UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 94-1276
CPC INTERNATIONAL, INC.,
Plaintiff - Appellant,
v.
NORTHBROOK EXCESS & SURPLUS
INSURANCE COMPANY,
Defendant - Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ronald R. Lagueux, U.S. District Judge]
Before
Torruella, Chief Judge,
Bownes, Senior Circuit Judge,
and Cyr, Circuit Judge.
Jerome P. Facher, with whom Michelle D. Miller, Nicholas
Carter, Hale and Dorr, David L. Harris, Geoffrey A. Price and
Lowenstein, Sandler, Kohl, Fisher & Boylan were on brief for
appellant.
Philip J. McGuire, with whom Douglas G. Shreffler, Gleason,
McGuire & Shreffler, Kenneth P. Borden, Higgins, Cavanaugh &
Cooney, Stephen W. Miller, James B. Burns and Clark, Ladner,
Fortenbaugh & Young were on brief for appellee.
January 25, 1995
TORRUELLA, Chief Judge. Plaintiff-appellant, CPC
TORRUELLA, Chief Judge.
International, Inc. ("CPC"), filed this action seeking a
declaration that defendant-appellee, Northbrook Excess & Surplus
Insurance Company ("Northbrook"), is obligated to indemnify it
for environmental cleanup costs related to land and water
contamination allegedly caused by Peterson/Puritan, Inc.
("Peterson/Puritan"), a former subsidiary of CPC. At the close
of CPC's evidence in the jury trial of the case, the district
court granted Northbrook's motion, pursuant to Fed. R. Civ. P.
50(a), for judgment as a matter of law. CPC appeals 1) the
district court's pretrial choice-of-law decision predicting that
a New Jersey court would apply the substantive law of Rhode
Island and 2) the district court's grant of judgment as a matter
of law. For the reasons stated herein, we affirm the district
court's choice-of-law decision and certify a question to the
Rhode Island Supreme Court.
I.
I.
BACKGROUND
BACKGROUND
A. Factual Background
A. Factual Background
The ultimate issue in this case is whether Northbrook
is obligated to indemnify CPC for environmental cleanup costs
related to land and water contamination caused by
Peterson/Puritan, an aerosol packaging plant formerly owned by
CPC. CPC is a multinational packaging and manufacturing
corporation headquartered in New Jersey. From July 1, 1979 to
July 1, 1980, Northbrook served as CPC's first layer excess
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insurance carrier, with a $25 million umbrella liability policy.
In 1968, CPC acquired the Puritan Aerosol Company and
renamed it Peterson/Puritan. Peterson/Puritan manufactures,
among other things, flea spray, hair spray, spot remover and oven
cleaner. Its manufacturing facility is located in the town of
Cumberland, Rhode Island, on a seventeen-acre site ("the
Peterson-Puritan site") fronted on its western side by the
Blackstone River. In 1979, both Cumberland and the neighboring
town of Lincoln discovered chemical contamination in their
municipal water supplies, the Quinnville Wellfields. The wells
were closed later that year.
In 1980, the United States Environmental Protection
Agency ("EPA") hired the environmental engineering firm Goldberg-
Zoino and Associates to conduct a hydrogeological study of the
aquifer underlying the Blackstone River (the "GZA Report"). In
1982, based on the results of the GZA Report, the Town of Lincoln
sued Peterson/Puritan for contamination of the Quinnville Wells.
That suit was settled in 1984 for $780,000. The settlement was
paid by Northwestern National Insurance Company ("Northwestern
National"), CPC's primary insurance carrier, under a policy with
a coverage limit of $1 million.
In 1983, EPA placed an area including the
Peterson/Puritan site and the aquifer east of the Blackstone
River (designated by the EPA as "OU-1") on its National
Priorities List. In 1987, following several years of
negotiations, EPA issued an Administrative Order by Consent,
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pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601 et
seq., which identified Peterson/Puritan as the party responsible
for numerous hazardous chemicals migrating into the groundwater,
and ordered Peterson/Puritan to investigate additional
responsible parties and further analyze site conditions. Later
that year, Northwestern National informed CPC and Northbrook that
the primary insurance policy was exhausted, thus bringing
Northbrook into the fold.1
In July of 1987, CPC filed suit against Northbrook in
New Jersey state court seeking a declaration that Northbrook is
obligated to indemnify it for environmental cleanup costs and
damages arising from the Town of Lincoln settlement and the EPA-
ordered cleanup. On the basis of diversity jurisdiction,
Northbrook removed the case to the United States District Court
for the District of New Jersey. In 1989, the New Jersey district
court granted Northbrook's motion to transfer venue to the United
States District Court for the District of Rhode Island.
After the transfer, CPC filed a motion for a
declaration that the substantive law of New Jersey governs this
litigation. In an Opinion dated June 21, 1990, the Rhode Island
district court concluded, first, that in ruling upon the choice-
1 In May of 1987, CPC agreed to sell Peterson/Puritan to Hi-Port
Industries, Inc., a Texas corporation. As part of that
agreement, Peterson/Puritan assigned to CPC its rights to claims
under any insurance policy for expenses already paid by CPC in
connection with the environmental contamination claims against
Peterson/Puritan.
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of-law issue it must apply the law of the state which would have
been applied had the change of venue not occurred and, second,
that a New Jersey court would apply New Jersey law to this case
because, as the home base of the insured, CPC, it has the most
significant interest in the outcome of the case. CPC Int'l, Inc.
v. Northbrook Excess & Surplus Ins. Co., 739 F. Supp. 710, 713-15
(D.R.I. 1990).
