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13-P-1240 Appeals Court

ONEBEACON AMERICA INSURANCE COMPANY vs. NARRAGANSETT ELECTRIC 

COMPANY; AMERICAN HOME ASSURANCE COMPANY & others,

1 third-party 

defendants (No. 1).

No. 13-P-1240.

Suffolk. June 3, 2014. - June 3, 2015.

Present: Kantrowitz, Hanlon, & Carhart, JJ.

Conflict of Laws. Limitations, Statute of. Practice, Civil, 

Summary judgment, Statute of limitations, Dismissal, 

Judicial discretion, Attorney's fees. Insurance, 

Comprehensive liability insurance, Excess Liability 

Insurance, Construction of policy, Insurer's obligation to 

defend, Defense of proceedings against insured, Pollution 

exclusion clause, Disclaimer of liability. Indemnity. 

Contract, Insurance, Indemnity, Construction of contract, 

Parties, Performance and breach. Real Property, 

Environmental damage. Jurisdiction.

 

1 Century Indemnity Company; Certain Underwriters at 

Lloyd's, London and Certain London Market Insurance Companies;

National Union Fire Insurance Company of Pittsburgh, PA

(National Union); John Does 1-200; American International 

Specialty Lines Insurance Company (AISLIC); and Chartis 

Specialty Insurance Company (Chartis). During the course of the 

proceedings below, AISLIC was succeeded by Chartis. Subsequent 

to the proceedings, American Home Assurance Company, Chartis, 

and National Union were apparently succeeded by American 

International Group, Inc. For the sake of clarity, we refer to 

the parties as their names appear in the pleadings.
2

Civil action commenced in the Superior Court Department on 

July 25, 2005. 

Motions for summary judgment regarding choice of law issues 

were heard by Allan van Gestel, J., and a motion for 

reconsideration was considered by him; motions for summary 

judgment were heard by Margaret R. Hinkle, J., and Peter M. 

Lauriat, J.; the remaining issues were tried in two phases 

before them; and entry of final judgment was ordered by Lauriat, 

J.

Jay T. Smith, of the District of Columbia (A. Hether Cahill

with him) for Narragansett Electric Company.

Kevin J. O'Connor for OneBeacon America Insurance Company.

David B. Chaffin for Century Indemnity Company.

Eileen T. McCabe, of New York, & John T. Harding, for 

Certain Underwriters at Lloyd's, London, & others, were present 

but did not argue.

Michael F. Aylward, for American Home Assurance Company & 

others, was present but did not argue. 

KANTROWITZ, J. To put this rather dense environmental case 

in perspective, pollution in some of the affected areas started 

in the mid-1800s, and the first of several insurance policies at 

issue was written in 1945. Today, we are asked to rule on the 

propriety of the allowance of numerous summary judgment motions 

and the verdicts in three separate, lengthy jury trials.2

I. Background. The plaintiff, OneBeacon America Insurance 

Company (OneBeacon), brought this declaratory judgment action in 

July, 2005, against its insured, Narragansett Electric Company 

(NEC), seeking a determination that OneBeacon had no duty to 

 

2 We also review the conversion of the voluntary dismissal 

without prejudice of certain of Narragansett Electric Company's 

counterclaims to a dismissal with prejudice.
3

defend or indemnify NEC for damages associated with 

environmental contamination at several sites, formerly utilized 

by NEC's predecessors for manufactured gas plant operations and 

waste disposal. NEC counterclaimed for breach of contract and 

declaratory relief, adding other insurers that had issued 

primary and excess liability insurance policies to NEC for the 

years in question.

The majority of NEC's claims were dismissed on summary 

judgment as either time-barred or as not covered under the 

policies. NEC appeals from those dismissals. In the three jury 

trials, NEC prevailed on its remaining claims, against Century 

Indemnity Company (Century) and Certain Underwriters at Lloyd's, 

London and Certain London Market Insurance Companies

(collectively, London), who cross-appeal. We affirm in part and 

reverse in part.

The issues before us are numerous and complex, involving 

Massachusetts procedure and Rhode Island substantive law. The 

substantive aspects of the appeal and cross appeals are factintensive and involve Rhode Island law. We address them by way 

of an unpublished memorandum and order pursuant to our rule 

1:28, which accompanies this opinion.3 Our discussion here 

focuses principally on NEC's appeal from the denial of certain 

 

3 See OneBeacon America Ins. Co. v. Narragansett Elec. Co. 

(No. 2), 87 Mass. App. Ct. (2015), issued this day. 
4

claims as untimely under Massachusetts law. We consider the 

issue of timeliness and the accrual of claims in the context of

insurance coverage for environmental contamination.4

A. The parties and policies. NEC is a Rhode Island 

utility company with its principal place of business in 

Providence. It is successor to the Blackstone Valley Electric 

Company (BVEC), and the Blackstone Valley Gas & Electric 

Company.5 The sites involved in this case were used by NEC's 

predecessors for manufactured gas plants and electric 

operations, and for waste disposal, from the mid-1800s until the 

1980s. Soil and groundwater contamination were eventually 

discovered at those sites, prompting governmental and private 

actions against NEC. NEC sought defense costs and 

indemnification from a number of insurers that issued primary 

and excess policies to NEC for policy periods between 1945 and

1986. 

OneBeacon, through its predecessors, issued thirteen 

primary comprehensive general liability policies to NEC, 

covering the period of October, 1972, to January 1, 1985. These

policies provided for defense costs and indemnification for

 

4 The cross appeals also raise issues involving accrual in 

connection with one of the jury trials, which we address in our 

rule 1:28 memorandum and order.

5 For the sake of clarity, we refer to the companies by 

their current name, NEC.
5

property damage in actions brought against the insured by third 

parties.

Predecessors of Century issued both primary and excess 

coverage to NEC. The primary policy was for January 1, 1985, to 

January 1, 1986, and similarly provided for defense costs and 

indemnification. The excess policies were for July 8, 1949, to 

May 1, 1965, and provided indemnification coverage in excess of 

retained limits as specified in the policies. Excess policies 

were also issued by American Home Assurance Company (American 

Home), for June 1, 1973, to June 1, 1985,

6 and by London, for 

March 1, 1945, to June 1, 1968. 

