Peterborough v. Hartford Fire Ins. CV-92-50-SD 04/07/97 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Town of Peterborough

v. Civil No. 92-50-SD

The Hartford Fire Insurance Company, its affiliates; ITT Hartford Insurance Group

O R D E R

In this declaratory judgment action, the Town of

Peterborough seeks coverage under a comprehensive general

liability (CGL) insurance policy for the various costs relating

to the investigation and cleanup of groundwater and surface water

contamination caused by hazardous wastes located at the former

town dump.

Before the court is a motion for summary judgment filed by

Hartford Fire Insurance Company, its affiliates, and ITT Hartford

Insurance Group (collectively, Hartford) , to which plaintiff

objects.1 Hartford argues that plaintiff is not entitled to

indemnification under the CGL policy because (1) the town did not

sustain "damages" within the meaning of the CGL policy and (2)

the damages the town did sustain did not result from an

1The court has also reviewed Hartford's reply memorandum. "occurrence" as defined by the policy. For the reasons that

follow, the court finds and rules that genuine issues of material

fact exist on both questions; therefore, Hartford's motion is

denied.

Background

In 1986 the owners of a large parcel of land ("the northern

parcel") located in Peterborough, New Hampshire, made the unhappy

discovery that their land, surface water, and groundwater were

heavily contaminated with hazardous volatile organic compounds

(VOCs) and dense non-aqueous phase liquids (DNPLs). The source

of the contamination turned out to be the south-side adjacent

parcel of land that had been used as the town burning dump from

1948 to 1970 ("the dump site"). During that period, various

wastes, including liquid industrial solvents, were disposed of at

the site until 1970, when the dump was closed down and capped

with permeable soil.

Soon after the discovery of the contamination at the

northern parcel in the mid-1980s, the owner of the dump site.

Eastern Mountain Sports (EMS),2 contacted ENSR Consulting and

Engineering Company to investigate the contamination on both

2EMS acquired a portion of the site in 1980 from a previous owner.

2 properties and evaluate remedial alternatives. With approval

from the New Hampshire Department of Environmental Services

(NHDES), ENSR then launched into a detailed study of both the

dump site and the northern parcel with the purpose of determining

"the most appropriate remedial action for design and

implementation." ENSR Report, October 1991, at 1-1.

ENSR submitted a final report to NHDES in October of 1991.

In its report, ENSR considered several options, including

installing pump wells to capture groundwater within the till

deposits, but ruled out such options for various technical

reasons. Recognizing the limitations of other means of

remediation, ENSR made a multi-part proposal. First, it

suggested recapping the landfill with a multi-level coverage

system in order to reduce infiltration of precipitation into the

landfill and to reduce the leaching and migration of contaminants

from the landfill materials. ENSR Report at 1-11. It also

proposed that the northern parcel be purchased so that "control

over access and development would be maintained" and that a

groundwater management zone (GMZ) be established. Id. Finally,

ENSR recommended that a long-term groundwater and surface water

monitoring program be established at both sites. In making this

recommendation, ENSR noted that contaminant migration appeared to

be "generally contained" within the site boundaries, but that the

3 proposed monitoring program was necessary to assess changes in

conditions over time. Id. at 1-12. NHDES approved ENSR's

proposals, with some modifications.

For reasons that will be developed infra, the core of the

current dispute between the parties is whether the multi-level

cap proposed by ENSR would function primarily as a "remedial"

measure, to help clean up the contamination, or whether it

instead would function as a "preventive" measure, designed to

contain the contamination and prevent its spread.

In 1991 Peterborough hired Aries Engineering, Inc., to

assist in developing a site closure plan for the site that would

be consistent with ENSR's recommendations and the NHDES's letter

approving ENSR's final report. In addition, the site closure

plan was to be consistent with the complex regulations

promulgated by NHDES relative to landfill closures. Aries

conducted a limited groundwater assessment to determine the

appropriate boundaries of the GMZ and conducted a hydrogeologic

study of the site to determine the direction and limits of the

contamination plume. In 1993 Peterborough purchased the northern

parcel adjacent to the site, in part because the owners of the

property had threatened to sue Peterborough for the contamination

of their property. Another reason behind the purchase was to

give Peterborough the ability to control the entire area

4 comprising the GMZ.

Meanwhile, the lawsuit that triggered the instant action had

begun. In 1990 EMS sued New Hampshire Ball Bearings (NHBB) in

this Court (Loughlin, J.), seeking to recover environmental

response costs related to the site and other relief. NHBB was

alleged to be responsible for depositing a vast amount of

hazardous chemicals at the site. In November 1994 Peterborough,

NHBB, and EMS entered into a Consent Agreement, which was

approved by Judge Loughlin. Under the Agreement, Peterborough

agreed to pay a 39 percent share of the costs relating to the

response action at the site and related investigation costs.