The parties filed cross-motions for summary judgment
and, on March 15, 1991, the district court denied CPC's motion
for summary judgment and allowed Northbrook's cross-motion on the
ground that the pollution exclusion clause in Northbrook's policy
precluded coverage for gradual pollution. The district court
concluded that CPC failed to sustain its burden of establishing a
genuine issue of fact with respect to whether the contamination
of the aquifer was "sudden and accidental," within the meaning of
New Jersey law, and therefore held that the pollution exclusion
applied. CPC Int'l, Inc. v. Northbrook Excess & Surplus Ins.
Co., 759 F. Supp. 966, 976 (D.R.I. 1991).
CPC appealed and, on March 24, 1992, we reversed the
district court's grant of summary judgment for Northbrook and
remanded the case to the district court. We concluded that, in
predicting how the New Jersey Supreme Court would interpret the
"sudden and accidental" provision, the district court gave
insufficient weight to decisions of the New Jersey Superior
Court's Appellate Division (New Jersey's intermediate appellate
court), which had concluded that the "sudden and accidental"
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provision is ambiguous and had interpreted it favorably to
insureds as providing coverage for gradual pollution. See CPC
Int'l, Inc. v. Northbrook Excess and Surplus Ins. Co., 962 F.2d
77, 97-98, reh'g denied, 962 F.2d 98 (1st Cir. 1992).2
After the case was remanded, Northbrook moved for
reconsideration of the district court's 1990 choice-of-law
decision. In a Memorandum and Order dated December 16, 1993 (the
"Second Choice-of-Law Decision"), the district court granted
Northbrook's motion, holding that the substantive law of Rhode
Island would henceforth govern the case. We denied CPC's
petition for mandamus.
The case went to trial on January 28, 1994. Over
eleven days, CPC offered testimony from several witnesses,
including three experts, and employees of the former
Peterson/Puritan facility. At the close of CPC's evidence,
Northbrook moved for judgment as a matter of law under Fed. R.
Civ. P. 50(a). On February 16, 1994, the district court
delivered a detailed oral opinion concluding that CPC had failed
to present evidence from which a reasonable jury could conclude
that there was an "occurrence" -- an event resulting in property
damage -- during the policy period. The district court therefore
granted Northbrook's motion for judgment as a matter of law.
2 Because the New Jersey Supreme Court had never interpreted the
"sudden and accidental" provision, and New Jersey does not have a
procedure for certification of questions, the district court
based its decision on its interpretation of decisions from New
Jersey's trial and appellate courts, and general principles of
contract interpretation gleaned from a review of New Jersey
Supreme Court cases. See generally CPC Int'l, 759 F. Supp. 966.
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This appeal followed.
II.
II.
STANDARD OF REVIEW
STANDARD OF REVIEW
We review the district court's choice-of-law decision
de novo. See Crellin Technologies, Inc. v. Equipmentlease Corp.,
18 F.3d 1, 4 (1st Cir. 1994). With respect to the district
court's grant of judgment as a matter of law, we note, at the
outset, that judgment as a matter of law is proper at the close
of the plaintiffs' case only when, after scrutinizing plaintiffs'
evidence and the inferences reasonably to be drawn therefrom in
the light most favorable to the plaintiffs, the trial court
concludes that no reasonable jury could find in plaintiffs' favor
on any permissible claim or theory. Rol n-Alvarado v.
Municipality of San Juan, 1 F.3d 74, 76 (1st Cir. 1993).
Judgment as a matter of law may be entered only if the evidence,
viewed from this perspective, is such that reasonable minds could
not differ as to the outcome. Id.
We review the Rule 50(a) motion decision de novo, see
Salve Regina Coll. v. Russell, 499 U.S. 225, 231-32, 111 S. Ct.
1217, 113 L.Ed.2d 190 (1990); Jordan-Milton Mach., Inc. v. F/V
Teresa Marie, II, 978 F.2d 32, 34 (1st Cir. 1992), under the same
standards governing the district court, Rol n-Alvarado, 1 F.3d at
76, with a view to the legal sufficiency of the evidence
presented by the plaintiffs.
III.
III.
DISCUSSION
DISCUSSION
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CPC contends that the district court erred, first, in
determining that Rhode Island law would govern the case, after
previously determining that New Jersey law would govern, and,
second, in concluding that CPC had failed to present evidence
from which a reasonable jury could find in its favor.3
A. Choice of Law
A. Choice of Law
CPC asserts that the district court erred in changing
its original choice-of-law determination. CPC makes two related
arguments in support of this assertion. First, CPC contends that
the district court violated the "law of the case" doctrine in
changing its original choice-of-law ruling. Second, CPC
maintains that the district court's second choice-of-law ruling
was erroneous -- i.e., that a New Jersey court would not apply
the substantive law of Rhode Island to this case.
In its original choice-of-law decision, the district
court ruled that a New Jersey court would apply the substantive
law of New Jersey to the facts of this case. The court concluded
that, under New Jersey's choice-of-law rules, New Jersey, as the
location of the insured, has the strongest interest in the
outcome of the case. The court rejected Northbrook's contention
that the substantive law of Rhode Island, the site of the
contamination, or, in the alternative, the law of Illinois, the
state in which the insurer accepted the risk, should apply.
