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18-P-330 Appeals Court
TIMOTHY CREAMER & another1 vs. ARBELLA INSURANCE GROUP.
Essex. November 6, 2018. – March 13, 2019.
Present: Sullivan, Kinder, & Shin, JJ.
Insurance, Homeowner’s insurance, Coverage, Property damage.
Contract, Insurance. Oil and Gas. Real Property,
Environmental damage. Practice, Civil, Summary judgment.
Civil action commenced in the Superior Court Department on
April 7, 2014.
The case was heard by Salim Rodriguez Tabit, J., on motions
for summary judgment.
Brad W. Graham for the plaintiffs.
Michael B. Weinberg (Ben N. Dunlap also present) for the
SHIN, J. After the plaintiffs purchased a residential
property (property), they discovered that heating oil had
spilled from a supply line, contaminating the property and
1 Stacy Creamer.
threatening to migrate, or actually migrating, to the adjacent
property. Alleging that the sellers concealed the spill, the
plaintiffs brought suit against them for deceit, negligence and
negligent misrepresentation, and liability under G. L. c. 21E.2
The sellers, who had declared bankruptcy, failed to answer or
appear, and a default judgment entered against them. The
plaintiffs then commenced this action seeking, among other forms
of relief, a declaration that the sellers’ homeowners insurance
policy (policy) issued by Arbella Insurance Group (Arbella)
covers the claims raised in the underlying lawsuit.
On the parties’ cross motions, a Superior Court judge
granted summary judgment in favor of Arbella, essentially on the
ground that the source of the plaintiffs’ injury is the sellers’
act of concealing the spill, which does not qualify as an
“occurrence” under the policy. On appeal the plaintiffs quarrel
with the judge’s decision only insofar as it relates to their
claim under G. L. c. 21E. We agree with the plaintiffs that,
with regard to that claim, the source of their injury is the
spill itself, and not the sellers’ later act of concealment, as
G. L. c. 21E imposes liability based on ownership status without
2 G. L. c. 21E, § 5 (a), provides, in relevant part, that
“the owner or operator of a vessel or a site from or at which
there is or has been a release or threat of release of oil . . .
shall be liable, without regard to fault, . . . to any person
for damage to his real or personal property incurred or suffered
as a result of such release or threat of release.”
regard to fault. We further conclude, however, that there
remains a genuine issue of material fact as to whether the
plaintiffs’ c. 21E damages fall within the policy exclusion for
“‘property damage’ . . . [w]hich is expected or intended by the
insured.” We therefore vacate the judgment and remand.
Background. 1. Underlying complaint. The complaint
against the sellers, filed in May 2008, alleged the following
facts. The sellers were “owners and residents of the [p]roperty
for many years.” While they lived on the property, a heating
oil fuel line leaked oil “over an extended period of time,”3
causing contamination of the foundation, the ground underneath,
and the groundwater. The spill also “posed an imminent threat
to adjoining property or actually migrated to the adjoining
In June 2005 the sellers listed the property for sale.
Several weeks later, their agent provided the plaintiffs with
the “[s]eller’s [s]tatement of [p]roperty [c]ondition,” which
made no mention of an oil spill. The sellers thereafter
accepted the plaintiffs’ offer to purchase the property for
$380,000, and the sale closed on October 28, 2005.
3 The complaint alleged that another defendant, Bursaw Oil
Corporation, installed a new supply line in the mid-1990s and
failed to remove the existing line. The plaintiffs settled
their claims against this defendant.
The day after the closing, the plaintiffs noticed a smell
of oil on the property. They then discovered that rugs were
concealing a sizeable oil spill that had permeated the concrete
flooring. Although the sellers knew about the spill prior to
the sale, they “took affirmative steps to conceal and/or prevent
the plaintiffs from discovering” it. For example, they “made
affirmative representations that no non-obvious conditions were
present on the [p]roperty that would affect [its] value or use.”
As a result of the spill, the plaintiffs incurred “response
costs” and “damage to their real and personal property.”
- Subsequent proceedings. In June 2009 Arbella sent the
sellers a letter disclaiming coverage under the policy.4 The
default judgment against the sellers entered in December 2012.
In October 2013 execution issued in the amount of $1,062,205.62,
including interest and costs.
In March 2014 the plaintiffs commenced this action against
Arbella, seeking a declaration as to coverage and seeking to
reach and apply the sellers’ interest in the policy to the
default judgment.5 While the complaint on its face seeks to
4 As far as it appears from the summary judgment record, the
policy initially covered the period from July 15, 2003, to July
15, 2004. The policy was then renewed twice for one-year
periods on July 15, 2004, and July 15, 2005. The policy
terminated upon the sale of the property on October 28, 2005.
