Court Opinion

ID: 804139
Source: CourtListenerOpinion
Date Created: 2012-07-11 20:27:00+00
Date Added: 2024-06-11T18:00:10.933076
License: Public Domain

United States Court of Appeals
                      For the First Circuit

No. 11-2193

              TRAVELERS CASUALTY AND SURETY COMPANY,

                      Plaintiff, Appellant,

                                v.

         PROVIDENCE WASHINGTON INSURANCE COMPANY, INC.,

                       Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT

                 FOR THE DISTRICT OF RHODE ISLAND

          [Hon. William E. Smith, U.S. District Judge]

                              Before

                   Howard, Lipez and Thompson,
                         Circuit Judges.

     Robert A. Kole, with whom John A. Nadas, Nellie E. Staley,
Choate, Hall & Stewart LLP, Jason C. Preciphs, R. Kelly Sheridan
and Roberts, Carroll, Feldstein & Peirce, were on brief for
appellant.
     Todd D. White, with whom Katy A. Hynes, John T. Mulcahy and
Adler Pollock & Sheehan P.C. were on brief, for appellee.

                          July 11, 2012
            HOWARD, Circuit Judge. Invoking diversity jurisdiction,

appellant Travelers Casualty and Surety Company, Inc. ("Travelers")

sought a declaratory judgment that appellee Providence Washington

Insurance Company, Inc. ("PWIC") is obliged to join in the defense

of New England Container Company, Inc. ("NE Container" or "NECC"),

in connection with a contribution action involving clean-up costs

for the Rhode Island Centredale Manor Superfund Site ("Superfund

Site" or "Site").    Granting summary judgment to PWIC, the district

court ruled that PWIC did not owe NE Container a duty to defend in

the underlying action.         On Travelers' appeal, we reverse the

decision, vacate the judgment, and remand.

                               I. Background

            The dispute between the two insurance companies stems

from efforts that the Environmental Protection Agency ("EPA")

initiated    over    a     decade    ago     to    remediate     environmental

contamination   at   the    Superfund       Site   under   the   Comprehensive

Environmental Response, Compensation, and Liability Act ("CERCLA").

See 42 U.S.C. §§ 9601-9675.         This case touches only the tip of the

litigation iceberg regarding the Site.1             To decide it, we broach

Rhode Island law on the duty to defend in the environmental damage

context, albeit under circumstances in which the Rhode Island

     1
       See, e.g., Emhart Indus., Inc. v. Century Indem. Co., 559
F.3d 57 (1st Cir. 2009); Century Indem. Co. v. Liberty Mut. Ins.
Co., 815 F. Supp. 2d 508 (D.R.I. 2011); Century Indem. Co. v.
Liberty Mut. Ins. Co., 708 F. Supp. 2d 202 (D.R.I. 2010).

                                      -2-
Supreme     Court     has     had   little    opportunity       to   apply      its   own

precedents.

               The catalyst for this litigation occurred in 2000, when

the EPA issued a unilateral administrative order to compel several

entities,      including      NE    Container    and    Emhart   Industries,          Inc.

("Emhart"), to remove hazardous substances that had been disposed

of at the Site as part of the former operations of several

companies.       The agency noted that hazardous substances had been

found in surface and subsurface soil, in sediment, and in the

groundwater and surface water of the adjacent Woonasquatucket

River.      It described Emhart as a successor to the liability of

several chemical companies that had operated at the Site from about

1943   to    approximately          1971   and   had   buried    drums     and    other

containers at the Site.             The EPA also stated that NE Container had

conducted business operations at the Site from approximately 1952

to around 1969.             Those operations included obtaining 55-gallon

drums containing residual chemicals, disposing of drum residuals in

the soil, and incinerating the residuals.                    Finally, the current

owners    of    the   Site     property      were   identified       as   two   limited

partnerships that had acquired the property in 1976 and 1982,

respectively,         and     had    constructed       two   high-rise       apartment

buildings, a roadway and parking lots in the mid-1970s and the

early 1980s.

                                           -3-
          Some years after the administrative order was issued, in

2006 Emhart filed federal and state court actions against NE

Container and the two NE Container insurers that are the parties

currently before us ("Emhart action" or "Emhart complaint").2 Each

action levied essentially the same general claims:         that NE

Container is liable for at least some of the response costs that

Emhart has been paying, and would pay in the future, in connection

with the clean-up of the Superfund Site; and that NE Container's

insurers are obliged under their policies to provide coverage to NE

Container for any monies that it owes Emhart in relation to the

Site response costs.3 The insurers had provided general commercial

liability policies to NE Container during different time periods

from the late 1960s through the mid-1980s.     Travelers' policies

extended from 1969 to 1982, and PWIC's policies spanned the years

1982 to 1985.

