Court Opinion

ID: 2963022
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:05:03.093803+00
Date Added: 2024-06-11T15:01:27.470069
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

          No. 94-1540

                             NEW HAMPSHIRE BALL BEARINGS,

                                Plaintiff - Appellee,

                                          v.

                          AETNA CASUALTY AND SURETY COMPANY,

                                Defendant - Appellant.

                                 ____________________

          No. 94-1544

                          NEW HAMPSHIRE BALL BEARINGS INC.,

                                Plaintiff - Appellant,

                                          v.

                          AETNA CASUALTY AND SURETY COMPANY,
                      AND AMERICAN MOTORISTS INSURANCE COMPANY,

                               Defendants - Appellees.

                                 ____________________

          No. 94-1545

                          NEW HAMPSHIRE BALL BEARINGS INC.,

                                Plaintiff - Appellee,

                                          v.

                          AETNA CASUALTY AND SURETY COMPANY,

                                Defendant - Appellee.

                                 ____________________

                        AMERICAN MOTORISTS INSURANCE COMPANY,

                                Defendant - Appellant.

                                 ____________________

                    APPEALS FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF NEW HAMPSHIRE

                [Hon. Martin F. Loughlin, Senior U.S. District Judge]
                                          __________________________

                                 ____________________

                                        Before

                               Torruella, Chief Judge,
                                          ___________

                            Bownes, Senior Circuit Judge,
                                    ____________________

                               and Cyr, Circuit Judge.
                                        _____________

                                _____________________

               Stephen  H. Roberts, with whom Ouellette, Hallisey, Dibble &
               ___________________            _____________________________
          Tanguay, P.A., Allan B.  Taylor and Dan,  Berry & Howard were  on
          _____________  ________________     ____________________
          brief for Aetna Casualty and Surety Company.
               James M. Sweet, with whom Susan M. Kennedy, Drinker Biddle &
               ______________            ________________  ________________
          Reath,  Richard C. Nelson  and Nelson,  Kinder, Mosseau  & Gordon
          _____   _________________      __________________________________
          were on brief for American Motorists Insurance Company.
               Michael C.  Harvell, with whom  John E. Peltonen,  Thomas S.
               ___________________             ________________   _________
          Burack,  Thomas M.  Closson and  Sheehan, Phinney,  Bass &  Green
          ______   __________________      ________________________________
          Professional Association  were on  brief for  New Hampshire  Ball
          ________________________
          Bearings.

                                 ____________________

                                   January 5, 1995
                                 ____________________

                                         -2-

                    TORRUELLA,  Chief Judge.   This  is the  second of  two
                    TORRUELLA,  Chief Judge.
                                ___________

          insurance coverage,  declaratory judgment actions to  come before

          the  court in  recent months  on  appeal from  the United  States

          District Court for the District of New Hampshire.  See Mottolo v.
                                                             ___ _______

          Fireman's Fund  Ins. Co.,  No. 94-1707 (1st  Cir. Jan.  3, 1995).
          ________________________

          Both cases raise similar issues.  The question we decide on  this

          appeal  is whether  a general  liability  insurance policy  which

          provides  coverage for  property  damage  that  results  from  an

          "occurrence"  applies to  the  intentional  dumping of  hazardous

          waste.   We conclude that, as a matter  of New Hampshire law, the

          "occurrence" provision does  not apply to the facts  of this case

          and  that, therefore, the  defendant insurance companies  are not

          obligated  to  indemnify  the  plaintiff-appellee.    Because  we

          conclude that the district court decision to the contrary must be

          reversed,  and judgment  entered  in  favor  of  the  defendants-

          appellants, we need not reach the issue of what triggers coverage

          under  the policies,  nor need  we interpret  the owned  property

          exclusion.  Likewise, the damages questions decided below are not

          necessary to our conclusion.

                                          I.
                                          I.

                                      BACKGROUND
                                      BACKGROUND
                                      __________

                    New   Hampshire    Ball   Bearings,    Inc.   ("NHBB"),

          manufactures precision  ball bearings  for use  in the  aerospace

          industry.  It has operated a manufacturing facility ("the plant")

          located  approximately  one-quarter   mile  west  of  the   South

          Municipal  Well ("the South Well") in Peterborough, New Hampshire

                                         -3-

          since  1957.   NHBB relies  heavily on  the  use of  solvents for

          essential  degreasing   and   cleaning   functions   during   the

          manufacturing  process.    These solvents  include  the  volatile

          organic compounds  ("VOCs") trichloroethylene ("TCE")  and 1,1,1-

          trichloroethane ("TCA").  

