144 F.

3d 35
46 ERC 1682, 28 Envtl. L. Rep. 21,270,
49 Fed. R. Evid. Serv. 863

CPC INTERNATIONAL, INC., Plaintiff, Appellee,

v.
NORTHBROOK EXCESS AND SURPLUS INSURANCE
COMPANY, Defendant, Appellant.
Nos. 97-2073, 97-2074.

United States Court of Appeals,

First Circuit.
Heard April 10, 1998.
Decided June 1, 1998.

Michael Aylward, with whom Alice Olsen Mann, Morrison, Mahoney &
Miller, Daniel A. Bartoldus, James J. Jennings, Joshua N. Krellen, and
Rivkin, Radler & Kremer, were on brief, for Appellant.
David L. Harris, with whom Geoffrey A. Price, Lowenstein, Sandler,
Kohl, Fisher & Boylan, P.C., Mark O. Denehy, and Adler, Pollock &
Sheehan, Inc., were on brief, for Appellee.
Laura A. Foggan, Daniel E. Troy, Andrew D. Tabachnik, and Wiley, Rein
& Fielding, on brief for amicus curiae Insurance Environmental Litigation
Association.
Before TORRUELLA, Chief Judge, LYNCH, Circuit Judge, and
STEARNS, District Judge.*
LYNCH, Circuit Judge.

An accident in 1974 involving a railroad tank car and a chemical storage tank
has led to years of environmental litigation and, ultimately, to this court's
consideration of those events almost a quarter century later. In June 1974, an
engineer of the Providence and Worcester Railroad Company moved a group of
railroad tank cars while one car was still attached to a chemical storage tank at
a manufacturing facility in Cumberland, Rhode Island. The facility is located on

the banks of the Blackstone River. A hole was torn in the bottom of the tank
and the contents, over 6,200 gallons of perchlorethylene ("perc"), gushed out,
boring a four-foot hole in the ground. The fire department responded to an
emergency call and hosed down the area of the spill. No further action was
taken, and so matters rested until 1979.
2

In October 1979, the Rhode Island Department of Public Health tested drinking
water wells across the Blackstone River, in the nearby town of Lincoln, for
environmental pollution. The state's decision to test in this manner was an
advanced one for the times. Those tests and subsequent tests showed that the
wellfields and the aquifer from which they drew water were contaminated with
a variety of volatile organic chemicals ("VOC's"), including perc, 1,1dichlorethane, 1,1-dichloroethylene, 1,2-transdichloroethylene, 1,1,1trichloroethane, trichloroethylene, and trichlorofluoromethane. The wells,
which supplied water to Cumberland and Lincoln, were immediately closed.
Subsequent investigation by the United States Environmental Protection
Agency ("EPA") pointed to an area across the Blackstone River and east of the
wells as the likely source of the aquifer's contamination. That area was
occupied by the Peterson/Puritan manufacturing facility, which produced and
packaged various household and personal care products. Peterson/Puritan is a
subsidiary of the plaintiff CPC International, Inc., now known as Bestfoods.
This facility is where the tank car accident happened in 1974.

This suit demonstrates the immense cost, complexity and duration of

environmental insurance litigation.1 In 1987, CPC sued its excess carrier,
Northbrook Excess and Surplus Liability Company,2 for indemnification of
costs incurred during the EPA ordered clean-up of pollution at
Peterson/Puritan. This is the third appeal to this court. Judgments have twice
been vacated, this court has certified a question to the Rhode Island Supreme
Court, the Rhode Island Supreme Court has issued an opinion which clarified
Rhode Island "trigger of coverage" law, and the case has been twice tried to
juries. We discuss that history later. In 1997, a jury awarded CPC
$12,632,885.94 in damages plus over $5 million in pre-judgment interest. That
award is the subject of this appeal.

As is common in these cases, the jury had two main issues to decide. The first
was whether an "occurrence" causing property damage took place between July
1, 1979, and July 1, 1980, which was the policy period during which
Northbrook provided coverage. The second was to determine whether the
property damage resulted from company activities that were excluded from
coverage by the policy's standard "pollution exclusion" provision or whether
the relevant occurrences fit within the also standard "sudden and accidental"

exception to that exclusion (and was thus covered). As evidenced by the

verdict, the jury decided both issues in favor of CPC.
5

Northbrook attacks the verdict on both fronts. First, Northbrook says the
evidence compels the conclusion that there was no occurrence during the policy
period. Northbrook says that the "property damage" at issue in the case is
strictly in the area immediately surrounding the Peterson/Puritan manufacturing
facility, and that CPC either knew or should have known of this property
damage prior to the policy period. Therefore, there was no "occurrence" (as that
term is defined in Rhode Island law) during the policy period and no coverage
is available.

