Millipore Corp. v. Travelers Indemnity Co.

United States Court of Appeals
For the First Circuit

Nos. 96-1788, 96-1789, 96-1790, 96-1791, 96-1792, 96-1793, 96-1794, 96-
1842

MILLIPORE CORPORATION,
Plaintiff, Appellant,

v.

THE TRAVELERS INDEMNITY COMPANY, HARTFORD ACCIDENT AND INDEMNITY
COMPANY, and INSURANCE COMPANY OF NORTH AMERICA,

Defendants, Appellees.

THE TRAVELERS INDEMNITY COMPANY and INSURANCE COMPANY OF NORTH AMERICA,

Defendants, Appellants,
v.

MILLIPORE CORPORATION,

Plaintiff, Appellee.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. George A. O'Toole, U.S. District Judge]

Before

Boudin, Circuit Judge,

Bownes, Senior Circuit Judge,

and Lynch, Circuit Judge.

David A. Guberman, with whom Robert J. Muldoon, Jr., Nereyda

Garcia and Sherin & Lodgen LLP were on brief, for plaintiff-appellant

and cross-appellee Millipore Corporation.

Paul Koepff, with whom Rosemary Boller, James Arbogast, O'Melveny

& Myers LLP, David Chaffin and Hare & Chaffin were on brief, for

defendant-appellee and cross-appellant Century Indemnity Company, f.k.a.
Insurance Company of North America.

James L. Ackerman, with whom Maura D. Sullivan and Day, Berry &

Howard were on brief, for defendant-appellee and cross-appellant The

Travelers Indemnity Company.

John P. Ryan, Robert G. Eaton and Sloane & Walsh were on brief,

for defendant-appellee Hartford Accident and Indemnity Company.

May 30, 1997

LYNCH, Circuit Judge. The substantial costs of
LYNCH, Circuit Judge.

remediating environmental damage under the Comprehensive

Environmental Response, Compensation and Liability Act

("CERCLA"), 42 U.S.C. 9601 et seq., and other

environmental laws have pitted businesses against their

insurers in fierce disputes over who will bear these costs.

That is the case here.

Underlying this lawsuit is the cleanup of five

hazardous waste sites, three in Massachusetts and two in New

Jersey. Millipore Corporation was one of the sources of

waste at the sites, and was a defendant in several actions

alleging violations of federal and state environmental laws.

Millipore defended these suits and incurred liability as to

some of the sites. It may ultimately be responsible for

contributing to the remediation costs of the other sites as

well.

The primary issue here is whether the district

court erred in entering summary judgment for the insurers

(and then denying reconsideration) on the ground that none of

Millipore's CERCLA liability is covered under any of the

comprehensive general liability ("CGL") policies Millipore

carried during the relevant periods. In considering this

question, we must address, among other things, the "pollution

exclusion" provisions of the insurance policies, which

preclude coverage for pollution-related claims unless the

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release of pollutants was "sudden and accidental." Based on

recent developments in Massachusetts environmental insurance

law, we vacate in part the grant of summary judgment.

We also conclude that New Jersey law applies to

claims under policies issued to a New Jersey corporation

later acquired by Millipore, and that summary judgment was

properly entered in favor of one of Millipore's insurers,

Travelers Indemnity Company, because Millipore failed to

produce evidence of an occurrence within the Travelers policy

period. Finally, we hold that Millipore was entitled to

summary judgment on the insurers' counterclaims for

reimbursement for defense costs paid to Millipore.

I.

The insurance coverage issues involved in this case

are best understood in context. CERCLA, which was enacted in

1980, is the primary federal statutory scheme regulating

hazardous waste cleanups. Some states have enacted their own

regimes as well. CERCLA imposes liability for the costs of

cleaning up hazardous waste sites and for the loss of natural

resources due to pollution on three categories of potentially

responsible parties ("PRPs"): past and present owners and

operators of hazardous waste sites, some companies that

transported waste to these sites, and companies that

generated waste disposed of at these sites. 42 U.S.C.

9607(a). Suit may be brought against a PRP by the federal

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government, a state, or a private party who bore cleanup

costs. Jerry, Understanding Insurance Law 65, at 459-60

(2d ed. 1996). See generally Ostrager & Newman, Insurance

Coverage Disputes, 10.01, 10.02 (8th ed. 1995).

CERCLA creates novel forms of liability for

environmental harm. It is, in general, a strict liability

regime. St. Paul Fire & Marine Ins. Co. v. Warwick Dyeing

Corp., 26 F.3d 1195, 1197-98 (1st Cir. 1994). The CERCLA

cost allocation scheme may operate retroactively as well: a

PRP may be held responsible for actions taken before CERCLA

was enacted and before the PRP was aware that its actions

might lead to environmental liability. Jerry, supra, 65,

at 459-60. CERCLA allows joint and several liability when

specific damage cannot be attributed to particular PRPs,

which is often the case at hazardous waste sites. Id. 65,

at 460.1

Faced with environmental liability, companies began

turning to their third-party liability insurance carriers for

coverage under CGL policies. Comment, The 1970 Pollution

Exclusion in Comprehensive General Liability Policies, 24

Duq. L. Rev. 1083, 1083 (1996). See generally Ballard &

Manus, Clearing Muddy Waters: Anatomy of the Comprehensive

General Liability Pollution Exclusion, 75 Cornell L. Rev. 610

1. CERCLA does, however, create a right of contribution.
Id.

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(1990). CGL policies are usually occurrence policies that

protect insureds against most types of risk and are available

for nearly all types of business ventures. Note, The "Sudden

and Accidental" Exception to the Pollution Exclusion Clause

in Comprehensive General Liability Insurance Policies, 45

Vand. L. Rev. 161, 163-65 (1992).

Since 1970, the standard CGL policy has contained a

pollution exclusion clause barring coverage for pollution-

related damage which should reasonably have been foreseen.

Id. at 167; see also Greenlaw, The CGL Policy and the

Pollution Exclusion Clause, 23 Colum. J.L. & Soc. Probs. 233,

240-41 (1990). The provision in general use from 1970 until

1985 excludes coverage for:

bodily injury or property damage arising
out of the discharge, dispersal, release
or escape of smoke, vapors, soot, fumes,
acids, alkalis, toxic chemicals, liquids
or gases, waste materials or other
irritants, contaminants or pollutants
into or upon land, the atmosphere or any
water course or body of water . . . .

