House of Clean Inc. v. St. Paul Fire

775 F.Supp.2d 302

HOUSE OF CLEAN, INC., Plaintiff,

v.ST. PAUL FIRE AND MARINE INSURANCE CO., INC., Defendant.

Civil Action No. 07–10839–NMG.

United States District Court, D. Massachusetts.

May 27, 2011.

David C. McSweeney, Robert A. Fasanella, Rubin & Rudman, LLP, Boston, MA, for Plaintiff.Robert A. Kole, Ethan V. Torrey, Jennifer A. Brennan, John A. Nadas, Choate, Hall & Stewart, Boston, MA, for Defendant.

MEMORANDUM & ORDER

GORTON, District Judge.

This breach of contract action arises out of the refusal of several insurance companies to provide coverage under liability policies held by a dry cleaning business, House of Clean, Inc. (“HOC”). HOC's insurance claims were made after the release of certain hazardous material on real property in Andover, Massachusetts. Before the Court are the parties' motions for summary judgment and St. Paul's motions to strike.

I. Factual Background

Plaintiff HOC was founded by Nicholas Aznoian in 1967. From 1967 until 2007, HOC operated a dry cleaning business on property at 77 Main Street, Andover, Massachusetts (“the Site”). During that time, HOC used the compound perchloroethylene (“PCE”) as the primary cleaning agent in its dry cleaning business. For the duration of its business operations and, according to HOC, especially from the years 1970 to 1985, PCE was released into the soil around the property.

The release of PCE was apparently the product of a two-step process. First, PCE was prevalent in the basement. Used PCE filters and waste PCE, in powder form, were stored in cardboard boxes in the basement near a loading ramp each week awaiting trash collection. Second, when PCE was delivered to a 125–gallon storage tank originally kept in the basement, some PCE apparently leaked out of the deliverer's hose onto the basement floor and delivery ramp. Additional spills occurred when waste PCE was transferred from the first floor to 5–gallon storage buckets in the basement because those buckets would sometimes overflow.

Consequently, HOC alleges, some PCE made its way into the ground during rare, heavy rain storms. A drain located at the base of a loading ramp adjacent to the basement would apparently back up and cause flooding. The PCE in cardboard boxes and on the basement floor would then contaminate the flood waters and flow back into the drain as the water level receded.

In 2005, in conjunction with an inspection by a potential lessee of the property, PCE and trichloroethylene (“TCE”) were detected in the soil and groundwater. PCE was also detected in the air of surrounding residential apartments. As a result, on April 4, 2006, pursuant to Mass. Gen. Laws ch. 21E, the Massachusetts Department of Environmental Protection (“DEP”) issued a notice of responsibility (“NOR”) to HOC stating that there had been a release of hazardous material and ordering the submission of a response plan.

On October 2, 2006, HOC provided notice of the NOR to two insurers, co-defendants St. Paul Fire and Marine Insurance Company, Inc. (“St. Paul”) and Wausau Underwriters Insurance Company (“Wausau”). On August 13, 2008, individuals with interests in the properties around the dry cleaning business brought suit against HOC for damages arising out of the contamination, Callanen, et al. v. Aznoian, et al., Civ. A. No. 08–1640 (Mass.Super.Ct.) (“the Third–Party Action”). In general, HOC seeks to have its insurers defend it against and indemnify it for any liability incurred as a result of the NOR and the Third–Party Action.

On September 18, 2009, HOC and the Third–Party Plaintiffs entered into an interim settlement agreement in which HOC agreed to continue to assume responsibility for and undertake all reasonable and necessary response actions required to achieve Class A2 Partial Response Action Outcomes for the Third–Party Plaintiffs' properties, as well as for HOC to establish a “reasonable financial assurance” of approximately $680,000 for the completion of the same. To date, HOC claims it has incurred over $1.6 million in indemnity expenses.

II. Procedural History

After sending to St. Paul several demand letters and failing to receive a written response, HOC filed its complaint on May 2, 2007 against St. Paul. St. Paul responded by letter dated May 11, 2007, that it would conditionally participate in the defense of HOC under a complete reservation of rights. In an amended complaint, HOC added allegations that St. Paul violated the Massachusetts Consumer Protection Act, Mass. Gen. Laws ch. 93A (“Chapter 93A”).