          NE Container subsequently tendered the Emhart action to

its insurers.   Travelers agreed to contribute to NE Container's

defense pursuant to a reservation of rights, while PWIC took the

position that it had no duty to defend.       Travelers has since

     2
       In its brief, appellee PWIC remarks in passing that "[a]
direct action against a third-party's insurer's [sic], when the
third-party is neither deceased nor bankrupt, is unusual at best,
and arguably prohibited by statute."    It provides no developed
argument on the matter, and we give it no further attention. See
United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990).
     3
       For ease, we henceforth refer to the complaints in the
singular.

                               -4-
incurred significant defense costs associated with the Emhart

action, bringing us to the matter that is the basis for this

appeal.

           In 2010, Travelers filed the instant action in federal

court, seeking a judgment compelling PWIC to contribute to NE

Container's defense in the Emhart action and an award for PWIC's

fair share of the past defense costs that Travelers has incurred.

The two insurance companies eventually filed cross-motions for

summary judgment.      The district court ruled that PWIC was not

contractually obligated to defend NE Container in the Emhart

action, observing that, "the alleged property damage occurred

before the commencement of [the PWIC policy period between 1982 and

1985]."   This timely appeal followed.     As we explain, the district

court mistakenly focused solely on the timing of the insured's

alleged polluting activities, rather than also considering the

potential timing of property damage caused by those activities.

                               II. Analysis

           This    diversity   case   is   governed   by   Rhode   Island

substantive law.    Our review is de novo because the question of an

insurer's duty to defend is one of law in Rhode Island.         See Flori

v. Allstate Ins. Co., 388 A.2d 25, 26 (R.I. 1978).         Before delving

into the particulars of the case we outline the legal landscape.

                                   -5-
A. Rhode Island Insurance Law

          Generally speaking, an insurer's obligations toward its

insured are two-fold:   a duty to defend and a duty to indemnify.

See, e.g., Mellow v. Med. Malpractice Joint Underwriting Ass'n of

R.I., 567 A.2d 367, 368 (R.I. 1989) (per curiam).    "[T]he duty to

defend is broader in its scope than the duty of an insurer to

indemnify, and its existence does not depend on whether the injured

party will ultimately prevail against the insured."      Employers'

Fire Ins. Co. v. Beals, 240 A.2d 397, 403 (R.I. 1968), abrogated on

other grounds by Peerless Ins. Co. v. Viegas, 667 A.2d 785 (R.I.

1995).   Whether an insurer's duty to defend arises from the

inception of a lawsuit against its policyholder hinges

          on whether the complaint in the underlying
          tort action alleges facts and circumstances
          bringing the case within the coverage afforded
          by the policy. That question is resolved by
          comparing the complaint in that action with
          the policy issued by the insurer; if the
          complaint discloses a statement of facts
          bringing the case potentially within the risk
          coverage of the policy the insurer will be
          duty-bound to defend irrespective of whether
          the plaintiffs in the tort action can or will
          ultimately prevail.

Flori, 388 A.2d at 26 (emphasis added); accord Hingham Mut. Fire

Ins. Co. v. Heroux, 549 A.2d 265, 266 (R.I. 1988).

          Rhode Island thus applies the common "pleadings test."

See Progressive Cas. Ins. Co. v. Narragansett Auto Sales, 764 A.2d

722, 724 (R.I. 2001); see also Emhart Indus., 559 F.3d at 75

                                -6-
(reviewing Rhode Island law).             As suggested by its name, the

pleadings   test    focuses   on    the    pleading   allegations    without

consideration of extrinsic evidence; therefore, the duty to defend

may arise even where "known facts conflict with the facts alleged

in the . . . complaint."         Flori, 388 A.2d at 26; see also Beals,

240 A.2d at 403 (concluding that "a liability insurer's duty to

defend is predicated not upon information in its possession which

indicates   or   even   proves    non-coverage,   but   instead     upon   the

allegations in the complaint filed against the insured").

            Once triggered, an insurer's duty to defend continues

until the coverage question is resolved either by the establishment

of facts showing no potential for coverage or by the conclusion of

the underlying lawsuit.       See Shelby Ins. Co. v. Ne. Structures,

Inc., 767 A.2d 75, 77 (R.I. 2001); Conanicut Marine Serv., Inc. v.

Ins. Co. of N. Am., 511 A.2d 967, 971 (R.I. 1986).          An insurer may

seize the initiative and seek resolution of coverage questions,

including the duty to defend, in a declaratory judgment action.

See Emhart Indus., 559 F.3d at 74 (construing Rhode Island law);

Conanicut Marine, 511 A.2d at 971 & n.10; see also Beals, 240 A.2d

at 401.

            Against this legal backdrop, we set forth the pertinent

policy language as informed by Rhode Island law.          We then describe

the Emhart complaint, and finally turn to assess the grant of

summary judgment.