3 CPC also maintains that the district court erred in deciding
the case on "general principles of law," rather than the law of
New Jersey or Rhode Island. We address this contention with our
discussion of the merits of the case.
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Northbrook sought, unsuccessfully, to have the choice-of-law
question certified to this court. The district court then
granted Northbrook's motion for summary judgment under New Jersey
law.
In reversing the district court's summary judgment
ruling, we noted that the district court's June 21, 1990 choice-
of-law decision that New Jersey law governs was not questioned on
appeal and that, therefore, it "is law of the case." CPC Int'l,
962 F.2d at 91. We rejected Northbrook's petition for rehearing
on the choice-of-law issue, concluding that Northbrook did not
preserve the issue on appeal. After the case was remanded,
Northbrook filed a motion requesting that the district court
reconsider its previous choice-of-law ruling.
In its Second Choice-of-Law Decision, the district
court made two related rulings. First, the district court
decided that the New Jersey Supreme Court's recent decision in
Gilbert Spruance Co. v. Pennsylvania Manufacturers' Ass'n
Insurance Co., 629 A.2d 885 (N.J. 1993), represents "a clear and
contrary change in the law applicable to the case" and,
therefore, that "the law of the case presumption is overcome."
Second, the court held that a New Jersey court, applying the
newly articulated principles of Gilbert Spruance, would apply the
substantive law of Rhode Island to the facts of this case and,
therefore, that Rhode Island law, rather than New Jersey law,
would govern this litigation.
As noted previously, under normal circumstances we
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review de novo a district court's choice of the substantive law
to apply in a particular case. In this case, however, an
additional consideration guides our review of the district
court's choice-of law decision. Under the "law of the case"
doctrine, a decision by an appellate court on a particular issue,
unless vacated or set aside, governs the issue during all
subsequent stages of the litigation. United States v. Rivera-
Mart nez, 931 F.2d 148, 151 (1st Cir.), cert. denied, U.S.
, 112 S. Ct. 184, 116 L.Ed.2d 145 (1991). The law of the case
doctrine bars litigants from rearguing issues previously decided
on appeal. See, e.g., United States v. Rosen, 929 F.2d 839, 842
n.5 (1st Cir.), cert. denied, U.S. , 112 S. Ct. 77, 116
L.Ed.2d 51 (1991); United States v. De Jes s, 752 F.2d 640, 642-
43 (1st Cir. 1985); White v. Martha, 377 F.2d 428, 431 (5th Cir.
1967). The doctrine is based on considerations of "stability in
the decisionmaking process, predictability of results, proper
working relationships between trial and appellate courts, and
judicial economy." United States v. Connell, 6 F.3d 27, 30 (1st
Cir. 1993). Under the law of the case doctrine, when a trial
court, on remand, seeks to dispose of a case in accordance with
an appellate court's mandate, it "'must implement both the letter
and the spirit of the mandate, taking into account the appellate
court's opinion and the circumstances it embraces.'" Id.
(quoting United States v. Kikumura, 947 F.2d 72, 76 (3d Cir.
1991)).
The law of the case was not intended, however, to serve
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as an absolute bar to reconsideration, nor a limitation on a
federal court's power. Rivera-Mart nez, 931 F.2d at 151. We
have, therefore, recognized that a district court may, as an
exception to the law of the case doctrine, reexamine a previous
ruling when "controlling authority has since made a contrary
decision of the law applicable to such issues. . . ." Id.4 CPC
argues that the New Jersey Supreme Court's decision in Gilbert
Spruance does not represent "a contrary decision of the law
applicable" to the district court's original choice-of-law
decision.
We agree with the district court's conclusion that
Gilbert Spruance represents a decision which is contrary to the
law as applied by the district court in its original choice-of-
law decision. We also think that, although Gilbert Spruance does
not necessarily mandate the decision reached by the district
court, it certainly provides ample support for the district
court's prediction that the New Jersey Supreme Court, if faced
with the question, would conclude that Rhode Island law should
govern this dispute.
In its original choice-of-law ruling, the district
court analyzed a host of decisions by the New Jersey Appellate
Division. The district court also reviewed what was, at the
4 Under the law of the case doctrine, issues once decided should
not be reopened "'unless the evidence on a subsequent trial was
subsequently different, controlling authority has since made a
contrary decision of the law applicable to such issues, or the
decision was clearly erroneous and would work a manifest
injustice.'" Rivera-Mart nez, 931 F.2d at 151 (quoting White v.
Martha, 377 F.2d 428, 432 (5th Cir. 1967)).
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time, the New Jersey Supreme Court's most recent decision
concerning choice-of-law in the liability-insurance context --
State Farm Mut. Auto. Ins. Co. v. Estate of Simmons, 84 N.J. 28,
417 A.2d 488 (1980) -- and predicted that a New Jersey court
would consider New Jersey, the location of the insured's
principal headquarters, the state with the strongest interest in
the outcome of the case. In eliminating the law of Rhode Island
as a possibility, the district court relied on the Appellate
Division's decision in Westinghouse Elec. Corp. v. Liberty Mut.
Ins. Co., 233 N.J.Super. 463, 559 A.2d 435 (App.Div. 1989), which
adopted the "uniform-contract-interpretation" approach to choice-
of-law determinations. Under that approach, policy
interpretation should be uniform nationwide and not vary
according to the location of the risk.
