-
USCA1 Opinion
December 16, 1992
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT _____________________
No. 92-1588 No. 92-1588
HIGH VOLTAGE ENGINEERING CORPORATION, HIGH VOLTAGE ENGINEERING CORPORATION,
Plaintiff, Appellant, Plaintiff, Appellant,
v. v.
FEDERAL INSURANCE COMPANY, FEDERAL INSURANCE COMPANY,
Defendant, Appellee. Defendant, Appellee.
____________________ ____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Walter Jay Skinner, U.S. District Judge] [Hon. Walter Jay Skinner, U.S. District Judge] ___________________
____________________ ____________________
Before Before
Cyr, Circuit Judge, Cyr, Circuit Judge, _____________
Bownes, Senior Circuit Judge, Bownes, Senior Circuit Judge, ____________________
and Fust ,* District Judge. and Fust ,* District Judge. ______________
____________________ ____________________
William G. Southard with whom Sarah B. Porter and Bingham, Dana & William G. Southard with whom Sarah B. Porter and Bingham, Dana & ___________________ _______________ _______________
Gould were on brief for appellant. Gould were on brief for appellant. _____
Peter G. Hermes with whom Mark E. Young and Peabody & Arnold were Peter G. Hermes with whom Mark E. Young and Peabody & Arnold were _______________ _____________ ________________
on brief for appellee. on brief for appellee.
____________________ ____________________
____________________ ____________________
*Of the District of Puerto Rico, sitting by designation. *Of the District of Puerto Rico, sitting by designation.
CYR, Circuit Judge. Appellant High Voltage Engineering CYR, Circuit Judge. _____________
Corporation ("High Voltage") instituted this diversity action in
the United States District Court for the District of Massachu-
setts against Federal Insurance Company ("Federal") demanding
reimbursement of costs incurred in defending and indemnifying
certain of its officers and directors in an underlying state
court action. The district court granted summary judgment for
Federal, on the ground that insurance coverage was excluded under
the pollution exclusion clause. We affirm.
I I
BACKGROUND BACKGROUND __________
A. The Underlying State Court Action A. The Underlying State Court Action _________________________________
On September 14, 1983, American Landmark Development,
Inc. ("Landmark") agreed to buy thirty-four acres of commercial
real estate in Burlington, Massachusetts ("Burlington site") from
High Voltage. Landmark assigned its purchase rights to Oskar
Brecher and Bruce Silverman, d/b/a American Landmark Partners and
American Landmark Partners II ("ALP"). On March 27, 1984, ALP
purchased the Burlington site from High Voltage and leased back
the portion on which High Voltage was to continue its manufactur-
ing operation.
At the time of the sale, the Chief Executive Officer of
High Voltage assured ALP that the Burlington site had not been
contaminated by hazardous waste during the preceding fifteen
years. Three years later, in March 1987, hazardous materials
were discovered in the soil, groundwater, and bedrock at the
Burlington site. The contaminants were most conspicuous near a
degreaser unit operated by High Voltage. The cleaning solvents
utilized in the High Voltage degreaser unit were identical to the
contaminants found in the surrounding area. ALP notified High
Voltage and attempted to arrive at a settlement on the cleanup
costs.
In December 1987, High Voltage became the target of a
hostile tender offer by Natalie Acquisition Corporation
("Natalie"), a subsidiary of Hyde Park Partners, a limited
partnership controlled by Clifford Press and Laurence Levy.
Natalie borrowed $51 million from Marine Midland National Bank
("Marine Midland") to finance Natalie's acquisition of High
Voltage's stock. By March 1988, Natalie had acquired 94% of High
Voltage's stock, and Press and Levy became officers and directors
of High Voltage. In August 1988, Press and Levy merged Natalie
into High Voltage, and High Voltage assumed liability for the
Marine Midland loans with which the High Voltage takeover had
been financed.
Meantime, ALP met with little success in persuading
High Voltage to clean up the hazardous wastes at the Burlington
site. In February 1988, ALP again demanded that High Voltage
accept responsibility for the cleanup. In March 1988, ALP
threatened legal action unless High Voltage cleaned up the
contamination and compensated ALP in damages. Ultimately, in
September 1988, ALP brought an action in Massachusetts Superior
4
Court demanding declaratory, injunctive, and monetary relief from
High Voltage, Press, and Levy, among others.