Peterborough also agreed to perform future activities that

included groundwater and surface water monitoring, cap

maintenance, and site inspections. At the time, the total

response costs were estimated to be $2,500,000, with

Peterborough's responsibility totaling $975,000.

In the present action, filed in 1992, Peterborough seeks

coverage under several CGL policies issued by Hartford for

Peterborough's share of the responsibility for the response

action. In a previous order, this court entered judgment in

Hartford's favor with respect to all of the policies except

Policies Nos. 08SMP 905678 and 08 SMP 100151. See Order of June

9, 1993, (Devine, J.). Both of these remaining policies provide

5 standard CGL coverage for property damage caused by an

occurrence.

Since the initiation of this lawsuit, certain other

developments have occurred. In January of 1995, Aries submitted

a Landfill Closure Design to NHDES on behalf of Peterborough; the

Design was subseguently approved, with some modifications, in May

of 1996. Under the Design, the proposed remedy for the site

consists of covering the landfill with a synthetic cap, along

with several other layers of material. In addition, the Design

reguires the town to take certain other measures to close the

site, including erosion and sedimentation control measures,

preliminary site development, stormwater management, and post­

closure monitoring.

Discussion

1. Summary Judgment Standard

Summary judgment is appropriate when there is no genuine

issue of material fact and the moving party is entitled to a

judgment as a matter of law. Rule 56(c), Fed. R. Civ. P.; Lehman

v. Prudential Ins. Co. of Am.,

, 327 (1st Cir. 1996) .

Since the purpose of summary judgment is issue finding, not issue

determination, the court's function at this stage "'is not [] to

weigh the evidence and determine the truth of the matter but to

6 determine whether there is a genuine issue for trial.'" Stone &

Michaud Ins., Inc. v. Bank Five for Savings,

(D.N.H. 1992) (quoting Anderson v. Liberty Lobby, Inc.,

(1986)).

When the non-moving party bears the burden of persuasion at

trial, to avoid summary judgment he must make a "showing

sufficient to establish the existence of [the] element[s]

essential to [his] case." Celotex Corp. v. Catrett,,

(1986). It is not sufficient to "'rest upon mere

allegation[s] or denials of his pleading.'" LeBlanc v. Great Am.

Ins. C o .,

(1st Cir. 1993) (quoting

), cert, denied, ___ U.S. ___, 114 S. C t .

1398 (1994). Rather, to establish a trial-worthy issue, there

must be enough competent evidence "to enable a finding favorable

to the non-moving party." Id. at 842 (citations omitted).

In determining whether summary judgment is appropriate, the

court construes the evidence and draws all justifiable inferences

in the non-moving party's favor.

. Nevertheless, "[e]ven in cases where elusive concepts such

as motive or intent are at issue, summary judgment may be

appropriate if the non-moving party rests merely upon conclusory

allegations, improbable inferences, and unsupported speculation."

Medina-Munoz v. R.J. Reynolds Tobacco Co.,

(1st

7 Cir. 1990) (citations omitted).

2. The Merits

Plaintiff Peterborough seeks coverage under the CGL policies

for costs resulting from the contamination at the former dump

site, including the costs of constructing the landfill cap, all

related systems, and all related investigation costs. The CGL

policies provide coverage to the town with respect to "all sums

which [it] shall become legally obligated to pay as damages

because of bodily injury or property damage . . . caused by an

occurrence." See Policies Nos. 08 SMP 905678 and 08 SMP 100151

(attached to defendant's motion for summary judgment). The

parties' first dispute focuses on whether the interpretation of

"damages" could extend to the various response actions taken, or

planned to be taken, by Peterborough.

Both sides rely on Coaklev v. Maine Bonding & Cas. Co.,

,

(1992), which held that

remedial response costs imposed by the Environmental Protection

Agency (EPA) and by NHDES, including the costs of complying with

a cleanup injunction and reimbursing EPA for related

investigatory costs, are "damages" within the meaning of CGL

policies. In contrast, the court held that predominantly

preventive measures and related investigatory costs would not

gualify as "damages."

,

. In drawing this distinction, the court observed that "the cost of

cleaning up the contamination, including related investigatory

costs, is directly related 'to the amount of damages which might

result' to the groundwater if the groundwater is not cleaned up."

,

(guoting Desrochers v. Casualty Co.,

,

(1954)) (emphasis added).