Note, supra, at 167. However, the pollution exclusion clause

generally "does not apply if such discharge, dispersal,

release or escape is sudden or accidental." Id.2

2. Beginning in 1970, the pollution exclusion clause was
included in CGL policies as a mandatory endorsement, and in
1973, the clause was inserted into the body of the policy.
Id. In 1986, the insurance industry replaced the 1970

pollution exclusion clause with an "absolute pollution
exclusion." Jerry, supra, 65, at 468.

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Based on the language of their CGL policies,

insurers developed a three-step process for determining

whether environmental liability was covered: "(1) did an

'occurrence' occur? . . . If so, (2) does the pollution

exclusion apply, i.e., was the injury or damage caused by one

of the named materials in connection with one of the four

events ('discharge,' etc.) in the exclusion? . . . If so, (3)

does the exception to the exclusion apply, i.e., was the

event 'sudden and accidental'?" Jerry, supra, 65, at 463-

64. The insurers often argued that claims based on CERCLA

liability were precluded from coverage due to the pollution

exclusion clause.3 As a result, the meaning of the exception

to the pollution clause, and particularly the definition of

the term "sudden and accidental," has been hotly contested.

II.

Against this backdrop, the facts are recited in the

light most favorable to Millipore, the party against whom

summary judgment was granted. Soileau v. Guilford of Maine,

Inc., 105 F.3d 12, 13 (1st Cir. 1997).

3. Commentators have suggested that insurers were ill-
equipped to deal with claims based on CERCLA liability. The
insurance industry did not foresee the enactment of CERCLA's
retroactive strict liability regime; accordingly, insurers
did not allocate financial resources for CERCLA claims.
Note, supra, at 174-75. The problem, however, was not merely

CERCLA's retroactivity. The risk of liability under CERCLA
is difficult to ascertain because environmental damage often
does not become evident until many years after the end of a
policy period. Id. at 175; cf. United States v. Charter

Int'l Oil Co., 83 F.3d 510, 516 (1st Cir. 1996).

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Millipore is a Massachusetts corporation primarily

engaged in manufacturing products and providing services for

the analysis and purification of liquids. Millipore has its

corporate headquarters as well as a manufacturing facility in

Bedford, Massachusetts, with other Massachusetts

manufacturing facilities in Milford and Taunton. Millipore

disposed of its manufacturing wastes at several different

sites in Massachusetts, including the Silresim Waste

Reclamation and Disposal Facility in Lowell, the Charles

George Landfill in Tyngsboro, and the Re-Solve Waste

Reclamation and Disposal Facility in North Dartmouth.

Between December 1975 and March 1982, Millipore

owned the Worthington Biochemical Corporation, located in

Freehold, New Jersey, which produced research enzymes and

related chemicals. The Worthington manufacturing process

involved the use of substances defined as hazardous,

including trichloroethylene and freons. Worthington disposed

of much of its waste materials at the Lone Pine Landfill in

Freehold.

All four of these sites where Millipore and

Worthington disposed of their wastes have a history of

contaminating neighboring land and water. These troubled

sites share numerous similarities involving poor design and

sloppy operations. At the Silresim site, chemicals dumped

into the disposal pit regularly seeped through the concrete

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lining of the pit into the ground. In 1973, the Commonwealth

of Massachusetts required the operators of the site to find a

solution to the problem of contaminated runoff. The landfill

operators failed to do so, and also committed numerous

violations of state regulations between 1973 and 1975. The

Commonwealth made continued operation of the facility

contingent upon regulatory compliance. The operators filed

for bankruptcy, leading to the revocation of their operating

permit in 1977. They abandoned the site later that year.

Raging chemical fires swept the site in October 1977, August

1978, and again in April 1983.

In 1983, Millipore received notification from the

EPA that it was a PRP with respect to the Silresim site.

Later that year, in December, Massachusetts initiated a legal

action in federal court under CERCLA and various state

environmental laws. See Commonwealth v. Pace, No. 83-3883-G

(complaint filed in District of Massachusetts). It sought to

recover cleanup costs from more than 200 companies that had

used the Silresim site, including Millipore and Waters

Associates, which Millipore had purchased in 1980. In

December 1983, Millipore was also named as a defendant in a

similar case brought by the federal government. United

States v. General Chem. Corp., No. 92-10923-T (complaint

filed in District of Massachusetts). Shortly thereafter,

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Millipore and others paid the Commonwealth $2 million in

settlement,andenteredinto aconsentdecreeinthe federalaction.4

The operators of the Charles George Landfill also

committed numerous infractions of state environmental

regulations. During inspections of the landfill in 1971 and

1975, the Commonwealth discovered leachate5 emanating from

the landfill. By September 1976, leachate had contaminated

three of the four groundwater basins at the site, and the

surrounding wetlands were polluted by runoff from the

facility. The situation was exacerbated when, on June 12,

1980, a fire broke out and burned until July 9. Millions of

gallons of water were poured onto the landfill to extinguish

the fire, generating toxic leachate and causing the water

table to rise temporarily. In June 1983, the Commonwealth

filed suit in state court to bring landfill operations into

compliance with state law. The landfill was ultimately

closed by court order later in 1983.

The United States and the Commonwealth filed

separate suits in 1985 against the Charles George Trucking

Company, an owner-operator of the landfill, and others. The

4. Other parties have engaged in litigation involving this
site as well. Indeed, one of the two cases recently decided
by the Supreme Judicial Court clarifying the scope of the
pollution exclusion under Massachusetts law involved the
Silresim site. See Nashua Corp. v. First State Ins. Co., 648

N.E.2d 1272 (Mass. 1995). The case is discussed below.

5. Leachate consists of liquid byproducts of the natural
decomposition process of trash in a landfill environment.

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complaints alleged violation of CERCLA and other federal and

state laws, and sought, among other things, past and future

costs of cleaning up the landfill. In 1986, the EPA notified

Millipore that it was a PRP with respect to the Charles

George site, and in 1989 Millipore was added as a defendant

in two consolidated cases in the District of Massachusetts

entitled United States v. Charles George Trucking Co., No.