                    Contamination  of the South Well was discovered in 1982

          during  the  first  routine sampling  of  the  Peterborough water

          supply  for VOCs.   This contamination  was traced  to NHBB.   No

          other potential responsible parties have been identified.  In May

          of  1983,  the  United  States  Environmental  Protection  Agency

          ("EPA") put the  South Well and contiguous areas  on the National

          Priorities  List,  making  them eligible  for  funding  under the

          Comprehensive Environmental  Response Compensation  and Liability

          Act  of 1980  ("CERCLA"), 42  U.S.C.     9601-75, amended  by the
                                                            ___________

          Superfund Amendments and Reauthorization Act of 1986, Pub. L. No.

          99-499, 100 Stat. 1613 (1986).  

                    NHBB   is  required   to  clean   up  hazardous   waste

          contamination  at the South  Municipal Well in  Peterborough, New

          Hampshire ("the  South Well")  pursuant to  a 1986  consent order

          entered into with  the EPA and an Administrative  Order issued by

          EPA on  June 19, 1990.   A  feasibility study has  indicated that

          cleanup of the South Well will take 19 to 32 years.

                    In  1987,  NHBB  brought   this  action  against  Aetna

          Casualty  &  Surety  Company  ("Aetna")  and  American  Motorists

          Insurance Company ("AMICO"), seeking a declaration that Aetna and

          AMICO  are  obligated  to indemnify  NHBB  for  its environmental

                                         -4-

          cleanup costs at the South  Well.  Following a fourteen-day bench

          trial, which included  an evidentiary view of the  NHBB plant and

          the  South  Well, the  district  court  issued  a  34-page  Order

          containing  detailed  findings  with respect  to  NHBB's  use and

          disposal  of solvents  at the  NHBB  plant.   The district  court

          concluded that NHBB's practice  for disposing of solvents  led to

          pervasive  leaking, overflowing  and  intentional discharging  of

          solvents onto the  ground, leading to contamination  of the South

          Well through the groundwater.

                    Among  the pertinent findings by the district court are

          the following.   NHBB  used tanker trailers  to dispose  of waste

          liquids from the plant.   The original trailer had a  capacity of

          250  gallons while subsequent  trailers had capacities  of 500 to

          750 gallons.  When the trailer filled up, the normal practice was

          for NHBB employee's to  dump its contents at the town  dump.  The

          district court found,  however, that "about twice a  year because

          of inclement weather,  solvents and waste were  discharged on the

          NHBB premises which subsequently went into the groundwater."  The

          district  court  concluded  that  "[t]hese  discharges  were  not

          accidental."

                    The  court also  noted that  on  other occasions  tanks

          would accidentally overflow, discharging solvents onto the ground

          at the plant.   This overflowing continued,  notwithstanding some

          efforts by NHBB  to curtail it.   In each  year between 1957  and

          1983,  solvents were  spilled onto the  ground at  the plant.   A

          tumble  sump used to store waste occasionally overflowed, causing

                                         -5-

          solvents  in free  phase and  dissolved  form to  spill onto  the

          ground and flow through a discharge pipe into a nearby brook.  In

          1982, a  roof tank  with  a capacity  of 275  gallons leaked  TCA

          through a ruptured pipe onto the ground at the plant.

                    The court also  found that wastes were  discharged from

          sinks, floor drains and roof drains at the plant onto the  ground

          and wetlands  of the plant, and into the  town sewer and a nearby

          brook.  Some  of the wastes flowed  into the wetland area  of the

          plant while others flowed into a brook near the plant.  The court

          found that NHBB was still discharging volatile compounds from its

          outfalls in late 1982.

                    In  conclusion, the district  court made  the following

          findings of fact:

                    1.   During  the 1950's,  1960's and early  1970's, the

          public and industry were not  generally aware of the threat which

          hazardous   wastes  posed  to  the  environment  in  general  and

          groundwater in particular.

                    2.    NHBB intentionally  discharged solvents  onto the

          soil and top surface.

                    3.   NHBB's contamination of the soil and wetlands  was

          intentional, not fortuitous.

                    4.  At the time  of its intentional discharge, NHBB did

          not understand the effect its discharge of solvents would have on

          the groundwater.

                    5.    NHBB's  contamination  of   the  groundwater  was

          unintentional.