The court further reasoned that when damage has already been done

to a particular area, the costs of cleaning it up would likely be

the same as the amount of "damages."

However, the costs of

preventive measures would not correlate as closely to the amount

of "damages" incurred. Therefore, "containment costs, including

related investigatory costs, do not fit the definition because

they are not compensation or satisfaction imposed by law for a

wrong or injury caused by a violation of a legal right." Id. at

416,

(guotation omitted).

In Coaklev, the court was faced with the issue of whether

environmental response costs imposed by or likely to be imposed

by EPA and NHDES pursuant to the Comprehensive Environmental

Response, Compensation, and Liability Act,

, et

seg. (CERCLA) and comparable state statutes would gualify as

"damages" under CGL policies. There, a landfill containing

hazardous waste had to be closed when NHDES discovered that

groundwater and wells in neighboring areas were contaminated. Applying the remedial/preventive distinction outlined above,

the court held that the cost of cleaning up the contaminated

groundwater was remedial rather than preventive, as was

reimbursement of EPA's investigatory costs related to the

cleanup.

,

. The court also found

that it appeared that a containment cap proposed for the landfill

was a "predominantly preventive measure," as were the related

investigatory costs.

Although the court left the ultimate

decision of what constitutes "damages" to the superior court to

be resolved in the first instance,

,

-

88, it did note that the hazardous waste sought to be contained

in the landfill had not yet injured the groundwater, and

therefore the containment plan was essentially "preventive,"

,

.

Following Coaklev, this court's task is to apply the

remedial/preventive distinction to the facts in the case at bar.

The response costs for the former town dump site recommended in

the Landfill Closure Design and associated investigatory costs

can be divided into four categories: (1) the costs of

constructing a new landfill cap and related costs and the costs

related to establishing a groundwater management zone (GMZ); (2)

the costs associated with the post-closure monitoring plan; and

(3) the amount paid by Peterborough to purchase the northern

10 parcel.

Seizing on the apparent similarities between the facts of

this case and those of Coaklev, Hartford argues that the costs

related to the construction of a new landfill cap are essentially

preventive in nature and therefore not covered as "damages" under

the CGL policies. The basic fact that the cap is intended to

keep in or contain contaminants in the landfill is very strong

evidence that it serves a predominantly preventive function.

However, Peterborough has submitted evidence sufficient to create

a genuine issue of material fact as to whether, in this case,

aside from its preventive function, the cap aided in the cleanup

of the groundwater and surface water already contaminated by the

migration of substances from the dump.

The record reveals that ENSR, the environmental consulting

firm hired to investigate and propose a response plan, considered

several options for cleaning up the contaminated groundwater and

surface water at the dump site and the adjacent northern

property. For various technical reasons, ENSR determined that

more active cleanup mechanisms such as pumping and treating the

water or installing a trench to extract shallow groundwater for

treatment were not feasible or practical. See Affidavit of Peter

J. McGlew at 55 33-35 (attached to Peterborough's objection).

For example, one factor cited by ENSR was worker safety. ENSR

11 Report at 3-16. Instead, ENSR proposed and NHDES approved a

multi-layer low permeability cap at the site in order to

eliminate existing leachate seeps and to clean up the surface

water contamination. See McGlew Affidavit at 5 25.3 It appears

that the "prevention" of such seepage also would have the

remedial effect of aiding the process of natural attenuation of

the groundwater and surface water. Natural attenuation refers to

processes such as biodegradation, dispersion, and dilution. Once

the dissolved DNPLs reach the Contoocook River near the site, the

DNPLs are further degraded by such natural processes as aeration,

volatilization, and photolysis.

at 5 39. Furthermore,

Aries, ENSR and NHDES agreed that a more passive remedial action such as capping the landfill and establishing a GMZ for the attenuation of DNAPL constituents was appropriate here, especially in light of the potential adverse impacts to the environment and the infeasibility of implementing a Site ground water pump and treat remediation plan.

at 5 41. Apparently, the cap would create conditions that

would facilitate the natural degradation of the contamination.

It follows that the landfill cap may have had both

preventive and remedial functions. See, e.g., M. Mooney Corp. v.

USF&G,

,

(1992)

31he cap would function, in part, by preventing the infiltration of precipitation into the landfill, thereby reducing the leaching of the contaminants from the soil. ENSR Report at 1- 1 1 .