85-2463-WD, and Commonwealth v. Charles George Trucking Co.,

No. 85-2714. A consent decree was ultimately entered into,

and was upheld in United States v. Charles George Trucking

Co., 34 F.3d 1081 (1st Cir. 1994).6

The Re-Solve site operated as a waste reclamation

facility from 1956 to 1980 and handled a variety of hazardous

substances. In October 1958, an explosive blaze destroyed

much of the facility. It eventually re-opened, but from the

early 1970's on, the Massachusetts Department of

Environmental Quality Engineering (DEQE) (now the Department

of Environmental Protection) was actively involved in

monitoring the site. The EPA also eventually began an

investigation. The site was a significant source of

6. The Charles George site has been at the center of a great
deal of environmental litigation, both in federal and state
court. See, e.g., United States v. Charles George Trucking

Co., 823 F.2d 685 (1st Cir. 1987); Hussey Plastics Co. v.

Continental Cas. Co., No. 90-13104-WD (D. Mass. Jun. 17,

1993); Landauer Inc. v. Liberty Mut. Ins. Co., 628 N.E.2d

1300 (Mass. App. Ct. 1994); Roche Bros. Barrell & Drum Co. v.

Employers Fire Ins. Co., No. 91-6120 (Mass. Super. Ct. Jan.

13, 1994).

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pollution. The sides of the waste lagoons at the site were

not effectively sealed, which allowed pollutants to seep out.

In addition, rain routinely caused the lagoons to overflow

into the neighboring wetlands. Millipore was named a PRP,

and the United States filed a CERCLA action to recover the

costs of cleaning up the site, naming as defendants some 225

companies, including Millipore, which had sent waste to the

facility. In 1988, Millipore entered into a consent decree.7

At the Lone Pine Landfill in New Jersey, rain

regularly caused contaminated runoff to drain directly into

the nearby Marasquan River. Toxic waste was buried in

unlined pits, which allowed seepage into the surrounding

soil. In addition, decomposing garbage routinely caused

fires and even explosions. After a particularly harmful

chemical fire in 1978, New Jersey environmental officials

issued an administrative order to mitigate the damage. After

non-compliance with the order, the landfill was ordered

closed the following year. Millipore and Worthington were

each designated as a PRP, in 1985 and 1990 respectively. In

1989, Millipore and the EPA entered into a consent decree

7. Other litigation involving this site included Hazen Paper

Co. v. United States Fidelity & Guaranty Co., 555 N.E.2d 576

(Mass. 1990) and General Chemical v. First State Ins. Co.,

No. 90-5855 (Mass. Super. Ct. Sept. 18, 1992). In addition,
Highlands Insurance Co. v. Aerovox Inc., 676 N.E.2d 801

(Mass. 1997), the second of the two recent SJC cases
explaining the scope of the pollution exclusion clause under
Massachusetts law, concerned the Re-Solve site. Aerovox is

discussed later in this opinion.

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involving on-site remediation, and in 1991, Millipore and the

EPA entered into a second consent decree involving off-site

remediation.

There were also environmental problems at the

Worthington plant itself. In 1976 or 1977, a freeze drier

line at the plant ruptured, causing no more than 60 gallons

of trichloroethylene to be released into drains leading to an

on-site wastewater treatment facility. From there, the

trichloroethylene evidently made its way into the soil and

groundwater and migrated off site.

Millipore sold Worthington's assets in 1982 to Flow

General, which in 1983 sold the assets to Cooper BioMedical,

Inc. In 1986, Cooper performed an environmental assessment

which disclosed trichloroethylene contamination. Cooper took

remedial measures, and in 1990 instituted a CERCLA action

against Millipore, seeking reimbursement for costs associated

with the cleanup.

As to each of these sites, Millipore sought

coverage under its CGL policies and those of Worthington and

Waters, two potentially liable subsidiaries. Where, as here,

CERCLA liability arises out of a PRP's operations over the

course of many years, it often implicates general liability

policies issued by several different insurers. Ostrager &

Newman, supra, 10.01, at 404. A Travelers Indemnity

Company policy issued to Millipore covered damage occurring

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between April 1975 and July 1976. A Hartford Accident and

Indemnity Company policy issued to Millipore covered damage

occurring between July 1976 and May 1977. Hartford also

issued a general liability policy covering the period between

August 1974 and May 1977 to Worthington Biochemical

Corporation; Millipore purchased Worthington in 1975. And

Hartford issued two one-year liability policies covering the

period between January 1975 and January 1977 to Waters

Associates, a Massachusetts company purchased by Millipore in

1980. Finally, Insurance Company of North America ("INA")8

issued eight general liability policies to Millipore covering

the period between May 1977 and January 1986.

The Hartford and INA policies contained the

standard pollution clause, quoted above, generally contained

in CGL policies between 1970 and 1985. The language of the

pollution exclusion provision in the Travelers policy is

somewhat different in ways we need not address at this

juncture.9

8. Century Indemnity is the successor to INA, but in this
opinion we refer to the company as INA.

9. The Travelers policy states that the insurance does not
apply:

to bodily injury or property damage arising out of

any emission, discharge, seepage, release or escape
of any liquid, solid, gaseous or thermal waste or
pollutant

(i) if such emission, discharge, seepage,
release or escape is either expected or

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Millipore sent notice to the insurers regarding the

Silresim site in 1983, the Re-Solve site in 1984, the Charles

George and Lone Pine sites in 1989, and the Cooper site in

1990. The insurers responded that they planned to

investigate whether Millipore's claims were covered under its

CGL policies. In September 1990, INA acknowledged receipt of

Millipore's notice of loss for the Cooper facility (formerly

the Worthington plant) and paid Millipore a share of the

defense costs in the underlying litigation, but expressly

reserved all rights under the policy.10 Millipore and its

insurers then disagreed about payment of the costs incurred

by Millipore in litigating the underlying action involving

the Charles George site. After lengthy negotiations, they

entered into an interim agreement in January 1993, under

which the insurers would pay the defense costs but reserved

the right to seek reimbursement if it was later determined

intended from the standpoint of any insured or

any person or organization for whose acts or
omissions any insured is liable, or

(ii) resulting from or contributed to by any
condition in violation of or non-compliance
with any governmental rule, regulation or law
applicable thereto . . . .

10. INA forwarded $3,682 to Millipore to pay for its share
of the cost of defending the suit involving the Cooper
facility; the payment was accompanied by a letter reserving
the right to reimbursement.

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that they had no duty to defend or indemnify Millipore.11

Apparently, the insurers paid no defense costs relating to

the other three sites.

