Opinion
10-P-2002
08-18-2011
WARNER COMPANY v. LIBERTY MUTUAL INSURANCE COMPANY.
NOTICE: Decisions issued by the Appeals Court pursuant to its rule 1:28 are primarily addressed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, rule 1:28 decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28, issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The Warner Company (Warner) appeals from a separate and final judgment of the Superior Court declaring that Liberty Mutual Insurance Company (Liberty Mutual) owes no duty to defend or indemnify Warner against third party claims alleging bodily injury from exposure to silica dust (silica claims). Warner argues that the motion judge incorrectly concluded that a settlement agreement which resolved prior litigation between the parties released Liberty Mutual from a duty to defend and indemnify against the silica claims. For the following reasons, we affirm.
Background. Warner is a wholly owned subsidiary of Waste Management, Incorporated (WMI). In the late 1980's and early 1990's, various governmental agencies and private parties brought claims charging WMI with liability for the consequences of environmental contamination at numerous landfills throughout the United States (contamination claims). WMI and its affiliated entities had multiple general and excess liability insurance policies with Liberty Mutual and requested defense and indemnification against the contamination claims. Liberty Mutual denied any obligation to defend or indemnify WMI. In response, WMI brought suit against Liberty Mutual in New Jersey Superior Court seeking a declaration that Liberty Mutual had a duty to defend or indemnify WMI against a certain segment of the contamination claims. A number of WMI's subsidiary entities sought similar relief against Liberty Mutual in Federal court in Massachusetts. Additionally, Liberty Mutual filed suit in Massachusetts Superior Court seeking a declaration that Liberty Mutual had no duty to defend or indemnify WMI with respect to another segment of the contamination claims.
In addition to Liberty Mutual, WMI included more than 150 insurers as defendants in the New Jersey litigation. WMI sought declaratory relief against those insurers also.
Approximately a decade later and with the New Jersey litigation still pending, the parties attempted to reach a comprehensive settlement. On September 28, 2001, WMI and Liberty Mutual agreed to a settlement in principle. The essential terms of this agreement emerged in a document which the parties referred to as 'the term sheet.' The term sheet stated that it was 'subject to the execution of a formal settlement agreement' that 'will contain other provisions common to insurance settlements and necessary to effectuate the material terms identified here.' The term sheet included the following paragraph:
On behalf of itself and other related entities including Warner. Hereafter our use of the name WMI includes Warner.
'Scope of Release by WMI: WMI . . . will release . . . environmental claims under the [relevant insurance] policies at all known and unknown sites other than sites in Minnesota that are or will be the subject of claims by the state of Minnesota. The release will include property damages, bodily injury, personal injury, toxic tort, natural resource damages, bad faith and all other environmental claims (whether or not presently asserted) at known and unknown sites. The release specifically does not include asbestos claims and other non-environmental claims, except to the extent that those claims are included in environmental discharges from any site.'The term sheet further stated that '[e]nvironmental claims will be defined in the agreement.'
On October 31, 2001, the parties executed a '[s]ettlement [a]greement and [r]elease' (agreement). Pursuant to this agreement, WMI released Liberty Mutual from three categories of claims: (1) the claims asserted in the existing litigation; (2) liabilities and obligations under the policies with respect to '[e]nvironmental [c]laims,' as that term was defined in the agreement; and (3) claims based upon allegations of bad faith, unfair claims practices, unfair trade practices or the like in the treatment of '[e]nvironmental [c]laims' under the policies. The agreement defined '[e]nvironmental [c]laims' as any claims against WMI that
'(i) Seek compensatory, punitive, or statutory damages, declaratory judgment, contribution, indemnification, subrogation, injunctive relief, medical or environmental monitoring, or any other form of relief whatsoever, on account of alleged bodily injury, death, personal injury, property damage, loss of use of property, diminution in the value of property, damage to natural resources, or any other injury of any kind, nature or description arising from any alleged, potential or actual pollution or contamination or exposure to pollutants, irritants, or contaminants or any other allegedly toxic, deleterious, or hazardous substances or to any products containing same, including, without limitation, 'hazardous substance' as that term is defined in 42 U.S.C. § 9601, lead, asbestos and electro magnetic fields; or
'(ii) Demand or request that any person or entity: (a) respond to, investigate, remove, remediate, clean-up, or monitor the effects of, pollutants or contaminants, or any other allegedly toxic, deleterious, or hazardous substances or product including, without limitation, 'hazardous substance' as that term is defined in 42 U.S.C. § 9601, lead, asbestos and electro magnetic fields; or (b) pay clean-up costs, contribution costs, or payment of or reimbursement for the study, investigation, removal, remediation, or clean-up of contaminants or pollutants.'
The agreement also stated the following:
'The term 'Environmental Claims' includes, but is not limited to, any and all claims and actions brought by the United States, the United States Environmental Protection Agency, any other foreign or domestic governmental agency, or any private Person or entity, against WMI . . . under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601, et seq. ('CERCLA'), the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901, et seq. ('RCRA'), the New Jersey Spill Compensation and Control Act, N.J.S.A. §§ 58:10 23.11, et seq., the Environmental Cleanup Responsibility Act, now known as the Industry Site Recovery Act, N.J. 13:1K-6 et seq., or any other federal or state statute or the common law, and whether sounding in tort, contract, equity, nuisance, trespass, negligence, strict liability, or any other theory of liability whatsoever.'