                                         -6-

                    Based on these  findings, the district court  held that

          NHBB  is  entitled  to indemnification  from  Aetna  for expenses

          related to the investigation and cleanup up of the groundwater at
                                                             ___________

          the South Well, but not the soil or wetlands, pursuant to Aetna's

          general liability  insurance policy in effect for the period July

          1, 1982 to July  1, 1983.1  The court ordered  Aetna to reimburse

          NHBB in the amount of  $14,213,199.94 and ordered Aetna to defend

          NHBB in any related suits.

                                         II.
                                         II.

                                  STANDARD OF REVIEW
                                  STANDARD OF REVIEW
                                  __________________

                    We  review determinations of state law  made in a bench

          trial of a diversity action de novo.  Williams v. Poulos, 11 F.3d
                                      __ ____   ________    ______

          271, 278  (1st Cir.  1993); Blanchard v.  Peerless Ins.  Co., 958
                                      _________     __________________

          F.2d 483, 487 (1st Cir. 1992).  The district court's  findings of

          fact  will be upheld in the absence of clear error.  Fed. R. Civ.

          P. 52(a);  Williams, 11  F.3d at 278.   In  other words,  we will
                     ________

          defer to the district court's findings of fact unless we form "'a

          strong,  unyielding  belief  that  a  mistake  has  been  made.'"

          Cumpiano v. Banco  Santander Puerto Rico, 902 F.2d  148, 152 (1st
          ________    ____________________________

          Cir. 1990).

                    The clearly erroneous standard  also ordinarily applies

          when we review  a trial court's resolution of  mixed questions of

                              
          ____________________

          1  The district court found  that the "trigger date" for purposes
          of  determining insurance  coverage was  October  1982 (when  the
          contamination  was discovered  by the  State  of New  Hampshire).
          AMICO's policies were no longer in effect as of October 1982 and,
          consequently, the court ruled that  they did not provide coverage
          for the contamination.

                                         -7-

          fact and law.   See In re  Extradition of Howard, 996  F.2d 1320,
                          ___ ____________________________

          1328 (1st Cir. 1993) ("the  more fact dominated the question, the

          more likely  it is  that  the trier's  resolution of  it will  be

          accepted  unless shown  to be  clearly erroneous").   If  a trial

          court  "bases  its   findings  upon  a  mistaken   impression  of

          applicable legal principles,"  however, we are  not bound by  the

          clearly erroneous standard.  LoVoulo  v. Gunning, 925 F.2d 22, 25
                                       _______     _______

          (1st   Cir.  1991)   (quoting   Inwood   Laboratories   v.   Ives
                                          _____________________        ____

          Laboratories, 456 U.S. 844, 855 n. 15, 102 S.Ct. 2182, 72 L.Ed.2d
          ____________

          606 (1982)).

                    In addition, we  note that the district  court properly

          found that, because there is no underlying state court lawsuit in

          this  case,  the  burden shifting  framework  of  New Hampshire's

          declaratory judgment act, N.H. Rev. Stat. Ann.   491.22, does not

          apply and the  burden of establishing  coverage remains with  the

          plaintiff, NHBB.   See  Town of Allenstown  v. National  Casualty
                             ___  __________________     __________________

          Co., No. 94-1106, slip op. at 8-9 (1st Cir. Sept. 30, 1994).
          ___

                                         III.
                                         III.

                                      DISCUSSION
                                      DISCUSSION
                                      __________

                    Aetna is  required to indemnify  NHBB for monies  it is

          legally obligated to pay because of property damage caused by "an

          occurrence."  The policy defines  "occurrence" as "an accident  .

          . . which results in .  . . property damage neither  expected nor

          intended from the standpoint of the insured."  The district court

          found  that NHBB intentionally contaminated the soil and wetlands

          but did not  realize the effect its  pollution would have  on the

                                         -8-

          groundwater.   The narrow issue we decide in this case is whether

          NHBB's  contamination of groundwater  with hazardous waste  is an

          "occurrence" or an "accident" under those circumstances.