Millipore brought suit against the insurers in five

separate federal court actions, one for each site, seeking

the full costs of defending the underlying actions,

indemnification for its liability, and damages for unfair and

deceptive insurance practices. All three insurers were named

as defendants in the cases involving the Silresim and Charles

George sites. INA and Hartford were the named defendants in

the cases involving the Lone Pine and Cooper sites, while INA

was the only defendant named in the case involving the Re-

Solve site. Otherwise, the pleadings in all five cases are

substantially identical.12

The insurers responded that the pollution exclusion

provisions in the insurance policies defeated coverage and

counterclaimed for reimbursement of the defense costs already

paid to Millipore for the Charles George and Cooper sites.

11. Under this agreement, INA sent $115,192.10 to Millipore
for its share of Millipore's defense costs, along with a
letter reserving the right to reimbursement. INA had
previously sent $40,844.15 Travelers paid Millipore a total
of $97,922.42 for defense fees; accompanying each payment
were letters in which Travelers specifically reserved the
right to seek reimbursement.

12. In each complaint, Count I asks for declaratory
judgment, Count II asserts claims under Mass. Gen. Laws chs.
93A and 176D, and Count III alleges breach of contract.

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The cases were consolidated before Judge Rya Zobel in the

District of Massachusetts.

In April 1994, following the close of extensive

discovery, the insurers moved for partial summary judgment,

seeking dismissal of Millipore's claims for declaratory

relief. Judge Zobel granted the insurers' motion in March

1995. She first rejected Millipore's argument that New

Jersey substantive law should apply to the sites in New

Jersey. She noted that "[t]he Massachusetts Supreme Judicial

Court has articulated a clear preference for the law of one

state to interpret multistate comprehensive general liability

policies," and reasoned that, "[a]s the place of plaintiff's

incorporation and its principal place of business,

Massachusetts has the most significant interest in this

lawsuit."

Judge Zobel also agreed with the insurers' argument

that the pollution exclusion clauses preclude coverage. She

stated that "a survey of the current caselaw suggests that it

is the initial release, not subsequent leakage or damage from

that release which determines the issue." She went on to

conclude that "the initial releases of pollutants into the

landfills . . . do not fall within the meaning of 'sudden and

accidental' as defined in the caselaw," because Millipore's

"waste disposal practices were a routine aspect of business

activity." The case subsequently was transferred to Judge

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George O'Toole when Judge Zobel became head of the Federal

Judicial Center.

Millipore moved for reconsideration on May 5, 1995

in light of new Massachusetts caselaw. On May 2, 1995, the

Supreme Judicial Court handed down Nashua Corp. v. First

State Insurance Co., 648 N.E.2d 1272 (Mass. 1995), construing

a pollution exclusion clause in a case involving an insurance

dispute between another company that disposed of waste at the

Silresim facility and its liability insurer. Nashua Corp.

held that, notwithstanding the history of routine polluting

activities by the operator of the Silresim site, the evidence

presented of a fire and subsequent explosion at Silresim

defeated the insurer's motion for summary judgment based on

the pollution exclusion. Id. at 1275-76. The court reasoned

that the fire and explosion caused the sudden and accidental

release of pollutants into the environment, thus placing the

resulting damage into the exception to the pollution

exclusion clause. Millipore argued that the same fire and

explosion at Silresim placed its resulting CERCLA liability

within the exception to the exclusion as well.

The district court denied the motion for

reconsideration in November 1995. Judge O'Toole held that

Nashua Corp. did not represent a change in Massachusetts

substantive law and therefore that reconsideration was not

warranted.

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The insurers then moved for summary judgment on

Millipore's remaining claims and on the counterclaims for

reimbursement for Millipore's defense costs. The district

court dismissed the breach of contract and bad faith

insurance practices claims.13

However, the district court ruled against the

insurers on their counterclaims, granting summary judgment in

favor of Millipore, on the theory that the insurers' duty to

defend is more expansive than their duty to indemnify. The

court reasoned that a finding that an insurer is not

contractually obligated to indemnify an insured does not

necessarily relieve the insurer of its duty to shoulder the

burden of defense, concluding that the insurers incurred the

defense costs in fulfilling their contractual obligations and

were thus not entitled to reimbursement.

Millipore now appeals, arguing that New Jersey law

governs the two New Jersey sites, and that under Nashua

Corp., the evidence that fires and other accidental events

caused the sudden and accidental release of pollutants

created a genuine issue of material fact, making a grant of

summary judgment inappropriate. INA and Travelers (but not

Hartford) cross-appeal from the district court's entry of

13. The bad faith insurance practices claims were dismissed
without prejudice to their reinstatement if the grant of
partial summary judgment for the insurers were to be
reversed; the court evidently viewed these claims as
derivative of the declaratory judgment action.

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judgment for Millipore on their counterclaims for

reimbursement for defense costs.

III.

Choice of Law

The parties dispute which state's law applies as to

Counts I and II,14 so we turn to Massachusetts choice of law

principles. Spurlin v. Merchants Ins. Co., 57 F.3d 9, 10

(1st Cir. 1995) (forum choice of law rules govern federal

courts sitting in diversity). Millipore argues that the law

of New Jersey should govern the dispute involving the New

Jersey sites, while the insurers contend that the law of

Massachusetts should be applied to the entire case. Our

review of the district court's choice of law determination is

de novo. In re San Juan Dupont Plaza Hotel Fire Litig., 45

F.3d 569, 576 (1st Cir. 1995).

The first step in performing a choice of law

analysis is to determine whether there is a conflict between

the substantive laws of the interested jurisdictions. New

Jersey insurance law recognizes the doctrine of regulatory

estoppel, which in this context limits the applicability of

the pollution exclusion clause as a result of

14. Count II alleges unfair and deceptive insurance
practices under Mass. Gen. Laws chs. 93A and 176D, and
therefore the question is not which state's law applies, but
whether plaintiff has created a genuine issue of material
fact as to whether the Massachusetts statutes are applicable
here. Cf. Roche v. Royal Bank of Canada, 109 F.3d 820, 829-

32 (1st Cir. 1997).

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misrepresentations allegedly made by the insurance industry

to insurance regulators about the purpose and scope of the

clause. Under New Jersey law, the meaning of the pollution

exclusion clause is limited by the insurance industry's

official explanation for its 1970 revisions to the standard

CGL policy. Consequently, the pollution exclusion clause is

construed to "provide coverage identical with that provided

under the prior occurrence-based policy, except that the

clause [is] interpreted to preclude coverage in cases in

which the insured intentionally discharges a known pollutant,

irrespective of whether the resulting property damage was

intended or expected." Morton Int'l, Inc. v. General

Accident Ins. Co. of Am., 629 A.2d 831, 875 (N.J. 1993).