B. The Present Dispute B. The Present Dispute ___________________
In October 1987, prior to Natalie's takeover of High
Voltage but after the discovery of the contaminants at the
Burlington site, Federal issued an executive liability and
indemnity policy to High Voltage, insuring High Voltage's offi-
cers and directors against loss occasioned by third party claims
for wrongful acts committed during the policy period. High
Voltage itself was insured under the policy for defending or
indemnifying its officers and directors against third party
claims. The coverage exclusions in the Federal policy included
the pollution exclusion clause at issue in the present dispute
and a property damage exclusion clause.
In April 1988, High Voltage notified Federal of ALP's
threats to initiate legal action, and in October 1988 provided
Federal with a copy of the ALP complaint. Federal declined
coverage, citing the pollution and property damage exclusions.
High Voltage initiated the present diversity action,
seeking a judicial declaration that Federal was liable under the
policy for losses incurred by High Voltage and its officers and
directors in connection with the ALP action, damages for breach
of contract, and damages for unfair and deceptive business
practices under Mass. Gen. L. ch. 93A. Subsequently, High
Voltage dropped all demands for relief, except its claim for
5
damages incurred in behalf of Press and Levy in connection with
count XIV of the ALP complaint alleging unfair and deceptive
trade practices under Mass. Gen. L. ch. 93A. Federal moved for
summary judgment under the pollution and property damage exclu-
sion clauses. High Voltage countered with a motion for partial
summary judgment relating to the same issues. Finding "no
relevant ambiguity in the [p]olicy, or uncertainty in the facts,
which would justify denying effect to the [p]olicy's pollution
exclusion," the district court concluded that the High Voltage
claims "clearly lie outside the [p]olicy's coverage under the
circumstances in this case." On appeal, High Voltage challenges
the grant of summary judgment.
II II
DISCUSSION DISCUSSION __________
"We review de novo to ensure that no genuine issue of __ ____
material fact . . . has been overlooked and that . . . [the
moving party was] entitled to summary judgment as a matter of
law." Jimenez v. Peninsular & Oriental Steam Navigation Co., 974 _______ __________________________________________
F.2d 221, 222 (1st Cir. 1992) (citing Milton v. Van Dorn Co., 961 ______ ____________
F.2d 965, 969 (1st Cir. 1992)). The proper interpretation of an
insurance policy presents a question of law. Nieves v. Intercon- ______ _________
tinental Life Ins. Co. of Puerto Rico, 964 F.2d 60, 63 (1st Cir. ______________________________________
1992); see also Atlas Pallet, Inc. v. Gallagher, 725 F.2d 131, ___ ____ ___________________ _________
134 (1st Cir. 1984). As the findings of fact material to the
6
present appeal are undisputed, we need only determine whether
Federal is entitled to judgment as a matter of law.
The ALP complaint in the underlying state court action
comprises seventeen counts against numerous defendants and
alleges violations of the Massachusetts Oil and Hazardous Materi-
al Release Prevention Act, breach of warranty, breach of lease,
deceit, trespass, and negligence. The relief ALP sought includ-
ed: an injunction directing defendants to assess, contain, and
remove hazardous waste contamination at the Burlington site and
to cease and desist from further releases of contaminants;
damages caused by the contamination; damages resulting from High
Voltage's unfair and deceptive practices, including its alleged
misrepresentation and concealment and its failure to clean up the
contamination; damages for breach of its warranty relating to the
absence of site contamination; the annulment, as a fraudulent
conveyance, of High Voltage's agreement to satisfy Marine Mid-
land's loans to Natalie, the proceeds from which were used to buy
High Voltage stock; annulment of the High Voltage security
agreement with Marine Midland, granting security interests and
mortgages in all High Voltage assets, which allegedly rendered
High Voltage insolvent and placed its assets beyond ALP's reach;
and an injunction against the liquidation of High Voltage's
assets and the conveyance of any additional assets to Marine
Midland.
The controversy on appeal focuses on count XIV of ALP's
complaint in the underlying state court action. Count XIV names
7
Press, Levy, and Hyde Park Partners as defendants and charges
unfair and deceptive trade practices in violation of Mass. Gen.
L. ch. 93A. The relevant substantive allegations in count XIV
are as follows:
161. On information and belief, Press and
Levy, on behalf of Hyde Park Partners, control the
affairs of High Voltage and have for their own
personal benefit intentionally stalled the Plain-
tiffs in order to consummate the merger, document
High Voltage's obligation and collateral to Marine
Midland, and liquidate assets of High Voltage
without making them available to the Plaintiffs.