12 (recognizing that implementing remedial measures may, at times,

incidentally prevent future harm). While capping the landfill

would serve to prevent the spread of contamination, it also

appears that the cap may have had the primary purpose of aiding

in the cleanup of the contaminated groundwater and surface water

at the site and at the adjoining northern property. Thus, the

trier of fact should decide whether the cap, including all of the

costs associated with its construction, is covered by CGL

policies.4

The court's decision to leave the "preventive vs. remedial"

determination to the jury in this instance is also supported by

policy concerns. The record reveals that ENSR recommended the

cap to aid in the cleanup of a nearby groundwater and surface

water after carefully investigating several other remedial

options. It ruled out these alternatives primarily because of

considerations of feasibility, practicality, cost effectiveness,

and worker safety. If a court were to decide that landfill caps

were always "preventive" and therefore not covered by the

standard CGL policy as a matter of law, Peterborough would be

4Ihe court's decision applies as well to the "related closure systems" at the dump site, mentioned by Hartford in its motion at page 9. These measures include the stormwater management system designed to remove surface water over the cap, and erosion and sedimentation control measures used in preparation for the installation of the cap.

13 discouraged from choosing the most feasible, practical, and safe

means of cleanup.

Hartford also argues that the groundwater management zone

and the post-closure monitoring plan are essentially preventive

in nature and therefore not covered by the CGL policies. ENSR

recommended the GMZ in order to "regulate the use of contaminated

groundwater following initial remediation actions such as source

control." ENSR Report at 3-17. Under the plan, the groundwater

and surface water within the GMZ would be monitored for the

presence of VOCs.

Having reviewed the evidence, the court

finds that a genuine issue of fact exists as to whether the GMZ

and the post-closure monitoring plans have the remedial function

of aiding in the cleanup of the groundwater and surface water,

rather than of simply ensuring that further contamination of

these areas would be prevented.

Similarly, a genuine issue of material fact exists as to

whether the purchase of the northern parcel was related to the

cleanup of the contaminated groundwater and surface water.

Peterborough purchased the northern parcel for $140,000, in part

because the owners threatened to bring suit against the town for

the total diminution in value of their property caused by the

contamination. ENSR also recommended the purchase of the

northern parcel in order to permit the extension of the GMZ. See

14

After careful review of the record, the court finds and

rules that a genuine issue of fact exists concerning whether such

costs constituted "damages" to property under the CGL policy.

Accordingly, for the above-stated reasons, the court denies

defendants' motion for summary judgment on the issue of whether

certain costs and related investigatory costs constituted

"damages" under the CGL policy.

Hartford next argues that the costs of closing the landfill

are not covered under the policies because they are not caused by

an "occurrence." Hartford argues that Peterborough seeks costs

incurred pursuant to the standard closure of a municipal

landfill, implemented pursuant to New Hampshire law reguiring the

closure of all landfills. Hartford notes that the Landfill

Closure design states that its purpose is to close the landfill

consistent with the applicable NHDES rules pertaining to the

closure of landfills, "specifically, DES WMD Solid Waste Rules

Env-Wm 312 'Universal Closure Standards', Env-Wm 2507 'Landfill

Closure and Post Closure Standards' adopted July 1, 1991, and the

May 1990 DES 'Guidance Document For The Closure Of Solid Waste

Landfills In New Hampshire.'" Defendants' Motion at 20.

According to defendant, the costs potentially incurred by

Peterborough are costs that would have been incurred even if the

site did not contain hazardous substances.

15 Although defendants' argument is not without merit, the

court finds and rules that a material issue of fact exists.5

Again, it appears that the landfill cap may have served dual

purposes. This type of cap may have been reguired by the

relevant administrative rules. But the record reveals that the

cap may also have been established to aid in the cleanup of

contamination which resulted from the dumping of hazardous waste

at the dump site. The court further notes that defendants have

not argued that from Peterborough's perspective the dumping

itself was not an "occurrence." Instead, Hartford concedes that

"there are genuine issues of material fact as to whether an

'occurrence' has taken place at the Site and whether the Town

'expected' or 'intended' property damage at the Site."

Defendants' Motion at 21. Accordingly, the court finds and rules

that the issue is best decided by the trier of fact.

Conclusion

For the above-stated reasons, the court denies defendants'

motion for summary judgment (document 85) in its entirety and

5Plaintiff argues that the closure is governed by another set of regulations. As it is unnecessary to decide this dispute in order to rule on defendants' motion for summary judgment, the court declines to give an opinion on the subject.

16 grants defendants' motion to file a reply document (document 88).

SO ORDERED.

Shane Devine, Senior Judge United States District Court

April 7, 1997

cc: David W. Hess, Esg. Kevin M. Fitzgerald, Esg. Elizabeth M. Rice, Esg.

17