
USCA1 Opinion

	




          December 16, 1992                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                _____________________        No. 92-1588        No. 92-1588                        HIGH VOLTAGE ENGINEERING CORPORATION,                        HIGH VOLTAGE ENGINEERING CORPORATION,                                Plaintiff, Appellant,                                Plaintiff, Appellant,                                          v.                                          v.                              FEDERAL INSURANCE COMPANY,                              FEDERAL INSURANCE COMPANY,                                 Defendant, Appellee.                                 Defendant, Appellee.                                 ____________________                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                          FOR THE DISTRICT OF MASSACHUSETTS                    [Hon. Walter Jay Skinner, U.S. District Judge]                    [Hon. Walter Jay Skinner, U.S. District Judge]                                              ___________________                                 ____________________                                 ____________________                                        Before                                        Before                                  Cyr, Circuit Judge,                                  Cyr, Circuit Judge,                                       _____________                            Bownes, Senior Circuit Judge,                            Bownes, Senior Circuit Judge,                                    ____________________                             and Fust ,* District Judge.                             and Fust ,* District Judge.                                         ______________                                 ____________________                                 ____________________             William G. Southard with whom Sarah B. Porter and Bingham, Dana &             William G. Southard with whom Sarah B. Porter and Bingham, Dana &             ___________________           _______________     _______________        Gould were on brief for appellant.        Gould were on brief for appellant.        _____             Peter G. Hermes with whom Mark E. Young and Peabody & Arnold were             Peter G. Hermes with whom Mark E. Young and Peabody & Arnold were             _______________           _____________     ________________        on brief for appellee.        on brief for appellee.                                 ____________________                                 ____________________                                 ____________________                                 ____________________        *Of the District of Puerto Rico, sitting by designation.        *Of the District of Puerto Rico, sitting by designation.                    CYR, Circuit Judge.  Appellant High Voltage Engineering                    CYR, Circuit Judge.                         _____________          Corporation ("High Voltage") instituted  this diversity action in          the United  States District Court  for the District  of Massachu-          setts  against  Federal Insurance  Company  ("Federal") demanding          reimbursement  of costs  incurred  in defending  and indemnifying          certain of  its officers  and directors  in  an underlying  state          court action.   The district court  granted summary judgment  for          Federal, on the ground that insurance coverage was excluded under          the pollution exclusion clause.  We affirm.                                          I                                          I                                      BACKGROUND                                      BACKGROUND                                      __________          A.  The Underlying State Court Action          A.  The Underlying State Court Action              _________________________________                    On September 14, 1983,  American Landmark  Development,          Inc. ("Landmark")  agreed to buy thirty-four  acres of commercial          real estate in Burlington, Massachusetts ("Burlington site") from          High Voltage.   Landmark assigned  its purchase  rights to  Oskar          Brecher and Bruce Silverman, d/b/a American Landmark Partners and          American  Landmark Partners II  ("ALP").  On  March 27, 1984, ALP          purchased the Burlington site  from High Voltage and leased  back          the portion on which High Voltage was to continue its manufactur-          ing operation.                    At the time of the sale, the Chief Executive Officer of          High  Voltage assured ALP that  the Burlington site  had not been          contaminated  by  hazardous  waste during  the  preceding fifteen          years.   Three years later,  in March  1987, hazardous  materials          were  discovered in  the soil,  groundwater, and  bedrock  at the          Burlington site.   The contaminants were most  conspicuous near a          degreaser unit operated  by High Voltage.   The cleaning solvents          utilized in the High Voltage degreaser unit were identical to the          contaminants found in  the surrounding area.   ALP notified  High          Voltage  and attempted to arrive  at a settlement  on the cleanup          costs.                    In December 1987, High  Voltage became the target  of a          hostile  tender   offer   by  Natalie   Acquisition   Corporation          ("Natalie"),  a  subsidiary  of  Hyde Park  Partners,  a  limited          partnership  controlled  by  Clifford  Press and  Laurence  Levy.          