                                     -7-
B. Providence Washington Policies

          The   general   grant   of    coverage   and   duty   to defend

provisions provide:

          The company will pay on behalf of the insured
          all sums which the insured shall become
          legally obligated to pay as damages because of
          . . . property damage . . . to which this
          insurance applies, caused by an occurrence,
          and the company shall have the right and duty
          to defend any suit against the insured seeking
          damages on account of such . . . property
          damage, even if any of the allegations of the
          suit are groundless, false or fraudulent.

(Emphasis added.)     An "occurrence" is defined as "an accident,

including continuous or repeated exposure to conditions which

results in . . . property damage neither expected nor intended from

the standpoint of the insured."          (Emphasis added.)      In turn,

"property damage," is defined, in part, as "physical injury or

destruction of tangible property which occurs during the policy

period, including the loss of use thereof at any time resulting

therefrom . . . ."    (Emphasis added.)      With respect to property

damage caused by pollution, the policies provide:

          This insurance does not apply . . . to . . .
          property damage arising out of the discharge,
          dispersal, release or escape of smoke, vapors,
          soot, fumes, acids, alikis, toxic chemicals,
          liquids or gases, waste materials or other
          irritants, contaminants or pollutants into or
          upon land, the atmosphere or any water course
          or body of water; but this exclusion does not
          apply if such discharge, dispersal, release or
          escape is sudden and accidental.

                                  -8-
(Emphasis added.)

             Rhode Island case law provides a gloss on the meaning of

the   term   "occurrence"   as   set    forth   in   the   PWIC   policies   --

particularly in the environmental pollution context.               Especially

germane here, the state supreme court has addressed "when there has

been an 'occurrence' sufficient to trigger coverage under a general

liability policy [where] the insured sustains a chemical spill that

results in a property loss that is not discovered until years after

the spill took place."       CPC Int'l, Inc. v. Northbrook Excess &

Surplus Ins. Co., 668 A.2d 647, 649 (R.I. 1995), clarification

denied, 673 A.2d 71 (R.I. 1996).             The court determined that the

policy terms "property damage" and "occurrence" were "inextricably

intertwined," and that coverage extended to

             an event that results in compensable property
             damage during the policy period.     In other
             words, there can be no occurrence under the
             policy without property damage that becomes
             apparent during the policy period, and
             property loss and compensable damages cannot
             be assessed unless the property damage is
             discovered or manifests itself.

Id. at 649 (emphasis added).       Ultimately, it held that "coverage

under a general liability policy is triggered by an occurrence that

takes place when property damage, which includes property loss,

manifests itself or is discovered or in the exercise of reasonable

diligence is discoverable."      Id. at 650; see also Textron, Inc. v.

Aetna Cas. and Sur. Co. ("Textron-Wheatfield"), 754 A.2d 742, 745

(R.I. 2000); Textron, Inc. v. Aetna Cas. and Sur. Co. ("Textron-

                                       -9-
Gastonia"), 723 A.2d 1138, 1141 (R.I. 1999) (holding that each part

of the CPC Int'l test "independently triggers liability coverage

under an occurrence-based policy"); 4 Jeffrey E. Thomas et al., New

Appleman on Insurance Law Library Edition § 27.01[7][f] (2010)

(summarizing Rhode Island's approach for environmental property

damage coverage triggers).

           The    parties   agree   that      the    only   CPC   Int'l   trigger

category   that     potentially     is        implicated     in    the    present

circumstances is that an occurrence takes place when the property

damage "was discoverable in the exercise of reasonable diligence

during the policy period, notwithstanding the fact that it was not

actually discovered."       Textron-Gastonia, 723 A.2d at 1143.               For

this trigger category to implicate coverage under an occurrence-

based policy, the Rhode Island Supreme Court has explained that

           the contamination [must] not only exist during
           the   period   of  coverage,   but   also   be
           discoverable in the exercise of reasonable
           diligence.    In other words, in order to
           trigger coverage in the absence of actual
           discovery, [the insured] must have had some
           reason to test for contamination, and must
           actually have been able to discover it in the
           exercise of reasonable diligence.

Id. at 1144 (citation omitted); see also Textron-Wheatfield, 754

A.2d at 745 (citing Textron-Gastonia in distilling the components

required   for   the   discoverable      in    the   exercise     of   reasonable

diligence coverage trigger). The obligation to exercise reasonable

diligence calls upon a reviewing court to examine what the insured

                                    -10-
"should have known," see CPC Int'l, Inc. v. Northbrook Excess &

Surplus Ins. Co., 144 F.3d 35, 43 n.6 (1st Cir. 1998) (interpreting

Rhode Island law); it does not, however, require the business

operator "to go around looking to find out if [it is] contaminating

anything," Textron-Wheatfield, 754 A.2d at 746 (internal quotation

marks omitted).

