Opinion ID: 199993
Heading Depth: 2
Heading Rank: 2

Heading: The Utica Cross-Appeal

Text: 18 The district court determined that ¶ f(2)(a) neither encompasses the non-remediation damages incurred by Weathermark, nor any costs unrelated to actual removal of the spilled oil from the Weathermark and ELAW properties, such as permanent property damages, diminution in the fair market value of the properties, or losses of rental or through-put income. Utica asserts in its cross-appeal that the district court erred in three respects. Its conclusions may be summarized as follows: 19 First, these nonremediation damages nonetheless constituted a loss, cost or expense arising out of a[] ... demand ... that [Hall] ... in any way respond to ... the effects of pollutants, since such nonremediation damages arose from the Weathermark lawsuit and would not have been incurred but for the oil spill. Second, the case law uniformly supports the contract interpretation advanced by Utica. Third, ¶ f(2)(a) notwithstanding, the diminution in the fair market value of property and the loss of rental or through-put income are independently excluded from coverage since the definition of property damage contained in the CGL policy — viz., physical injury to tangible property or loss of use of tangible property plainly does not encompass these types of intangible economic losses. We address these contentions in turn. 20 First, irresolvably ambiguous coverage exclusions are to be strictly construed against the insurer. See Preferred Mut. Ins. Co., 686 N.E.2d at 991. At first glance, the ¶ f(2)(a) phrases here involved — in any way respond and effects of pollutants — appear to be fairly broad, arguably even encompassing all property damages resulting from an oil spill. Yet construing the insurance policy as a whole, as required, see Mission Ins. Co., 517 N.E.2d at 466, we agree with the district court that an insured reasonably could construe the term respond as delimiting the scope of ¶ f(2)(a) to recoveries of remediation costs. 21 Contrary to the contention advanced by Utica, the term demand, appearing in ¶ f(2)(a), does not necessarily contemplate the entire lawsuit Weathermark filed in state court. Rather, demand may simply refer to an individual claim asserted in a lawsuit; here, the claim for reimbursement of remediation costs. See supra note 2. When real property becomes contaminated by a pollutant, two distinct types of damages frequently result. First, remediation damages obtain in the form of the expense incurred in the containment and removal of the pollutant, to the extent practicable, so as to return the property to its preexisting environmental condition. Thus, in the parlance of environmental law, costs incurred in rehabilitating a contaminated property to its preexisting environmental condition typically are referred to as  response costs. See, e.g., Mass. Gen. Laws. Ann. ch. 21E, § 4 (Response actions.). Accordingly, for example, normally the notice of responsibility issued by the DEP would not additionally demand that the remediating party remediate other property damage caused by the contamination, unless it too posed an environmental threat. In the present case, even though the oil in situ itself constituted property damage, see Hazen Paper Co. v. Fid. & Guar. Co., 407 Mass. 689, 555 N.E.2d 576, 583-84 (1990), that is not to say that other consequential or incidental property damage may not have been caused, which the mere removal of the spilled oil would not remedy. 22 Thus, by employing the term respond in ¶ f(2)(a), the Utica pollution exclusion gave rise to an ambiguity, particularly since the preceding listing of activities pertained exclusively to remediation efforts — viz., testing or monitoring for, cleaning up, removing, or containing the pollutant. Compare Mass. Gen. Laws. Ann. ch. 21E, § 4 (Response actions.), with id. § 5(a)(iii) (making responsible parties liable to any person for damage to his real or personal property incurred or suffered as a result of such release or threat of release). 23 Further, ¶ f(1) specifically excludes from coverage ` property damage ' arising out of the actual ... discharge ... of pollutants, yet lists only four circumstances in which the exclusion applies, none of which pertain to the insureds Hall and Riddell. See Aldridge v. A.T. Cross Corp., 284 F.3d 72, 84 (1st Cir.2002) (court of appeals may affirm district court on any ground apparent in record). It is a well settled rule of construction for insurance policies that `a specific provision relating to a particular subject will govern in respect to that subject, as against a general provision even though the latter, standing alone, would be broad enough to include the subject to which the more specific provision relates. So. Cal. Edison Co. v. Harbor Ins. Co., 148 Cal.Rptr. 106, 112, 83 Cal.App.3d 747, 759 (1978) (citation omitted); see also Transamerica Leasing, Inc. v. Inst. of London Underwriters, 267 F.3d 1303, 1308 (11th Cir.2001); 13 John A. Appleman & Jean Appleman, Insurance Law and Practice § 7357, at 181 (1979 & Supp.2002). Thus, even though the reference, in ¶ f(2)(a), to effects of pollutants — standing alone — may be exceedingly broad, the preceding specific reference to property damage in ¶ f(1) supersedes it, rendering it ambiguous insofar as it may purport to encompass nonremediation damages. Moreover, had Utica so intended, it readily could have obviated any ambiguity. See, e.g., Gaylord Container Corp. v. CNA Ins. Cos., 807 So.2d 864, 870 (La.Ct.App.2001) (adding final sentence to ¶ f(2)(a)-like pollution exclusion: To the extent that any of the above is determined to be ... `Property Damage', said ... `Property Damages' [are] also excluded.). 24 Second, the unreported cases cited by Utica are either inapposite or unpersuasive. 4 For instance, Manufacturers Gasket Co. v. Transcon., No. 93-3108 (6th Cir. Dec.6, 1993), merely held that the pollution exclusion barred coverage for a private lawsuit seeking to recover costs for pollutant cleanup.  The issue of nonremediation damages was never mentioned. In Coal Heat v. United States Fidelity and Guaranty Co., 2000 WL 1689713 (E.D.Pa. Nov. 2, 2000), the court specifically rejected the remediation-nonremediation distinction drawn in Utica Mutual Ins. Co. v. Hall Equipment, Inc., 73 F.Supp.2d 83 (D.Mass.1999), citing cases from other jurisdictions in which the courts [broadly] interpreted the phrase `arising out of' in the Pollution Exclusion to indicate a `but for' or `causal' relationship between the damage claimed and the released pollutants. Id. at . Nevertheless, the phrase arising out of does not modify effects of pollutants, but purports simply to require some causal connection between the loss and the  demand.  As already noted, exclusion ¶ f(2)(a) does not use the term suit, and although a suit may be a demand, the term demand does not necessarily comprehend a lawsuit, but instead may simply refer to a claim asserted in a lawsuit. See supra note 2. Accordingly, the underlying premise in Coal Heat is flawed, since demands for remediation costs are segregable from demands for nonremediation property damages. 25 Finally, we need not address the Utica contention that some of these nonremediation damages are excludible on the independent ground that the property damage definition contained in the insurance contract does not encompass these types of intangible economic losses. Nowhere in its motion for partial summary judgment did Utica urge this separate and independent ground for excluding coverage for this particular subset of nonremediation damages. Accordingly, its argument must be deemed waived. See VanHaaren, 989 F.2d at 4-5. 26 Since ¶ f(2)(a) is ambiguous as concerns any exclusion of nonremediation property damages, it is to be construed against the insurer which drafted the policy. See Preferred Mut. Ins. Co., 686 N.E.2d at 991. 27 Affirmed. The parties are to bear their own costs.