Northbrook buttresses this challenge by saying it was unfairly hampered in its

presentation of its case (that CPC knew or should have known of the property
damage) when the trial court excluded evidence about environmental events
before 1979 elsewhere in the CPC corporate family. Northbrook says that the
proposed evidence, two prior judicial decisions in which CPC was a party,
contained fact-findings relevant to the state of CPC's internal knowledge and
the state-of-knowledge in the industry about groundwater pollution.
Northbrook's says that the evidence demonstrates that CPC's regular wastedisposal practices and the 1974 perc spill should have put CPC on notice of
property damage long before 1979, and thus there is no coverage during the
insuring period.

Second, Northbrook challenges the jury's conclusion that the property damage
was caused by a "sudden and accidental" discharge. Northbrook concedes the
1974 perc spill was sudden and accidental, but argues that the evidence
compels a conclusion that it was Peterson/Puritan's routine waste-disposal and
polluting practices, not the 1974 perc spill, which caused the pollution around
the Peterson/Puritan site. Northbrook points out that the comprehensive general
liability policy at issue here contains a standard pollution exclusion for the
discharge of chemicals, and the only exception to that exclusion is for "sudden
and accidental" events. Thus, Northbrook says, even if there were an
occurrence during the policy period, Northbrook is still not liable because the
clean-up costs were driven by CPC's routine polluting activities, not the spill. 3

Now, twenty-five years after the tank rupture, almost twenty years after the
discovery that the wells were contaminated and eleven years after the suit was
instituted, we affirm the jury award. While the evidence did not necessarily
require the jury's conclusions, it certainly permitted them. We do not reach the
cross-appeal.

9* Background Facts
10

We set the stage for the parties' arguments with a general outline of the actions
and findings of the involved governmental environmental agencies as to the two
wellfields and the Peterson/Puritan site. Much of this is undisputed. The
appropriate inferences to be drawn from certain environmental findings are, of
course, disputed, and were argued to the jury.

11

In October 1979, the Rhode Island Department of Health, Division of Water

Supply, using testing procedures advanced for the times, tested the municipal
water supplies of the Town of Cumberland and the neighboring Town of
Lincoln and discovered VOC contamination. The Quinnville Wellfield,
supplying Cumberland, is located on the west side of the Blackstone River,
across the river and approximately three fifths of a mile from the
Peterson/Puritan manufacturing facility. The Lenox Street Well, supplying
Lincoln, is located on the same side of the river as Peterson/Puritan, over a mile
away. Both wells were closed immediately after the contamination was
discovered.

12

In 1980, the EPA hired environmental engineers Goldberg-Zoino and

Associates ("GZA") to conduct a hydrogeologic study of portions of the aquifer
underlying and around the Blackstone River in order to establish the source and
extent of the groundwater pollution contaminating the wells. In 1982, GZA
reported its conclusion that the most probable source of the contamination of
the Quinnville Wellfield was the Peterson/Puritan plant. GZA relied principally
on three critical findings: (1) the highest levels of VOC groundwater
contamination were observed in the industrial area where Peterson/Puritan was
located; (2) the VOC's found in the Quinnville Wellfield were the same as
those found in the groundwater in the industrial area; and (3) Peterson/Puritan
was the only operation in the area known to use and store the VOC's found in
the water supply.

13

According to GZA's report, the Blackstone River typically acts as a

groundwater flow boundary, meaning that groundwater on the east side of the
river is generally unable to cross over to the west side. When the wells are
pumping, however, the river is not an effective barrier and groundwater is
drawn into the wellfield.

14
During
sustained pumping of the Lincoln wellfield, ... a portion of the flow crosses
the Blackstone from the Cumberland side of the river. Flow enters the wellfield via
both induced infiltration from the river and direct groundwater flow beneath the
river from the northeast corner of the site.

15

In addition, the levels of the contaminant concentration in the wellfield are

directly related to the intensity of the pumping.When the wells are turned off
and the flow field reverts to its natural state, as described above, contaminant
levels decrease significantly. When the wells are turned on again, contaminant
concentrations increase with pumping duration to their previous levels. This
indicates that contaminant flow is being induced via pumping from outside of
the normal recharge area for the wellfield, i.e. the Cumberland side of the
Blackstone River [where Peterson/Puritan is located].

16

GZA concluded that the pumping of the wells drew contaminants from the area
immediately surrounding the Peterson/Puritan plant under and across the river
into the wellfield. Based on this analysis, Peterson/Puritan became the EPA's
primary focus.

17

Following this report, Peterson/Puritan hired Malcolm Pirnie, Inc., another

environmental engineering firm, to further analyze the VOC groundwater
contamination of the wellfield. Malcolm Pirnie's report, issued in June 1983,
supported GZA's conclusion. "Peterson/Puritan is responsible for the release of
VOC's to the aquifer sufficient to have contributed to the past contamination of
the Quinnville Wellfield...." In addition, "the sustained pumping from the
wellfields could draw contaminated groundwater from the east to the west side
of the Blackstone River where it could be drawn into the wells." The report
stated that the wellfield was no longer contaminated, but that contamination
would be renewed by the recommencement of pumping within the wellfield
without prior interception of the contaminant plume.

