“Sudden and Accidental” And Statute of Limitations Are Jury Questions

A  Massachusetts Court of Appeals, applying Massachusetts law, reversed summary judgment to various insurers against Narragansett Electric Co. (“NEC”) for environmental damage claims on the grounds that the timing of the insurers’ denial of the claims presented a fact question that should have been submitted to a jury. In a separate unpublished opinion entered the same day, the Court of Appeals, applying Rhode Island law, reversed the trial court’s entry of summary judgment in favor of the insurers on pollution exclusion grounds because there was a material question of fact as to whether the contamination was “sudden and accidental.”

The underlying claims arose out of demands by the Rhode Island Department of Environmental Management that certain utility and waste disposal sites, used from the mid-1800s up until the 1980s, be remediated. The carriers denied NEC’s claims on several grounds, including pollution exclusions and that coverage was not triggered. The trial court determined that Rhode Island law applied to substantive issues while Massachusetts law applied to procedural issues. The trial court entered summary judgment for the insurers on statute of limitations grounds as to some of the sites and on pollution exclusion grounds as to other sites.

As to the statute of limitations issue, the Court of Appeals determined that Massachusetts’s six-year limit governed under Massachusetts’s conflict of law rules. The court further held that NEC’s claims accrued when the insurers failed or refused to pay defense and indemnity under the policies, rejecting NEC’s arguments that they did not accrue until final judgment or settlement of the underlying cases. As the parties disputed which of the insurers’ letters constituted denials/disclaimers, the Court of Appeals held that the issue of when each insurer disclaimed coverage was a question material of fact for a jury and inappropriate for determination on summary judgment. Therefore, it found that the trial court was incorrect in allowing litigation as to only one of the eight sites to go to trial, while granting summary judgment as to the other seven sites.

The Court of Appeals also held that the trial court erred in dismissing NEC’s claims as to certain sites, where there was no RIDEM action, with prejudice. The court said that because there was no justiciable controversy as to those claims, the trial court lacked subject matter jurisdiction to dismiss the claims labeled “with prejudice.”

As to the pollution exclusion, in a separate unpublished opinion entered the same day, the Court of Appeals reversed the trial court and held that coverage was not barred by the policies’ pollution exclusions as a matter of law. The court reasoned that the evidence raised a question of fact as to whether NEC took reasonable steps to dispose of waste in a manner that complied with the highest standards of waste disposal at the time because, under Rhode Island law, “sudden and accidental” is construed to mean “unintended and unexpected.” Citing the Rhode Island Supreme Court, the Appeals Court stated that an insured “that exercises good faith in disposing of its wastes safely should be rewarded with coverage under the sudden and accidental exception when an unexpected discharge occurs despite those efforts.”

The court also affirmed other summary judgment orders in favor of certain insurers, finding that there was no question of fact that the waste disposal did not occur during the dates of coverage, and because the mere migration of contamination is not an “event” under Rhode Island law, the policies were not triggered.

The court additionally affirmed other jury verdicts in favor of the policyholder. OneBeacon America Ins. Co. v. Narragansett Electric Co., No. 13-P-1240 (Mass. App. Ct. Jun. 3, 2015).