Within this legal framework, Millipore would be entitled to

coverage for its CERCLA liability if it could prove that it

never intentionally discharged a known pollutant.

In contrast, the pollution exclusion clause is

interpreted much more expansively under Massachusetts law.

The SJC has never recognized New Jersey's doctrine of

regulatory estoppel in this context, and there is no

indication that Massachusetts would adopt the doctrine.

Indeed, in Lumbermens Mutual Casualty Co. v. Belleville

Industries, Inc., 555 N.E.2d 568 (Mass. 1990) ("Belleville

I"), the SJC refused to consider the drafting history of the

pollution exclusion clause in determining the meaning of the

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term 'sudden' in the clause. The court reasoned that the

term is unambiguous and therefore that no extrinsic evidence

is necessary to understand its meaning. Belleville I, 555

N.E.2d at 573; see also Polaroid Corp. v. Travelers Indem.

Co., 610 N.E.2d 912, 916 n.7 (Mass. 1993) (striking amici

curiae briefs solely devoted to discussing the drafting and

regulatory history of the pollution exclusion clause). Under

the Massachusetts interpretation of the pollution exclusion

clause, Millipore would need to make a stronger showing to

survive a motion for summary judgment. There is a conflict

between New Jersey and Massachusetts law over the

interpretation of the pollution exclusion clause.

The question becomes whether the district court

correctly applied Massachusetts law to the disputes involving

the New Jersey sites. This determination involves two

distinct analyses, one for the policies issued by Hartford

and INA to Millipore and the other for the policy issued by

Hartford to Worthington before it was acquired by

Millipore.15

15. All of Millipore's potential CERCLA liability for the
New Jersey sites arises out of the actions of Worthington, a
wholly owned subsidiary. A Hartford policy issued to
Worthington covers these two sites. INA policies issued to
Millipore also provide coverage to the New Jersey sites,
because these policies by their terms extended to Millipore
subsidiaries. Hartford also issued a policy directly to
Millipore during the relevant period. It is unclear,
however, whether Millipore sought coverage for liability at
the New Jersey sites under this policy as well as under the
policy issued to Worthington. No Travelers policies were

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Massachusetts courts take a flexible interest-based

approach to conflict of laws issues and will consider a wide

variety of factors in choosing the applicable law. Cosme v.

Whitin Mach. Works, Inc., 632 N.E.2d 832, 834 (Mass. 1994).

These factors include those listed in the Restatement

(Second) Conflict of Laws: (1) the needs of the interstate

and international system, (2) the policies of the forum, (3)

the policies of other interested jurisdictions, (4) the

protection of justified expectations, (5) the basic policies

underlying the particular field of law, (6) certainty,

predictability and uniformity of result, and (7) ease of

applicability. Bushkin Assocs., Inc. v. Raytheon Co., 473

N.E.2d 662, 669 (Mass. 1985) (citing Restatement (Second)

Conflict of Laws 6 (1971)). They also include factors

proposed by conflict of laws commentators: (1)

predictability, (2) maintaining interstate and international

order, (3) simplifying the judicial task, (4) advancing the

interests of the forum, and (5) applying the better legal

rule. Bushkin Assocs., 473 N.E.2d at 670 n.7 (citing Leflar,

American Conflicts Law 109, at 195 (3d ed. 1977)). The SJC

has indicated that it "feel[s] free . . . to borrow from any

of the various lists to help focus . . . attention on the

considerations particularly relevant to the case . . . ."

Bushkin Assocs., 473 N.E.2d at 670.

involved in the suits involving the New Jersey sites.

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22

The polices issued by Hartford and INA to Millipore

are multistate CGL policies. In addressing the choice of law

issue with respect to such policies, the SJC has articulated

a clear preference for looking to the law of one state to

govern the interpretation of such multistate policies.

United Techs. Corp. v. Liberty Mut. Ins. Co., 555 N.E.2d 224,

227 (Mass. 1990); W.R. Grace & Co. v. Hartford Accident &

Indem. Co., 555 N.E.2d 214, 221 (Mass. 1990). The SJC

reasoned that the expectations of the parties as well as

commercial realities require that the language in a single

set of insurance policies should mean the same thing in every

state. United Techs., 555 N.E.2d at 227 & n.10.

Under Massachusetts law, one jurisdiction's rules

of decision must be applied to all of the sites covered under

multistate CGL policies. Here, the state with the strongest

interest in seeing its substantive law applied to all of the

sites is Massachusetts. Massachusetts is Millipore's state

of incorporation and its principal place of business. Most

of the policies were negotiated and administered in and

around Boston. Three of the five sites are in Massachusetts.

We affirm the district court's decision to apply

Massachusetts law to the disputes involving coverage under

multistate CGL policies issued directly to Millipore of

liability at the New Jersey as well as at the Massachusetts

sites.

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23

The policy Hartford issued to Worthington before it

was acquired by Millipore is not, however, a multistate CGL

policy and so is not necessarily governed by the choice of

law rules set forth by the SJC for such policies. Instead,

we look again to Massachusetts choice of law rules for

guidance on the issue of what law should apply to the

insurance disputes involving this policy.

An important consideration is the expectation of

the parties at the time the policy was issued. It is

significant that Millipore only acquired Worthington after

Hartford had issued the policy under which coverage is

disputed. At the time the policy was issued, Worthington's

principal place of business was in New Jersey, as are the

covered sites. Both Worthington and Hartford would

reasonably have expected New Jersey law to govern the policy.

In addition, New Jersey has a strong interest in

the integrity of its insurance regulatory process. In

Morton, the highest court of New Jersey evinced its belief

that limiting the scope of the pollution exclusion clause

advances that interest. Morton, 629 A.2d at 875. Morton

also indicates that New Jersey public policy favors the

protection of New Jersey insureds, id.; Worthington was such

an insured at the time the Hartford policy was issued. New

Jersey thus has a strong interest in seeing its law applied

to this controversy.