18

In 1983, the EPA designated an area including both the Peterson/Puritan site
and the aquifer east of the Blackstone River as "OU-1," and placed the site on
its National Priorities List. In 1987, following several years of negotiations with
Peterson/Puritan, the EPA issued an Administrative Order by Consent, pursuant
to the Comprehensive Environmental Response Compensation and Liability
Act ("CERCLA"), 42 U.S.C. 9601-9675. That Order identified
Peterson/Puritan as the party responsible for the release of the hazardous
substances migrating into the groundwater at OU-1.

19

As required by the Order, Peterson/Puritan undertook a Remedial

Investigation/Feasibility Study ("RI/FS") to investigate additional responsible
parties and further analyze site conditions. This report was prepared by ABB
Environmental Services and issued in 1993. ABB, like Malcolm Pirnie, largely
confirmed GZA's finding that Peterson/Puritan was the principal source of
VOC contamination in the aquifer and the Quinnville Wellfield.4

20

The EPA issued its Record of Decision ("ROD") for the OU-1 site in June
1993. The ROD stated that the Quinnville Wellfield "was a drinking water
source in 1979, when it was closed due to OU-1 contamination. Prior to its
closure, the wellfield provided water that did not pose any health threats." The
ROD further stated that the 1974 perc spill, along with historical releases into
manholes and catch basins, was the primary source of contamination of the
Quinnville Wellfield. The ROD concluded that the wells could be reopened
when the contamination was remediated, and ordered CPC to clean up the OU1 area as a prerequisite for the reopening of the wells. Finally, because the
wellfield was "a receptor of OU-1 contamination," and "the potential future use
of the wellfield as a drinking water source is a realistic possibility," the
December 13, 1995, Consent Order between CPC and the EPA extended OU-1
to include the Quinnville Wellfield.5

II
Insurance Coverage and Terms
A. Primary Coverage and Town of Lincoln Suit
21
22

In October 1982, based on GZA's report, the Town of Lincoln filed suit against
Peterson/Puritan for damages resulting from the contamination of its water
supply. In June 1984, the suit was settled when Peterson/Puritan agreed to pay
the Town of Lincoln $780,000 and install and maintain engineering controls in
exchange for the Town's release of all potential claims. The settlement was paid
by Northwestern National Insurance Company, CPC's primary insurance
carrier, under a policy with a coverage limit of $1 million. On April 10, 1987,
Northwestern National informed CPC and Northbrook that the primary
insurance policy was exhausted, thus bringing Northbrook into the arena.

B. The CPC-Northbrook Insurance Policy

23

From July 1, 1979, to July 1, 1980, CPC was insured by Northbrook under an
umbrella liability policy. This policy, with a limit of $25 million, was CPC's
first layer excess policy, hence the next coverage in line after Northwestern
National's $1 million primary policy was exhausted. The Northbrook policy
insured CPC worldwide, including CPC's subsidiaries and all other entities
financially controlled by CPC.

24

Under Section 1, "Coverage," the policy stated:

The Company hereby agrees, subject to the limitations, terms and conditions
25

hereinafter mentioned, to indemnify the Insured for all sums which the Insured shall
be obligated to pay by reason of the liability
A. imposed upon the Insured by law, or
B. assumed under contract or agreement by the Named Insured,
26
for damages on account of
27
A. Personal Injuries
B. Property Damage
C. Advertising Liability,
28
caused by or arising out of each Occurrence happening anywhere in the world.
29
30

The Definitions section contained the following definitions:

31

"Property Damage" shall mean loss of or direct damage to or destruction of

tangible property (other than property owned by any Insured) and which results
in an Occurrence during the policy period....

32

"Occurrence" means an accident, event or happening including continuous or

repeated exposure to conditions which results, during the policy period, in
Personal Injury, Property Damage or Advertising Liability neither expected nor
intended from the standpoint of the Insured....
The Exclusions section provided:

33 policy shall not apply to Personal Injury or Property Damage arising out of the
This
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;
but this exclusion does not apply if such discharge, dispersal, release or escape is
sudden and accidental.
34

In a "reservation-of-rights" letter dated April 27, 1987, Northbrook advised

CPC that it had no obligation to indemnify CPC for claims arising from the
Town of Lincoln action or the EPA-ordered cleanup. The letter was based, inter
alia, on the pollution exclusion and on the date of occurrence.III

This Litigation

A. Commencement of Suit and Initial Application of New Jersey Law

35
36

On July 21, 1987, CPC filed suit against Northbrook in New Jersey Superior
Court. CPC alleged that all of the conditions precedent to insurance coverage
had been satisfied or waived, and sought a declaration that Northbrook was
obligated to indemnify CPC for Peterson/Puritan's "entire ultimate net loss" in
excess of Northwestern National's $1 million coverage limit. CPC also sought a
judgment estopping Northbrook from further denying coverage.