162. On information and belief, Press, Levy
and Hyde Park Partners have exerted their control
over High Voltage to cause High Voltage to take
minimal action in regards to the contamination
problem; have delayed the progress by firing engi-
neers previously retained by them and by limiting
the efforts of the engineers currently retained by
High Voltage; and have knowingly injured the
Plaintiffs, for the personal gain of Press, Levy
and Hyde Park Partners.
. . . .
166. Press, Levy and Hyde Park Partners, in
their conduct towards the Plaintiffs, have em-
ployed unfair and deceptive acts and practices
against the Plaintiffs, primarily and substantial-
ly in the Commonwealth of Massachusetts in the
conduct of a trade or commerce, each and every one
of which is a separate and distinct cause of ac-
tion, including, but not necessarily limited to
the following:
a. By using their control over the
affairs of High Voltage to attempt to sabo-
tage the Plaintiffs' development of the [Bur-
lington site].
b. By deceiving and stalling the
Plaintiffs for their own personal gain.
c. By attempting to use economic
duress against the Plaintiffs to force
them to abandon their claim against High
Voltage, and to enable High Voltage to
8
attempt to liquidate the Plaintiffs'
promissory note to High Voltage.
d. By using their control over High
Voltage to cause High Voltage to continue to
fail to remove said contamination from [the
Burlington site].
e. By using their control over High
Voltage to cause High Voltage to fraudulently
convey its assets to Marine Midland.
f. By using their control over High
Voltage to interfere with the contractual
relations between the Plaintiffs and High
Voltage, and to cause High Voltage to breach
its contracts with and other obligations to
the Plaintiffs.
g. By causing High Voltage to negotiate
with the Plaintiffs in bad faith as aforesaid
in order to stall the Plaintiffs from pursu-
ing their rights against High Voltage.
h. By causing High Voltage to act in a
manner designed to continue to injure the
Plaintiffs, to continue to frustrate the
Plaintiffs in their efforts to remove the
hazardous materials from the [Burlington
site], to place the Plaintiffs in a position
of economic duress.
i. By causing High Voltage to breach
its obligation of good faith and fair deal-
ing.
The pollution exclusion clause in the Federal insurance
policy provides:
[Federal] shall not be liable under this policy to
make any payment for Loss in connection with any
claim(s) made against any Insured Person(s) . . .
(D) where all or part of such claim is, directly ___ __ ____ ________
or indirectly, based on, attributable to, arising __ __________
out of, resulting from or in any manner related to __ ___ ______ _______ __
the Insured's Wrongful Act(s) concerning: ___ _________ ________ ______ __________
(1) the actual, alleged or threatened ___ _______
discharge, release or escape of Pollutants _________ _______ __ ______ __ __________
into or on real or personal property, water
or the atmosphere.
(2) any Loss or expense arising out of any ___ ____ __ _______ _______ ___ __ ___
direction or request that the Insured test _________ __ _______ ____ ___ _______
9
for, monitor, clean up, remove, contain, _____ __ ______ _______
treat, detoxify or neutralize Pollutants.1 _____ ________ __ __________ __________
(Emphasis added.) The policy defines "Loss" as "the total amount
which any Insured Person(s) becomes legally obligated to pay on
account of each claim and for all claims in each Policy Year made
against them for Wrongful Acts for which coverage applies,
including, but not limited to, damages, judgments, settlements,
costs and Defense Costs." A "Wrongful Act" is "any error,
misstatement, misleading statement, act, omission, neglect, or
breach of duty committed, attempted, or allegedly committed or
attempted, by any Insured Person, individually or otherwise, in
his Insured Capacity, or any matter claimed against him solely by
reason of his serving in such Insured Capacity."
The parties agree that Massachusetts law applies. See ___
Mathewson Corp. v. Allied Marine Indus., Inc., 827 F.2d 850, 853 ________________ __________________________
n.3 (1st Cir. 1987) (accepting parties' "expressed preference"
for the application of Massachusetts law). Under Massachusetts
law, "[t]he first approach to the question of interpretation must
be to read [the] policy as one would read any ordinary contract
to inquire what the simplified, conversational language of the
policy would mean to a reader applying normal reasoning or
analysis." Commerce Ins. Co. v. Koch, 25 Mass. App. Ct. 383, __________________ ____
384, 522 N.E.2d 979, 980 (1988). See also Nelson v. Cambridge ___ ____ ______ _________
____________________
1The policy identifies terms defined elsewhere in the
instrument with capital letters and bold type in some places and
capital letters and quotation marks in others. To minimize
confusion, we retain the capital letters in direct quotes from
the policy, but dispense with the bold type and quotation marks.
