United States Liability Insurance v. Bourbeau

                  UNITED STATES COURT OF APPEALS
                      FOR THE FIRST CIRCUIT
                                           

No. 94-1919

            UNITED STATES LIABILITY INSURANCE COMPANY,

                      Plaintiff - Appellee,

                                v.

       LARRY BOURBEAU, d/b/a BOURBEAU PAINTING CONTRACTORS,

                      Defendant - Appellant.

                                           

           APPEAL FROM THE UNITED STATES DISTRICT COURT

                FOR THE DISTRICT OF MASSACHUSETTS

           [Hon. Michael Ponsor, U.S. Magistrate Judge]
                                                                

                                           

                              Before

                     Torruella, Chief Judge,
                                                     

                  Coffin, Senior Circuit Judge,
                                                        

                    and Stahl, Circuit Judge.
                                                      

                                           

     Michael Pill for appellant.
                           
     Pamela S. Gilman,  with whom Taylor, Anderson &  Travers was
                                                                       
on brief for appellee.

                                           

                          March 3, 1995
                                           


          TORRUELLA, Chief Judge.   Defendants-appellants,  Larry
                    TORRUELLA, Chief Judge.
                                          

Bourbeau  and Bourbeau Painting  Contractors ("Bourbeau"), appeal

the district court's summary judgment ruling that no coverage was

provided  under  an  insurance   policy  issued  to  Bourbeau  by

plaintiff-appellee,  United  States  Liability Insurance  Company

("U.S. Liability"),  for injury to property  caused by Bourbeau's

alleged  negligent removal of lead paint.  For the reasons stated

herein, we affirm.

                            BACKGROUND
                                      BACKGROUND
                                                

          The pertinent facts  are not  in dispute.   In July  of

1991,  Larry  Bourbeau,  doing  business  as   Bourbeau  Painting

Contractors, entered  into a contract  with the  Town of  Hadley,

Massachusetts, to  strip and paint two  town buildings, including

the North  Village  Hall.   Pursuant  to the  contract,  Bourbeau

purchased comprehensive  liability insurance from  U.S. Liability

for the period of July 2, 1991 to July 2, 1992.  The policy terms

covered property damage up to $300,000.

          Bourbeau began  work removing old paint  from the North

Village  Hall.   While this  work was  in progress,  however, the

Massachusetts  Department  of  Environmental  Protection  ("DEP")

notified Bourbeau  that paint chips  from the North  Village Hall

were  contaminating the  surrounding soil.   The  Town  of Hadley

incurred  costs   of  approximately   $50,000  cleaning   up  the

contaminated site.   Bourbeau  subsequently finished his  work on

the  two buildings  but the  Town of  Hadley, citing  its cleanup

costs, refused to pay him.  

                               -2-


          In  March  of  1993, the  owner  of  a  parcel of  land

abutting  the  North  Village  Hall  filed  suit  against  Hadley

alleging that Hadley had caused lead to be  deposited on his land

during the  course of  restoring and  painting the North  Village

Hall.  Hadley then filed a third-party complaint against Bourbeau

seeking indemnification for any  judgment which might be rendered

against the town in favor of the abutter.

          On August 20, 1993, U.S. Liability filed this diversity

action  in the  United  States District  Court for  Massachusetts

seeking  a  declaration that  it is  not  obligated to  defend or

indemnify Bourbeau  for property  damage sustained by  Hadley, or

any abutting land owners, due to the alleged negligent release of

contaminated  paint chips  on the  North Village  Hall property.1

Upon  cross motions for summary judgment on the ultimate issue of

coverage, the  district court  held that the  "absolute pollution

exclusion"  clause contained  in the  insurance policy  precludes

coverage  for  property  damage  caused  by  alleged  lead  paint

contamination.   The  court therefore  granted  U.S.  Liability's

motion  for summary  judgment  and denied  Bourbeau's motion  for

summary judgment.