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It is true that applying New Jersey law in this

instance would not advance the interest in uniformity. At

first blush it may seem somewhat anomalous to have the laws

of different states govern very similar CGL policies

providing coverage to the same sites. However, Worthington

and Millipore were unrelated entities at the time the

Hartford policy was issued; the expectations of the parties

and the legitimate interests of New Jersey should not be

defeated by the fortuity of the subsequent purchase. We

reverse the district court's decision to apply Massachusetts

law to the disputes involving the policy Hartford issued to

Worthington, and we hold that New Jersey law applies to that

policy. Thus, as to the New Jersey sites covered under the

policy Hartford issued to Worthington, we remand, without

further discussion of the facts concerning the releases or

the policy language, for consideration of liability on Counts

I and III under New Jersey law.

Travelers' Coverage Argument

Travelers' primary argument in support of its

motion for summary judgment is distinct from that of the

other two insurers. This argument involves the first step in

determining whether CERCLA liability is covered under a CGL

policy, that is, whether there was an "occurrence" within the

meaning of the policy. That determination is distinct from

the determination of whether there was a sudden and

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accidental event within the meaning of the pollution

exclusion clause: the focus in the former inquiry is on

whether there was property damage during the policy period,

while in the latter it is on the circumstances of the

release. Belleville I, 555 N.E.2d at 571 (noting that

failure to appreciate this distinction has led to analytical

confusion).

The language of the policy states that coverage is

provided for damages as a result of "bodily injury or . . .

property damage to which this insurance applies, caused by an

occurrence." The policy limits property damage to damage

occurring within the policy period. Travelers argues that

there was no property damage during its policy period.

The Travelers policy only insured the Silresim and

Charles George sites, and only for the period lasting from

April 1975 until July 1976. Travelers points out that

Millipore seeks coverage for damages arising out of events

taking place at the Silresim site between 1977 and 1983, and

at the Charles George site in 1980. These occurrences

postdated the end of the Travelers policy period, and

Travelers argues that there could have been no damage during

the policy period.

The issue is complicated somewhat by the fact that

Massachusetts has not yet ruled on the proper approach to

take in determining whether there has been actual property

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damage during the policy period. This was one of the

questions certified to the SJC in Belleville I, but that

court declined to answer the question due to an insufficient

factual record, and the issue remains open. Belleville I,

555 N.E.2d at 575 & n.9. The Belleville I court did note

that there are five viable approaches: the release theory,

the injury-in-fact theory, the manifestation theory, the

first discovery theory, and the continuous trigger theory.

Id. at 575-76. Here, we need not predict which approach

Massachusetts would adopt, as Millipore has not demonstrated

that there were any occurrences during the Travelers policy

period under any of the possible approaches.

The insured bears the burden of proving coverage,

see, e.g., United States Liab. Ins. Co. v. Selman, 70 F.3d

684, 688 (1st Cir. 1995), and Millipore essentially conceded

at oral argument that it had not met its burden of proving

that any damage occurred during the Travelers policy period.

Instead, Millipore argued that it should be allowed on remand

to put in additional evidence of abrupt and unexpected

events, such as fires, that occurred before or during the

policy period and that could have caused harm during the

policy period.16 Millipore, however, had ample opportunity

16. Due to the retroactive strict liability nature of the
CERCLA regime, a company may be responsible for damages
occurring before it began shipping waste to a site. As the
SJC explained in Aerovox:

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to create a record, and there has been no intervening

clarification of the governing law. Travelers first raised

the "occurrence" argument in its answer to the complaint,

putting Millipore on notice that it was contesting whether

there was harm during the policy period.17 Accordingly, we

affirm the grant of summary judgment in favor of Travelers.

The Pollution Exclusion Clauses Under Massachusetts Law

To analyze INA and Hartford's argument, we turn to

the pollution exclusion clause under Massachusetts law,

particularly in light of the recently decided cases of Nashua

Corp. v. First State Insurance Co., 648 N.E.2d 1272 (Mass.

1995) and Highlands Insurance Co. v. Aerovox Inc., 676 N.E.2d

801 (Mass. 1997). Nashua Corp. was decided after Judge Zobel

granted summary judgment against Millipore; Aerovox while

this appeal was pending. Prior to Nashua Corp. and Aerovox,

[Under CERCLA,] the allocation of damages
is not differentiated by the time when a
particular PRP sent contaminated waste to
the site or by the waste of a particular
PRP. Thus, the fact that [the insured]
did not ship waste to [the site] before
1973, fifteen years after the fire, does
not preclude the possibility that some
fraction of the damages [the insured] was
asked to pay resulted from the 1958 fire.

Aerovox, 676 N.E.2d at 806.

17. While it is true that Travelers erroneously termed this
argument an affirmative defense, suggesting that it bore the
burden of proof on the issue, this area of the law is
sufficiently well settled that Millipore should have known
that it would have to bear the burden of proving that damage
occurred during the policy period.

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28

the SJC had issued several decisions construing pollution

exclusion clauses in insurance contracts, establishing

general principles. However, it was unclear under what

circumstances damage due to the release of pollutants on

particular occasions would be covered under the sudden and

accidental exception to the pollution exclusion clause if the

insured had also engaged in pollution-generating activities

not subject to the exception over a longer period.

The SJC had ruled that "[t]he sudden event to which

the exception in the pollution exclusion clause applies

concerns neither the cause of the release of a pollutant nor

the damage caused by the release. It is the release of

pollutants itself that must have occurred suddenly, if the

exception is to apply . . . ." Belleville I, 555 N.E.2d at

571.18 The focus is therefore on the circumstances of the

release. Id.

As to the meaning of the term "sudden" the word has

a temporal element, and so the release of pollutants must be

abrupt (as well as accidental) for there to be coverage. Id.

18. The SJC later clarified that the circumstances
surrounding the event causing the release may be informative
in determining whether the release itself was sudden and
accidental. Goodman v. Aetna Cas. & Sur. Co., 593 N.E.2d

233, 235 (Mass. 1992). This court later held that, when
waste is poured directly into the ground (as opposed to first
being placed in a container), "the relevant discharge from
which the damage arose is clearly the disposal of waste
containing hazardous substances into the landfill." Warwick

Dyeing, 26 F.3d at 1204; cf. Patz v. St. Paul Fire & Marine

Ins. Co., 15 F.3d 699, 703-03 (7th Cir. 1994).

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29

at 572. The SJC further explained that a discharge

continuing over an extended period of time would likely cease

to be sudden. Liberty Mut. Ins. Co. v. SCA Servs., Inc., 588

N.E.2d 1346, 1350 (Mass. 1992).