10
Mut. Fire Ins. Co., 30 Mass. App. Ct. 671, 673, 572 N.E.2d 594, ___________________
596 (1991). "A policy of insurance whose provisions are plainly
and definitely expressed in appropriate language must be enforced
in accordance with its terms." Stankus v. New York Life Ins. _______ ___________________
Co., 312 Mass. 366, 369, 44 N.E.2d 687, 689 (1942); see Cody v. ___ ___ ____
Connecticut Gen. Life Ins. Co., 387 Mass. 142, 146, 439 N.E.2d _______________________________
234, 237 (1982); Nelson, 30 Mass. App. Ct. at 673, 572 N.E.2d at ______
596. But "where language in an insurance policy is found to be
ambiguous, 'doubts as to the intended meaning of the words must
be resolved against the insurance company that employed them and
in favor of the insured.'" Id. (quoting August A. Busch & Co. v. ___ _____________________
Liberty Mut. Ins. Co., 339 Mass. 239, 243, 158 N.E.2d 351, 353 _____________________
(1959)). Coverage exclusions are to be strictly construed and
any ambiguity is to be interpreted in favor of the insured.
Andover Newton Theological School, Inc. v. Continental Cas. Co., ________________________________________ ____________________
930 F.2d 89, 93 (1st Cir. 1991) (applying Massachusetts law).
The district court ruled that
[c]ount XIV of the underlying complaint
clearly alleges claims which are "directly or ________ __
indirectly, based on, attributable to, aris- __________
ing out of, resulting from or in any manner __ ___ ______
related to [Press and Levy's] 'Wrongful _______ __ ________
Act(s)' concerning the actual, alleged or ______ __________
threatened discharge, release or escape of
'pollutants' into or on real or personal
property, water or the atmosphere." . . . The
unfair and deceptive acts alleged in count
XIV constitute Wrongful Acts under 9.1 of
the Policy, which in context clearly relate
to the pollution of the site.
11
(Emphasis added.) The crux of the High Voltage claim on appeal
is that count XIV of the ALP complaint alleges certain "wrongful
acts" by Press and Levy that do not "concern" the release of
pollutants, and therefore are not excluded from coverage by the
pollution exclusion clause. High Voltage specifically cites, as
examples, the allegations that Press and Levy stalled ALP's
pursuit of its claim against High Voltage in order to liquidate
High Voltage assets for their personal gain, fraudulently con-
veyed High Voltage assets, frustrated ALP's real estate develop-
ment efforts, and sought to compel ALP to abandon its claim
against High Voltage. As each is delineated a "separate and
distinct cause of action," High Voltage urges that the claims
alleged in 166 of the ALP complaint, see supra pp. 7-8, are ___ _____
independent of all pollution-related claims, hence not within the
purview of the pollution exclusion clause. In order to ascertain
whether the pollution exclusion applies to the claims in count
XIV for which High Voltage seeks reimbursement from Federal, we
must determine whether "all or part of" the claims are "in any
manner related" to "wrongful acts"2 of Press and Levy concerning
either the release of pollutants or "any Loss or expense arising
out of any direction or request that the Insured test for,
monitor, clean up, remove, contain, treat, detoxify or neutralize
Pollutants."
____________________
2The policy definition of "wrongful act" includes acts
"allegedly committed or attempted."
12
As High Voltage views the matter, neither the com-
plaint's primary focus on pollution-related claims, nor its
inclusion of non-contamination claims traceable to the alleged
contamination, triggers the pollution exclusion clause. As we
see it, however, there could be no legally cognizable claim
against Press or Levy in the underlying state court action, but ___
for the alleged "wrongful acts" indisputably related to pollu- ___
tion.