                    
                              

1  Count II  sought  a declaration  that  U.S. Liability  is  not
obligated to  defend or  indemnify Bourbeau  with respect  to any
contractual  obligations he  might have  assumed in  his contract
with Hadley.  U.S. Liability did not move for summary judgment on
Count II  and the district court dismissed it as moot in light of
its grant of summary judgment for U.S. Liability on Count I. 

                               -3-


                        STANDARD OF REVIEW
                                  STANDARD OF REVIEW
                                                    

          We review a district  court's grant of summary judgment

de novo.   LeBlanc v. Great  Am. Ins. Co.,  6 F.3d 836, 841  (1st
                                                   

Cir.  1993), cert.  denied,     U.S.    ,  114 S.  Ct.  1398, 128
                                    

L.Ed.2d  72 (1994).   Because the facts  in this case  are not in

dispute,  our  decision  turns  on  the  interpretation  of  U.S.

Liability's  insurance policy, which is  a question of  law.  See
                                                                           

Nieves v. Intercontinental Life Ins. Co. of P.R., 964 F.2d 60, 63
                                                          

(1st Cir. 1992).  The parties agree that this diversity action is

governed by the substantive law of Massachusetts.  See Klaxon Co.
                                                                           

v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S. Ct. 1020,  85
                                   

L.Ed.  1477 (1941);  American Title  Ins. Co.  v. East  West Fin.
                                                                           

Corp., 959 F.2d 345, 348 (1st Cir. 1992).    
               

                            DISCUSSION
                                      DISCUSSION
                                                

          The dispositive  question in  this case is  whether the

allegedly contaminating  lead paint was a  "pollutant" within the

meaning  of  the "Absolute  Pollution  Exclusion"  clause in  the

insurance policy.  We  agree with the district court  that, under

the undisputed facts of this case, the lead paint was a pollutant

within the meaning of the absolute  pollution  clause  and  that,

therefore, U.S. Liability is not obligated to indemnify or defend

Bourbeau in  any underlying lawsuit arising  from property damage

caused  by Bourbeau's  alleged  negligent release  of lead  paint

chips.    The "Absolute Pollution  Exclusion" clause provides, in

pertinent part:

            Notwithstanding the  terms and conditions
            of this policy which are or may be to the

                               -4-


            contrary,   it   is   agreed  that   this
            insurance does not apply:

            1.   to Bodily Injury, Personal Injury or
            Property Damage,

            2.   to  Damages for  the Devaluation  of
            Property . . .,

            3.    to  any   Loss,  Cost  or  Expense,
            including  but not  limited to  Fines and
            Penalties,    arising    out    of    any
            governmental direction or request, or any
            private party or  citizen action that the
            named  insured  test for,  monitor, clean
            up, remove, contain,  treat, detoxify  or
            neutralize pollutants,

            4.  to  any Litigation or  Administrative
            Procedure  in which  the  insured may  be
            involved as a party:

            arising   out   of  actual,   alleged  or
            threatened discharge,  dispersal, release
            or escape of pollutants into or upon land
            . . . whether or not such actual, alleged
                                          
            or   threatened   discharge,   dispersal,
            release or escape  is sudden,  accidental
            or gradual in nature.

            Pollutants   means  any   solid,  liquid,
                                                               
            gaseous    or    thermal   irritant    or
                                                               
            contaminant, including but not limited to
                                                               
            smoke,   vapor,   soot,   fumes,   acids,
                                                               
            alkalis, toxic chemicals or materials and
                                                               
            waste.   Waste  includes, in  addition to
                           
            materials to be disposed of, materials to
            be recycled, reconditioned or reclaimed.

            This  exclusion  is  intended to  exclude
            from the coverage provided by this policy
            of  insurance  all liability  and expense
            arising out of or  related to any form of
                                                               
            pollution, whether or not  such pollution
                               
            is  intentionally  caused and  whether or
            not   the   resulting   injury,   damage,
            devaluation, cost or expense  is expected
            or  intended from  the standpoint  of the
            insured.