B. The sites, response actions, and notices. Of the eight

involved sites, seven are located in Rhode Island; the remaining 

site is located in Massachusetts and Rhode Island.7 A Superior 

Court judge (first judge) divided the sites into two phases for 

litigation purposes.

8

 

6 AISLIC and National Union, related entities of American 

Home, issued pollution legal liability (PLL) policies to NEC as 

well. Chartis is the successor to AISLIC.

7 While we could speculate why redress was not sought in the 

State with the greatest number of affected sites, we do not.

8 On November 19, 2007, the judge ordered the parties to 

select two or three sites "to be representative sites for the 

purposes of all further discovery and trial in the initial phase 

of this action."
6

1. Phase I. The parties jointly stipulated to the 

selection of the "Tidewater" and "Lawn Street" sites for Phase 

I.9

a. Tidewater. The Tidewater site is located in Pawtucket, 

Rhode Island, and was formerly used as a manufactured gas plant 

and power plant. On October 28, 1986, the Rhode Island 

Department of Environmental Management (RIDEM) notified NEC that 

contaminated waste materials had been found at the site and 

requested that NEC construct a barrier to prevent public access 

to the contaminated area pending investigation. In 1987, NEC 

forwarded the RIDEM correspondence to National Union Fire 

Insurance Company of Pittsburgh, PA (National Union), and 

Century. On September 12, 1995,10 RIDEM issued a "Letter of 

Responsibility" (LOR) to NEC, asserting that NEC was a 

responsible party for alleged releases of certain contaminants

and demanding that NEC undertake a remedial investigative work 

plan at its own expense. The LOR set forth enforcement actions 

and penalties for failure to comply. NEC agreed to the LOR on 

 

9 A second Superior Court judge handled the motion practice 

with respect to the Phase I sites, and also presided over a jury 

trial concerning the existence and terms of six lost London 

policies. In addition, she subsequently presided over a jury 

trial regarding the unresolved questions concerning the Lawn 

Street site. A third Superior Court judge presided over a jury 

trial with respect to the issues not resolved by summary 

judgment for the Tidewater site.

10 The reason for the lengthy delay is unclear. 
7

September 22, 1995, and on April 17, 1996, NEC submitted a draft 

of the requisite plan to RIDEM. 

On October 5, 1995, NEC notified OneBeacon, American Home,

Century, and London of the Tidewater LOR and demanded defense 

costs and indemnification. On November 15, 1995, Century 

notified NEC that it could not find the 1985 policy and was 

reserving its rights. On December 27, 1996, American Home 

disclaimed coverage as to its excess policies that did not 

provide coverage for pollution legal liability (PLL). On June 

14, 2001, American Home disclaimed coverage as to its PLL 

policies as well. On March 18, 1996, and again on October 14, 

1998, OneBeacon disclaimed coverage, and on March 25, 1996, 

London disclaimed as to its duty to defend as an excess carrier, 

and reserved its rights as to indemnification.

b. Lawn Street. The second site selected, Lawn Street, is 

located partially in Attleboro, Massachusetts, and partially in 

Cumberland, Rhode Island, and was formerly a sand and gravel pit

owned by a third party. NEC disposed sulfur-containing oxide 

box wastes from Tidewater at Lawn Street. On November 21, 1986, 

the Massachusetts Department of Environmental Quality 

Engineering (DEQE)

11 sent NEC a "Notice of Responsibility" (NOR)

 

11 The Department of Environmental Protection is the 

successor agency to the Department of Environmental Quality 

Engineering. See St. 1989, c. 240, § 101.
8

pursuant to G. L. c. 21E, for the presence of contaminants at 

Lawn Street. In April, 1987, NEC notified OneBeacon of the NOR 

regarding Lawn Street. On October 23, 1987, NEC entered into an 

administrative consent order with DEQE that required NEC to 

prepare and implement site investigation plans. Subsequently, 

on September 13, 1996, NEC entered into an amended 

administrative consent order, agreeing to comply with the

requirements of the Department of Environmental Protection (DEP)

for remediating the site.

On February 29, 1996, NEC demanded coverage from American 

Home. On December 27, 1996, American Home disclaimed coverage 

as to its non-PLL policies and reserved its rights as to the PLL 

policies; on June 14, 2001, American Home disclaimed coverage 

under the PLL policies as well. On May 27, 1998, NEC notified 

OneBeacon of the amended administrative consent order for Lawn 

Street, and on October 14, 1998, OneBeacon disclaimed coverage.12 

 

12 On June 8, 2001, London disclaimed any duty to defend, as 

an excess insurer, and reaffirmed its reservation of rights 

regarding coverage. London eventually denied coverage based on 

its position that no covered event took place at Lawn Street 

during the policy period. On March 31, 1997, NEC sought a 

coverage determination from Century for Lawn Street. Century 

responded that it was investigating the claim under a 

reservation of rights.
9

2. Phase II. The Phase II sites are the Pawtucket water 

supply board (PWSB), Hamlet Avenue, J.M. Mills, High Street, 

Pond Street, and Exchange Street.13

a. PWSB. The PWSB site, located in Cumberland, Rhode 

Island, was a waste disposal site that received sulfurcontaining oxide box waste from NEC that allegedly caused a 

release of hazardous substances. On September 12, 1995, RIDEM 

sent NEC an LOR and demanded reimbursement of $296,381.70 for 

remediation. On September 22, 1995, NEC agreed to comply by 

remitting the costs to RIDEM, pursuant to an escrow agreement

whereby the funds were held pending resolution of related 

litigation.

14 On October 5, 1995, NEC notified OneBeacon, 

American Home, Century, and London of RIDEM's claims and sought 

defense costs and indemnification for responding to the LOR. On 

November 15, 1995, Century issued a reservation of rights, 

stating that it was trying to locate the relevant policies. 