            Accordingly, in the context of the pleadings test, the

Emhart complaint gives rise to PWIC's duty to defend NE Container

if its allegations show the potential that property damage was

discoverable in the exercise of reasonable diligence during the

policy period, between 1982 and 1985.

C. Allegations in the Emhart Complaint

            The complaint first sketches the EPA's charges against

the multiple polluters of the Site, including the 1999 notice of

potential liability issued to NE Container and the EPA's demand in

2000 that Emhart remediate the Site and reimburse the EPA for the

response costs.    The EPA also issued a unilateral administrative

order to NE Container and Emhart, as well as to other entities,

requiring   them   to   undertake   certain   time-critical    actions   to

remediate the environmental conditions at the Site.       The complaint

identifies the Site as two parcels of land and portions of the

adjacent Woonasquatucket River and its floodplain.            According to

the complaint, the EPA still needed to complete a "Remedial

                                    -11-
Investigation    to    characterize     the    nature      and   extent   of   the

contamination at the Site . . . ."

           The   Emhart     complaint   also        describes    NE   Container's

alleged polluting activities at the Site.                  It alleges that NE

Container operated a facility for reconditioning steel drums on a

portion of the Site from about 1952 until the early 1970s; that the

drums   "often    contained     small   amounts       of   residue"    including

trichorophenol;       and   that   during     its    business    operations    NE

Container had "incinerated the drums that it received" and "spills

and leaks of the residual contents of the drums" occurred when they

were brought to the incinerator.         The complaint further states:

           ·[T]he actions of NECC in incinerating drums,
           as part of the reconditioning process,
           resulted   in    the   "release"   into    the
           "environment," within the meaning of 42 U.S.C.
           §§ 9601(8) and 9601(22), of various cogeners
           of dioxin;

           ·In  addition to the release of dioxin, the
           operations of NECC resulted in the "release"
           into the "environment," within the meaning of
           42 U.S.C. §§ 9601(8) and 9601(22), of other
           "hazardous substances," within the meaning of
           42 U.S.C. § 9601(14);

           ·[D]uring  the period in which NECC was an
           operator of a portion of the Site, there was
           "disposal," within the meaning of 42 U.S.C.
           § 9601(29), of "hazardous substances," within
           the meaning of 42 U.S.C. § 9601(14), at the
           Site as a result of the activities of NECC;

           ·[A]s a result of activities conducted at the
           Site by NECC, there have been "releases" or
           threatened "releases," within the meaning of

                                     -12-
          42 U.S.C. §§ 9601(8) and 9601(22), of
          "hazardous substances," within the meaning of
          42 U.S.C. § 9601(14), at and from the Site.

          ·The aforesaid releases or threatened releases
          of hazardous substances at the Site have
          caused Emhart to incur necessary "response"
          costs, within the meaning of 42 U.S.C.
          § 9601(25), . . . [for which] NECC is liable
          to Emhart for its proportional share . . . .

          ·[T]here  is a controversy between Emhart and
          NECC concerning the nature and extent of the
          obligation of NECC to pay for anticipated
          future response costs with respect to the
          Site.

          The complaint describes Emhart's liability for Site

clean-up as based on the activities of a predecessor chemical

manufacturing company that conducted business operations on a

portion of the Site from the 1940s through about 1968. Ultimately,

Emhart sought, among other things, an award for "the damages to

which it is entitled as a result of the conduct of New England

Container Company, Inc."4

     4
       As noted, the complaint also levied claims against Travelers
and PWIC as NE Container's insurers in connection with the policies
that they had provided to NE Container. Emhart sought a judgment
that, among others things, both Travelers and PWIC were obligated
"to satisfy [NE Container's] obligations to Emhart with respect to
the damages that Emhart will recover if it prevails." In 2007, the
district court issued an order severing and staying Emhart's claims
against Travelers and PWIC, "pending resolution of the underlying
cost recovery action between Emhart and [NE] Container . . . ."
Emhart Indus., Inc. v. New England Container Co., Inc., et. al, No.
06-CV-218S (D.R.I. Aug. 15, 2007) (Order).

                               -13-
D. The District Court's Analysis

           The district court determined that the complaint failed

to show that the damage potentially "occurred" between 1982 and

1985.   The court observed that by 1982, the start date of the PWIC

insurance policy, NE Container no longer had any operations on the

Centredale   Manor   Site,   and   there    was   no   allegation   that   NE

Container had any connection with the property in question during

the mid-1980s policy time frame.          Remarking that it had found no

Rhode Island court decision holding that the coverage trigger "was

satisfied when the policy period did not correspond at all to the

period during which the insured conducted its allegedly harmful

activities," the district judge underscored that, here, "there is

not even a small speck of an overlap between the policy period and

the period of the insured's allegedly damaging activities."

           We agree with Travelers that looking only to the timing

of NE Container's alleged polluting activities is too narrow a

focus, and that Rhode Island law requires consideration of the

potential timing of the property damage itself.