                    In Mottolo v. Fireman's Fund Ins. Co., No. 94-1707 (1st
                       _______    _______________________

          Cir. Jan. 3,  1995), we  analyzed the law  of New  Hampshire with

          respect  to  "occurrence"  policy provisions.    We  will briefly

          summarize  the salient  principles.   The  New Hampshire  Supreme

          Court  construes   the  term   "accident"  in   the  context   of

          "occurrence" coverage to mean "'an undesigned contingency, . .  .

          a  happening by  chance, something  out  of the  usual course  of

          things, unusual, fortuitous,  not anticipated, and not  naturally

          to be  expected.'"  Jespersen v.  U.S. Fidelity &  Guar. Co., 131
                              _________     __________________________

          N.H. 257, 260,  551 A.2d 530 (1988) (quoting  Vermont Mutual Ins.
                                                        ___________________

          Co. v. Malcolm,  128 N.H. 521,  523, 517 A.2d  800 (1986)  (other
          ___    _______

          citations omitted).

                    In Providence Mutual Fire Insurance Co. v. Scanlon, 138
                       ____________________________________    _______

          N.H. 301,  638 A.2d 1246  (1994), the Court articulated  the test

          for determining whether there is an accident as follows:

                      "If the insured did not intend to inflict
                      the   injury   on  the   victim   by  his
                      intentional act,  and the act  was not so
                      inherently injurious that  the injury was
                      certain to follow  from it, the act  as a
                      contributing  cause  of injury  would  be
                      regarded    as    accidental    and    an
                      'occurrence.'"

          Scanlon, 638  A.2d at 1249  (quoting Vermont Mutual, 128  N.H. at
          _______                              ______________

          524).   Under Scanlon, NHBB's  actions were  not "accidental"  if
                        _______

          either 1)  it intended to  inflict the injury  or 2) its  actions

          were "inherently injurious."

                                         -9-

                    The district court's findings  that NHBB's intended  to

          contaminate  the top soil and wetlands,  but not the groundwater,

          raise the question  whether those "injuries"  can be divided  for

          purposes of  determining whether  NHBB "intended  to inflict  the
                                                                        ___

          injury on the  victim by his intentional  act."  We have  serious
          ______

          doubts that  the intended injuries  to the top soil  and wetlands

          are divisible from the unintended injury to the groundwater.  See
                                                                        ___

          Lumbermens Mutual  Casualty Co.  v. Belleville  Indus., 938  F.2d
          _______________________________     __________________

          1423, 1427-28  (1st Cir. 1991) (cautioning  against microanalysis

          of a continuing  pattern of pollution).  We need  not decide that

          question here, however,  because we find that  NHBB's intentional

          actions were inherently injurious within the meaning of Scanlon.
                                                                  _______

                    The  test  of   "inherently  injurious"  conduct  under

          Scanlon  is  that  "an insured's  intentional  act  cannot  be an
          _______

          'accident' when it is so inherently injurious that 'it is certain

          to result in some injury, although not necessarily the particular

          alleged injury.'"   Green Mountain Ins. Co. v.  Foreman, 138 N.H.
                              _______________________     _______

          440,  ___, 641 A.2d 230, 232 (1994) (quoting Scanlon, 638 A.2d at
                                                       _______

          1249).  In determining whether  an insured's actions were certain

          to result  in some injury,  New Hampshire law instructs  that the

          reviewing court  look at "the  character of the act  viewed, with

          reference to the insured, as a cause of injury."   Jespersen, 131
                                                             _________

          N.H. at 260  (quoting Vermont Mutual, 128 N.H. at 524).  This has
                                ______________

          been interpreted as an objective standard.  "[T]he Court does not

          look to the actor's subjective intent that the result in question

          occur, but rather, the Court 'may infer that the actor's state of

                                         -10-

          mind was  the same as a  reasonable person's state  of mind would

          have been.'"  King v. Prudential  Property and Cas. Ins. Co., 684
                        ____    ______________________________________

          F. Supp. 347, 349 (D.N.H. 1988) (quoting W. Keeton, D.  Dobbs, R.

          Keeton, & D. Owen, Prosser and Keeton on the Law of Torts   8, at
                             ______________________________________

          35-36).

                    Although the district court cited much of the above New

          Hampshire law, it  ultimately relied on New Jersey  law in making

          its determination that NHBB's  intentional discharge of  solvents

          was an "occurrence."  Citing Morton International Inc. v. General
                                       _________________________    _______

          Accident  Insurance Co.,  134 N.J.  1, 629  A.2d 831  (1993), the
          _______________________

          district   court  sought   to   determine  "whether   exceptional

          circumstances exist that objectively establish [NHBB's] intent to

          injure."   This test does not  reflect the law of  New Hampshire.