With respect to the word "accidental," the SJC

ruled that, even if the insured did not intend the discharge

of pollutants, releases of pollutants are not sudden and

accidental when the insured turned the waste over to a waste

processor who intentionally discharged the pollutants.

Polaroid Corp., 610 N.E.2d at 915-16. This court held that,

under Massachusetts law, events "not clearly beyond . . .

long-range reasonable expectation[s]" cannot be considered

accidental. Lumbermens Mut. Cas. Co. v. Belleville Indus.,

Inc., 938 F.2d 1423, 1427 (1st Cir. 1991) (Belleville II).

The Belleville II court raised but declined to answer the

question at the heart of this case: "When, in the case of an

insured whose operations involve a likelihood of continuing

polluting releases, a court might properly identify a sudden

release so beyond the pale of reasonable expectability as to

be considered 'accidental,' we need not decide." Id.

Relying on this body of caselaw, Judge Zobel

sensibly concluded that the exception to the pollution

exclusion clause is not applicable if the harm is caused by

waste intentionally sent to a landfill. However, Nashua

Corp. and Aerovox, decided after her decision, make clear

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30

that the exception to the pollution exclusion clause may have

some force even in the context of a "pollution-prone

industry." Aerovox, 676 N.E.2d at 806 n.10.

In Nashua Corp., the SJC ruled that,

notwithstanding a company's history of routinely delivering

hazardous waste to a landfill, evidence of a subsequent

unexpected and abrupt release of a significant amount of

pollutants into the environment may sometimes defeat the

insurer's motion for summary judgment based on the pollution

exclusion clause. Nashua Corp., 648 N.E.2d at 1276. The

test set forth in Nashua Corp. draws on the reasoning in

Belleville II and focuses on the whether the triggering event

is common or uncommon. Id. Specifically, the Nashua Corp.

court found that evidence of a burst tank seal at one site

and a fire and subsequent explosion at another site

(Silresim) created a genuine issue of material fact as to

whether the relevant releases were sudden and accidental.

Id.

The court in Aerovox reaffirmed the principles set

forth in Nashua Corp., explaining that the test is whether

the triggering event is "so beyond the pale of reasonable

expectability as to be considered 'accidental.'" Aerovox,

676 N.E.2d at 806 n.10. Aerovox further held that "the

insured must bear the burden of proving that the

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31

contamination was caused by a sudden and accidental release."

Id. at 805.19

Aerovox focused on whether the damage resulting

from a release which might meet Nashua Corp.'s sudden and

accidental test in fact led to any identifiable damages that

were more than de minimis. After Aerovox, an insured, to

survive a motion for summary judgment, must "raise a factual

issue as to whether the sudden and accidental release caused

an appreciable amount of the damage for which it is being

held liable." Aerovox, 676 N.E.2d at 806.

In light of these intervening cases, we think there

was error in the denial of the motion for reconsideration.

Nashua Corp. and Aerovox are significant decisions, raising

the possibility of at least partial insurance recovery where

many thought, based on prior law, that no such possibility

existed. Aerovox arguably requires a new level of precision

in proving a causal connection between a particular event and

particular damages. The parties are entitled to have their

arguments viewed in this new light.

19. Judge O'Toole apparently denied the motion for
reconsideration on the premise that Judge Zobel had applied
the correct legal standard but had concluded that the
plaintiff's factual showing had been insufficient to defeat a
motion for summary judgment. However, we understand the
Zobel opinion differently, as having been issued before, and
without the assistance of, Nashua Corp. and Aerovox. Judge

O'Toole did not have the assistance of Aerovox.

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32

The insurers ask that we nevertheless affirm the

grant of summary judgment based on the factual record which

was submitted to Judge Zobel before the clarification of the

law occasioned by Nashua Corp. and Aerovox. The insurers

rely on the fact that in Aerovox, the SJC, as a matter of

state law, granted summary judgment against the insured, even

though the record was compiled before that parties had the

benefit of the Nashua Corp. decision. The insurers argue

with some merit that the affidavits submitted by Millipore

relating to the three Massachusetts sites are no more precise

than those found wanting by the SJC in Aerovox; they argue

with less merit that affidavits Millipore submitted as to the

New Jersey sites suffer from similar weaknesses.

We decline the insurers' invitation for two

reasons. The first is that these initial judgments as to the

adequacy of a record on summary judgment are better made by

the trial court in the first instance. See, e.g., Vicknair

v. Formosa Plastics Corp., 98 F.3d 837, 839 (5th Cir. 1996)

(vacating and remanding for prudential reasons in light of

changed law to afford the trial court the first opportunity

to apply new law to the facts of the case); Satcher v. Honda

Motor Co., Ltd., 993 F.2d 56, 57 (5th Cir. 1993) ("The

district court, with its extensive knowledge of the facts and

proceedings in this case, is in a far better position than

are we to address and to first apply" new caselaw.); cf.

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33

Thomas v. American Home Prods., Inc., 117 S. Ct. 282 (1996)

(mem.) (explaining the Court's practice of vacating and

remanding in light of changed state law). The second reason

for remand is that we think the better, fairer outcome is to

permit the parties to make new submissions, if they wish, in

light of the significant intervening clarification of the

law. See, e.g., Naturist Society, Inc. v. Fillyaw, 958 F.2d

1515, 1524 (11th Cir. 1992) (finding it "inapproriate" to

consider parties claims' without further factfinding in light

of newly amended state regulations); Brinley v. Commissioner,

782 F.2d 1326 (5th Cir. 1986) ("justice requires" remand to

allow submission of additional evidence in light of newly

announced legal standard). The district court may wish to

keep the parties on a short leash as to the timing of any

further submissions. We do not suggest that the parties are

entitled to any more discovery: after almost six years of

litigation, they should know their cases and be prepared to

make their best showings.

We wish to be clear. To survive the motions for

summary judgment, Millipore must present specific evidence

creating a genuine issue as to whether the incidents at the

sites were sudden and accidental and caused more than a de

minimis release of pollutants into the environment. See

Aerovox, 676 N.E.2d at 806. To the extent that Millipore

chooses to rely on expert opinions, they must be more than

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34

"conclusory assertion[s] about ultimate legal issues." Hayes

v. Douglas Dynamics, Inc., 8 F.3d 88, 92 (1st Cir. 1993). We

are "not willing to allow the reliance on a bare ultimate

expert conclusion to become a free pass to trial." Id.