OneBeacon disclaimed coverage on March 18, 1996, and again on 

 

13 The Davies Vocational School site was also litigated in 

Phase II. NEC has not appealed from the dismissal of its claims 

for Davies Vocational School. The third Superior Court judge 

handled the motion practice with respect to the Phase II sites.

14 The escrow agreement provided that NEC would deposit the 

funds "to satisfy its obligations to the State pending 

resolution of the issue of whether FFC [ferric ferrocyanide] is 

a hazardous substance" under State and Federal law, which NEC

was litigating in a related matter.
10

October 14, 1998. On March 25, 1996, London notified NEC that 

it had no duty to defend under the excess policies, and reserved 

its rights as to any indemnification obligations. On December 

27, 1996, American Home denied coverage based on its policy's

"pollution exclusion" provision, and again declined coverage on 

June 14, 2001.

b. Hamlet Avenue. The Hamlet Avenue site, located in 

Woonsocket, Rhode Island, was used by NEC as a manufactured gas 

plant and power plant. Soil and groundwater contamination were

found at the site, and on February 11, 1997, RIDEM issued an LOR 

to NEC, directing NEC to develop a site investigation plan. On 

February 21, 1997, NEC notified OneBeacon, American Home, 

Century, and London, and sought defense costs and

indemnification. On February 25, 1997, NEC settled with RIDEM, 

agreeing to pay for the work specified in the LOR, but did not 

notify the insurers. Century responded on April 7, 1997,

reserving its rights. Also on April 7, 1997, London informed 

NEC that it had no duty to defend under the excess policies and

reserved its rights as to any obligation to indemnify. On 

October 14, 1998, OneBeacon disclaimed coverage, and on June 14, 

2001, American Home disclaimed coverage as well.15

 

15 Chartis (as successor to AISLIC) was also notified of the 

LOR on February 21, 1997, and disclaimed coverage on November 

24, 1997.

 
11

c. J.M. Mills. J.M. Mills is a former landfill located in 

Cumberland, Rhode Island. Between 1967 and 1982, NEC hired a 

contractor to carry waste from one of its facilities to J.M. 

Mills, which was owned by a third party. The waste included 

creosote-covered utility poles. In 2000, the Environmental 

Protection Agency (EPA), in the course of investigating 

contamination at J.M. Mills, issued a "Request for Information"

(RFI) to NEC. On May 28, 2004, EPA identified NEC as a 

potentially responsible party (PRP), and informed NEC that it 

was liable for past and future cleanup costs. NEC sought 

coverage from OneBeacon, Century, London, and American Home for 

expenses in connection with the cleanup of the site. All of the 

insurers disclaimed coverage, based either on the pollution 

exclusion provisions in their policies, or on the basis that no 

triggering event occurred during the policy period.

d. High, Pond, and Exchange Streets. The final three 

sites are referred to as High Street, Pond Street, and Exchange 

Street, located in Central Falls, Woonsocket, and Pawtucket,

Rhode Island, respectively. When BVEC merged into NEC in 2000, 

NEC notified RIDEM of the prior use of those sites as 

manufactured gas plants. NEC also notified the insurers on 

April 5, 2000, of the potential for governmental claims 
12

regarding cleanup of these sites and included the sites in its 

counterclaims.

16

C. Prior proceedings. OneBeacon filed this action in 

Superior Court on July 25, 2005, seeking a declaration that it 

has no duty to defend or indemnify NEC for environmental 

contamination claims under the thirteen comprehensive general 

liability insurance policies issued to NEC between 1972 and 

1985. On September 14, 2005, NEC counterclaimed against 

OneBeacon for breach of contract and declaratory relief. On 

cross motions for summary judgment, the first Superior Court 

judge ruled that Rhode Island substantive law would apply in 

interpreting the policies. The second judge determined that 

Massachusetts's six-year statute of limitations would apply to 

the claims, rather than Rhode Island's ten-year statute of 

limitations. On October 12, 2007, NEC amended its counterclaim, 

adding the other insurers involved in this appeal, and 

subsequently filed a second amended counterclaim on July 13, 

2009, adding additional insurers and claims, including a claim 

against AISLIC for defense costs, and against Century for breach 

of its 1985 primary policy.

On the Phase I claims, summary judgment entered for 

OneBeacon and American Home on statute of limitations grounds

 

16 RIDEM had yet to take action with respect to these three 

sites at the time of the final hearing in these proceedings.
13

with respect to both Tidewater and Lawn Street.

17 On the same 

basis, summary judgment entered for Century on NEC's duty to 

defend claim as to Tidewater, but NEC's claims against Century 

and London for indemnification were tried to a jury, which found 

for NEC. As to Lawn Street, summary judgment entered for London

and American Home (see note 17, supra) on their duty to 

indemnify, on the ground that no triggering event had occurred 

during the policy period. NEC's claims against Century for the 

Lawn Street site went to trial, with a jury verdict for NEC.18

NEC also prevailed in a third trial to establish the terms of 

six lost policies issued by London.

In the Phase II proceedings, summary judgment entered for 

all insurers on NEC's claims for PWSB and Hamlet Avenue, on 

statute of limitations grounds. As to J.M. Mills, summary 

judgment entered for OneBeacon, Century, and American Home based

on the pollution exclusion clauses in their policies; summary 

judgment entered for London (as it had on the Lawn Street 

claims) on the basis that no triggering event had occurred 

during the policy period. NEC moved to voluntarily dismiss its 

 

17 As to Lawn Street, summary judgment entered for American 

Home for the additional reason that no triggering event had 

occurred during the policy period.

18 At the beginning of the Lawn Street trial, Century waived 

its statute of limitations defense as to the duty to defend, and 

trial proceeded on the indemnification claims.
14

claims for High Street, Pond Street, and Exchange Street. The

motion was allowed, conditioned on NEC's paying the insurers' 

attorney's fees related to those claims. When the parties

failed to agree on how to proceed as to the fee request, the 

judge dismissed the claims with prejudice, omitting the fee 

award.

