Wednesday, June 11, 2008

Boston Gas Company v. Century Indemnity

Jun 10: In the U.S. Court of Appeals, First Circuit, Case No. 07-1452. As explained by the Appeals Court, this is a dispute between Boston Gas Company (Boston Gas), the largest provider of natural gas in the New England area, and one of its insurers, Century Indemnity Company (Century). Before natural gas became the primary source of energy in New England, Boston Gas produced gas fuel at facilities called manufactured gas plants (MGPs). The MGPs created gas by heating coal in large ovens, generating gas which was then purified and piped out for use. The process also produced a variety of byproducts, including ash, drip oil, tar and coke. Many are non-biodegradable and some are deemed carcinogenic, and they now contaminate the ground and water around many former MGP sites; further, MGPs were often sited near waterways which were contaminated in turn. Contamination has been discovered at twenty-nine former Boston Gas MGPs; this case concerns only one of those sites, located in Everett, Massachusetts.

At trial, the jury awarded Boston Gas over $6.1 million in past remediation expenses; the district court also issued a declaratory judgment obligating Century to pay all future costs associated with the investigation and environmental cleanup of the Everett site. Century now appeals on multiple grounds from the district court's judgment.

Among other conclusions, the Appeals Court said, "We conclude that as to future costs, Century cannot reargue matters that have already been decided, but conversely, Boston Gas cannot properly seek to recover for future costs spent purely to remediate its own property where no threat exists of contamination outside the site. The district court will be able to determine the scope of litigation when a dispute arises, using doctrines like collateral estoppel, waiver, and the like to prevent relitigation of matters that have been, or could have been, decided.

"By its literal terms the declaratory judgment could be read to encompass costs that are not recoverable under Century's policy; the district court may not have considered that requiring Century to indemnify Boston Gas for all costs related to 'investigation and cleanup' may apply more broadly than it intended. On remand an adjustment is needed in order to clarify that Boston Gas' entitlement extends only to costs incurred for remediation not barred by the terms of Century's policies and consistent with the findings of the jury." Additionally, the Appeals Court certified three questions concerning allocation of liability to the Massachusetts Supreme Judicial Court for its consideration.

Access the complete opinion (
click here). Access the certified order (click here).