37

Northbrook removed the action to the U.S. District Court which transferred it to
the District of Rhode Island pursuant to 28 U.S.C. 1404(a). CPC then filed a
motion for a declaration that the substantive law of New Jersey still governed
the litigation. The motion was allowed on the basis that a New Jersey court
would apply New Jersey law to the case because New Jersey was the state
which connected all the parties together and so had the most significant interest
in the outcome of the case. See CPC Int'l, Inc. v. Northbrook Excess & Surplus
Ins. Co., 739 F.Supp. 710, 715 (D.R.I.1990).

38

Applying New Jersey law, the district court allowed Northbrook's motion for
summary judgment on the ground that the pollution exclusion clause in the
policy precluded coverage for gradual pollution. See CPC Int'l, Inc. v.
Northbrook Excess & Surplus Ins. Co., 759 F.Supp. 966 (D.R.I.1991). The
district court predicted that the New Jersey Supreme Court, which had not ruled
on the issue, would define the term "sudden and accidental" as referring to
events which are unexpected and unintended and which occur abruptly or over
a short period of time. See id. at 973. The court ruled that CPC had not shown
that the contamination was within this definition.

39

On appeal, this court reversed and remanded, saying the district court's
prediction gave insufficient weight to the decisions of the New Jersey Superior
Court's Appellate Division (New Jersey's intermediate appellate court), which
had concluded that the term "sudden and accidental" was ambiguous and had to
be interpreted favorably to insureds as providing coverage for gradual pollution.
This court concluded that the New Jersey Supreme Court would more likely
construe "sudden and accidental" to mean only unintended and unexpected, i.e.,
not requiring the event to be abrupt or immediate. See CPC Int'l, Inc. v.
Northbrook Excess & Surplus Ins. Co., 962 F.2d 77, 97 (1st Cir.1992).

B. Round Two: Application of Rhode Island Law and First Trial

40

41

On remand, Northbrook moved for reconsideration of the initial choice-of-law

ruling in light of an intervening change in New Jersey choice-of-law rules. That

motion was granted on the basis that New Jersey law now dictated that the
substantive law of Rhode Island governed the case. See CPC Int'l, Inc. v.
Northbrook, 839 F.Supp. 124 (D.R.I.1993). This court denied CPC's petition
for mandamus.
42

The case went to a jury trial on January 28, 1994. At the close of CPC's
evidence, Northbrook moved for judgment as a matter of law under
Fed.R.Civ.P. 50(a). On February 16, 1994, the district court granted
Northbrook's motion, saying that CPC had failed to present evidence from
which a reasonable juror could conclude that there had been an "occurrence"
during the 1979-80 policy period, because the perc spill took place in 1974 and
there was no evidence that the contamination reached the aquifer during the
policy period.

C. The Second Appeal: The Trigger of Coverage Question Under Rhode Island Law
43
44

On appeal, this court affirmed the application of Rhode Island law, but
concluded that Rhode Island law was unclear on the trigger of coverage and
certified this question to the Rhode Island Supreme Court:

45 trigger-of-coverage standard would the Rhode Island Supreme Court use for
What
determining at what point an "occurrence" causing "property damage" took place,
within the meaning of the insurance policy provisions provided in the separate
opinion in this case, where an insured alleges that a spill of hazardous contaminants
in 1974 migrated through the groundwater, causing immediate injury to the pertinent
property, which was not, in fact, discovered, however, until at least 1979.
46

CPC Int'l, Inc. v. Northbrook, 46 F.3d 1211, 1222 (1st Cir.1995). The Rhode
Island Supreme Court answered:

47 "occurrence" under a general liability policy takes place when property

[A]n
damage, which includes property loss, manifests itself or is discovered or in the
exercise of reasonable diligence, is discoverable.
48

CPC Int'l, Inc. v. Northbrook, 668 A.2d 647, 650 (R.I.1995). In light of that
answer, this court vacated the judgment in Northbrook's favor and remanded
the case for a new trial. The second trial was conducted in June of 1997 and
resulted in the verdict for CPC. CPC was awarded $12,632,885.94 in damages
plus prejudgment interest in the amount of $5,333,283. In addition, Northbrook
was obligated to reimburse CPC for all costs incurred by CPC in remediating
the Peterson/Puritan site after February 28, 1997. After the jury verdict, the

court denied Northbrook's motions for judgment as a matter of law under

Fed.R.Civ.P. 50 and for a new trial under Fed.R.Civ.P. 59. It is from this jury
verdict that this appeal is taken.
IV
Discussion
49

We discuss the pertinent evidence in light of the particular claims on appeal.

The facts are stated as the jury and district court could have found them. See
Cambridge Plating Co., Inc. v. Napco, Inc., 85 F.3d 752, 756 (1st Cir.1996).