(emphasis added).

                               -5-


                               -6-


          Under the  rules of statutory construction  followed by

the Massachusetts  Supreme Judicial  Court ("the SJC"),  we "must

construe the words of the policy according to the fair meaning of

the  language used, as applied to the subject matter."  Jacobs v.
                                                                        

United  States Fidelity & Guar.  Co., 627 N.E.2d  463, 464 (Mass.
                                              

1994)  (citing Johnson v. Hanover Ins. Co., 508 N.E.2d 845 (Mass.
                                                    

1987)).   "Moreover, where the words of an insurance contract are

'plain  and free from ambiguity  they must be  construed in their

usual and ordinary  sense.'"   Id. (quoting Hanover  Ins. Co.  v.
                                                                       

Ramsey, 539  N.E.2d 537 (Mass. 1989))  (other citations omitted).
                

In addition, the SJC has stated that, when construing language in

an  insurance  policy,  it  will "consider  what  an  objectively

reasonable insured, reading  the relevant policy  language, would

expect to be covered."  Hazen Paper Co. v. United States Fidelity
                                                                           

& Guar. Co., 555 N.E.2d 576 (Mass. 1990).
                     

          In  our view,  the language  of the  Absolute Pollution

Exclusion clause  is clear and  unambiguous on its  face.   It is

plainly intended  to be an absolute bar to coverage for "any form

of pollution."   The most notable aspect of the  exclusion is its

breadth -- it applies  to all releases of pollutants,  as opposed
                                       

to  only  those  which are  not  "sudden  and  accidental."   Cf.
                                                                          

Lumberman's  Mutual Casualty  Co., 555  N.E.2d 568  (Mass. 1990).
                                          

Under the  Absolute Pollution  Exclusion clause, the  policy does

not  apply to  property damage  arising out of  actual discharge,

dispersal, release or escape of pollutants into or upon land.  In

this  case, it is alleged  that property damage  arose out of the

                               -7-


discharge, dispersal, release or escape of lead paint chips  into

or upon land.2   The  only question, therefore,  is whether  lead

paint  chips, as they were  disposed of in  this case, constitute

"pollutants." 

          Under   the   Absolute   Pollution  Exclusion   clause,

"pollutants means any solid,  liquid, gaseous or thermal irritant

or contaminant, including but not limited  to smoke, vapor, soot,
                                                       

fumes, acids,  alkalis, toxic  chemicals or materials  and waste.

Waste  includes, in  addition  to materials  to  be disposed  of,

materials to be recycled, reconditioned or reclaimed."  (emphasis

added).   After reading this  definition of pollutant,  we do not

see  how an  objectively  reasonable insured  would expect  to be

covered  for contamination of property  caused by the removal and

discharge of lead paint chips.  In   our  view,   an  objectively

reasonable person reading the Absolute Pollution Exclusion clause

would consider lead paint both a "solid . . .  contaminant" and a

"toxic chemical."   An  objectively reasonable person  would also

consider  lead  paint chips  "materials  to  be disposed  of"  or

"waste."   A reading of the specifically  listed pollutants would

only  buttress this  interpretation.   The non-exclusive  list of

irritants and  contaminants provides  the insured a  potpourri of

pollutants to consider, from  smoke to toxic chemicals.   We fail

to  see  how an  objectively  reasonable  insured could  possibly

believe  that   "smoke,  vapor,  soot,  [and]   fumes"  would  be
                    
                              

2  In its third-party complaint, the Town of Hadley  alleges that
Bourbeau  "caused lead-based paint to be discharged upon the land
of the Town."

                               -8-


considered pollutants while lead paint would not.

          This should end the inquiry.  The best way to interpret

an  insurance policy is to  read the policy.   Bourbeau, however,

points  to a  recent case  decided by the  SJC which  he contends

supports his  position that lead  paint is  not a pollutant.   Of

course, if the SJC interprets the term "pollutant" inconsistently

with our  understanding of the term,  we are bound  to follow the

SJC's construction in this case.  