At the time of the district court's first choice-of-law
opinion, State Farm was the controlling decision of the New
Jersey Supreme Court with respect to choice-of-law issues in the
liability-insurance context. State Farm held that, because the
law of the place of contract "generally comport[s] with the
reasonable expectations of the parties concerning the principal
situs of the insured risk," that state's law should be applied
"unless the dominant and significant relationship of another
state to the parties and the underlying issue dictates that this
basic rule should yield." State Farm, 84 N.J. at 37. State Farm
directs courts, in making that determination, to rely on the
factors and contacts set forth in sections 6 and 188 of
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Restatement (Second) of Conflicts of Laws (1971). Id. at 34-
35.5 Thus, State Farm creates a rebuttable presumption that the
law of the state where the contract was entered into will govern
the dispute. See J. Josephson, Inc. v. Crum & Forster Ins. Co.,
265 N.J.Super. 230, 239, 626 A.2d 81, 86 (App.Div. 1993).
Gilbert Spruance changes the presumption by rejecting
the "uniform-contract-interpretation approach" and adopting the
"site-specific" approach to choice-of-law determinations in the
casualty-insurance context. See Gilbert Spruance, 134 N.J. at
111-14. The New Jersey Supreme Court now directs courts to look,
first, to section 193 of Restatement (Second) of Conflicts of
Laws, which sets forth the site-specific rule by creating a
presumption that a casualty-insurance policy be interpreted under
the substantive law of the state that "the parties understood was
to be the principal location of the insured risk, unless some
other state has a more significant relationship" to the parties,
the transaction, and the outcome of the controversy under a
Restatement section 6 analysis. Gilbert Spruance, 134 N.J. at
111 (quoting Restatement (Second) of Conflicts of Laws 193).
5 Restatement (Second) of Conflict of Laws 188 provides that
the general rule in contract actions is that the law of the state
with the most significant relationship to the parties and the
transaction under the principles stated in Restatement 6
governs. Section 6 lists several factors to be considered in a
choice-of-law analysis: 1) the relevant policies of the forum; 2)
the relevant policies of other interested states; 3) the
protection of justified expectations; 4) the basic policies
underlying the particular field; 5) the needs of the interstate
and international systems; 6) certainty, predictability, and
uniformity of result; and 7) the ease in determination and
application of the law applied.
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Gilbert Spruance also provides that when the subject matter of
the insurance is a predictably multistate operation or activity,
"the significance of the principal location of the insured risk
diminishes," and "the governing law is that of the state with the
dominant significant relationship according to the principles set
forth in Restatement section 6." Id. (citations omitted).
The Gilbert Spruance decision resolved a conflict among
different panels of New Jersey's Appellate Division by
specifically rejecting the "uniform-contract-interpretation
approach" to choice-of-law determinations and adopting the "site-
specific" approach. Compare Westinghouse, 559 A.2d 435; with
Diamond Shamrock Chemicals Co. v. Aetna Cas. & Surety Co., 258
N.J.Super. 167, 609 A.2d 440 (App.Div. 1992) (interest of state
where pollution site lies is "more dominant and significant");
Johnson Matthey, Inc. v. Pennsylvania Mfrs. Ass'n Ins. Co., 250
N.J.Super 51, 593 A.2d 367 (App.Div. 1991) (interest of state
where pollution site lies is "paramount"). In its initial
choice-of-law ruling, the district court relied on the reasoning
behind the Westinghouse court's adoption of the uniform-contract-
interpretation approach in determining that the law of Rhode
Island, the location of the risk, should not govern this case.
CPC Int'l, 739 F. Supp. at 714. The Gilbert Spruance court's
rejection of the uniform-contract-interpretation is therefore a
highly significant change in the controlling authority. It
changes the equation upon which the district court relied in
making its initial choice of law decision. The district court was
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obligated to predict which state's substantive law the New Jersey
Supreme Court would apply to the facts of this case, a task made
all the more difficult because New Jersey does not have a
procedure for certifying questions. In our view, the principles
announced by the New Jersey Supreme Court represent a significant
change in the law applicable to the district court's choice-of-
law decision. We conclude, therefore, that the district court's
departure from the law of the case was justified.
We also conclude, on de novo review, that the district
court's prediction that the New Jersey Supreme Court would apply
the law of Rhode Island in this case is supported by New Jersey
case law, particularly the principles announced in Gilbert
Spruance. Under the site-specific rule adopted by Gilbert
Spruance, it is presumed that the substantive law of the state
which is the principal location of the insured risk governs,
unless another state has a more significant overall interest in
the case. Gilbert Spruance, 134 N.J. at 112. New Jersey's only
connection with the case is that CPC's headquarters are located
in New Jersey. Moreover, Gilbert Spruance explained that "[w]hen
the waste-producing facility and the waste site are located in
the same state, their common location makes the application of
[the Restatement's choice-of-law factors] straightforward." Id.
at 107. As the district court noted, in this case the waste was
both generated and disposed of in Rhode Island.
CPC argues that Gilbert Spruance explicitly left open
the question of whose law would apply in a case such as this.
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CPC cites the following language in support of this proposition.
We have no occasion to consider in
this appeal the problem presented when
waste generated in New Jersey predictably
is disposed of in another state. . . .
Specifically, we express no view on the
proposition . . . that when another state
is the foreseeable location of the waste-
site, the court must engage in a section
6 analysis to determine if that state has
the most significant relationship with
[the case].