A. The Discoverability of Property Damage

50

Northbrook's central argument on appeal is that its motion for judgment as a

matter of law was improperly denied, because the evidence compels the
conclusion that CPC knew or reasonably should have known of property
damage before July 1979.

51

Appellate review of the grant or denial of a motion for judgment under

Fed.R.Civ.P. 50 is de novo, applying the same standard that governed the
adjudication of the motion in the district court. See Costos v. Coconut Island
Corp., 137 F.3d 46, 48 (1st Cir.1998). All of the evidence is examined in the
light most favorable to the nonmoving party, drawing all possible inferences in
its favor. See Cambridge Plating Co., 85 F.3d at 764. We do not consider the
credibility of witnesses, resolve conflicts in testimony, or evaluate the weight of
the evidence. See Wagenmann v. Adams, 829 F.2d 196, 200 (1st Cir.1987). We
will reverse the denial of a Rule 50 motion "only if reasonable persons could
not have reached the conclusion that the jury embraced." Coconut Island Corp.,
137 F.3d at 48 (citation and internal quotation marks omitted).

52

Here, the initial issue is whether there is sufficient evidentiary support for the
jury's conclusion that there was an "occurrence" between July 1, 1979, and July
1, 1980. The terms of the policy are set forth earlier. The definition of
"occurrence" is given content by Rhode Island law:

53 "occurrence" under a general liability policy takes place when property

[A]n
damage, which includes property loss, manifests itself or is discovered or in the
exercise of reasonable diligence, is discoverable.
54

CPC Int'l, Inc., 668 A.2d at 650. Under this formulation, the term "occurrence"
and "property damage" are closely connected:

55 together, the provisions of the Northbrook policy provide coverage to an

Read
insured that sustains an occurrence--that is, an event that results in compensable
property damage during the policy period. In other words, there can be no
occurrence under the policy without property damage that becomes apparent during
the policy period, and property loss and compensable damages cannot be assessed
unless the property damage is discovered or manifests itself. "Property damage" and
"occurrence" are thus inextricably intertwined.
56

Id. at 649.

57

Northbrook focuses its attack on the "discoverability" prong of the Rhode

Island definition of "occurrence", saying that CPC should have known that its
routine waste-disposal and polluting activities and the 1974 perc spill would
cause property damage long before 1979.6 Northbrook argues that the jury,
while properly instructed on Rhode Island law, misapplied that instruction.7 As
to how the jury applied the instruction, our knowledge is only that the jury
returned a general verdict in favor of CPC in the amount of $12,632,885.94, and
thus necessarily found that the property damage did not manifest itself, and
could not have reasonably been discovered, before July 1979. Northbrook did
not request special verdicts.

B. Exclusion of Evidence
58

Before addressing the merits of the insurer's argument on this sufficiency issue,
we stop to consider Northbrook's argument that it was erroneously prevented
from painting a fair and complete picture for the jury by the exclusion of
evidence. As with any argument addressed to the exclusion of evidence,
Northbrook faces the challenge of meeting the abuse of discretion standard. See
Rodriguez-Hernandez v. Miranda-Velez, 132 F.3d 848, 855 (1st Cir.1998)
(citation omitted). If Northbrook were correct that the exclusion of evidence
was an abuse of discretion and prejudicial, we would not reach the issue of
whether there was adequate evidence to support the jury verdict. But while
Northbrook's argument is far from frivolous, our conclusion is that the ruling
was well within the court's discretion.

59

The major component of Northbrook's defense was that CPC should have
known about the property damage resulting from the perc spill and other
polluting activities well before 1979. Towards that end, Northbrook put on
state-of-the-art and state-of-knowledge evidence as to CPC's knowledge before
1979 of the dangers of release of VOC's and perc in an effort to show that CPC
knew or should have known that the chemicals would contaminate the ground
and groundwater.

60

We take it as given that such evidence may generally be helpful to the jury in
determining what a party should have known at some time in the past. Findings
about what another operation of the company knew and had been told about the
danger of groundwater contamination of a similar type can help the jury in
determining whether CPC exercised reasonable diligence with regard to this
particular spill. See Chemical Leaman Tank Lines, Inc. v. Aetna Cas. and Sur.
Co., 817 F.Supp. 1136, 1150 (D.N.J.1993) (admitting evidence of plaintiff
insured's problems at other tank cleaning sites on issue of company's
knowledge).