5 See G. L. c. 175, § 113 (“Upon the recovery of a final
judgment against any person by any person . . . for any loss or
recover the total amount of the default judgment, the
plaintiffs’ summary judgment opposition and cross motion
identified “the basis on which the [plaintiffs] now seek to
reach the Arbella policy” as “the [G. L. c.] 21E claim for which
Arbella’s insureds were found liable through default judgment.”
Similarly, on appeal, the plaintiffs represent that “[t]hey
agree with the Superior Court [judge] that the [p]olicy provides
no coverage for deceit and misrepresentation” and that they
“seek review only as to the Superior Court [judge’s]
conclusion as to coverage for the [G. L. c.] 21E claim.” The
sole question before us, therefore, is whether the policy covers
the plaintiffs’ claim for damages under c. 21E.
Discussion. We review the judge’s decision to grant
summary judgment de novo, viewing the evidence in the light most
favorable to the plaintiffs. See Boazova v. Safety Ins. Co.,
462 Mass. 346, 350 (2012). To prevail on summary judgment,
Arbella had the “burden of demonstrating the absence of triable
damage specified in the preceding section, if the judgment
debtor was at the accrual of the cause of action insured against
liability therefor, the judgment creditor shall be entitled to
have the insurance money applied to the satisfaction of the
judgment . . .”); G. L. c. 214, § 3 (9) (Superior Court has
jurisdiction over “[a]ctions to reach and apply the obligation
of an insurance company to a judgment debtor under a . . .
policy insuring a judgment debtor against liability for loss or
damage on account of . . . damage to property, in satisfaction
of a judgment covered by such policy, which has not been
satisfied within thirty days after the date when it was
issues . . . by showing that [the plaintiffs have] no reasonable
expectation of proving an essential element of their case.” Id.
“[W]here an insurer commits a breach of its duty to defend
and the insured defaults, the insurer is bound by the factual
allegations in the complaint . . . in determining whether the
insurer has a duty to indemnify.” Metropolitan Prop. & Cas.
Ins. Co. v. Morrison, 460 Mass. 352, 361 (2011). See Miller v.
United States Fid. & Guar. Co., 291 Mass. 445, 448 (1935)
(“Where an action against the insured is ostensibly within the
terms of the policy, the insurer, whether it assumes the defense
or refuses to assume it, is bound by the result of that action
as to all matters therein decided which are material to recovery
. . .”). Here, the parties agree that, because of the sellers’
default, the factual allegations of the underlying complaint
must be accepted as true. Still, however, Arbella may raise any
coverage defense that “is compatible with the facts to which the
insurer is bound.” Winbrook Communication Servs., Inc. v.
United States Liab. Ins. Co., 89 Mass. App. Ct. 550, 552 n.7
(2016). This means that, while Arbella may not litigate the
issues resolved by the default judgment, it is not precluded
from “showing that the cause of action upon which the judgment
was entered was not included in its policy of insurance.”
Sciaraffa v. Debler, 304 Mass. 240, 242 (1939). See Joyce v.
London & Lancashire Indem. Co., 312 Mass. 354, 358 (1942)
(insurer may “set up in an action against it any matter
constituting a defence and not already determined in the
Distilled to their essence, Arbella’s defenses are that
(1) the source of the plaintiffs’ injury is the sellers’
concealment of the spill, which is not an “occurrence” within
the meaning of the policy; (2) no loss occurred during the
policy period; and (3) the property damage was “expected or
intended” by the sellers and is thus excluded from coverage.6 We
address these arguments in turn.
- Property damage caused by an “occurrence.” The policy
provides that, “[i]f a claim is made or a suit brought against
an ‘insured’ for damages because of . . . ‘property damage’
caused by an ‘occurrence’ to which this coverage applies,
[Arbella] will . . . [p]ay up to [its] limit of liability for
the damages for which the ‘insured’ is legally liable.”
“Occurrence” is defined as “an accident, including continuous or
6 Arbella also contends that the policy’s owned property
exclusion applies. Arbella failed to raise this argument in the
trial court, however, and the argument “depends on facts not
established in the record.” Aetna Cas. & Sur. Co. v.
Continental Cas. Co., 413 Mass. 730, 735 (1992). We note also
that where “there was contamination of adjacent property, the
costs of remedial efforts to prevent further contamination of
that property are not excluded from coverage by the owned
property clause.” Hakim v. Massachusetts Insurers’ Insolvency
Fund, 424 Mass. 275, 280 (1997). See Rubenstein v. Royal Ins.