Id. at 113-14. In our view, this language merely leaves open the
possibility that when waste is generated in New Jersey and
disposed of in another state, New Jersey law might still apply.
As noted, in this case, the waste was both generated and disposed
of in Rhode Island. Under such circumstances, there is every
reason to predict that the New Jersey Supreme Court would
recognize with equal vigilance the "urgent concern for the health
and safety of [Rhode Island's] citizens" implicated by the
generation and dumping of toxic waste in that state. See id. at
113 (quoting Johnson Matthey, 250 N.J.Super. at 57.
For the foregoing reasons, we affirm the district
court's decision that the New Jersey Supreme Court would apply
the substantive law of Rhode Island in this case. We now turn to
the merits of this appeal -- the district court's decision
granting Northbrook's motion for judgment as a matter of law.
B. The Grant of Judgment as a Matter of Law
B. The Grant of Judgment as a Matter of Law
1. The Policy Provisions
1. The Policy Provisions
Northbrook issued a comprehensive liability policy to
CPC which was in effect from July 1, 1979 through July 1, 1980.
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Pursuant to that policy, Northbrook agreed to indemnify CPC for
personal injuries, property damage and/or advertising liability
"caused by or arising out of each Occurrence happening anywhere
in the world." The policy defines "property damage" as "loss of
or direct damage to or destruction of tangible property (other
than property owned by an insured) and which results in an
Occurrence during the policy period." The policy defines
"Occurrence" as:
an accident, event or happening including
continuous or repeated exposure to
conditions which results, during the
policy period, in Personal Injury,
Property Damage or Advertising Liability
neither expected nor intended from the
standpoint of the Insured
. . . . All such Personal Injury,
Property Damage or Advertising Injury
caused by one event or repeated exposure
to substantially the same conditions
shall be deemed to result from one
Occurrence.
2. The District Court Decision
2. The District Court Decision
In ruling upon Northbrook's motion for judgment as a
matter of law, the district court made the following pertinent
findings of fact. Between 1963 and the late 1970s,
Peterson/Puritan polluted the environment in the area of its
plant in Cumberland, Rhode Island. Peterson/Puritan employees
routinely dumped chemicals, including volatile organic compounds
("VOCs"), into the drain and septic systems. In 1974, a railroad
tank container at Peterson/Puritan spilled causing approximately
6,200 gallons of the solvent perchloroethylene to spill onto and
into the soil (the "1974 PERC spill").
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The theory of the case presented by CPC at trial,
primarily through the testimony of two expert witnesses, was that
prior to the 1974 PERC spill, the VOCs dumped from
Peterson/Puritan were in the soil but, because of the presence of
silt and clay, had not reached groundwater. In other words, they
were stagnant. Dr. Tod Delaney testified that the PERC spill
mobilized these VOCs in the soil and led them into the
groundwater and, eventually, the combined force travelled a
several thousand foot path to the Quinnville Wells. Dr. Delaney
testified that, but for the 1974 PERC spill, there would have
been no pollution of the Quinnville Wells. Dr. Delaney also
testified that the leading edge of the 1974 PERC spill reached
and contaminated the Quinnville Wells in 1979, during the policy
period. Pollution of the Quinnville Wellfields was discovered in
October 1979, during the policy period.
In its detailed oral opinion granting judgment as a
matter of law for Northbrook, the district court reasoned that,
because the policy was only in effect from July 1, 1979 to July
1, 1980, the burden at trial was upon CPC to present evidence
from which a reasonable jury could infer that there was an
"occurrence" during that period.
The district court stated that CPC's theory at trial
was that because the EPA desires to reopen the Quinnville Wells,
and cleaning the aquifer is directly related to that goal, the
"occurrence" for purposes of insurance should be measured by when
the contamination of the wells occurred. The difficulty with
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this theory, as the district court explained, is that the Town of
Lincoln's claim against Peterson/Puritan to clean up the
Quinnville Wells had been settled in 1984 and Northwood had paid
the settlement under its insurance policy. The present action
concerns the EPA's claims against CPC regarding the aquifer east
of the Blackstone River -- the area designated by the EPA as OU-1
-- not the Quinnville Wells.
The district court stated that whatever the EPA's
motivations concerning reactivating the Quinnville Wells in the
future may be, "the fact of the matter is that the area being
remediated is east of the Blackstone River." The court then
concluded that the "occurrence" in this case took place before
the policy became effective.
The plaintiff seeks to recover the costs
of remediation of the aquifer east of the
Blackstone River from this defendant.
The evidence is clear in this case from
the experts presented by the plaintiff,
that the aquifer was damaged within the
meaning of the policy when it was
polluted by the PERC spill in 1974 within
days or at best, weeks of June 21, 1974
when this PERC spill took place, five
years or more before July 1, 1979 when
this policy took effect.
Because it found that the "occurrence" took place
before the policy came into effect, the district court concluded
that, as a matter of law, Northbrook was not obligated to
indemnify CPC. The district court explained that:
If there is a principle of insurance law
that means anything it is the principle
that insurance protects a policyholder
against future contingent events. It is
not for the purpose of providing
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compensation for events that have already
taken place, and that is so under the law
of New Jersey, Rhode Island, the First
Circuit, or any other jurisdiction within
the United States. So, simply on that
ground alone, the occurrence in this case
clearly took place before the policy
became effective, there can be no
recovery of the remediation costs from
this insurance carrier.