We address in this opinion NEC's appeal from the summary 

judgment rulings dismissing its claims as time-barred. We also 

address NEC's appeal from the dismissal, with prejudice, of its 

claims for High Street, Pond Street, and Exchange Street.

19

II. Issues on appeal. A. Statute of limitations. NEC 

argues that the judge erred in applying Massachusetts's six-year 

statute of limitations rather than Rhode Island's ten-year 

period, and that, in any event, its claims were not time-barred 

under either provision.

1. Choice of law. Massachusetts provides a six-year 

limitations period, under G. L. c. 260, § 2, for breach of 

contract claims, while Rhode Island provides a ten-year 

limitations period, under R.I. Gen. Laws § 9-1-13. The forum 

 

19 In our accompanying rule 1:28 memorandum and order, we 

address Century and London's cross appeals from certain rulings 

made by the trial judges at their respective jury trials

(concerning the Phase I sites and the six lost London policies), 

as well as NEC's appeal from the allowance of various insurers' 

summary judgment motions on other than statute of limitations 

grounds (concerning J.M. Mills and Lawn Street).
15

State applies its own conflict of law rules in determining which 

State's law governs. See Clarendon Natl. Ins. Co. v. Arbella 

Mut. Ins. Co., 60 Mass. App. Ct. 492, 495 (2004). In resolving

a question involving the statute of limitations, Massachusetts 

utilizes the choice of law analysis set forth in Restatement 

(Second) of Conflict of Laws § 142 (Supp. 1989).

20 Nierman v. 

Hyatt Corp., 441 Mass. 693, 695 (2004), citing New England Tel. 

& Tel. Co. v. Gourdeau Constr. Co., 419 Mass. 658, 663-664 

(1995). Where, as here, the forum State has the shorter statute 

of limitations, which bars the claim, we apply § 142(1) of the 

Restatement, pursuant to which Massachusetts's six-year statute 

of limitations governs NEC's claims, unless exceptional 

 

20 Section 142 of the Restatement provides: 

"Whether a claim will be maintained against the 

defense of the statute of limitations is determined under 

the principles stated in § 6. In general, unless the 

exceptional circumstances of the case make such a result 

unreasonable:

"(1) The forum will apply its own statute of 

limitations barring the claim.

"(2) The forum will apply its own statute of 

limitations permitting the claim unless:

"(a) maintenance of the claim would serve no 

substantial interest of the forum; and

"(b) the claim would be barred under the 

statute of limitations of a state having a more 

significant relationship to the parties and the 

occurrence."
16

circumstances make the result unreasonable. Shamrock Realty Co. 

v. O'Brien, 72 Mass. App. Ct. 251, 255-256 (2008). NEC has 

identified no reason why Rhode Island was not available as an 

alternative forum or why it would have been "extremely 

inconvenient" to bring its claims there. See id. at 257. 

Specifically noting that NEC could have brought its claims in 

Rhode Island rather than awaiting OneBeacon's filing suit,

21 the 

judge properly ruled that Massachusetts's six-year statute of 

limitations for contract actions applied.

NEC asserts that the choice-of-law principles of 

Restatement (Second) of Conflict of Laws § 6 (1971), referenced 

in the first sentence of § 142, require a different result from

that provided in § 142(1).

22 However, we interpret § 142(1) to 

 

21 Indeed, even after OneBeacon filed suit in 2005, NEC 

could have filed a suit in Rhode Island and sought dismissal of 

the OneBeacon Massachusetts case. As we have noted, seven of 

the eight sites at issue were located in Rhode Island.

22 The factors listed in Restatement (Second) of Conflict of 

Laws § 6(2) (1971) are: 

"(a) the needs of the interstate and international 

systems,

"(b) the relevant policies of the forum, 

"(c) the relevant policies of other interested states 

and the relative interests of those states in the 

determination of the particular issue, 

"(d) the protection of justified expectations,
17

be consistent with the § 6 factors when the law of the forum 

State would bar the claim. See New England Tel. & Tel. Co. v. 

Gourdeau Constr. Co., 419 Mass. at 664 n.6 ("[t]he balance of 

§ 142 seems to set forth the way in which the principles of § 6 

will be implemented"); Shamrock Realty Co. v. O'Brien, 72 Mass. 

App. Ct. at 256, quoting from Restatement (Second) of Conflict 

of Laws § 142 comment f (Supp. 1989) (the forum State "has a 

substantial interest in preventing the prosecution in its courts 

of claims which it deems to be 'stale'"). Moreover, NEC's 

interpretation would impermissibly render all but the first 

sentence of § 142 superfluous. Cf. Wheatley v. Massachusetts 

Insurers Insolvency Fund, 456 Mass. 594, 601 (2010) (statute 

should not be interpreted to leave any part inoperative or 

superfluous).

2. Accrual. NEC alternatively argues that its claims were 

timely because they accrued within the six-year limitations

period. As mentioned, NEC's counterclaims against OneBeacon 

were brought in September, 2005, while most of its claims 

against the other insurers were brought in 2007, and still 

 

"(e) the basic policies underlying the particular 

field of law, 

"(f) certainty, predictability and uniformity of 

result, and

"(g) ease in the determination and application of the 

law to be applied."
18

others in 2009. We examine the history of dealings between NEC 

and the insurers to determine when NEC's claims accrued and,

thus, whether the motion judges erred in determining that 

certain claims were time-barred.

The statute of limitations for a claim for breach of an 

insurance policy, as in a contract action generally, begins to 

run on the date of the insurer's alleged breach. See Berkshire 

Mut. Ins. Co. v. Burbank, 422 Mass. 659, 661 (1996). Under this 

rule, NEC's claims accrued when the insurers failed or refused 

to pay defense and indemnity costs under the policies. See id. 

at 663 n.5. An action for breach of an insurance policy, like 

an action in tort, however, may be tolled until the insured

discovers the facts giving rise to its claim. Szymanski v. 