Co. of Am., 44 Mass. App. Ct. 842, 853-854 (1998).
repeated exposure to substantially the same general harmful
conditions, which results, during the policy period, in . . .
‘property damage.'” “Property damage” is defined in turn as
“physical injury to, destruction of, or loss of use of tangible
The plaintiffs, as the parties seeking to recover under the
policy, “bear the initial burden of ‘proving that the loss
within the description of the risks covered.'” Highlands
Ins. Co. v. Aerovox Inc., 424 Mass. 226, 230 (1997), quoting
Tumblin v. American Ins. Co., 344 Mass. 318, 320 (1962). The
plaintiffs have met this burden. Their suit against the sellers
sought damages for property damage caused by the release of oil
on the property. The initial release of the oil was accidental;
it thus qualifies as an “occurrence” under the policy. See
Trustees of Tufts Univ. v. Commercial Union Ins. Co., 415 Mass.
844, 848 (1993) (Tufts) (“The ‘occurrence’ is the ‘injurious
exposure’ to the hazardous material during the policy periods”).
In addition, the original complaint alleged that the spill
caused “damage to [the plaintiffs’] real and personal property.”
When a release of hazardous material results in property damage,
as we must accept that it has here, “cleanup costs” constitute
“damages within the policy language.” Hazen Paper Co. v. United
States Fid. & Guar. Co., 407 Mass. 689, 700 (1990). Accord
Tufts, 415 Mass. at 848; Rubenstein v. Royal Ins. Co. of Am., 44
Mass. App. Ct. 842, 848 (1998).
We reject Arbella’s contention that the source of the
plaintiffs’ injury is the intervening concealment of the spill
by the sellers. It is true as a general matter that we must
look at “the source from which the plaintiff’s . . . injury
originates rather than the specific theories of liability
alleged in the complaint” in determining coverage under a
policy. New England Mut. Life Ins. Co. v. Liberty Mut. Ins.
Co., 40 Mass. App. Ct. 722, 727 (1996). But we disagree with
Arbella’s characterization that “all of the [plaintiffs’] claims
against the [sellers] were stated as intentional misconduct in
deceiving the [plaintiffs] and knowingly misrepresenting the
condition of the property.” While that is the case with respect
to the deceit and misrepresentation claims, the G. L. c. 21E
claim does not depend on misconduct on the part of the sellers.7
Chapter 21E is “a strict liability statute that imposes
responsibility on the basis of status and does not require a
showing of fault.” Martignetti v. Haigh-Farr, Inc., 425 Mass.
294, 308 (1997). See G. L. c. 21E, § 5 (a) (site owner liable
for property damage “without regard to fault”). Thus, the
7 As the plaintiffs point out, Mass. R. Civ. P. 8 (e) (2),
365 Mass. 749 (1974), allowed them to plead claims in the
plaintiffs have incurred damages under c. 21E regardless whether
the sellers deceived or misled them into purchasing the
property. The injury, in other words, derives from the initial,
accidental release of the oil — which is an “occurrence” under
the policy — and not any later acts of misconduct committed by
For similar reasons we reject Arbella’s contention that the
underlying complaint alleged only financial harm, which is not
covered under the policy. As to the c. 21E claim, the complaint
plainly alleged that the plaintiffs incurred property damage and
cleanup costs as a result of the spill. These are covered
damages under the policy. See Tufts, 415 Mass. at 848; Hazen
Paper, 407 Mass. at 700. Loss during policy period. Arbella next argues that
the policy provides no coverage because the plaintiffs did not
incur their damages until after the closing of the sale.
Specifically, because the policy was terminated upon the
closing, Arbella argues that there was no “accident . . . during
the policy period” as required to establish an occurrence.
8 Arbella cites a number of cases from other jurisdictions
that found no coverage with regard to claims that an insured
negligently or intentionally misrepresented the condition of a
property prior to a sale. See, e.g., Safeco Ins. Co. of Am. v.
Andrews, 915 F.2d 500, 502 (9th Cir. 1990). But none of those
cases involves a claim to recover remediation costs under a nofault
statute equivalent to c. 21E.