The parties included an integration clause which stated that
'[t]his [a]greement is the complete and entire agreement of the [p]arties and supersedes any prior agreements and communications between the [p]arties regarding or relating to the matters addressed herein. This agreement may not be modified, changed, contradicted, added to, or altered in any way by any previous written or oral agreements or any subsequent oral agreements.'In exchange for this release, Liberty Mutual paid WMI $18,500,000.
After the settlement agreement went into effect, numerous plaintiffs sued Warner in the Pennsylvania Court of Common Pleas alleging bodily injury from exposure to silica dust from products manufactured or supplied by Warner (or its predecessor). The plaintiffs in those cases worked primarily in industries associated with sandblasting. They alleged that their use of silica sand supplied by Warner created respirable silica dust particles and that their inhalation of those particles caused them to contract silicosis.
Warner notified Liberty Mutual of the silica claims and requested defense and indemnification under various policies. Citing the agreement, Liberty Mutual refused to defend or indemnify Warner against the silica claims. In response, Warner filed the present action against Liberty Mutual in Massachusetts Superior Court. After the parties had engaged in discovery, Liberty Mutual moved for summary judgment.
The motion judge granted it. She concluded that the settlement agreement released Liberty Mutual from the duties to provide defense and indemnification to Warner against the silica claims.
Discussion. Warner presses two arguments. First, it contends that the motion judge should have read the settlement agreement in combination with the term sheet. Second, Warner proposes that the settlement agreement applies ambiguously to the silica claims and therefore that its meaning should not proceed to disposition by summary judgment.
a. Standard of review. 'We review a grant of summary judgment de novo, construing all facts in favor of the nonmoving party.' Miller v. Cotter, 448 Mass. 671, 676 (2007), citing Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120 (1991). '[T]he interpretation of a contract is a question of law for the courts, . . . and releases are a form of contract.' Leblanc v. Friedman, 438 Mass. 592, 596 (2003).
b. Integration clause. Warner cites numerous cases in which courts have held that two separate documents require integrated reading for determination of the parties' intentions. See, e.g., Fenoglio v. Augat, Inc., 254 F.3d 368, 371 (1st Cir. 2001); Gilmore v. Century Bank & Trust Co., 20 Mass. App. Ct. 49, 56 (1985); Matthews v. Planning Bd. of Brewster, 72 Mass. App. Ct. 456, 462-463 (2008). However, as the motion judge pointed out, none of these cases involved a document with an integration clause. 'Where the writing shows on its face that it is the entire agreement of the parties and 'comprises all that is necessary to constitute a contract, it is presumed that they have placed the terms of their bargain in this form to prevent misunderstanding and dispute, intending it to be a complete and final statement of the whole transaction." Bendetson v. Coolidge, 7 Mass. App. Ct. 798, 802-803 (1979), quoting from Glackin v. Bennett, 226 Mass. 316, 319-320 (1917).
Here, the integration clause explicitly states that the parties intended the settlement agreement to embody their entire agreement and to supersede any prior agreements. That language clearly establishes that the parties did not intend the term sheet to represent any part of their agreement. Additionally, WMI had the benefit of sophisticated corporate management and competent counsel for creation of the superseding final settlement document. Consequently no injustice would result from literal enforcement of the chosen language. See Sound Techniques, Inc. v. Hoffman, 50 Mass. App. Ct. 425, 433-434 (2000) (enforcing merger clause against plaintiff where the bargaining powers of the parties were equal and plaintiff was represented by counsel throughout the negotiations).
c. Ambiguity of the settlement agreement. '[W]here the agreement of two contracting parties has been put in an unambiguous written form that the parties consider as final[,] this final form is the contract and, therefore, evidence of negotiations leading up to this final form of the contract is immaterial.' Amerada Hess Corp. v. Garabedian, 416 Mass. 149, 155 (1993), quoting from Liacos, Massachusetts Evidence 385 (5th ed. 1981). 'Where, however, the contract . . . has terms that are ambiguous, uncertain, or equivocal in meaning, the intent of the parties is a question of fact to be determined at trial.' Seaco Ins. Co. v. Barbosa, 435 Mass. 772, 779 (2002). 'Contract language is ambiguous 'where the phraseology can support reasonable difference of opinion as to the meaning of the words employed and the obligations undertaken." President & Fellows of Harvard College v. PECO Energy Co., 57 Mass. App. Ct. 888, 896 (2003), quoting from Suffolk Constr. Co. v. Lanco Scaffolding Co., 47 Mass. App. Ct. 726, 729 (1999). '[E]xtrinsic evidence may be admitted when a contract is ambiguous on its face or as applied to the subject matter.' General Convention of the New Jerusalem in the United States of Am., Inc. v. MacKenzie, 449 Mass. 832, 836 (2007).