61

Such state-of-the-art and state-of-knowledge evidence is used by both sides in

many contexts in civil and criminal environmental and toxic tort litigation. For
example, it is used by insurers and insureds in insurance coverage cases. See
Mottolo v. Fireman's Ins. Co., 43 F.3d 723, 730 (1st Cir.1995) (discussing the
usual summary judgment burden shifting rules applied to this area of law);
Chemical Leaman Tank Lines, Inc., 817 F.Supp. at 1149-50 (use by insurer
against insured); Hatco Corp. v. W.R. Grace & Co., 801 F.Supp. 1334, 1376
(D.N.J.1992)(insured submits state-of-knowledge evidence to oppose insurer's
contention that insured intended and expected to cause contamination at site);
New Castle County v. Continental Cas. Co., 725 F.Supp. 800, 803-04
(D.Del.1989) (state-of-the-art knowledge about leachate from landfills
apparently introduced by insured on issue of whether the pollution was
expected). It is also used in the allocation of responsibility under the "Gore"
factors in private party CERCLA contribution actions. See Gould v. A & M
Battery Tire Serv., 987 F.Supp. 353, 363-64 (M.D.Pa.1997) (successor operator
presents state-of-the-art defense). Some state-of-the-art evidence was
introduced here, but specific evidence was excluded.

62

Here, Northbrook sought to introduce (1) judicial decisions in two previous

CPC coverage suits involving groundwater contamination at CPC facilities in
New Jersey and Michigan, see CPC Int'l, Inc. v. Hartford Accident & Indemnity
Co., Bergen No. L37236-89 (N.J.Super. April 15, 1996); CPC Int'l, Inc. v.
Aerojet-General Corp., 825 F.Supp. 795 (W.D.Mich.1993); (2) trial testimony
of CPC's Senior Corporate Counsel and others as to whether certain facts found
in those opinions were correct; and (3) certain related documents. There was no
specific offer of proof as to what any of the proposed witnesses would say; their
depositions had not been taken. Nor was this broad band of evidence narrowly
tailored to the precise issues involved at trial.

63

Northbrook argued that such evidence would show that CPC knew long before
1979 about the harmful effects of VOC groundwater contamination.
Northbrook wanted to introduce certain findings of fact contained in the judicial

decisions establishing that CPC was cleaning up groundwater contamination in

its facilities before the 1970's and that one state court had enjoined CPC from
using lagoons for waste disposal because of the contamination which resulted.
CPC responded that circumstances at the Michigan and New Jersey sites were
very different from those at Peterson/Puritan, and that the prejudicial and
confusing effect of admitting the decisions would far outweigh their probative
value.
64

The New Jersey case was a coverage suit filed by CPC for indemnification of
environmental remediation costs incurred during the clean-up of three facilities
operated by a CPC subsidiary. All three sites had VOC groundwater
contamination from the use of underground storage tanks and lagoons into
which aqueous chemical waste residues were deposited.8 The Michigan case
was a consolidated CERCLA action where numerous parties contested liability
for the cleanup of a dormant manufacturing facility which had heavy soil,
surface water, and groundwater contamination, principally from the use of
unlined lagoons as sites for chemical waste disposal.9

65

After extensive voir dire, the district court excluded the decisions on
Fed.R.Evid. 403 grounds, saying first that their introduction would require a
"replay of the litigation of those two cases," in that the parties would have to
argue about the similarity of the previous lawsuits to the instant case. This
would take "much time and considerable effort, and I think with little result."
The court also said that the opinions were not relevant to whether CPC could
have discovered property damage in the exercise of reasonable diligence,
because the facts underlying the two opinions were different than the facts
here; moreover, neither opinion addressed the issue of "property damage" as
defined in the policy. The court concluded that introduction of the prior
decisions could prejudice the jury about CPC and its conduct in the instant
case.

66

We start with Northbrook's initial burden of showing that the proffered

evidence was relevant. On this, there is considerable confusion. If the proffered
evidence plainly showed that the other sites involved similar chemicals and
similar methods of transport and contamination, we could easily find the
evidence relevant. But the record is confused and confusing. It appears that the
other sites involved largely chemicals which were not VOC's at all and included
phenols and chlorides. It also appears that the sites did not involve a massive
quickly-happening and quickly disappearing flood of a chemical, such as the
1974 perc spill, but slow seepage and spillage from constantly filled waste
lagoons.

67

But recognizing that knowledge is often gained from analogous events as well
as from identical events, we will assume the evidence was at least somewhat
relevant. Under Rule 403, the district judge was then required to determine
whether "its probative value [was] substantially outweighed by the danger of
unfair prejudice, confusion of the issues, or misleading the jury, or by
considerations of undue delay, waste of time, or needless presentation of
cumulative evidence."

68

The dangers of unfair prejudice were certainly real, as the trial judge
recognized. "Unfair prejudice," as the Advisory Committee Note teaches,
means an "undue tendency to suggest decisions on an improper basis,
commonly, though not necessarily, an emotional one." Northbrook sought to
introduce evidence in the form of judicial decisions that two other courts had
made findings that other CPC operations had contaminated groundwater.
Citizens do not look fondly on industrial polluters, particularly when the
industries have been found to be such by a court. There was a danger such
evidence would lead to a decision based on emotion or a desire to punish. We
have said exclusions under Rule 403 were appropriate where such dangers are
strong. See United States v. Aguilar-Aranceta, 58 F.3d 796, 800-802 (1st
Cir.1995); LaPlante v. American Honda Motor Co., 27 F.3d 731, 739-40 (1st
Cir.1994); cf. Nickerson v. G.D. Searle & Co., 900 F.2d 412, 418 (1st
Cir.1990) (affirming exclusion of questions of medical expert on his work in
abortion clinics because of danger of an emotional reaction).