This argument is foreclosed by the Supreme Judicial Court’s
decision in Tufts. There, the current owner of a hazardous
waste site brought suit against the prior owner (Tufts) to
recover cleanup and response costs under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
(CERCLA), as amended, 42 U.S.C. §§ 9601 et seq. (1988). See
Tufts, 415 Mass. at 845-846. Although over a decade had passed
since Tufts conveyed the land, the court held that Tufts’s
insurers had a duty to defend the lawsuit, rejecting their
contention “that the proper inquiry under the policies is
. . . whether the entity making the claim sustained harm during
the policy period.” Id. at 848. Analyzing language identical
in substance to that at issue here, see id. at 847-848, the
court concluded that the policy did not “requir[e] that the
claimant possess an ownership interest in the property at the
time the damage occurred.” Id. at 849. Rather, it required
only “that the property damage itself occur during [the policy
period].” Id. at 848. The court reasoned that the purpose of
CERCLA supported this interpretation: “[S]ince CERCLA and the
Massachusetts equivalent, G. L. c. 21E, attempt to place the
ultimate responsibility for cleaning up hazardous waste on those
entities responsible for the contamination, . . . it [is]
entirely logical that the insurer whose policies are in effect
during the time that the property damage is alleged to have
occurred be required to defend the insured.” Id. at 852.
Here, the underlying complaint established that the release
of the oil occurred during the sellers’ ownership of the
property. The “property damage itself” thus occurred while the
policy was in effect. Id. at 848. This was sufficient to
trigger coverage under the policy, regardless whether the
property damage was “disclosed or manifested during the policy
period.” Id. at 853. See Rubenstein, 44 Mass. App. Ct. at 850-
851 (insurers had duty to defend prior owner of property
contaminated by oil spill even though spill was not discovered
until after property was sold). “Expected or intended” exclusion. We turn to the
exclusion for “‘property damage’ . . . [w]hich is expected or
intended by the insured.” For the sellers to have “intended”
the property damage, they must have intended the damage itself,
not just “the act” causing the damage, though they “need not
intend[ed] to cause the precise [damage] which occurred.”
Hanover Ins. Co. v. Talhouni, 413 Mass. 781, 784 (1992). For
the sellers to have “expected” the property damage, they must
have “kn[own] to a substantial certainty that the [damage] would
result.” Quincy Mut. Fire Ins. Co. v. Abernathy, 393 Mass. 81,
86 (1984). Because the exclusion is not “in the same paragraph
as the coverage clause” but “in a separate and distinct part of
the insurance policy,” the burden is on Arbella to show that the
exclusion applies. Highlands Ins. Co., 424 Mass. at 232 n.8.
While conceding that “the initial oil leak may have been an
‘accident’ at one time,” Arbella argues that the damage ceased
to be accidental and became “expected or intended” once the
sellers discovered the spill and intentionally allowed it to
“fester” over time. We agree that, when the sellers discovered
the spill, they must have known to a substantial certainty that
property damage would result. From that point forward,
therefore, any further property damage was “expected,” if not
“intended,” by the sellers. See Utica Mutual Ins. Co. v. Hamel,
46 Mass. App. Ct. 622, 625 (1999) (property damage was
“expected” where evidence showed that insured “knew to a
substantial certainty that . . . continual waste water spills
from [waste water treatment system] would cause ‘some damage’ to
premises”). See also Travelers Ins. Co. v. Waltham Indus.
Lab. Corp., 883 F.2d 1092, 1098-1099 (1st Cir. 1989) (property
damage was either “expected” or “intended” where insured was
“notified repeatedly that . . . discharges [of pollutants] were
going into the sewer system and into the ground and . . . did
nothing effective to reduce or abate the discharge”).9
9 Cf. Lumbermens Mut. Cas. Co. v. Belleville Indus., 407
Mass. 675, 681 n.6 (1990) (construing “sudden and accidental”
clause in pollution exclusion and stating that, if initial
The problem for Arbella, however, is that the summary
judgment record does not establish when the sellers discovered
the spill or whether the period of concealment caused additional
or increased property damage. While the original complaint
alleged that the oil leaked “over an extended period of time,”
and that the sellers knew about the spill prior to the sale of
the property,10 it is silent as to the date of discovery.
Because a genuine issue of material fact thus exists, remand is
required for a determination of what portion of the plaintiffs’
c. 21E damages falls outside the exclusion. See Nashua Corp. v.
First State Ins. Co., 420 Mass. 196, 203 (1995) (error to grant
summary judgment where “factual question exist[ed] regarding
what portion of the pollution damage” fell outside pollution
exclusion clause). Cf. Highlands Ins. Co., 424 Mass. at 235
(summary judgment appropriate where plaintiff had no reasonable
expectation of proving damages, other than “de minimis amount,”
not falling within pollution exclusion).
Conclusion. For the above reasons, we vacate the judgment
and remand for further proceedings consistent with this opinion.
release “continues for an extended period,” then “at some point,
presumably, it would likely cease to be accidental or sudden”).
10 Contrary to the plaintiffs’ assertions, the c. 21E claim
clearly incorporated these factual allegations.