           It is true, as the district court noted, that there is a

dearth of Rhode Island case law on the bounds of the reasonable

diligence coverage trigger. In fact, Textron-Gastonia and Textron-

Wheatfield are about the only cases in which the state supreme

court has explored the scope of this coverage trigger, see also

Truk-Away of R.I., Inc. v. Aetna Cas. & Sur. Co., 723 A.2d 309

                                   -14-
(R.I. 1999), but neither case did so in the context of an insurer's

duty to defend, see Emhart Indus., 559 F.3d at 69 (discussing

Textron cases and concluding that neither provided a holding on the

insurers' duty to defend). Even with little express direction from

state precedents, however, we are confident that the "discoverable

in the exercise of reasonable diligence" coverage trigger does not

require a temporal overlap between the policy period and the

insured's active business operations during which the allegedly

damaging activity took place.        See, e.g., Travelers Indem. Co. v.

Children's Friend & Serv., No. PC98-2187, 2005 WL 3276224, at *10-

11   (R.I.   Super.    Ct.   2005)   (unpub.)   (ruling     that   under   an

occurrence-based      general   liability   policy,   the   timing   of    the

"property damage" is the relevant focal point for determining the

potential for coverage and the insurer's duty to defend, and

emphasizing that whether the causative event happened during or

before the policy period is not material); Ins. Co. of N. Am. v.

Kayser-Roth Corp., No. PC 92-5248, 1999 WL 813661, at *13, 27-28,

35 (R.I. Super. Ct. 1999) (unpub.) (following the CPC Int'l trigger

framework and ruling that, at a time when the insured had already

closed its facility and long sold the property to a third party,

the insured could have discovered with reasonable diligence the

environmental property damage resulting from a chemical spill event

that took place during its business operations).

                                     -15-
          As construed by the Rhode Island courts, the very aim of

that state's coverage trigger is to make clear that a covered

"occurrence" can indeed take place when the latent injury or damage

becomes manifest at some point down the road from the actual

polluting event or activity.      See Textron-Wheatfield, 754 A.2d at

746.   The Rhode Island Supreme Court has explained that the

reasonable diligence category of coverage trigger, in particular,

is meant to address

          the problem of latent injury (such as asbestos
          poisoning)   or   latent   damage   (such   as
          groundwater contamination), when the injury or
          damage, although covered by the policy, is not
          immediately discernible or occurs after an
          unexpected event sets in motion a series of
          incidents that eventually results in the
          manifestation of the damage.

Id. And, the tandem Textron decisions neither purport to truncate,

nor operate to truncate, the supreme court's holding in CPC Int'l,

which rejected a trigger-of-coverage test premised on when the

injury-causing event occurred in favor of one focusing on the

manifestation,   discovery   or    discoverability   with   reasonable

diligence of the resulting property damage.       See CPC Int'l, 668

A.2d at 649-50. Instead, both cases simply display the application

of the precedent established under CPC Int'l         in the summary

judgment setting, further clarifying that the trigger categories

are independent of one another such that actual discovery of the

property damage during the policy period is not required.         See

                                  -16-
Textron-Wheatfield, 754 A.2d at 745-46; Textron-Gastonia, 723 A.2d

at 1141-42.

             To be sure, in both Textron cases the insureds' polluting

activity    during    the   operation    of   their   respective     business

facilities (including spills and leaks into the soil) overlapped

with the policy periods at issue. See Textron-Wheatfield, 754 A.2d

at 744, 747; Textron-Gastonia, 723 A.2d at 1139, 1143-44.             Also in

both cases, with respect to the insureds' reason to test for, and

their ability to discover, the environmental damage during the

policy period, the Rhode Island court noted evidence that their

former employees had personal knowledge of the polluting activity

taking    place   during    the   business    operations.     See    Textron-

Wheatfield, 754 A.2d at 747; Textron-Gastonia, 723 A.2d at 1143-44.

One lesson to be drawn from these cases is that the ultimate

resolution of the coverage trigger question between the insured and

its insurer depends on evidence that the insured had some reason to

test for the contamination and must actually have been able to

discover it in the exercise of reasonable diligence during the

policy period.       But, we read neither case as requiring a temporal

overlap    between    the   policy   period   and   the   alleged   polluting

activity during an entity's business operations. In each case, the

state supreme court simply was addressing the facts of the case as

presented.