Natalie borrowed  $51 million  from Marine Midland  National Bank          ("Marine  Midland")  to  finance  Natalie's  acquisition  of High          Voltage's stock.  By March 1988, Natalie had acquired 94% of High          Voltage's stock, and Press and Levy became officers and directors          of High Voltage.   In August 1988, Press and  Levy merged Natalie          into High Voltage,  and High  Voltage assumed  liability for  the          Marine Midland  loans with  which the High  Voltage takeover  had          been financed.                    Meantime,  ALP met  with  little success  in persuading          High Voltage to clean  up the hazardous wastes at  the Burlington          site.  In  February 1988,  ALP again demanded  that High  Voltage          accept responsibility  for  the  cleanup.   In  March  1988,  ALP          threatened  legal  action  unless  High Voltage  cleaned  up  the          contamination  and compensated  ALP in  damages.   Ultimately, in          September 1988,  ALP brought an action  in Massachusetts Superior                                          4          Court demanding declaratory, injunctive, and monetary relief from          High Voltage, Press, and Levy, among others.          B.  The Present Dispute          B.  The Present Dispute              ___________________                    In October  1987, prior  to Natalie's takeover  of High          Voltage  but  after  the discovery  of  the  contaminants  at the          Burlington  site,  Federal  issued  an  executive  liability  and          indemnity policy  to High Voltage, insuring  High Voltage's offi-          cers and directors against loss  occasioned by third party claims          for  wrongful  acts committed  during  the policy  period.   High          Voltage  itself was  insured under  the policy  for defending  or          indemnifying  its  officers  and  directors  against  third party          claims.   The coverage exclusions  in the Federal policy included          the  pollution exclusion clause  at issue in  the present dispute          and a property damage exclusion clause.                    In April  1988, High Voltage notified  Federal of ALP's          threats  to initiate legal  action, and in  October 1988 provided          Federal  with  a copy  of the  ALP  complaint.   Federal declined          coverage, citing the pollution and property damage exclusions.                    High  Voltage initiated  the present  diversity action,          seeking a judicial declaration that Federal was liable  under the          policy for losses incurred  by High Voltage and its  officers and          directors in connection with the  ALP action, damages for  breach          of  contract,  and  damages  for unfair  and  deceptive  business          practices  under  Mass.  Gen. L.  ch.  93A.   Subsequently,  High          Voltage  dropped all  demands for  relief,  except its  claim for                                          5          damages incurred in behalf  of Press and Levy in  connection with          count  XIV of  the ALP  complaint alleging  unfair and  deceptive          trade practices under Mass. Gen.  L. ch. 93A.  Federal moved  for          summary judgment  under the pollution and  property damage exclu-          sion clauses.  High  Voltage countered with a motion  for partial          summary  judgment  relating  to the  same  issues.    Finding "no          relevant ambiguity in the [p]olicy, or  uncertainty in the facts,          which would  justify denying  effect to the  [p]olicy's pollution          exclusion," the  district court  concluded that the  High Voltage          claims  "clearly lie  outside the  [p]olicy's coverage  under the          circumstances in this case."   On appeal, High Voltage challenges          the grant of summary judgment.                                          II                                          II                                      DISCUSSION                                      DISCUSSION                                      __________                    "We review de novo  to ensure that no genuine  issue of                               __ ____          material fact  . . .  has been  overlooked  and that  . . .  [the          moving party was]  entitled to  summary judgment as  a matter  of          law."  Jimenez v. Peninsular & Oriental Steam Navigation Co., 974                 _______    __________________________________________          F.2d 221, 222 (1st Cir. 1992) (citing Milton v. Van Dorn Co., 961                                                ______    ____________          F.2d 965, 969  (1st Cir. 1992)).  The proper interpretation of an          insurance policy presents a question of law.  Nieves v. Intercon-                                                        ______    _________          tinental Life  Ins. Co. of Puerto Rico, 964 F.2d 60, 63 (1st Cir.          ______________________________________          1992);  see also Atlas Pallet,  Inc. v. Gallagher,  725 F.2d 131,                  ___ ____ ___________________    _________          134 (1st Cir.  1984).  As  the findings of  fact material to  the                                          6          present  appeal are  undisputed, we  need only  determine whether          Federal is entitled to judgment as a matter of law.                    