On July 23, 2007, however, HOC and St. Paul entered into an agreement whereby HOC would release St. Paul from certain liability in exchange for a payment. In November, 2008, after HOC successfully reopened the case due to St. Paul's refusal to pay its defense costs, the parties added to the July, 2007 agreement new procedures for the payment of defense costs and, with leave of Court, the litigation was stayed once again. Also that fall, HOC amended its complaint a second time to add Wausau as party defendant.

On April 30, 2009, the Court granted HOC's motion to amend its complaint a third time to add additional defendants, Globe Indemnity Company and Royal–Globe Insurance Company (“Royal”). In a Memorandum & Order on April 2, 2010, the Court allowed plaintiff's motion for partial summary judgment on its breach of contract claim against Arrowood Indemnity Company (“Arrowood”), a successor to Royal, but allowed Arrowood's motion for partial summary judgment on HOC's Chapter 93A claim. House of Clean, Inc. v. St. Paul Fire & Marine Ins. Co., Inc., 705 F.Supp.2d 102 (D.Mass.2010). Thereafter, Arrowood was voluntarily dismissed along with all other defendants except St. Paul.

Currently, the only remaining counts are for a declaratory judgment and breach of contract against St. Paul. In April, 2011, the Court heard oral argument on plaintiff's motion to amend its complaint a fourth time to re-allege a Chapter 93A claim against St. Paul. The Court denied the motion. Now before the Court are the parties' motions for summary judgment and St. Paul's motions to strike two of HOC's affidavits and an expert report.

III. Cross Motions for Summary JudgmentA. Legal Standard

The role of summary judgment is “to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.” Mesnick v. Gen. Elec. Co., 950 F.2d 816, 822 (1st Cir.1991) (quoting Garside v. Osco Drug, Inc., 895 F.2d 46, 50 (1st Cir.1990)). The burden is upon the moving party to show, based upon the pleadings, discovery and affidavits, “that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c).

A fact is material if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “Factual disputes that are irrelevant or unnecessary will not be counted.” Id. A genuine issue of material fact exists where the evidence with respect to the material fact in dispute “is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

Once the moving party has satisfied its burden, the burden shifts to the non-moving party to set forth specific facts showing that there is a genuine, triable issue. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Court must view the entire record in the light most hospitable to the non-moving party and indulge all reasonable inferences in that party's favor. O'Connor v. Steeves, 994 F.2d 905, 907 (1st Cir.1993). Summary judgment is appropriate if, after viewing the record in the non-moving party's favor, the Court determines that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law.

B. The Parties' Positions

HOC moves for a declaration that St. Paul is obligated to defend HOC in litigation brought by the DEP and other third parties and has breached that duty by refusing to pay its reasonable defense-related costs. St. Paul moves for a declaration that it has no duty to defend or indemnify HOC because 1) HOC has not provided evidence of property damage taking place during the alleged policy period (January 1, 1970 through January 1, 1981) and 2) coverage under the January 1, 1973 through January 1, 1981 insurance policies is barred by the pollution exclusions in those policies.¹ The pollution exclusions provide that the insurance polices do not provide coverage for:

property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourses or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.(emphasis added).² The parties dispute whether the release of PCE in this case was “sudden and accidental” and, therefore, covered by the insurance policies.C. Duty to Defend

1. Duty to Defend Standard

In general, if the allegations against an insured are “reasonably susceptible of an interpretation that they state or adumbrate a claim covered by the policy terms,” the insurer must proffer a defense. E.g., Essex Ins. Co. v. BloomSouth Flooring Corp., 562 F.3d 399, 403 (1st Cir.2009) (citations omitted). Further, if such allegations (i.e., those reasonably susceptible to an interpretation that they state a claim) exist on the face of the underlying claims, then to escape the duty to defend, an insurer must demonstrate “with conclusive effect” that the third-party cannot establish a claim within the policy. In re Acushnet River & New Bedford Harbor, 725 F.Supp. 1264, 1266 (D.Mass.1989).

2. St. Paul's Duty to Defend

With respect to St. Paul's duty to defend, the Court concludes, for the reasons set forth in its April, 2010 M & O,...