The district court also rejected CPC's case for another
reason. The court, accepting arguendo CPC's theory that
remediation of the aquifer is tied in with reopening the
Quinnville Wells, concluded that CPC had failed to sustain its
burden of showing that damage to the Quinnville Wells took place
during the policy period. Dr. Willard Murray testified that,
depending upon the undetermined porosity of the soil, the leading
edge of the PERC plume reached the Quinnville Wells between
October or November 1978, and December 1981. Reviewing that
testimony, the district court noted that it is "just as probable
that that army of VOC's led by the PERC arrived at the Quinnville
Wells in 1978 or early 1979 as it is that it arrived after July
1, 1979." The district court therefore concluded that "[n]o jury
could find that this pollution plume arrived at the Quinnville
Wells after July 1, 1979 without completely speculating."
The district court held that there is "no possibility"
that CPC could recover from Northbrook for the costs of
remediation of the OU-1 area and, therefore, granted Northbrook's
motion. In conclusion, the court stated that "[t]his case is
being decided on general principles of law and it really doesn't
matter whose law applies in this case."
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By declining to look specifically to the controlling
law in this case, the law of Rhode Island, the district court
essentially held that, under general principles of insurance law,
there is one trigger date for calculating the time when an
"occurrence" causing "property damage" takes place; or, at least
that, if there is more than one possible trigger date, CPC could
not recover under any of them. In fact, there are at least seven
trigger dates utilized by different jurisdictions for determining
the time at which an occurrence causing property damage takes
place.6 Moreover, as discussed below, CPC could possibly
recover under one or more of these theories. Thus, it is
critical to determine which trigger theory of coverage Rhode
Island would apply to this case.
As noted, there are at least seven theories used in
different jurisdictions for determining when an occurrence policy
provision is triggered. See generally In re Acushnet River & New
Bedford Harbor: Proceedings Re Alleged PCB Pollution, 725 F.
Supp. 1264, 1274-75 (D.Mass. 1989) (describing the seven
standards), aff'd in part and rev'd in part on other grounds sub
nom., Lumbermens Mut. Cas. Co. v. Belleville Indus., Inc., 938
F.2d 1423 (1st Cir. 1991), cert. denied, U.S. , 112 S. Ct.
969, 117 L.Ed.2d 134 (1992). These seven theories or standards
are as follows.
6 These different legal standards are critical because, as is
the case here, most, if not all, "occurrence" policy provisions
only allow recovery for an occurrence causing property damage
during the policy period.
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First, the wrongful act theory would hold that the
occurrence causing property damage took place when the 1974 PERC
spill occurred. Second, the exposure theory would hold that the
occurrence causing property damage took place when the VOCs
leeched into the environment. See Continental Ins. Co. v.
Northeastern Pharmaceutical and Chem. Co., 811 F.2d 1180, 1189
(8th Cir. 1987), modified on other grounds after reh'g en banc,
842 F.2d 977 (8th Cir. 1988), cert. denied, U.S. , 109 S.
Ct. 66, 102 L.Ed.2d 43 (1988). Third, the injury-in-fact theory
would hold that the occurrence causing damage to property took
place when the level of VOCs was such that the aquifer was
actually injured or contaminated. See American Home Products
Corp. v. Liberty Mut. Ins. Co., 748 F.2d 760, 765 (2d Cir.
1984).7 Fourth, the manifestation theory would hold that the
occurrence causing property damage took place when the damage
became "reasonably capable of . . . diagnosis." Eagle Pitcher
Indus., Inc. v. Liberty Mut. Ins. Co., 682 F.2d 12, 25 (1st Cir.
1982) (applying the law of Ohio and Indiana), cert. denied, 460
U.S. 1028, 103 S. Ct. 1280, 75 L.Ed.2d 500 (1983); American Home
Assurance Co. v. Libby-Owen-Ford Co., 786 F.2d 22, 30 (1st Cir.
1986) (applying Ohio law). Fifth, the first discovery theory
would hold that the occurrence causing damage to property took
place when the property owner actually discovered the pollution.
7 This appears to be the theory used by the district court in
its initial decision, under "general principles of law," that CPC
could not recover because injury to the aquifer took place "when
it was polluted by the PERC spill in 1974 within days or at best,
weeks of June 21, 1974 when this PERC spill took place . . ."
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Pittsburgh Corning Corp. v. Travelers Indem. Co., No. 84-3985,
1988 WL 5291 (E.D.Pa. Jan. 20, 1988). The sixth theory is a
combination of the fourth and fifth. Under this theory, the
occurrence causing damage to property took place when the insured
"knew or should have known" of the property damage. See In re
Acushnet, 725 F. Supp. at 1274 n.17 (citing Bartholomew v.
Insurance Co. of North America, 502 F. Supp. 246, 252-54
(D.R.I.), aff'd, 655 F.2d 27 (1st Cir. 1981). Finally, the
continuous trigger theory would hold that the occurrence causing
property damage took place both at the time of exposure and at
the time of manifestation. Keene v. Insurance Co. of North
America, 667 F.2d 1034, 1047 (D.C.Cir. 1981), cert. denied, 455
U.S. 1007, 102 S. Ct. 1644, 71 L.Ed.2d 875 (1982).