                                     -17-
             It may be difficult to unearth evidence and prove for

indemnity purposes that property damage occurred in accord with the

reasonable diligence coverage trigger during a time frame when the

insured has long ceased its business operations that coincided with

the pollution activity.         Still, there is a vast array of factual

circumstances in the progressive environmental damage context, and

we must take our cue from the Rhode Island court's demarcation of

an    "occurrence"    coverage      trigger      for   delayed        manifestation

scenarios.    Cf. Emhart Indus., 559 F.3d at 69 (concluding that the

state   court's     silence    on   the   duty    to   defend   issue     does   not

sufficiently support [the insurer-appellant's] claim that the Rhode

Island Supreme court would not apply the pleadings test in the

CERCLA context).      Accordingly, we do not subscribe to the district

court's narrower view that the Emhart complaint failed to show the

potential that reasonably discoverable property damage occurred

during the mid-1980s simply because there was no overlap between

the policy period and NE Container's polluting activities. Without

this constraint, we consider de novo whether the allegations in the

complaint triggered PWIC's duty to defend.              See Flori, 388 A.2d at

26.

E. Sufficiency of the Allegations under the Pleadings Test

             PWIC contends that the occurrence of third-party property

damage at the Site during the policy period that is attributable to

NE    Container's    alleged    polluting        activities     "is    never     even

                                      -18-
intimated" in the Emhart complaint. Further, it says that there is

a "complete absence" of any allegations showing that NE Container

had a reason to test for environmental contamination or that any

such property damage was capable of detection during the policy

periods.    In contrast, Travelers, although acknowledging that the

Emhart complaint does not expressly identify the date on which

property damage was discoverable at the Site, urges that a fair

reading of the allegations in accord with the broad pleadings test

shows a potential for coverage.           Travelers has the better view.

            The Emhart complaint alleges that the EPA named both

Emhart and NE Container, among others, as the sources of the

environmental damage found throughout the Superfund Site, a site

that incorporates a broad swath of contaminated land and water

extending beyond the boundaries of NE Container's former facility.

The complaint's description of NE Container's polluting activities

consists of "spills and leaks" of chemical-laden residuals from the

drums, as well as the release of hazards resulting from the

incineration of the drums.         This pollution may have taken place

during the entire course of the facility operations, allegedly

spanning from 1952 until the early 1970s.             Additionally, according

to the complaint, NE Container's activities caused releases of

hazardous   substances      "at   and    from   the   Site."    Finally,   the

complaint    notes   that    the    eventual     discovery     of   widespread

environmental damage in the late 1990s allegedly showed damage both

                                        -19-
at and in the vicinity of the NE Container site, including both

land and water contamination.

             Fairly read, these allegations give rise to the potential

that NE Container's polluting activities may have spanned two

decades, and that the pollution migrated from NE Container's

property and eventually caused damage to surrounding land and

waterways,    which    damage    was     discovered     in    1999.        While    the

complaint    does    not   include     specific      allegations       showing     when

property damage became detectable, the potential magnitude of NE

Container's alleged polluting activities supports a reasonable

inference that property damage was discoverable in the exercise of

reasonable    diligence     some     time    before    its        actual   discovery,

including during the policy period.                  Certainly, the complaint

raises many questions about the timing and scope of the damage

allegedly caused by NE Container, and about whether NE Container

had a reason to test for damage at the Site and could have detected

damage during the policy period.            But faithful application of the

pleadings test leads us to conclude that the allegations give rise

to the potential that a state of facts exists demonstrating that

environmental       property    damage      caused    by     NE    Container     was

discoverable in the exercise of reasonable diligence at the Site

during the PWIC policy period.

             It also bears observing that the question of when latent

environmental damage became reasonably discoverable is ultimately

                                       -20-
a fact-intensive matter, often requiring considerable investigation

which may not necessarily take place prior to the inception of a

private contribution action between multiple polluters.     Indeed,

while the specific timing of the discoverability of latent property

damage allegedly caused by the defendant-polluter is crucial for

purposes of implicating coverage under a particular insurance

policy, it is not central to the private contribution action.   Cf.

Emhart Indus., 559 F.3d at 66, 75 (noting that the EPA document

does not speak to the discoverability of the environmental damage

because such issue is unrelated to CERCLA liability).     Thus, the

lack of additional specificity in the Emhart complaint does not

foreclose the insurer's duty to defend its insured where the

allegations show a potential that a state of facts exists that will

bring the case within the coverage afforded under the policy.

          PWIC acknowledges -- as it must -- that under Rhode

Island law, neutral or ambiguous allegations do not foreclose an

insurer's duty to defend.      But it contends that the complete

absence of specific allegations connecting NE Container to the

property during the policy period precludes the Emhart complaint

from being characterized as ambiguous or neutral on the potential

for coverage.   We disagree.

          We previously have remarked that Rhode Island law on the

duty to defend "may mean that when one cannot tell what claim is

being asserted against the insured but it may be one covered by the

                               -21-
policy . . . the duty to defend continues, at least until the scope

of the claim is brought into focus."    Hartford Fire Ins. Co. v.

R.I. Pub. Transit Auth., 233 F.3d 127, 131 (1st Cir. 2000).   Rhode

Island cases display a consistent message: lack of specificity in

a complaint leaving in doubt whether a state of facts exists

showing the case is within the risk of coverage, or pleadings that

display the existence of a question of fact regarding coverage,

trigger the duty to defend, and that duty continues until such time

as facts are shown to foreclose coverage (or the parties settle).