The ALP complaint in  the underlying state court action          comprises   seventeen  counts  against  numerous  defendants  and          alleges violations of the Massachusetts Oil and Hazardous Materi-          al Release Prevention Act,  breach of warranty, breach of  lease,          deceit, trespass, and negligence.  The  relief ALP sought includ-          ed:  an  injunction directing defendants to assess,  contain, and          remove hazardous  waste contamination at the  Burlington site and          to  cease  and  desist  from further  releases  of  contaminants;          damages caused by the  contamination; damages resulting from High          Voltage's unfair  and deceptive practices,  including its alleged          misrepresentation and concealment and its failure to clean up the          contamination; damages for breach of its warranty relating to the          absence  of site  contamination; the  annulment, as  a fraudulent          conveyance, of  High Voltage's  agreement to satisfy  Marine Mid-          land's loans to Natalie, the proceeds from which were used to buy          High  Voltage  stock;  annulment  of the  High  Voltage  security          agreement with  Marine Midland, granting  security interests  and          mortgages in  all High  Voltage assets, which  allegedly rendered          High Voltage insolvent and placed its assets beyond  ALP's reach;          and  an  injunction against  the  liquidation  of High  Voltage's          assets and  the  conveyance of  any additional  assets to  Marine          Midland.                    The controversy on appeal focuses on count XIV of ALP's          complaint  in the underlying state court action.  Count XIV names                                          7          Press,  Levy, and  Hyde Park Partners  as defendants  and charges          unfair and deceptive  trade practices in violation  of Mass. Gen.          L.  ch. 93A.  The  relevant substantive allegations  in count XIV          are as follows:                       161.   On  information  and  belief, Press  and                    Levy, on behalf of Hyde Park Partners, control the                    affairs  of High  Voltage and  have for  their own                    personal benefit intentionally stalled  the Plain-                    tiffs in order to consummate the  merger, document                    High Voltage's obligation and collateral to Marine                    Midland,  and liquidate  assets  of  High  Voltage                    without making them available to the Plaintiffs.                       162.  On  information and  belief, Press,  Levy                    and Hyde  Park Partners have exerted their control                    over High  Voltage to  cause High Voltage  to take                    minimal  action  in regards  to  the contamination                    problem; have delayed the progress by firing engi-                    neers previously retained by  them and by limiting                    the efforts of the engineers currently retained by                    High  Voltage;  and  have  knowingly  injured  the                    Plaintiffs, for the personal  gain of Press,  Levy                    and Hyde Park Partners.                    . . . .                       166.   Press, Levy  and Hyde Park  Partners, in                    their conduct  towards  the Plaintiffs,  have  em-                    ployed  unfair  and deceptive  acts  and practices                    against the Plaintiffs, primarily and substantial-                    ly  in the  Commonwealth of  Massachusetts in  the                    conduct of a trade or commerce, each and every one                    of which is a  separate and distinct cause of  ac-                    tion,  including, but  not necessarily  limited to                    the following:                              a.   By  using their  control  over  the                         affairs of  High Voltage to attempt  to sabo-                         tage the Plaintiffs' development of the [Bur-                         lington site].                              b.  By  deceiving and stalling  the                         Plaintiffs for their own personal gain.                              c.   By attempting  to use economic                         duress against the  Plaintiffs to  force                         them to abandon their claim against High                         Voltage,  and to enable  High Voltage to                                          8                         attempt  to  liquidate  the  Plaintiffs'                         promissory note to High Voltage.                              d.   By  using their  control over  High                         Voltage  to cause High Voltage to continue to                         fail to  remove said contamination  from [the                         Burlington site].                              e.   By  using their  control over  High                         Voltage to cause High Voltage to fraudulently                         convey its assets to Marine Midland.                              f.   By  using their  control over  High                         Voltage  to  interfere  with the  contractual                         relations  between  the  Plaintiffs and  High                         Voltage, and  to cause High Voltage to breach                         its contracts  with and other  obligations to                         the Plaintiffs.                              g.  