Boston Mut. Life Ins. Co., 56 Mass. App. Ct. 367, 370 (2002). 

"When . . . the parties press different events as triggering 

accrual, the factual inquiry focuses on which was the first 

event reasonably likely to put the plaintiff on notice that the 

defendant's conduct had caused him injury." Id. at 371. NEC 

and the insurers disagree as to the nature and extent of the 

injury that should have alerted NEC to its claims. 

a. Duty to defend. NEC appeals from the summary judgment 

decisions of the second judge for OneBeacon and Century as to 

Tidewater, and from the decision of the third judge for both 
19

insurers as to Hamlet and PWSB.

23 The primary policies, issued 

by OneBeacon and Century, provided that the insurers had the 

"right and duty to defend" suits against the insured. NEC's 

initial counterclaim, filed in 2005, asserted that OneBeacon had 

a duty to defend. It was not until NEC's second amended 

counterclaim, filed in 2009, that NEC asserted that Century also 

had a similar duty to defend. NEC's claims for breach of the

duty to defend accrued when its demand to the insurers for costs 

associated with defending the claims was refused, and NEC began 

to incur such costs. See Siebe, Inc. v. Louis M. Gerson Co., 74 

Mass. App. Ct. 544, 558 (2009) (limitations period for breach of 

duty to defend begins to run when insured is sued, insurer 

refuses to defend, and insured begins to incur defense costs). 

See also Berkshire Mut. Ins. Co. v. Burbank, 422 Mass. at 662 

(action against insurer accrued when it refused to arbitrate 

plaintiff's claim); Lumbermens Mut. Cas. Co. v. Y.C.N. Transp. 

Co., 46 Mass. App. Ct. 209, 214 (1999) (assuming insurer's 

disclaimer violated duty to defend, insured required to bring 

action to recover defense costs within six years from the 

disclaimer); John Beaudette, Inc. v. Sentry Ins. A Mut. Co., 94 

F. Supp. 2d 77, 102-103 (D. Mass. 1999). The judges properly 

 

23 NEC also brought a claim for defense costs against one 

excess insurer (AISLIC), which is not at issue on appeal.
20

ruled that NEC's claims for defense costs were time-barred based 

on the dates it received the insurers' disclaimers.24

NEC urges that its duty to defend claims should be governed 

by the majority rule, which requires resolution of the 

underlying litigation against the insured before a claim for 

breach of the duty to defend accrues. See, e.g., Dutton-Lainson 

Co. v. Continental Ins. Co., 271 Neb. 810, 825-828 (2006), and 

cases cited; 17 Couch, Insurance § 236:102 (3d ed. 2000) (citing 

rule that underlying judgment triggers accrual of action for 

refusal to defend but acknowledging authority to the contrary). 

A primary reason cited for waiting until the underlying 

litigation concludes is to ascertain the extent of the insured's 

defense costs. See, e.g., Brannon v. Continental Cas. Co., 137 

P.3d 280, 285 n.20 (Alaska 2006). Massachusetts, however, does 

not follow the majority rule. Here, certainty as to the amount

of a plaintiff's claim is not a prerequisite to accrual of a 

breach of contract claim. See, e.g., International Mobiles 

Corp. v. Corroon & Black/Fairfield & Ellis, Inc., 29 Mass. App. 

Ct. 215, 221 (1990) (breach of contract claim accrued when 

 

24 As we have noted, OneBeacon disclaimed coverage as to 

Tidewater and PWSB on March 18, 1996, and again on October 14, 

1998; Century reserved its rights on November 15, 1995. As to 

Hamlet, OneBeacon disclaimed coverage on October 14, 1998, and 

Century reserved its rights on April 7, 1997. NEC's claim for 

coverage from OneBeacon was filed in September, 2005; its 

counterclaim against Century for a duty to defend was not filed 

until July, 2009, in the second amended counterclaim.
21

insurance agent failed to procure insurance policy, not later 

date, after trial of underlying negligence claim against 

insured). See also DiGregorio v. Commonwealth, 10 Mass. App. 

Ct. 861, 862 (1980). Therefore, accrual of an action for 

defense costs is not postponed until their full extent can be 

determined. 

NEC additionally argues that accrual should be tolled 

because the duty to defend is a continuing obligation, which the 

insurer might cure by the litigation's conclusion. See Vigilant

Ins. Co. v. Luppino, 352 Md. 481, 492 (1999). In Massachusetts, 

however, the possibility that the insurer might eventually cure 

the breach does not affect accrual once the breach occurs. See, 

e.g., International Mobiles Corp. v. Corroon & Black/Fairfield & 

Ellis, Inc., 29 Mass. App. Ct. at 221, citing DiGregorio v. 

Commonwealth, 10 Mass. App. Ct. at 862 (rejecting plaintiff's 

argument that accrual should be tolled until condition defendant 

required for payment of damages was fulfilled so that plaintiff 

could ascertain whether defendant would make any payment). 

Contrast Lumbermens Mut. Cas. Co. v. Y.C.N. Transp. Co., 46 

Mass. App. Ct. at 214-215 (by making partial payment after first 

disclaiming coverage and after statute of limitations had run, 

insurer waived the limitations defense). Accordingly, we 

decline to follow those jurisdictions that require resolution of 
22

the underlying litigation before the insured's claim for breach 

of the duty to defend accrues.

25

NEC further complains that the judges wrongly treated

Century's reservation of rights as a disclaimer of Century's 

duty to defend regarding claims against NEC for environmental 

pollution at Tidewater, Hamlet, and PWSB. Century reserved its 

rights for Tidewater and PWSB on November 15, 1995, and for 

Hamlet on April 7, 1997, but then failed to make a decision for 

a number of years, even as NEC incurred costs.26

We agree with the judges that Century's failure to render a 

decision on NEC's request for a defense, despite the significant 

passage of time, constituted a breach that triggered the statute 

of limitations at some point well before 2003. As one of the 

 

25 We also reject NEC's reliance on the "no action" 

provision in some of the policies as a basis to postpone accrual 

until judgment enters in the underlying action. The typical 

provision here provided, in relevant part, that "[n]o action 

shall lie against the [insurer] . . . until the amount of the 

Insured's obligation to pay shall have been finally determined 

either by judgment . . . or by written agreement." See, e.g.,

Ratner v. Canadian Universal Ins. Co., 359 Mass. 375 (1971). 