See, e.g.,   Allstate Ins. Co. v. Russo, 641 A.2d 1304, 1306 (R.I.

1994); Shelby Ins. Co., 767 A.2d at 77; Flori, 388 A.2d at 27;

Beals, 240 A.2d at 403.   An insurer has no duty to defend at the

inception of a lawsuit against its insured only where the pertinent

charging document plainly shows no potential for coverage.    See,

e.g., Sanzi v. Shetty, 864 A.2d 614, 618 (R.I. 2005); Truk-Away,

723 A.2d at 311-12; Craven v. Metro. Prop. and Cas. Ins. Co., 693

A.2d 1022, 1022 (R.I. 1997) (mem.); Viegas, 667 A.2d at 789; see

also Narragansett Jewelry Co., Inc. v. St. Paul Fire and Marine

Ins. Co., 555 F.3d 38, 41 (1st Cir. 2009) (applying Rhode Island

pleadings test to hold that the insurer had no duty to defend where

the allegations in the complaint plainly compelled a conclusion

that an exclusion to coverage applied).5

     5
       In unrelated litigation, the district court has concluded
that Rhode Island law permits it to look beyond the complaint when
necessary "to avoid permitting the pleading strategies, whims, and

                               -22-
            Our reading of Rhode Island law on the liberality of the

pleadings   test   for   purposes   of     the   duty   to   defend   also   is

consistent with the approach of other jurisdictions that abide by

the pleadings test or some corollary thereto.           The cases generally

hold that an insurer has a duty to defend its insured where the

complaint allegations are vague, ambiguous, or incomplete such that

the potential for coverage exists.         See, e.g., New York v. Blank,

27 F.3d 783, 790 (2d Cir. 1994) (interpreting New York law and

collecting cases); Monsler v. Cincinnati Cas. Co., 598 N.E.2d 1203,

1206 (Ohio 1991); Marleau v. Truck Ins. Exch., 37 P.3d 148, 153

(Or. 2001); Parker v. Hartford Fire Ins. Co., 278 S.E.2d 803, 804

(Va. 1981); Truck Ins. Exch. v. Vanport Homes, Inc., 58 P.3d 276,

281-82 (Wash. 2002) (en banc); see also William T. Barker, New

Appleman on Insurance: Current Critical Issues in Insurance Law §

III.C (April 2007) (emphasizing that "given the vagueness of notice

pleading, the insured ought not to be deprived of a full defense of

a covered claim" arising from ambiguities; "ambiguities in the

complaint must be construed in favor of coverage until those

ambiguities can be resolved.").6

vagaries of third party claimants to control the rights of parties
to an insurance contract," and "to ensure a degree of
'reasonableness.'" See Allstate Ins. Co. v. Greloch, No. 11-015,
2011 WL 4351630, at *4 n.3 (D.R.I. 2011) (unpub.) (internal
quotation marks and citations omitted).     This approach is not
discussed by the parties.
     6
       PWIC urges a more exacting review of the Emhart complaint,
arguing that a direct action against third-party insurers "raises

                                    -23-
          On    another    front,   PWIC    also   argues   that   following

Travelers's reading of the Emhart complaint is akin to adopting the

"continuous trigger" test, which PWIC says is contrary to Rhode

Island's test under CPC Int'l.          We disagree.

          Generally       stated,   a     "continuous    trigger" coverage

standard "charges a loss to policies in effect from the time of

exposure to manifestation, and, thus, presumes injury from the time

of exposure through manifestation."         Emhart Indus., 559 F.3d at 77

(emphasis added) (internal quotation marks omitted).          In contrast,

Rhode Island's pleadings test triggers the duty to defend only when

the pleading allegations show the potential that property damage

occurred during the policy period.         See id. at 77-78; see also 23

Eric Mills Holmes, Holmes' Appleman on Insurance 2d § 145.3[2][a]

(2003) (interim volume) (characterizing the CPC Int'l Rhode Island

standard as a manifestation trigger of coverage); Thomas, supra §

27.01[7][g]    (explaining    the   overlap    between   coverage   trigger

theories).7    As our holding in this case does not presume injury

the bar" with respect to what Emhart had to establish in the
complaint.   Because PWIC provides no legal authority for this
approach, we do not address its merits. See Zannino, 895 F.2d at
17.   For the same reason, we do not consider the appellee's
contention that NE Container "could not have had any reason to
test" for pollution damage because it lacked a legal right to enter
the Site property during the relevant policy period.
     7
       It is not necessarily certain that the Rhode Island Supreme
Court has put to rest the continuous trigger test in the
environmental context.    See Textron-Gastonia, 723 A.2d at 1141
("Because we conclude that liability under the policy may be
established by one of the recognized CPC tests, we need not address

                                    -24-
from the time of exposure to manifestation, it compels neither a

defense nor indemnity under a continuous trigger rubric.                We

conclude only that the complaint allegations show the potential

that property damage was discoverable in the exercise of reasonable

diligence during the mid-1980s.