          By looking  for objective  evidence from  which  the court  could

          infer NHHB's  subjective intent  to injure  the groundwater,  the
                        _________________

          court ignored  the objective  nature of the  inquiry required  by

          Vermont Mutual and its progeny.  Although we could remand to  the
          ______________

          district court for  reconsideration under  the appropriate  legal

          standard, we  are perfectly  equipped to  apply the  proper legal

          standard to the factual findings of the district court.

                    As we interpret  it, the test that emerges from Vermont
                                                                    _______

          Mutual and  its  progeny is  the  following: would  a  reasonable
          ______

          company in  NHBB's position know that its intentional dumping and

          contamination of the soil  and wetlands with hazardous  waste was

          certain  to  result in  some  injury  to  property, although  not

          necessarily the  particular injury to  the groundwater.   To this

                                         -11-

          question, our answer is yes.   In our view, the  district court's

          findings that  1) NHBB  intentionally contaminated  the soil  and

          wetlands -- a  finding that was  not contested on appeal;  2) the

          dumping was done in a reckless manner with no perceptible concern

          for whether the  materials would migrate from the  NHBB site; and

          3)  much  of the  waste  flowed  directly  into a  nearby  brook,

          foreclose  any serious argument  that a reasonable  company would

          not have known that the dumping was certain  to cause some injury

          to adjacent property.

                    NHBB nonetheless presses  the argument that it  did not

          intend  to injure  the  groundwater.   The  Vermont Mutual  Court
                                                      ______________

          rejected the argument  that an event is an  "accident" within the

          meaning of the  policy language if the insured did  not expect or

          intend the injury that resulted: "[t]he policy does not condition

          coverage on the fortuitous nature  of the victim's injury, but on

          the  accidental character of the insured's act."  Vermont Mutual,
                                                            ______________

          128 N.H. at  524.  As the  New Hampshire Supreme Court  stated in

          Jespersen: "[b]ecause their  act was inherently injurious,  it is
          _________

          of  no  consequence  that  the  Jespersens  have  sworn,  without

          contradiction,  that they  did  not intend  to cause  the alleged

          injuries."  Jespersen, 131  N.H. at 261.  The fact  that NHBB did
                      _________

          not intend to injure the groundwater is irrelevant.

                    We also  think this case falls within the factual ambit

          of our decision in Great  Lakes Container Corp. v. National Union
                             ____________________________    ______________

          Fire Ins. Co., 727 F.2d 30 (1st  Cir. 1984).  In Great Lakes,  we
          _____________                                    ___________

          held,  pursuant  to   New  Hampshire  law,  that   there  was  no

                                         -12-

          "occurrence," under an  insurance policy similar to  that in this

          case, because the  insured discharged chemical pollutants  on its

          land "as a concomitant of its regular business activity."  Id. at
                                                                     __

          33.  The facts found by  the district court, and recited  herein,

          clearly establish that  NHBB discharged chemical pollutants  as a

          concomitant of its regular business activity.  The district court

          attempted  to distinguish  Great Lakes  by  pointing out  certain
                                     ___________

          facts apparently from which it could be inferred that the company

          in Great  Lakes subjectively  intended to  contaminate the  water
             ____________

          supply.  The subjective intent to pollute was not relevant to our

          decision  in Great  Lakes.   Great  Lakes stands  for the  simple
                       ____________    ____________

          proposition  that a company which engages in systematic pollution

          as  a concomitant of  its normal  business practice  cannot claim

          that such pollution was  "accidental."  See Belleville, 938  F.2d
                                                  ___ __________

          at 1429 (surveying similar  decisions in other circuits).   Thus,

          our analysis in  Great Lakes   applies  with equal  force to  the
                           ___________

          facts of this case.

                                         IV.
                                         IV.

                                      CONCLUSION
                                      CONCLUSION
                                      __________

                    For the reasons stated herein, the district court erred

          in finding  that Aetna was  required to indemnify NHBB  for costs

          associated  with  its  investigation and  cleanup  of groundwater

          contamination at the  South Municipal Well site  in Peterborough,

          New Hampshire.  We  hold that, as a matter of  New Hampshire law,

          NHBB's contamination of  the groundwater was not  an "occurrence"

          within the  meaning of  the insurance policy  issued by  Aetna to

                                         -13-

          NHBB.   We therefore reverse the judgment below, to the extent it
                  _________________________________________________________

          is inconsistent with this opinion, and enter judgment for Aetna.
          _______________________________________________________________

                                         -14-