There, although the insurer argued the claim against it was 

premature under the policy's "no action" provision, the court 

held that an insurer that "without right has refused to defend 

an action against its insured no longer can insist upon the case 

being carried to judgment against the insured." Id. at 379, 

quoting from Berke Moore Co. v. Lumbermens Mut. Cas. Co., 345 

Mass. 66, 70 (1962). See John Beaudette, Inc. v. Sentry Ins. A

Mut. Co., 94 F. Supp. 2d at 101-103.

26 Indeed, for all that appears, Century never made a formal 

disclaimer of its duty to defend.
23

judges explained, the time needed for the insurer to make a 

determination regarding its duty to defend "required no more 

than a comparison of the LOR against the terms of the 1985 

policy." See Siebe, Inc. v. Louis M. Gerson Co., 74 Mass. App. 

Ct. at 548, 558 (claim accrued when insured sent insurer notices 

of underlying lawsuits, and insurer failed to reply to notices). 

See also DiGregorio v. Commonwealth, 10 Mass. App. Ct. at 862;

Felton v. Labor Relations Commn., 33 Mass. App. Ct. 926, 927-928

(1992) (plaintiff's claim barred where he waited ten months, 

without inquiry, for union's response to his request to file 

grievance); Epstein v. C.R. Bard, Inc., 460 F.3d 183, 187-188 

(1st Cir. 2006) (statute of limitations was not tolled pending 

defendant's reply to plaintiff's letter inquiring whether 

defendant was improperly using his technology).

 b. Duty to indemnify. Accrual of NEC's claims for breach 

of the insurers' duty to indemnify involves somewhat different 

considerations. The policies required the insurers to indemnify 

NEC for amounts that NEC became legally obligated to pay as 

damages, because of property damage, in actions brought against 

it by third parties.

27 Thus, NEC's claims against the insurers

accrued when the insurers breached that duty, by failing or 

 

27 The language of the policies differs slightly, some

referring to the insured's legal obligation or loss the insured 

is legally obligated to pay, others to the insured's liability 

arising from a claim against it or imposed by law. 
24

refusing to pay environmental response costs that NEC became

legally obligated to pay. See Berkshire Mut. Ins. Co. v. 

Burbank, 422 Mass. at 663 n.5 (collecting cases).

NEC urges that its cause of action did not accrue until its 

legal obligation to pay environmental damages was established 

through adjudicatory proceedings, whether by judgment, 

settlement, or other binding determination. See, e.g., John 

Beaudette, Inc. v. Sentry Ins. A Mut. Co., 94 F. Supp. 2d at 103

(reasoning, inter alia, that underlying lawsuit against insured 

might determine that insured was not liable). See also 17 

Couch, Insurance § 236:17 (3d ed. 2000) (claim under commercial 

policy covering legal liability of insured accrues upon 

rendering of judgment against insured). While we understand the 

argument, we think a legal obligation imposed by a governmental 

agency, pursuant to an environmental statute, is different. The 

insured's liability for remediation in such instances may be

determined long before final judgment. Indeed, given the public 

interest in a prompt response to environmental hazards, the 

insured's legal obligation for the expenses may arise without

any litigation at all. 

In Hazen Paper Co. v. United States Fid. & Guar. Co., 407 

Mass. 689, 693-697 (1990), for example, a letter from the EPA 

was deemed the equivalent of a lawsuit, for purposes of 

establishing a duty to defend. In that case, the insured was 
25

required to respond to the EPA's assertion that releases of 

hazardous substances were occurring at a facility where the 

insured had sent solvents for recycling. The EPA letter, while 

seeking the insured's voluntary participation, essentially

required the insured's commitment to all measures needed to 

remediate the site, and advised of penalties for failure to 

cooperate. In the court's view, "It would be naive to 

characterize the EPA letter as a request for voluntary action."

Id. at 697. Given the statutory powers available to the EPA,

"[t]he prospects of avoiding financial responsibility were 

minimal because liability is not based on fault," and available 

defenses were few. Id. at 696-697. The obligation to pay 

response costs was imposed pursuant to the statutory authority 

granted to the agency, and required no lawsuit -- in fact, none 

had been filed. 

"[T]he EPA processes for the enforcement of obligations to 

aid in the cleaning up of environmental pollution have 

moved away from the use of lawsuits toward the use of 

agency demands for participation in remedial action. Those 

requests are dangerous for the alleged polluter to ignore 

because they often result in dispositive, extrajudicial 

solutions." 

Id. at 695-696. 

Applying those same principles to the duty to indemnify,

in Employers' Liab. Assur. Corp. v. Hoechst Celanese Corp., 43 

Mass. App. Ct. 465, 482-483 (1997), we reasoned that the excess 

insurers' duty to indemnify the insured for liability "imposed 
26

upon the Insured by law," as the policies provided, was 

triggered when an environmental agency sought response actions 

from the insured; formal litigation was not required.

28 As this

court explained, "It 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. Compare 

Wilkinson v. Citation Ins. Co., 447 Mass. 663, 671 (2006) (in 

usual case of insurer indemnification for property damage, 

"[t]he element of time is less critical"). 

Taking all of these considerations into account, we 

conclude that for purposes of accrual, NEC's legal obligation

was established when the respective governmental agencies 

imposed essentially mandatory requirements that NEC take action.

Neither litigation nor final resolution was necessary, in this 

context, to impose liability for purposes of accrual of NEC's 

indemnification claims against the insurers.