            PWIC's final argument is that NE Container's polluting

activity does not comport with the definition of "occurrence" and,

moreover,   it   implicates   the   pollution   exclusion   under   PWIC's

policies.   We are not convinced.

            As explained earlier, an "occurrence" covered under the

PWIC policies means "an accident, including injurious exposure to

conditions, which results in . . . property damage neither expected

nor intended from the standpoint of the insured."       With respect to

property damage that is caused by pollution, the PWIC policies

cover property damage arising from the "discharge, dispersal,

release or escape" of a contaminant only if such activity or event

was "sudden and accidental."        See Textron-Wheatfield, 754 A.2d at

750 (construing the pollution exclusion to mean that coverage is

barred for the intentional or reckless polluter).

the continuous trigger-of-coverage standard."); see also Emhart
Indus., 559 F.3d at 79 (declining to address merits of the
appellee's "considered dicta" argument regarding the Textron-
Gastonia remark, because the appellee had failed to distinguish CPC
Int'l as the operative ruling). We have no need to wade into this
thicket.

                                    -25-
              The Emhart complaint describes NE Container's polluting

activity as including the spilling and leaking of chemical-laden

residual contents of the drums when bringing the drums to the

incinerator.         Without addressing how this complaint allegation

could be said to prevent the potential for coverage, PWIC points

only to the 2000 EPA unilateral administrative order as support for

its position that "there is no indication in any of the charging

documents     that    NECC's    course    of    conduct    [during      its   regular

operations] was accidental or unintentional."                     The EPA order

generally avers that NE Container "dispos[ed] of certain drum

residuals in the soil at the Site and incinerat[ed] other drum

residuals at the Site."          Yet, PWIC makes no attempt to demonstrate

how these general allegations foreclose the potential that such

activity and resulting damage conform to the terms of coverage

under its policies.             See, e.g., id. (holding that while the

pollution exclusion "bars coverage for the intentional or reckless

polluter," it provides coverage to the insured which acts in good

faith but "still experiences unexpected and unintended releases of

toxic chemicals that cause damage," and also noting that whether an

insured was an intentional or reckless polluter is "usually a

matter for fact-finding at trial").

              Moreover, there is no indication in the record that the

EPA document was attached to the Emhart complaint, and PWIC makes

no   effort    to     address    well-established         state   law    forbidding

                                         -26-
consideration of extrinsic evidence when applying the pleadings

test.   See Flori, 388 A.2d at 26; Beals, 240 A.2d at 403; Thomas,

93 A.2d at 312.   Rather, it cites to Emhart Indus., 559 F.3d 57, to

support its cursory suggestion (posited in the statement of facts

of its appellate brief) that an EPA unilateral administrative order

can be considered a charging document for purposes of the duty to

defend.   While this may be true where an insurer is asked to

provide a defense against an EPA action, that is not this case;

PWIC is being called upon to join the defense of its insured in a

private contribution action.

           PWIC also says in passing (again, in the statement of

facts) that the 2000 EPA action "is incorporated by reference in

the [Emhart] Complaint."   State law, however, points another way,

and PWIC has not given any attention to that authority. See, e.g.,

Bowen Court Assocs. v. Ernst & Young, LLP, 818 A.2d 721, 726 (R.I.

2003) (holding that the mere fact that a pleading mentions or

refers to a document, without attaching it to the pleading, does

not cause that document to be incorporated by reference as if the

pleader had appended it to the pleading).

           In the end, we conclude that under the pleadings test,

the Emhart complaint triggered PWIC's duty to defend under its

policies issued in the mid-1980s. In so holding, we recognize that

there is exponentially more to this sprawling litigation than the

Emhart complaint and the PWIC policies.       Litigation involving

                                -27-
environmental damage at the Superfund Site was well on its way

prior to the 2006 Emhart action, and the Emhart action had advanced

beyond a nascent stage by the time Travelers pursued its 2010

action against PWIC.    The duty to defend question before us,

however, begins and ends with the Rhode Island pleadings test.

Having concluded this task, our review is complete.8

                         III. Conclusion

          We reverse the district court's decision, vacate the

judgment in favor of PWIC, and remand for the district court to

enter judgment in favor of Travelers that the Emhart complaint

triggered PWIC's defense obligations under its policies.       Any

remaining requests for relief sought by Travelers will be addressed

by the district court in due course.

     8
       PWIC advanced other arguments before the district court to
negate its duty to defend, such as late notice and known loss,
which the court rejected. PWIC does not challenge these rulings.

                               -28-