Whether this partial victory proves Pyrrhic for

Millipore remains to be seen -- the costs of insurance

coverage litigation may sometimes outstrip the small amount

of damages that an insured may be able to prove lie outside

the pollution exclusion clause. The parties may wish to

consider whether their best interests lie in a solution by

agreement.

Reimbursement for Defense Costs

Finally, there are the insurers' counterclaims for

reimbursement for money paid to Millipore for its defense

costs in the underlying Charles George and Cooper suits. INA

and Travelers contend that the district court's decision to

enter judgment in favor of Millipore on the counterclaims was

based on the erroneous assumption that the insurers had a

duty to defend Millipore until the district court issued its

opinion stating that the pollution exclusion clause precluded

coverage here. The insurers argue that, since they never had

a duty to defend or indemnify Millipore, and since they

reserved the right to reimbursement for any defense costs

paid to Millipore, they are entitled to recover in full the

sums they paid to Millipore.

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35

Under Massachusetts law, an insurer's duty to

defend an insured is more expansive than its duty to

indemnify. Boston Symphony Orchestra v. Commercial Union

Ins. Co., 545 N.E.2d 1156, 1158 (Mass. 1989). The duty to

defend is antecedent to, and independent of, the duty to

indemnify; the obligation of the insurer to defend is not

determined "by reference to the facts proven at trial.

Rather, the duty to defend is based on the facts alleged in

the complaint . . . ." Id.

The test for determining whether an insurer has a

duty to defend is well-established. Whether there is such a

duty is decided by:

matching the third-party complaint with
the policy provisions: if the allegations
of the complaint are 'reasonably
susceptible' of an interpretation that
they state or adumbrate a claim covered
by the policy terms, the insurer must
undertake the defense . . . .

Liberty Mut. Ins. Co. v. SCA Servs., 588 N.E.2d 1346, 1347

(1992) (quoting Sterlite Corp. v. Continental Cas. Corp., 458

N.E.2d 338, 340 (Mass. App. Ct. 1983)). Another way of

putting the point is that there is no duty to defend if, at

the time the claims were advanced, the insurer "could

reasonably have concluded that no aspect of the . . . claims"

fell within the scope of coverage. Polaroid Corp., 610

N.E.2d at 916.

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36

We agree with the district court that the

complaints against Millipore involving the Charles George and

Cooper sites are reasonably interpreted as stating claims

covered under the INA policies. The complaints allege claims

pursuant to CERCLA and other federal and state statutes

arising out of Millipore's generation of hazardous wastes

disposed of at the Charles George site and the spillage of

trichloroethylene at the Cooper site. These events are

clearly occurrences under the INA policies, and while the

resulting damage is pollution related, it at least arguably

falls under the exception to the pollution exclusion clause.

This conclusion is a corollary of our decision to vacate the

grant of summary judgment and remand to the district court.

The possibility of coverage is sufficient to trigger the duty

to defend. Sterlite Corp., 458 N.E.2d at 341.

Travelers' counterclaim presents a more difficult

question, but on balance we agree with the district court's

finding that Travelers had a duty to defend Millipore in the

underlying Charles George action. The amended complaints

filed by the United States and the Commonwealth in the

underlying Charles George action allege that between, at

least 1971 and 1983, a landfill was operated at the Charles

George site, and that, between at least 1973 and 1976,

hazardous wastes were disposed of there. Millipore, among

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37

others, is alleged to have generated hazardous substances

that were disposed of at the site.

The Travelers policy provides coverage for the

period between April 1975 and July 1976, and thus, according

to the complaints of the United States and the Commonwealth,

covers part of the time during which hazardous wastes were

shipped to the landfill. The facts alleged in the complaint

raised the possibility that some of the property damage at

the Charles George site occurred within the policy period.

The later determination that Millipore has not met its burden

of showing an occurrence during the policy period does not

negate the duty to defend, which grows out of the allegations

in the complaint against the insured. Boston Symphony

Orchestra, 545 N.E.2d at 1158; Nashua Corp. v. Liberty Mut.

Ins. Co., 1997 WL 89163 (Mass. Super. Ct. Feb. 18, 1997)

("[W]here a complaint is susceptible on its face of a reading

that brings the claim within the polciy, the insurer cannot

rely on facts outside the complaint to justify a unilateral

refusal to defend."). And the complaints are reasonably

susceptible to an interpretation under which the releases of

pollutants were not, in the language of the Travelers policy,

"either expected or intended from the standpoint of any

insured, or any person or organization for whose acts or

omissions any insured is liable."

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38

It is true that the Travelers pollution exclusion

clause also precludes coverage for damage "resulting from or

contributed to by any condition in violation of or non-

compliance with any governmental rule, regulation, or law

applicable thereto." The government complaints refer to the

Commonwealth's action against the operators of the Charles

George Landfill for violations of state environmental laws

and regulations, and to improper disposal of waste at the

site. This raises the distinct possibility that some of the

claims would be precluded from coverage on this basis.

However, although the question is a close one, we do not

believe that the complaints could reasonably have led

Travelers to conclude that no aspect of the claims fell

within the scope of coverage. See Polaroid Corp., 610 N.E.2d

at 916.

IV.

The decision of the district court is affirmed in

part, reversed in part and remanded for proceedings

consistent with this opinion. We affirm the district court's

ruling that Massachusetts law applies to all claims under the

multistate CGL policies issued directly to Millipore.

However, we hold that New Jersey law applies to claims

brought under the policy Hartford issued to Worthington, and

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39

remand for consideration of those claims under New Jersey

law.

With respect to the claims brought under the

multistate CGL policies issued directly to Millipore --

claims which involve all five sites and which are governed by

Massachusetts law -- we affirm the district court's grant of

summary judgment in favor of Travelers but we reverse the

grant of summary judgment in favor of INA and Hartford on all

three counts.20 We remand to allow the parties to submit

renewed affidavits in light of the standards articulated by

the SJC in Aerovox and Nashua Corp. And we affirm the

district court's grant of summary judgment in Millipore's

favor on the insurers' counterclaims for reimbursement of

defense costs.

20. We also reverse with respect to the claims based on the
Hartford policies issued by Hartford to Waters Associates, a
Massachusetts company acquired by Millipore in 1980.

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