By causing High Voltage to negotiate                         with the Plaintiffs in bad faith as aforesaid                         in  order to stall the Plaintiffs from pursu-                         ing their rights against High Voltage.                              h.   By causing High Voltage to act in a                         manner designed  to  continue to  injure  the                         Plaintiffs,  to  continue  to  frustrate  the                         Plaintiffs  in their  efforts  to remove  the                         hazardous  materials   from  the  [Burlington                         site],  to place the Plaintiffs in a position                         of economic duress.                              i.   By causing  High Voltage to  breach                         its  obligation of good  faith and fair deal-                         ing.                    The pollution exclusion clause in the Federal insurance          policy provides:                    [Federal] shall not be liable under this policy to                    make any  payment for Loss in  connection with any                    claim(s) made against any Insured  Person(s) . . .                    (D) where all or  part of such claim  is, directly                              ___ __  ____                    ________                    or indirectly, based  on, attributable to, arising                    __ __________                    out of, resulting from or in any manner related to                                              __ ___ ______ _______ __                    the Insured's Wrongful Act(s) concerning:                    ___ _________ ________ ______ __________                           (1)    the  actual, alleged  or  threatened                                  ___          _______                         discharge,  release  or escape  of Pollutants                         _________   _______  __ ______  __ __________                         into or on  real or personal  property, water                         or the atmosphere.                           (2) any Loss or  expense arising out of any                               ___ ____ __  _______ _______ ___ __ ___                         direction  or request  that the  Insured test                         _________  __ _______  ____ ___  _______                                          9                         for,  monitor,  clean  up,  remove,  contain,                                         _____  __   ______   _______                         treat, detoxify or neutralize Pollutants.1                         _____  ________ __ __________ __________          (Emphasis added.)  The policy defines "Loss" as "the total amount          which  any Insured Person(s) becomes  legally obligated to pay on          account of each claim and for all claims in each Policy Year made          against  them  for  Wrongful  Acts for  which  coverage  applies,          including, but not limited  to, damages, judgments,  settlements,          costs  and Defense  Costs."   A  "Wrongful  Act" is  "any  error,          misstatement,  misleading statement,  act, omission,  neglect, or          breach of  duty committed,  attempted, or allegedly  committed or          attempted, by  any Insured Person, individually  or otherwise, in          his Insured Capacity, or any matter claimed against him solely by          reason of his serving in such Insured Capacity."                    The parties agree that  Massachusetts law applies.  See                                                                        ___          Mathewson  Corp. v. Allied Marine Indus., Inc., 827 F.2d 850, 853          ________________    __________________________          n.3 (1st  Cir. 1987)  (accepting parties'  "expressed preference"          for the  application of Massachusetts law).   Under Massachusetts          law, "[t]he first approach to the question of interpretation must          be to read  [the] policy as one would read  any ordinary contract             to inquire what the simplified, conversational language of the          policy would  mean  to  a  reader applying  normal  reasoning  or          analysis."  Commerce  Ins. Co. v.  Koch, 25  Mass. App. Ct.  383,                      __________________     ____          384, 522 N.E.2d 979,  980 (1988).   See also Nelson v.  Cambridge                                              ___ ____ ______     _________                                        ____________________               1The  policy  identifies  terms  defined  elsewhere  in  the          instrument  with capital letters and bold type in some places and          capital  letters and  quotation  marks in  others.   To  minimize          confusion,  we retain the  capital letters in  direct quotes from          the policy, but dispense with the bold type and quotation marks.                                          10          Mut.  Fire Ins. Co., 30 Mass. App.  Ct. 671, 673, 572 N.E.2d 594,          ___________________          596  (1991).  "A policy of insurance whose provisions are plainly          and definitely expressed in appropriate language must be enforced          in accordance  with its terms."   Stankus v.  New York Life  Ins.                                            _______     ___________________          Co., 312 Mass. 366, 369,  44 N.E.2d 687, 689 (1942); see  Cody v.          ___                                                  ___  ____          Connecticut  Gen. Life Ins. Co.,  387 Mass. 142,  146, 439 N.E.2d          _______________________________          234, 237 (1982); Nelson, 30 Mass. App. Ct. at 673,  572 N.E.2d at                           ______          596.  