NEC additionally argues that its costs incurred prior to 

the mid-2000s were purely investigative, rather than remedial, 

 

28 As to the contrary view, that the insurers' duty would 

only be triggered by "a lawsuit or similar compulsory 

proceeding," Justice Kaplan observed, "In a superficial view, 

this seems incorrect, for we 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.
27

and so implicated only the accrual of its claims for breach of 

the insurers' duty to defend, not their duty to indemnify. See, 

e.g., American Bumper & Mfg. Co. v. Hartford Fire Ins. Co., 452 

Mich. 440, 460-461 (1996) (distinguishing investigation costs 

that go toward remediation from those aimed at limiting 

insured's liability, which are treated as defense costs). 

However, as the second judge observed, NEC claimed the right, in 

its answers to interrogatories, to recover all costs incurred at 

the sites, for both investigation and remediation, as 

indemnification costs. Moreover, NEC's response actions took a 

remedial turn long before the accrual dates for its 

indemnification claims against the insurers. For Tidewater, 

that happened when NEC agreed to the LOR on September 22, 1995, 

and incurred associated costs as of April, 1996, for submitting 

and implementing a remedial investigative work plan to address 

the environmental releases. For Lawn Street, NEC's legal 

liability for damages was established when it entered into the 

amended administrative consent order with DEP on September 13, 

1996, agreeing to conduct all necessary response actions. With 

regard to Hamlet, NEC responded to the LOR on February 25, 1997, 

by agreeing to pay for the remediation. And at PWSB, NEC 

responded to the LOR in September, 1995, by agreeing to comply 

with RIDEM's request to remit the remediation costs, and 
28

depositing the funds in escrow pending the outcome of related 

litigation.

29 See note 14, supra. 

NEC also complains that the third judge erred in ruling 

that the reservation of rights letters issued by Century and 

London, for PWSB and Hamlet, amounted to disclaimers by the time 

NEC's claims for indemnification accrued in October, 2001.30 

Century reserved its rights in 1995 and 1997 for PWSB and 

Hamlet, respectively, and London reserved its rights in 1996 and 

1997, for PWSB and Hamlet, respectively. The judge, relying on 

the duty to defend analysis in Siebe, Inc. v. Louis M. Gerson 

Co., 74 Mass. App. Ct. at 558, reasoned that the insurers' delay 

in failing to provide an affirmative response to NEC's demand 

for coverage, combined with the fact that NEC began to incur 

response costs at those sites, constituted a breach of contract 

sufficient to trigger the statute of limitations for NEC's 

indemnification claims.

 

29 NEC argues that its liability for cleanup at PWSB was not 

established until 2003, when it agreed to fund the remediation, 

and that placing the funds in escrow pending the outcome of its 

litigation as to whether the material removed from the site by 

RIDEM was a "hazardous substance" under Federal or State law did 

not establish liability. But we view the requirement that NEC 

escrow the funds, in order to comply with RIDEM's demand, as a 

legal obligation triggering accrual of its claim, regardless

whether the funds might ultimately be returned to NEC. See, 

e.g., DiGregorio v. Commonwealth, 10 Mass. App. Ct. at 862.

30 The judge incorrectly characterized London's response to 

NEC's notices regarding those sites as a denial of coverage, and 

London appears to concede the point.
29

Our review of the summary judgment record leads us to 

conclude otherwise. We think a question of fact exists as to 

whether the insurers' failure to make coverage determinations 

with respect to Hamlet and PWSB constituted disclaimers of their 

duty to indemnify prior to October, 2001. To begin, unlike the 

duty to defend, an insurer's determination of its duty to 

indemnify depends on actual facts, rather than allegations, and 

reasonably might require more time to investigate. See, e.g., 

Employers Mut. Cas. Co. v. PIC Contractors, Inc., 24 F. Supp. 2d 

212, 217 (D.R.I. 1998). Moreover, correspondence and deposition 

testimony in the record indicate that Century and London 

continued to communicate with NEC concerning PWSB and Hamlet 

after the initial reservation of rights letters were issued. A 

July 14, 1999, letter from London to NEC requested additional 

information to evaluate NEC's claims for Hamlet and PWSB, and a 

June 8, 2001, letter from London requested an itemization of 

costs already incurred as well as a "site-by-site estimate" for 

expected future costs for all NEC sites. Deposition testimony 

from a Century representative suggested that Century, as well, 

may have continued to communicate with NEC regarding the sites 

after issuing its initial reservation of rights.31 Construing 

 

31 In the case of Century's response regarding PWSB, a

Century representative testified that while there was no written 

correspondence in the file between 1995 and 2002, there may have 

been telephone calls and other verbal communication, "which I 
30

the evidence and reasonable inferences in favor of NEC, the 

nonmoving party, the insurers' conduct suffices to raise a 

question of fact as to whether Century and London's responses to 

NEC's indemnification claims for PWSB and Hamlet constituted 

disclaimers prior to 2001.

We note that the same judge presided at the trial for the 

Tidewater site, which involved NEC's indemnification claims 

against Century and London and took place almost a year before 

the judge ruled in their favor on NEC's indemnification claims 

for PWSB and Hamlet. At the Tidewater trial, the question 

whether Century and London's reservation of rights letters and 

subsequent conduct constituted disclaimers prior to 2001 was put 

to the jury on similar facts. We discern no basis for the 

divergent rulings and conclude that the summary judgment record 

raises an issue of material fact as to whether Century and 

London disclaimed their duty to indemnify NEC for PWSB and 

Hamlet; the matter should not have been decided as a matter of 

law on summary judgment. 

