Gordons a duty to defend as to the Notice of Responsibility from the Department of Environmental Protection dated December 12, 1998. The Gordons' motion for summary judgment on Count I of its counterclaim is DENIED as to Preferred's duty to indemnify. Preferred's motion for summary judgment on Count IV of the Gordons' counterclaim alleging a violation of G.L.c. 93A is DENIED .
Raymond J. Brassard Justice of the Superior Court
Dated: May 13, 2003.