But "where language  in an insurance policy is found  to be          ambiguous, 'doubts as to  the intended meaning of the  words must          be resolved against the insurance company that employed them  and          in favor of the insured.'"  Id. (quoting August A. Busch & Co. v.                                      ___          _____________________          Liberty Mut. Ins. Co.,  339 Mass. 239,  243, 158 N.E.2d 351,  353          _____________________          (1959)).  Coverage  exclusions are to  be strictly construed  and          any  ambiguity  is to  be interpreted  in  favor of  the insured.          Andover Newton Theological School,  Inc. v. Continental Cas. Co.,          ________________________________________    ____________________          930 F.2d 89, 93 (1st Cir. 1991) (applying Massachusetts law).                    The district court ruled that                    [c]ount  XIV  of  the   underlying  complaint                    clearly alleges claims which are "directly or                                                      ________ __                    indirectly, based on, attributable  to, aris-                    __________                    ing out  of, resulting from or  in any manner                                                    __ ___ ______                    related  to  [Press  and   Levy's]  'Wrongful                    _______  __                          ________                    Act(s)'  concerning  the  actual, alleged  or                    ______   __________                    threatened  discharge,  release or  escape of                    'pollutants'  into or  on  real  or  personal                    property, water or the atmosphere." . . . The                    unfair  and deceptive  acts alleged  in count                    XIV constitute Wrongful  Acts under   9.1  of                    the Policy,  which in context  clearly relate                    to the pollution of the site.                                          11          (Emphasis added.)   The crux of the High  Voltage claim on appeal          is  that count XIV of the ALP complaint alleges certain "wrongful          acts"  by Press and  Levy that  do not  "concern" the  release of          pollutants,  and therefore are not  excluded from coverage by the          pollution exclusion clause.   High Voltage specifically cites, as          examples,  the  allegations that  Press  and  Levy stalled  ALP's          pursuit of its claim  against High Voltage in order  to liquidate          High Voltage  assets for  their personal gain,  fraudulently con-          veyed High Voltage assets,  frustrated ALP's real estate develop-          ment  efforts,  and sought  to compel  ALP  to abandon  its claim          against  High Voltage.   As  each is  delineated a  "separate and          distinct cause  of action," High  Voltage urges  that the  claims          alleged in   166  of the  ALP complaint, see  supra pp. 7-8,  are                                                   ___  _____          independent of all pollution-related claims, hence not within the          purview of the pollution exclusion clause.  In order to ascertain          whether the pollution  exclusion applies to  the claims in  count          XIV for which  High Voltage seeks reimbursement from  Federal, we          must determine  whether "all or part  of" the claims  are "in any          manner related" to "wrongful acts"2 of Press and Levy  concerning          either  the release of pollutants or "any Loss or expense arising          out  of any  direction  or request  that  the Insured  test  for,          monitor, clean up, remove, contain, treat, detoxify or neutralize          Pollutants."                                        ____________________               2The  policy  definition  of  "wrongful  act"  includes acts          "allegedly committed or attempted."                                          12                    As  High Voltage  views  the matter,  neither the  com-          plaint's  primary  focus  on pollution-related  claims,  nor  its          inclusion of non-contamination  claims traceable  to the  alleged          contamination, triggers  the pollution  exclusion clause.   As we          see it,  however,  there could  be  no legally  cognizable  claim          against Press or Levy  in the underlying state court  action, but                                                                        ___          for the  alleged "wrongful  acts" indisputably related  to pollu-          ___          tion.                    Contrary to  High Voltage's contention that  the pollu-          tion  exclusion clause  is only implicated  if a  claim expressly          alleges a release of  pollutants "participated in, authorized, or          approved" by the insured,  its unambiguous language excludes from          coverage  any claim  "all  or part  of  [which] is,  directly  or                                ___  __ ____                   ________  __          indirectly, based on, attributable  to, arising out of, resulting          __________          from  or in any manner  related to the  Insured's Wrongful Act(s)                   __ ___ ______  _______ __ ___  _________ ________ ______          concerning" a release  of pollutants.   (Emphasis added.)   Under          __________          the construction urged by  High Voltage, the unambiguously expan-          sive language of the pollution exclusion clause would be rendered          superfluous.   