69

By focusing on judicial findings, Northbrook ran into other difficulties, ones

this court described in Kinan v. City of Brockton, 876 F.2d 1029 (1st Cir.1989).
In Kinan, the plaintiff sought to introduce evidence of two previous civil rights
actions filed against the same police officer whose conduct was the subject of
the instant suit; the plaintiff sought to introduce those previous decisions as
proof that the defendant had a custom or policy of depriving its citizens of
certain constitutional rights. See id. at 1033. The district court excluded the
evidence. See id. Kinan affirmed the exclusion on the basis that the evidence,
even if relevant, would result in jury confusion, wasted time, and be unfairly
prejudicial.10 See id. at 1034-35. Kinan based its reasoning in part on the fact
that the proffered cases had settled prior to trial and were decided on the basis
of negotiation, not adjudicated findings of fact. See id. While Kinan is far from
controlling, the dangers warned against in Kinan are real:

70
[I]ntroducing
evidence of the two other cases would inevitably result in trying those
cases, or at least portions of them, before the jury. The merits of the two other cases
would become inextricably intertwined with the case at bar. The result would be
confusion and consumption of a great deal of unnecessary time.

71

Id. at 1034. These concerns were echoed by the district court in excluding
Northbrook's proffered evidence.

72

Weighed against this is the seemingly weak probative value of the evidence. In
order to strengthen that probative value, Northbrook would have had to
introduce evidence perfecting the analogy of the other sites and chemicals to
the ones at issue in this trial. That, in turn, would have led, as the district court
aptly noted, "to a replay of the litigation of those other two cases." And that, in
turn, could have misled the jury and certainly would have caused delay. The
call made by the experienced trial judge, who had the look and feel of the trial
before him, was eminently reasonable and not an abuse of discretion.C.
Sufficiency of Evidence on Discoverability

73

We return to the picture as it was painted for the jury. CPC and Northbrook
presented two conflicting views of what CPC actually knew and what CPC
should reasonably have known about pollution around the plant and the effect
of the perc spill. Here, a jury rejected Northbrook's claim that the state-ofknowledge about the dangers of VOC's was such prior to 1979 that CPC was on
notice about the dangers of groundwater contamination.11

74

On appeal, Northbrook constructs its argument--that CPC knew or reasonably

should have known of that damage before 1979--out of these major elements:

75

1. CPC had actual knowledge of the perc spill in 1974.

76

2. CPC should have known that the perc from the spill would enter the
groundwater within a few days.

77

3. CPC knew in 1974 that perc was a hazardous substance from the Chemical
Safety Data Sheets ("CSDS"), which stated that "[i]f swallowed,
perchlorethylene liquid has toxic effects."

78

4. In 1972, the Manufacturing Chemists Association, the distributors of the

CSDS for perc, distributed a manual entitled "Guidelines For Chemical Plants
in Prevention, Control, and Reporting of Spills," which warned:
2.1.6 Pollution of Ground Waters

79
While
many spills result in detrimental effects on sewage treatment systems of
surface water, some can affect the quality of ground waters. Leaks from storage
tanks ... can percolate downward or laterally into shallow waters.

...
80
81 geology of the area is an influencing factor in determining the migration of
The
spills of this type. Sandy soils are particularly subject to percolation of pollutants
into ground waters
82

This statement did not, however, refer specifically to perc.

83

CPC opposed Northbrook's account with evidence that there was little reason
before 1979 to think that a perc spill, or even historic releases of VOC's into
manholes or catch basins at the plant, would descend into the aquifer, move
laterally into the wellfields, and cause property damage. CPC put on expert
testimony that the dangers known to be associated with exposure to perc in
1979 were of skin contact, inhalation, and possible asphyxiation. CPC's experts
said that these were the primary dangers that were known concerning VOC's.

84

As to the pre-1979 state-of-knowledge about responding to a perc spill, CPC's

evidence was that the earliest literature on that particular chemical was
information in 1978 from the National Firemen's Protection Association. That
information was that such spills should be washed down with a fire hose. Those
who actually dealt with the 1974 perc spill at the Peterson/Puritan facility
testified that the company followed the directions of the Rhode Island
Department of Environmental Management and washed down the spill and then
covered it over with soil or gravel. The primary risk people were then
concerned with was that of fire. Witnesses testified that there was little or no
contemporary awareness about the risk and effect of groundwater
contamination. Indeed, even as of 1979, there were no state or federal standards
for impermissible levels of perc in drinking water.