Contrary to High Voltage's contention that the pollu-
tion exclusion clause is only implicated if a claim expressly
alleges a release of pollutants "participated in, authorized, or
approved" by the insured, its unambiguous language excludes from
coverage any claim "all or part of [which] is, directly or ___ __ ____ ________ __
indirectly, based on, attributable to, arising out of, resulting __________
from or in any manner related to the Insured's Wrongful Act(s) __ ___ ______ _______ __ ___ _________ ________ ______
concerning" a release of pollutants. (Emphasis added.) Under __________
the construction urged by High Voltage, the unambiguously expan-
sive language of the pollution exclusion clause would be rendered
superfluous. See, e.g., Edmund Wright Ginsberg Corp. v. C.D. ___ ____ ______ ______ ________ ____ ____
Kepner Leather Co., 317 Mass. 581, 587, 59 N.E.2d 253 (1945) ("It ______ _______ ___
is a general rule in the construction of contracts that whenever
practicable every word shall be given some effect."). We decline
to adopt the gratuitous interpretation urged by High Voltage, as
the unambiguous pollution exclusion clause plainly requires no
direct relationship between the claim and the alleged "wrongful
13
act;" a claim "indirectly" related to the "wrongful act," "in
whole or in part" and "in any manner," is excluded from coverage.
High Voltage concedes that the "general theme" of the
complaint is the existence of contamination at the Burlington
site and that "aspects" of count XIV specifically, the allega-
tions that Press and Levy prevented High Voltage from removing
the contamination and frustrated ALP's efforts to remove the
contamination concern pollution. In our view, these allega-
tions form the core of ALP's claim against Press and Levy. The
remaining claims in count XIV either restate these allegations or
specify particular actions allegedly undertaken by Press and Levy
in order to prevent removal of the contamination. For example,
the allegations that Press and Levy stalled ALP in order to
consummate the merger and liquidate High Voltage's assets,
fraudulently conveyed High Voltage's assets, and sought to compel
ALP to abandon its claim, merely detail the methods allegedly
used by Press and Levy to impede removal of the contamination.
The allegation that Press and Levy frustrated ALP's real estate
development efforts particularizes a direct effect of their
alleged efforts to prevent removal of the contamination. The
allegation that Press and Levy caused High Voltage to breach its
contractual and other obligations to the plaintiffs essentially
restates the allegation that they impeded removal of the contami-
nation, as the complaint nowhere mentions obligations breached by
High Voltage that were unrelated to the purported obligation to
clean up the Burlington site.
14
Thus, we cannot conclude that the "wrongful acts" of
Press and Levy concerning the release of pollutants alleged
elsewhere in the complaint are entirely unrelated to the claims
in count XIV for which High Voltage seeks recovery.3 Clearly,
"all or part of" these claims are "directly or indirectly, based
on, attributable to, arising out of, resulting from or in [some]
manner" related to alleged "wrongful acts" of Press and Levy
concerning the release of pollutants and expenses arising from
ALP's request that High Voltage clean up the Burlington site.
Accordingly, these claims are excluded from coverage by the plain
language of the pollution exclusion.
As Federal was entitled to judgment as a matter of law,
the district court judgment must be affirmed.4
____________________
3Furthermore, many of these claims are related to "wrongful
acts" of Press and Levy concerning expenses arising out of a
"direction or request" for the removal of pollutants within the
meaning of subsection (2) of the pollution exclusion, in that
they allege attempts by Press and Levy to divert High Voltage
assets that otherwise would have been available to clean up the
Burlington site. The fraudulent conveyance claim, for example,
is clearly "related" to alleged "wrongful acts" of Press and Levy
concerning expenses arising out of ALP's request that High
Voltage clean up the Burlington site. Had ALP made no such
request, it would have lacked standing to bring the count XIV
fraudulent conveyance claim against High Voltage.
4High Voltage contends that it is entitled to recover the
legal defense costs it incurred in behalf of Press and Levy,
regardless of its entitlement to indemnification costs, because
the allegations in the ALP complaint are reasonably interpreted
as stating a claim covered under the terms of the policy. In
light of our holding that the plain language of the pollution
clause excluded coverage for "Loss" (including defense costs)
incurred by High Voltage in behalf of Press and Levy, High
Voltage's claim for reimbursement of its defense costs is pre-
cluded by the pollution exclusion clause. Thus, we do not reach
the Federal defense based on the property damage exclusion.
15
Affirmed. Affirmed ________
16
Document Info
Docket Number： 92-1588
Filed Date： 12/16/1992
Precedential Status： Precedential
Modified Date： 9/21/2015