See,  e.g., Edmund Wright  Ginsberg Corp.  v. C.D.                         ___   ____  ______ ______  ________ ____      ____          Kepner Leather Co., 317 Mass. 581, 587, 59 N.E.2d 253 (1945) ("It          ______ _______ ___          is  a general rule in the construction of contracts that whenever          practicable every word shall be given some effect.").  We decline          to adopt the gratuitous interpretation urged by  High Voltage, as          the unambiguous pollution  exclusion clause  plainly requires  no          direct relationship  between the claim and  the alleged "wrongful                                          13          act;"  a claim  "indirectly" related to  the "wrongful  act," "in          whole or in part" and "in any manner," is excluded from coverage.                    High Voltage  concedes that the "general  theme" of the          complaint  is the  existence of  contamination at  the Burlington          site and that "aspects" of count XIV    specifically, the allega-          tions that  Press and Levy  prevented High Voltage  from removing          the  contamination and  frustrated  ALP's efforts  to remove  the          contamination    concern  pollution.  In our view,  these allega-          tions form the  core of ALP's claim against Press  and Levy.  The          remaining claims in count XIV either restate these allegations or          specify particular actions allegedly undertaken by Press and Levy          in order to prevent  removal of the contamination.   For example,          the  allegations  that Press  and Levy  stalled  ALP in  order to          consummate  the  merger  and  liquidate  High  Voltage's  assets,          fraudulently conveyed High Voltage's assets, and sought to compel          ALP to abandon  its claim,  merely detail  the methods  allegedly          used  by Press and Levy  to impede removal  of the contamination.          The allegation that  Press and Levy frustrated  ALP's real estate          development  efforts  particularizes  a  direct  effect  of their          alleged efforts  to prevent  removal of  the contamination.   The          allegation  that Press and Levy caused High Voltage to breach its          contractual and  other obligations to the  plaintiffs essentially          restates the allegation that they impeded removal of the contami-          nation, as the complaint nowhere mentions obligations breached by          High Voltage that were  unrelated to the purported  obligation to          clean up the Burlington site.                                            14                    Thus, we  cannot conclude  that the "wrongful  acts" of          Press  and  Levy concerning  the  release  of pollutants  alleged          elsewhere  in the complaint are entirely  unrelated to the claims          in  count XIV for which  High Voltage seeks  recovery.3  Clearly,          "all  or part of" these claims are "directly or indirectly, based          on,  attributable to, arising out of, resulting from or in [some]          manner"  related  to alleged  "wrongful acts"  of Press  and Levy          concerning the  release of  pollutants and expenses  arising from          ALP's request  that High  Voltage clean  up the  Burlington site.          Accordingly, these claims are excluded from coverage by the plain          language of the pollution exclusion.                    As Federal was entitled to judgment as a matter of law,          the district court judgment must be affirmed.4                                        ____________________               3Furthermore, many of these  claims are related to "wrongful          acts"  of Press  and Levy  concerning expenses  arising out  of a          "direction or request" for  the removal of pollutants  within the          meaning of  subsection (2) of  the pollution  exclusion, in  that          they allege attempts  by Press  and Levy to  divert High  Voltage          assets that otherwise would  have been available to clean  up the          Burlington site.   The fraudulent conveyance  claim, for example,          is clearly "related" to alleged "wrongful acts" of Press and Levy          concerning  expenses  arising  out  of ALP's  request  that  High          Voltage clean  up  the Burlington  site.   Had ALP  made no  such          request, it would  have lacked  standing to bring  the count  XIV          fraudulent conveyance claim against High Voltage.               4High  Voltage contends that  it is entitled  to recover the          legal  defense costs  it incurred  in behalf  of Press  and Levy,          regardless of  its entitlement to  indemnification costs, because          the allegations  in the ALP complaint  are reasonably interpreted          as stating a  claim covered under  the terms of  the policy.   In          light of our  holding that  the plain language  of the  pollution          clause  excluded coverage  for "Loss"  (including  defense costs)          incurred  by High  Voltage  in behalf  of  Press and  Levy,  High          Voltage's claim  for reimbursement of  its defense costs  is pre-          cluded  by the pollution exclusion clause.  Thus, we do not reach          the Federal defense based on the property damage exclusion.                                          15                    Affirmed.                    Affirmed                    ________                                          16