Warner first argues that the settlement agreement is ambiguous on its face because the language focuses on pollution and contamination from landfills, and therefore leaves uncertain whether the agreement releases also product liability claims unrelated to contaminated landfills, such as the silica claims. Warner highlights references to the contamination claims in the recitals at the beginning of the settlement agreement.
Contrary to Warner's contention, the recitals do not relate to the scope of the intended release. The first six of the seven recitals operate solely to describe the existing litigation between WMI and Liberty Mutual. As they make clear, the litigation stems from a dispute about Liberty Mutual's duty to defend or indemnify WMI against lawsuits alleging injury resulting from landfill contamination. However, these recitals do not indicate that the parties intended solely to resolve the underlying dispute. See Eck v. Godbout, 444 Mass. 724, 728 (2005) ('The mere fact that the release itself identifies the specific matter that prompted the parties to execute a release, does not, by itself, operate to restrict the scope of a release that contains broad language releasing all claims of whatever nature the party executing the release may have against the party to whom the release is given'). In fact, the last recital indicates the opposite. It states that the parties intend to adopt a settlement in the underlying litigation 'as well as a settlement regarding the availability of insurance coverage for any and all 'Environmental Claims,' as defined herein, as well as other matters' (emphasis added). This double addenda language evidences an unambiguous desire to shape an agreement comprehensively defining Liberty Mutual's duties with respect to a broad range of third-party claims against WMI, as opposed to an agreement focusing solely on claims alleging injury caused by contaminated landfills.
Warner relies also on language in the settlement agreement's definition of '[e]nvironmental [c]laims.' It observes that the definition includes claims brought pursuant to Federal and State laws relating exclusively to contaminated landfills. It emphasizes the use of terms such as 'clean-up costs,' 'contaminants,' and 'pollutants.' That focus is too narrow. As shown above, the first section of the definition of '[e]nvironmental [c]laims' includes claims that allege injury resulting from 'exposure to pollutants, irritants, or contaminants or any other allegedly toxic, deleterious, or hazardous substances.' The definition of '[e]nvironmental [c]laims' also explicitly states that the term 'includes . . . any . . . claims and actions brought by . . . any private [p]erson or entity, against WMI in the past, present or future under . . . any . . . federal or state statute or the common law, and whether sounding in tort, contract, equity, nuisance, trespass, negligence, strict liability, or any other theory of liability whatsoever.' Nothing in this comprehensive language indicates an intent to restrict the definition of '[e]nvironmental [c]laims' to claims alleging injury caused by contaminated landfills.
Warner maintains that the settlement agreement is ambiguous as applied to the silica claims because it is unclear whether silica dust is a 'pollutant [], irritant[], or contaminant[].' Again, the categorical vocabulary of the settlement agreement is decisive. In addition to claims alleging injury from exposure to 'pollutants, irritants, or contaminants,' the definition of '[e]nvironmental [c]laims' includes claims alleging injury from exposure to 'any other allegedly toxic, deleterious, or hazardous substances' (emphasis added). Under these exhaustive terms, the silica claims unquestionably qualify as '[e]nvironmental [c]laims.' The plaintiffs in the silica claims have alleged that silica dust is 'inherently defective, ultra hazardous, dangerous, deleterious, poisonous, and otherwise highly harmful.'
By its plain language, the settlement agreement functions as a broad release of liability. The mere fact that the agreement refers to and releases Liberty Mutual from claims alleging injury from contaminated landfills does not create a facial ambiguity, because the language does not limit the release to such claims. See Atlas Tack Corp. v. Crosby, 41 Mass. App. Ct. 429, 433 (1996) (releases not limited to underlying tax litigation between parties because there was 'no language restricting the releases to claims arising out of that litigation'). Furthermore, the agreement is unambiguous as applied to the silica claims because, at a minimum, those claims plainly allege injury from exposure to an allegedly hazardous substance. See United States v. Witco Corp., 853 F. Supp. 139, 140 (E.D. Pa. 1994) (silica constitutes a hazardous substance within the meaning of CERCLA); Clarendon Am. Ins. Co. v. Bay, Inc., 10 F. Supp. 2d 736, 743, 744 (S.D. Tex. 1998) (silica dust falls within insurance policy's pollution exclusion where 'pollutant' defined as 'any solid, liquid, [or] gaseous . . . irritant or contaminant'); Garamendi v. Golden Eagle Ins. Co., 127 Cal. App. 4th 480, 485-486 (2005) ('[T]he widespread dissemination of silica dust as an incidental by-product of industrial sand-blasting operations most assuredly is what is 'commonly thought of as pollution' and 'environmental pollution" [citation omitted]). See also In re Silica Prods. Liab. Litigation, 398 F. Supp. 2d 563, 570 (S.D. Tex. 2005) (recognizing that 'the dangers of respirable silica have been known for many years' and that, in 1974, the National Institute of Occupational Safety and Health 'recommended that silica sand be prohibited for use as an abrasive blasting material in favor of less hazardous substances').
Conclusion. For the reasons well explained in the memorandum opinion of the motion judge, we affirm the separate and final judgment entered in the Superior Court.
So ordered.
By the Court (Graham, Brown & Sikora, JJ.),