The question of which trigger theory to apply is
critical in this case. If the Rhode Island Supreme Court would
apply the wrongful act, exposure, or injury-in-fact theories, the
district court's decision should be affirmed. If the Rhode
Island Supreme Court would apply the manifestation, first
discovery, or "reasonably knew or should have known" theories,
the case should be remanded to the district court for a new
trial. The reason for this is that, based on the testimony at
trial, a reasonable jury could have found that the 1974 PERC
spill caused the VOCs to migrate to the Quinnville Wells and that
the PERC-led contaminants reached the wells before October
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1979.8 Under the manifestation theory, a reasonable jury would
be entitled to infer, based on CPC's uncontroverted evidence,
that the first time CPC should have known of damage to the
aquifer was in October 1979, when the contamination of the
Quinnville Wells was discovered.9 It follows that the same
holds true for the first discovery and "knew or should have
known" theories.
The district court was obligated to determine which of
these trigger-of-coverage theories the Rhode Island Supreme Court
would apply in this case. Because it did not, we have endeavored
to do so here. In the end, however, we conclude that Rhode
Island law is unclear as to which trigger-of-coverage is to be
applied and, therefore, choose to certify the question to the
Rhode Island Supreme Court.
CPC argues that Bartholomew, a case from the United
8 The particular testimony that would support this is: 1)
Dr. Delaney's testimony, that, but for the PERC spill, the
Quinnville wells would not have been polluted; 2) the testimony
that the pollution was discovered in October 1979; and 3)
Dr. Murray's testimony that the leading edge of the PERC plume
reached the Quinnville Wells between October or November 1978,
and December 1981. If the jury accepted all these facts as true,
which we must do on appeal, it could determine that the PERC-led
pollutants, stimulated by the 1974 PERC spill, reached the wells
before October 1979.
9 The district court did not make specific findings as to
whether CPC (or Peterson/Puritan) reasonably should have known
that the 1974 Perc spill would damage the environment, although
the court did note that "the event was well recognized by the
management of Peterson/Puritan." The district court also noted
that it is "unfortunate that people were not environmentally
tuned in at that time because, of course, Peterson/Puritan could
have made a substantial claim against [the railroad carrier] for
polluting the environment."
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States District Court for Rhode Island, purporting to apply Rhode
Island law, is the controlling Rhode Island precedent.
Bartholomew holds that the date of the occurrence is the date
when the insured "knew or should have known" of the property
damage.10 Northbrook, on the other hand, maintains that the
Rhode Island Supreme Court's recent decision in Textron, Inc. v.
Liberty Mut. Ins. Co., 639 A.2d 1358 (R.I. 1994), indicates that
Rhode Island follows the "injury-in-fact" theory -- i.e., the
date of an occurrence is the date when the property damage
occurs. We agree that Bartholomew and Textron are the most apt
cases from Rhode Island on the trigger-of-coverage issue. Our
analysis of the two cases, however, leads us to the conclusion
that they raise more questions than they answer.
The district court in Bartholomew, finding no Rhode
Island law on the subject, predicted that the Rhode Island
Supreme Court would adopt the "reasonably knew or should have
known" trigger-of-coverage standard. There are several
difficulties with this case as an indicator of Rhode Island law.
First, our research indicates that no Rhode Island court has
either explicitly adopted or rejected the Bartholomew standard;
in fact, to our knowledge, no Rhode Island court has ever even
10 CPC actually maintains that Bartholomew establishes a
"manifestation" trigger of coverage -- i.e., there is no
"occurrence" under the policy until the "property damage" becomes
known. Bartholomew, however, clearly holds that the date of
occurrence is the date when the insured "knew, or reasonably
should have known," of the injury or property damage.
Bartholomew, 502 F. Supp. at 254. Accord American Home Assur.,
786 F.2d at 29 (reciting the Bartholomew test).
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cited Bartholomew. Second, our decision affirming the district
court in that case did not explicitly comment on the standard
adopted by the district court, but rather relied on the more
fundamental fact that the "defects were fully known, indeed sued
for, before the policies took effect." Thus, we commented, "[w]e
can only construe the present action as an attempt to 'job' the
defendants." Bartholomew v. Appalachian Ins. Co., 655 F.2d 27,
29 (1st Cir. 1981). Finally, and most importantly, if
Bartholomew is in conflict with Textron, obviously the Rhode
Island Supreme Court decision controls the present diversity
action.
In a footnote in Textron, Inc. v. Liberty Mut. Ins.
Co., 639 A.2d 1358 (1994), the Rhode Island Supreme Court made
the following statement.
In the area of general-liability
insurance, an occurrence policy provides
coverage for any "occurrence" which takes
place during the policy period. Under
this type of policy it is irrelevant
whether the resulting claim is brought
against the insured during or after the
policy period, as long as the injury-
causing event happens during the policy
period.
Id. at 1361 n.1 (emphasis added) (citing DiLuglio v. New England
Ins. Co., 959 F.2d 355, 358 (1st Cir. 1992) and Gereboff v. the
Home Indemnity Co., 119 R.I. 814, 818 n.1, 383 A.2d 1024, 1026
n.1 (1978)). Northbrook maintains that this statement indicates
that Rhode Island looks to the point when the injury in fact
occurs as the trigger date for coverage. Although we agree that
it could be read that way, we have several concerns about the
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reliability of this general statement as a predictor of Rhode
Island law in this case.
First, the statement in Textron is entirely dictum; it
appears only in a very general fashion and in a footnote; and it
was not relevant to decision of the case. In Textron, an insured
sought indemnification for property damage which allegedly
occurred during the coverage period but which was not reported
until twenty-one years after the last policy's expiration. The
case was disposed of, in favor of the insurer, pursuant to a
policy provision which required that the insured report the
property damage within one year of the expiration of the policy.
