CPC International, Inc. v. Northbrook Excess & Surplus Insurance

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 . . ."

-22-

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).

-25-

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

-26-

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

-27-

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.

-28-

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.

-29-

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.

-30-

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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