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CPC Int'l, Inc. v. Northbrook Excess & Surplus Ins. Co.

ELR Citation: 28 ELR 21270
Nos. 97-2073, -2074, 144 F.3d 35/(1st Cir., 06/01/1998)

The court holds that a corporation's insurance policy covered costs related to the 1979 discovery of contamination resulting from a 1974 perchloroethylene (PERC) spill. The court first notes that under Rhode Island law "property damage" and "occurrence" are inextricably intertwined. 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. The court then holds that the decision made by the trial judge to exclude evidence of two previous judicial decisions involving contamination at the corporation's other facilities was eminently reasonable and not an abuse of discretion. The trial judge concluded that introduction of the prior decisions could prejudice the jury about the corporation and its conduct in the instant case. Weighed against this is the seemingly weak probative value of the evidence. In order to strengthen that probative value, the insurer would have had to introduce evidence perfecting the analogy of the other sites and chemicals to the ones at issue in this trial. That, in turn, would have let to a replay of the litigation of those other two cases. And that, in turn, could have misled the jury and certainly would have caused delay.

The court next holds that the jury could reasonably find, as it implicitly did, that the earliest discovered or discoverable property damage was the contamination of a well in 1979. The corporation presented evidence that there was little reason before 1979 to think that a PERC spill, or even historic releases of volatile organic compounds into manholes or catch basins at the plant, would descend into the aquifer, move laterally into the wellfields, and cause property damage. The court also holds that the jury could reasonably have found that contaminants released at the plant would not have caused any property damage absent the PERC spill, and the PERC spill was therefore the real and ultimate cause of the environmental damage to the wells. In addition, the court holds that the jury could reasonably find that the costs incurred by the corporation during the U.S. Environmental Protection Agency's ordered cleanup are for remediating pollution so that use of the wellfield might resume. The court then holds that the facts of this case do not invoke any of the perils of microanalysis. This is not an instance of attempting to parse a sequence of events in regular polluting activities into component parts and then arguing whether each part is sudden and accidental. Rather, there was a massive, sudden and accidental event in the PERC spill, and it was up to the jury to decide whether that, or the ongoing pollution, led to the property damage for which indemnification is sought. Last, the court holds that because the insurer chose not to raise the issue of whether damages for sudden and accidental releases may be parsed out from damages by routine pollution within the exclusion, the issue is waived.

Counsel for Plaintiff
David L. Harris
Lowenstein, Sandler, Kohl, Fisher & Boylan
65 Livingston Ave., Roseland NJ 07068
(201) 992-8700

Counsel for Defendant
Michael F. Aylward
Morrison, Mahoney & Miller
250 Summer St., Boston MA 02210
(617) 439-7500

Before Torruella and Stearns,* JJ.