Tuesday, January 22, 2013

Boston Gas Company v. Century Indemnity Company

Jan 18: In the U.S. Court of Appeals, First Circuit, Case No. 11-1931. Appealed from the U.S. District Court for the District of Massachusetts, Boston. In this very detailed and highly complicated decision the Appeals Court explains that this appeal is the latest chapter in a long-running dispute between Boston Gas Company (Boston Gas) and one of its insurers, Century Indemnity Company (Century). What's more, the insured's activities giving rise to the dispute stretch back more than a century. During the latter part of the 19th and well into the 20th century, Boston Gas produced gas fuel at facilities known as manufactured gas plants (MGPs). Faced with liability under Massachusetts law for the costs of investigating and remediating environmental contamination discovered at a number of former MGP sites, see Mass. Gen. Laws ch. 21E (2006), Boston Gas filed this diversity action seeking a declaratory judgment as to Century's obligations under general commercial insurance (GCL) policies issued to Boston Gas by Century's predecessor and damages for breach thereof.
    As relevant to the appeal, jury trials were held with respect to two of the sites included in the cleanup, the Everett and Commercial Point sites. Boston Gas operated MGPs at the Everett and Commercial Point sites during the periods 1908-1969 and 1886-1930, respectively, and insured both sites with Century from 1951-1969. The Everett site litigation was the first to go to trial. The jury awarded Boston Gas over $6.1 million in past remediation expenses, and the district court issued a declaratory judgment obligating Century to pay all future costs associated with the cleanup of the site.
    On appeal, a central issue involved the proper method under Massachusetts law for allocating liability for long-term environmental contamination where the defendant GCL insurer had provided coverage for the risk for only a portion of the time during which the contamination took place. Based on an existing intermediate state court decision, the district court had applied an "all sums" or "joint and several" allocation method, whereby an insurer is responsible for an insured's total remediation costs as long as some property damage for which the insured is liable occurs during the policy period. Noting that the Commonwealth's highest court had not yet ruled on the issue, which was "determinative of the scope of Boston Gas' claim," a panel of this court certified the allocation question to the Supreme Judicial Court (SJC).
    The SJC rejected an "all sums" approach in favor of pro rata allocation, pursuant to which each insurer is obligated to pay only those costs associated with damage occurring during its policy period. . . The court held that the preferred method for allocating damages on a pro rata basis is a "fact-based" determination of the losses occurring during each policy period, but in the event that the evidence does not permit such an allocation, losses should be allocated based on the insurer's "time on the risk."
    The trial judge deferred ruling on post-trial motions and entry of final judgment pending the outcome of the Everett appeal. The Appeals Court said, "Those motions now having been resolved, and entry of judgment in the Commercial Point litigation stipulated to, Boston Gas appeals on multiple grounds. For the reasons set forth below, we affirm in all respects." Further, the Appeals Court concluded the following:
"Discerning no abuse of discretion in the district court's application of judicial estoppel, we affirm its entry of judgment allocating damages evenly across the 121-year span from the time of plant operations to trial. Consequently, Century is, as was found below, liable for 14.9% of the sum total of Boston Gas's recoverable costs."
"A reasonable jury could determine from this evidence that inhalation risks related solely to Boston Gas's use of its own property and presented no potential for third party impact. Absent such potential, Boston Gas's motion for judgment as a matter of law on the owned property exclusion was properly denied."
"Unable to reconcile the damages award with the arguments and evidence presented at trial, the district court properly vacated the verdict as being against the clear weight of the evidence. While Boston Gas accuses the district court of improperly invading the province of the jury, we view its decision to grant a new trial as designed to avoid just that. In short, there was no abuse of discretion."
    Finally, the Appeals Court concludes, ". . .we affirm the district court in all respects and remand for further proceedings in accordance with this opinion. We do so noting, once again, that '[t]his litigation, plainly unusually complicated, has been well handled by the district court,' and urge 'the parties . . . to consider whether a settlement between them is feasible before more time and expense is devoted to further litigation.' Boston Gas, 588 F.3d at 23-24."
    Access the complete opinion (click here). [#Remed, #CA1]

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