          In Atlantic Mut.  Ins. Co. v. McFadden,  595 N.E.2d 762
                                                          

(Mass.  1992), the  SJC held that  the Atlantic  Mutual Insurance

Company  was obligated to defend its insured in an action arising

out of the lead  poisoning of two  children in property owned  by

the insured.   In doing  so, the SJC  concluded that a  pollution

exclusion  clause in  the insurance  policy did  not apply.   For

reasons similar  to those  expressed by  the  district court,  we

conclude that McFadden is inapposite.  
                                

          Bourbeau  maintains  that  the  following  statement in

McFadden  indicates the SJC's position  that lead paint  is not a
                  

pollutant.  

            There  simply  is  no  language   in  the
            exclusion provision from  which to  infer
            that  the provision  was  drafted with  a
            view toward limiting  liability for  lead
            paint-related injury.  The  definition of
            "pollutant"  in  the   policy  does   not
            indicate   that  leaded   materials  fall
            within its scope.

Id. at 764.  The second  sentence quoted above certainly seems to
            

support  Bourbeau's position.  But aside from that bit of dictum,

there is nothing  in the express holding of McFadden or its facts
                                                              

                               -9-


that bears any relation to his case.  

          Most importantly,  McFadden  was not  an  environmental
                                               

pollution case.  McFadden concerned personal injury caused by the
                                   

presence of lead paint in a household.  This case concerns injury
                  

to  property caused by  the alleged  negligent discharge  of lead
                                                                  

paint  onto property.    The  latter  is  a  classic  example  of

"pollution" -- the discharging of a harmful substance onto land -

-  while the  former is  most demonstrably  not.   An objectively

reasonable person  simply would not ascribe  the word "pollution"

to the presence of lead paint in a house.  This, we think, is the

point of  McFadden.  This  interpretation is consistent  with the
                            

SJC's  observation in  that  case that  "the  terms used  in  the

pollution exclusion, such as 'discharge,' 'dispersal,' 'release,'

and  'escape,'  are  terms  of  art  in environmental  law  which

generally are used with  reference to damage or injury  caused by

improper disposal or containment of hazardous waste."  Id.    
                                                                   

          The  express holding  of McFadden  further demonstrates
                                                     

its inapplicability to this case.

            We   conclude   that  an   insured  could
            reasonably have  understood the provision
            at  issue to exclude  coverage for injury
            caused  by  certain  types of  industrial
            pollution,  but  not coverage  for injury
            allegedly  caused  by  the   presence  of
            leaded materials in a private residence.

Id.  The  court in McFadden quite simply  held that the pollution
                                     

exclusion  clause in that case  was not intended  to exclude from

coverage  injuries  caused by  the presence  of  lead paint  in a

household.  As such, it has no impact on this case, involving the

                               -10-


discharge of lead paint onto adjacent property.  

          Bourbeau also  argues that  he is entitled  to coverage

even if lead paint is considered a "pollutant" within the meaning

of  the policy.   He maintains  that the  cause of  the damage to

property  was a  covered risk  -- his  alleged negligence  in the

normal course  of performing the  painting contract --  and that,

therefore,  the  policy  applies,  even  if  the  result  of  his

negligence was pollution.  

          We need not  linger long on this  argument.  Bourbeau's

reliance on  Jussim v.  Massachusetts Bay Insurance  Company, 307
                                                                      

N.E.2d  11 (Mass. 1973) and Standard Elec. Supply Co., 307 N.E.2d
                                                               

11,  12 (Mass.App.Ct. 1973), is  unfounded.  In  those cases, the

negligence  of  third  parties  caused  oil  (Jussim)  and  water
                                                              

(Standard  Electric) to  spill on  adjacent property  and migrate
                             

onto  and damage  the insured's  property.   In Jussim,  the SJC,
                                                                

relying  on  the reasoning  of Standard  Electric, held  that the
                                                           

pertinent insurance policy covered the  damage, notwithstanding a

policy provision  excluding from coverage "loss . . . caused by .