B. Dismissal with prejudice. On February 4, 2011, after 

prosecuting its claims against the insurers for over five years, 

NEC moved to voluntarily dismiss its claims, pursuant to 

 

would have expected in the ordinary course of business," and 

that Century had continuously indicated to NEC that it was still 

gathering information. As for the Hamlet Avenue site, the same 

Century representative testified in 2010 that "we are continuing 

to investigate the site at this point."
31

Mass.R.Civ.P. 41(a)(2), 365 Mass. 803 (1974), for High Street, 

Pond Street, and Exchange Street. Although NEC had anticipated 

RIDEM involvement at those sites, no such action was 

forthcoming, and thus there existed no claim under the policies 

and no justiciable controversy. In an order issued in February, 

2012, the third judge, who heard the motion, conditioned the 

allowance of NEC's request for dismissal without prejudice upon 

NEC's payment of the insurers' reasonable costs and attorney's 

fees in responding to those claims. At a hearing held one month 

later, the parties reported that they had not reached agreement 

on how to proceed; as a result, the insurers had not yet 

submitted their fee request. Thereupon, in the interest of 

"mov[ing] this case on," the judge dismissed the claims with 

prejudice and omitted the award of attorney's fees.

On appeal, NEC argues that the claims should have been 

dismissed without prejudice, correctly observing that because 

the claims presented no justiciable controversy, the court 

lacked subject matter jurisdiction to enter an order of 

dismissal with prejudice. See Department of Community Affairs

v. Massachusetts State College Bldg. Authy., 378 Mass. 418, 422 

(1979) (court's subject matter jurisdiction limited to cases 

involving an actual controversy); Linehan v. Linehan, 453 Mass. 

1017, 1017-1018 (2009) (until claim became ripe, it did not meet 
32

jurisdictional threshold of an actual controversy; dismissed 

without prejudice). 

In entering the order of dismissal without prejudice, 

conditioned on NEC's paying the defendants' attorney's fees, the 

judge relied on rule 41(a)(2), which provides that voluntary 

dismissal be allowed "upon such terms and conditions as the 

court deems proper." See Quest Sys., Inc. v. Zepp, 28 Mass. 

App. Ct. 489, 494 (1990) (award of attorney's fees "not unusual 

where dismissal is without prejudice"). However, Mass.R.Civ.P.

12(h)(3), 365 Mass. 754 (1974), requires that "[w]henever it 

appears by suggestion of a party or otherwise that the court 

lacks jurisdiction of the subject matter, the court shall 

dismiss the action." The rule makes no mention of terms and 

conditions that may attach to dismissal when subject matter 

jurisdiction is lacking. In fact, this court has held that 

dismissal for lack of subject matter jurisdiction, even if 

labelled "with prejudice," will not bar a subsequent action by 

the plaintiff on the same claim. Department of Rev. v. Ryan R., 

62 Mass. App. Ct. 380, 383 (2004), citing Restatement (Second) 

of Judgments § 20 comment d (1982). See also Mass.R.Civ.P. 

41(b)(3), as amended, 454 Mass. 1403 (2009).

32

 

32 Rule 41(b)(3) provides, in relevant part, that "any 

dismissal not provided for in this rule, other than a dismissal 

for lack of jurisdiction, . . . operates as an adjudication upon 

the merits."
33

We recognize that the Superior Court judge possessed

inherent power to manage his case load and enforce his lawful 

orders, even in a manner not specifically authorized by the 

rules. See Sommer v. Maharaj, 451 Mass. 615, 621 (2008). But 

even assuming, without deciding, that such power may be 

exercised in the course of complex litigation when subject 

matter jurisdiction over a particular claim is lacking, NEC's 

conduct here did not warrant dismissal with prejudice. The 

court's inherent power is to be exercised with restraint and 

discretion, with the extreme sanction of dismissal with 

prejudice reserved for extreme misconduct. Id. at 621-622. 

Here, the hearing transcript suggests that NEC was not 

recalcitrant in failing to pay the insurers' fees but, rather, 

was awaiting information from the insurers regarding the amount 

of their fees. Indeed, at the March, 2012, hearing, the judge 

acknowledged, "[T]hat's fine. I appreciate you tried." We 

agree with NEC that the judge's decision to dismiss its claims 

with prejudice in order to "move this case on" was not 

warranted.

A question remains whether the judge had authority to order 

that NEC pay the insurers' attorney's fees as a condition of 

dismissal without prejudice, when the court lacked subject 
34

matter jurisdiction over the claims.

33 We think not. In Quest 

Sys., Inc. v. Zepp, supra, relied upon by the insurers, this 

court ordered dismissal without prejudice, with imposition of 

attorney's fees at the judge's discretion. 28 Mass. App. Ct. at 

498. However, that case did not implicate the trial court's 

subject matter jurisdiction. Again, Mass.R.Civ.P. 12(h) does 

not authorize the imposition of terms or conditions in the order 

of dismissal in this instance, and the record does not justify 

the fee award as a sanction for misconduct. NEC's claims 

involving High Street, Pond Street, and Exchange Street are

therefore to be dismissed without prejudice.

III. Conclusion. It was error to grant summary judgment 

(a) in favor of Century and London on statute of limitations 

grounds with respect to their duty of indemnification for Hamlet 

Avenue and PWSB; and (b) in favor of OneBeacon, Century, and 

American Home with respect to the application of the pollution 

exclusion provisions in their policies covering the J.M. Mills 

site. Accordingly, we reverse so much of the final judgment and 

declaratory decree as (a) declares that Century and London have 

no duty to indemnify NEC with respect to claims or liabilities 

at Hamlet Avenue and PWSB and dismisses those claims; and (b) 

declares that OneBeacon and Century have no duty to defend or 

 

33 NEC does not raise the point, but we address it, in 

accordance with Mass.R.Civ.P. 12(h)(3).
35

indemnify, and American Home has no duty to indemnify, NEC with 

respect to claims or liabilities at J.M. Mills and dismisses 

those claims. We vacate so much of the final judgment and 

declaratory decree as dismisses with prejudice NEC's claims as 

to High Street, Pond Street, and Exchange Street, and the 

judgment shall be modified to dismiss those claims without 

prejudice. In all other respects, the final judgment and 

declaratory decree is affirmed. The orders denying Century's 

motion for judgment notwithstanding the verdict (JNOV) or new 

trial, London's motion for JNOV, and London's motion for new 

trial and to alter or amend the judgment are affirmed. 

So ordered.