Textron, 639 A.2d at 1363. Thus, the outcome of the case in no
way depended upon the langauge in the footnote.
Second, Textron does not cite Bartholomew, a case
purportedly applying Rhode Island law, which is cited extensively
by courts in the First Circuit and other jurisdictions, and which
adopts an entirely different standard. We think this raises
questions as to exactly how broad a sweep the Textron court
intended its statement to have.
Third, the phrase "injury-causing event" could (we
think reasonably) be interpreted as either of three potential
trigger theories. It could mean Rhode Island uses the "wrongful
act theory" in its trigger of coverage analysis, which in this
case would be the 1974 PERC spill. It could mean, as Northbrook
argues, that Rhode Island follows the injury-in-fact theory.
Here, according to CPC's own expert witnesses, the injury in fact
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would have occurred within days of the 1974 PERC spill. Finally,
it could refer to the exposure theory. In this case, that would
have been when the VOCs leeched into the environment -- within
minutes of the 1974 PERC spill.11 Moreover, as the Bartholomew
court noted, the wrongful act theory, which we think is the most
literal reading of "injury-causing event," "has been rejected by
the vast majority of jurisdictions." Bartholomew, 502 F. Supp.
at 253 (citing Annotation, 57 A.L.R.2d 1358 (1958)).12
For the reasons stated above, we think that the law of
Rhode Island is "unclear" with respect to the trigger-of-coverage
issue. See Lehman Brothers v. Schein, 416 U.S. 386, 94 S. Ct.
1741, 40 L.Ed.2d 215 (1974). We also think that the trigger-of-
coverage issue is determinative of this appeal. We therefore
conclude that the most appropriate way to resolve the trigger of
coverage issue, consistent both with our duty to apply Rhode
Island law and with important principles of federalism, is to
certify the question to the Rhode Island Supreme Court pursuant
to Rule 6 of the Rhode Island Supreme Court Rules of Appellate
11 Judgment as a matter of law for Northbrook would be justified
under all three of these theories because, based on the evidence
adduced by CPC at trial, the pertinent events under these
theories of coverage did not take place during the policy period.
The significance of the fact that the statement could be
interpreted as adopting any of three different standards,
however, lies not in the substance of the three potential
standards, per se, but in the way it reflects the indeterminate
nature of the statement itself.
12 Rhode Island is, of course, entitled to adopt a minority rule
and, provided it does not contravene federal law, which this
clearly would not, we would be bound to apply it in this case.
However, given the other considerations listed above, we think it
is appropriate to take this factor into account.
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Procedure.
For the foregoing reasons, the district court's choice-
of-law decision is affirmed and a question certified to the Rhode
Island Supreme Court, with jurisdiction retained pending that
determination.
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UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
No. 94-1276
CPC INTERNATIONAL, INC.,
Plaintiff - Appellant,
v.
NORTHBROOK EXCESS & SURPLUS
INSURANCE COMPANY,
Defendant - Appellee.
CERTIFICATION
This Court hereby certifies a question of Rhode Island
state law to the Rhode Island Supreme Court, pursuant to Rule 6
of the Rhode Island Supreme Court Rules of Appellate Procedure,
and provides a brief statement of the grounds for certification.
The insurance policy at issue in CPC Int'l Inc. v.
Northbrook Excess & Surplus Ins. Co., No. 94-1276, requires that
the "occurrence" causing "property damage" must take place during
the policy period in order for coverage to be provided. In the
body of its Opinion in that case, this Court has identified seven
different approaches used by courts in different jurisdictions
for determining when an injury takes place in order to trigger
coverage. The different approaches are: the wrongful act theory,
the exposure theory, the injury-in-fact theory, the manifestation
theory, the first discovery theory, the "reasonably knew or
should have known" theory, and the continuous trigger theory.
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Neither of the two potentially relevant cases the Court
identified from Rhode Island -- Textron, Inc. v. Liberty Mutual
Insurance Co., 639 A.2d 1358 (R.I. 1994) and Bartholomew v.
Appalachian Insurance Co., 502 F. Supp. 246 (D.R.I.), aff'd, 655
F.2d 27 (1981) -- provides the necessary means to predict which
trigger-of-coverage standard the Rhode Island Supreme Court would
apply.
Accordingly, the Court certifies the following question
to the Rhode Island Supreme Court:
What trigger-of-coverage standard would
the Rhode Island Supreme Court use for
determining at what point an "occurrence"
causing "property damage" took place,
within the meaning of the insurance
policy provisions provided in the
separate opinion in this case, where an
insured alleges that a spill of hazardous
contaminants in 1974 migrated through the
groundwater, causing immediate injury to
the pertinent property, which was not, in
fact, discovered, however, until at least
1979?
The relevant facts are discussed in the separate
opinion in this case. In putting the above question to the Rhode
Island Supreme Court, we wish to make clear that we would, of
course, welcome the advice of the Court on any other question of
Rhode Island law it deems material to this case and upon which it
wishes to comment.
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The Clerk of this court will transmit this question and
our separate opinion in this case, along with copies of the
briefs and appendix in this case, to the Rhode Island Supreme
Court.
United States Court of Appeals
for the First Circuit
By:
Juan R. Torruella
Chief Judge
Dated: January 19, 1995
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