.  .   release,  discharge   or  dispersal  of   contaminants  or

pollutants."    Both  the  Jussim and  Standard  Electric  courts
                                                                   

reasoned  that the proximate cause of the pollution was a covered

event  -- the negligence of the neighbors -- and that, therefore,

the insured could recover.  Bourbeau argues  that, similarly, the

proximate cause of the pollution in this case was a covered event

-- his own negligence in removing the paint.

          This case  is distinguishable from  Jussim and Standard
                                                                           

                               -11-


Electric in at  least two respects.  First  of all, the insurance
                  

policies at issue  in those cases were  "all-risk" or first-party

policies.    Such  policies   are  typically  intended  to  cover

fortuitous  losses.   See  Standard  Electric, 307  N.E.2d  at 12
                                                       

("[l]oss from the  bursting of a pipe on the  premises of another

would seem  to be the  kind of  'fortuitous loss'  which is  'not

usually covered under other insurance' and  against which an 'all

risk'  policy  is  designed  to extend  protection"),  quoted  in
                                                                           

Jussim, 610 N.E.2d at 955.  In contrast, the fortuitous nature of
                

the loss is immaterial under the third-party insurance policy  at

issue in  this case.  The exclusion, by its terms, is targeted at

pollution regardless  of fault, responsibility or  causation.  We

cannot articulate  the policy  in any  plainer language than  its

own, which provides that it does not apply to any litigation

            arising   out   of  actual,   alleged  or
            threatened discharge,  dispersal, release
            or escape of pollutants into or upon land
            . . . whether or not such actual, alleged
                                                               
            or   threatened   discharge,   dispersal,
                                                               
            release or escape  is sudden,  accidental
                                                               
            or gradual in nature.
                                          

The policy continues:

            This  exclusion  is  intended to  exclude
            from the coverage provided by this policy
            of  insurance  all liability  and expense
            arising out of or  related to any form of
                                                               
            pollution, whether or not  such pollution
                               
            is  intentionally  caused and  whether or
                                                               
            not   the   resulting   injury,   damage,
                                                               
            devaluation, cost or expense  is expected
                                                               
            or  intended from  the standpoint  of the
                                                               
            insured.
                             

          In  addition, the  damage in  both Jussim  and Standard
                                                                           

Electric  was caused by the  alleged negligence of third parties,
                  

                               -12-


not,  as in  this  case,  the  insured  himself.    See  Standard
                                                                           

Electric, 307 N.E.2d at 12  ("Nor is it a loss which  the insured
                  

brings about by  his own act, for then he  has not merely exposed

the goods to the chance of injury, he has injured them himself.")

(citations omitted).   It would be ironic indeed to  hold that an

insured  is  not covered  for damage  to  property caused  by his

discharge  of pollutants  unless  it happens  that the  proximate

cause of  the pollution was his  own negligent conduct.   This is

particularly   so  because   one  could   plausibly  argue   that

discharging  pollutants onto  land  is,  by  its very  nature,  a

negligent act.  Appellant's  reasoning would eviscerate the plain

language and explicit purpose of the Absolute Pollution Exclusion

clause.       

          We need go no further.  See, e.g., Pritzker v. Yari, 42
                                                                       

F.3d 53,  73 (1st Cir.  1994) (Selya, J.).   The language  of the

policy is plain and unambiguous, and Appellant has directed us to

no  persuasive authority to the  contrary.  We  conclude that the

Absolute Pollution Exclusion clause in  this case is exactly what

it purports to be: absolute.  We see no reason why U.S. Liability

should be denied  the benefit  of its bargain  with Bourbeau,  as

reflected in the terms of the insurance contract.

          Accordingly,  the decision  of  the  district court  is

affirmed.
                  

                               -13-