CA1: a fun insurance coverage case ending in certification

Boston Gas Company v. Century Indemnity, No. 07-1452.  Certification order.  This is a really fun insurance coverage case.  I don’t really have time to go into details, but take a look.

Before getting to the fun insurance stuff, let’s talk about an exclusion of an expert report.  It seems like an expert changed his position about an issue right before trial  The District Court struck the report.  But, the First said that although this wasn’t an abuse of discretion, the issue will come up if there is a new trial.

Secondly, let’s talk about declaratory judgments.  After a jury verdict, the District Court granted a declaratory judgment for prospective damages pursuant to an insurance policy.  The First seems to say that these things are unwieldy, but doesn’t go so far as to condemn them, saying that the District Court can resolve any future disputes that arise, and “The district court will be able to determine the scope of litigation when a dispute arises, using doctrines like collateral estoppel, waiver, and the like to prevent relitigation of matters that have been, or could have been, decided.”

Third, prejudgment interest.  In Massachusetts its runs from the date of breach and a demand.  However, the facts (in the form of invoices) don’t indicate a demand as early as Boston Gas claims it was.

Fourth, missing policies.  One was over 50 years old.  The First says that this isn’t fatal, so long as the jury can figure out what they said.

Anyway, now to the fun insurance stuff.  Oh wait.  I put it below the fold.

Boston gas is suing its insurer over whether the insurer has to pay for a bunch of natural-gas-related environmental damages to its neighbors, which is was strictly liable for under state law.  The policies cover personal injury and [other peoples’] property (OPP) damage.  They had a $100,000/occurrence “self-insured retention.” “Boston Gas argued ... it needed to prove only that an occurrence had caused some off-site property damage during the policy periods--off-site because the policy had an "owned property" exclusion for damage to Boston Gas' own property. Off-site damage, in Boston Gas' view, required Century to indemnify Boston Gas for all its liabilities connected to the occurrence. Century responded that various exclusions contained in the policies precluded or limited indemnification.”  Century further argued that the damage was expected since there was evidence that it had been happening for some time, and Boston gas was just looking for cash to fix its own property.  (There was a jury instruction argument made on appeal, but the First says that was forfeit.)

As well, Century also takes the position that it isn’t the only insurer that should be on the hook: all insurers of the facility (during its lifetime) should be liable, and there should be some sort of pro rata allocation.  Secondly, Century argues that there should have been apportionment between off-site and on-site damage, and that the jury verdict form wasn’t specific enough.  The First seems to indicate that such apportionment is really very fact-specific (especially when some dirt is being removed from the site, which may or may not be necessary to things off the site). 

Again, a fairly common dispute, but the First says it isn’t really resolved in Massachusetts, so it certifies the issues.

After explaining when thing should be certified, the First certifies three insurance issues to Massachusetts SJC:

1. Where an insured protected by standard CGL policy language incurs covered costs as a result of ongoing environmental contamination occurring over more than one year and the insurer provided coverage for less than the full period of years in which contamination occurred, should the direct liability of the sued insurer be pro rated in some manner among all insurers "on the risk," limiting the direct liability of the sued insurer to its share but leaving the insured free to seek the balance from other such insurers?
2. If some form of pro rata liability is called for in such circumstances, what allocation method or formula should be used?
3. If a single insurer in such circumstances is subject to liability under more than one policy and each policy has a separate deductible or self-insured retention, should the insured be able to collect covered losses from a single policy subject only to that policy's deductible or self-insured retention, or should liability be reduced by the sum of the applicable self-insured retentions, effectively allocating total liability across the policies of that insurer in effect during the contamination period?