85

We conclude that the jury could reasonably find, as it implicitly did, that the
earliest discovered or discoverable property damage was the contamination of
the Quinnville Wellfield which caused it to be closed in 1979. 12 The evidence
did not compel a finding in Northbrook's favor.

D. The Pollution Exclusion and the Sudden and Accidental Exception

86
87

Having rejected Northbrook's challenge to the jury's finding that there was an
occurrence within the policy period, we turn to its related argument that the
property damage resulted from activities within the policy's pollution
exclusion, i.e., that CPC did not meet its burden of proving any "occurrence"
was caused by a "sudden and accidental" discharge.

88

Northbrook does not dispute that the 1974 perc spill was sudden and accidental
as that term is defined by Rhode Island law. Rather, its argument is that the
perc spill is beside the point because the property damage for which the
indemnification is sought is from all of the pollution at the Peterson/Puritan
site, and this pollution is largely the result of the regular and routine polluting
activities which took place at the plant over many years. This pollution
included washing waste-water containing chemicals down various sinks and
drains at the plant which discharged into the septic system and leaching fields.
It also includes minor leaks and spills that occasionally took place at the
chemical tank farm, where the spilled chemicals would travel directly through a
gravel floor into the ground. Northbrook contends that these activities were not
sudden and accidental, and thus are not covered under the pollution exclusion.
The existence of a single sudden and accidental event, Northbrook says, such as
the 1974 perc spill, does not mean that CPC may avoid the consequences of its
on-going contamination.

89

Northbrook's argument falters on the fact that the jury accepted an alternative
view of the evidence which has adequate support in the record. This alternate
view is that the indemnification is sought for clean-up costs mandated by the
EPA for OU-1 in its efforts to protect and restore the Quinnville Wellfield, that
the perc spill caused the damage to the wellfield, and that remediating the
contamination from the perc spill is the principal source of the costs--including,
as explained below, costs for remediating contamination which originated from
routine activities at the plant.

90

Evidence upon which the jury could rely included the ROD, which stated that
the wells had not been contaminated before 1979 and that, but for the
contamination, the wells could be reopened. Referring to the perc spill, the
ROD stated that "this spill, along with historical releases into manholes and
catch basins, ... is the primary source of contamination. " (Emphasis added).
The ROD described the wellfield as "a receptor of OU-1 contamination" and
said that "the potential future use of the wellfield as a drinking water source is a
realistic possibility." The ROD thus required CPC to clean-up the OU-1 area to
drinking water standards--a significant point which emphasizes the EPA's focus
on restoring the wellfield to use, not merely cleaning the soil (although one is
prerequisite to the other).

91

The jury could also credit evidence that in the period before the perc spill such
contamination as existed at the plant was trapped in the soil and did not migrate
into the groundwater, and that the perc spill was the vehicle which brought the
contaminants into the groundwater. On this point, there was expert testimony
that the perc spill was responsible: some of the perc volatilize, forming a large,

spreading vapor cloud which moved through the soil slowly, dissolving
contaminants in its path, carrying those contaminants along with it as it
descended into the groundwater.13
92

It is true, as Northbrook argues, that under the 1995 Consent Decree, CPC must
carry out the remedy in the ROD including: (1) the excavation of contaminated
soil in manholes and catch basins at the facility; (2) the capping of soil in the
tank farm and paving of soil in the O'Toole property; and (3) the
implementation of a soil venting and soil vapor extraction system. But the jury
apparently believed, on the evidence, that these costs were necessitated by the
clean-up of the aquifer so that the wells could be restored, and that it was
primarily the perc spill which necessitated that clean-up.

93

The evidence does not compel a finding in Northbrook's favor on this point.
The jury could reasonably have found that contaminants released at the plant
would not have caused any property damage absent the perc spill, and that the
perc spill was therefore the real and ultimate cause of the environmental
damage to the wells. And the jury could reasonably find that the costs incurred
by CPC during the EPA-ordered clean-up are for remediating pollution so that
use of the Quinnville Wellfield might resume.

94

In sum, Northbrook's challenge fails. The issues here were for the jury to
decide and there was sufficient evidence to support the verdict. See New Castle
County v. Hartford Accident and Indem. Co., 933 F.2d 1162, 1192 (3d
Cir.1991).

E. Microanalysis
95

The parties and the amicus have argued in their appellate briefs about
"microanalysis." Northbrook suggests two different concepts under the label of
"microanalysis." The first is that where there is a history of a pollution-prone
operation, it is wrong to analyze each single polluting event to determine
whether it was "unexpected," and thus perhaps subject to characterization as
"sudden and accidental." See, e.g., Lumbermens Mut. Cas. Co. v. Belleville
Indus., Inc., 938 F.2d 1423, 1427-30 (1st Cir.1991) (rejecting such an
approach). Amicus joins this argument, echoing this court in arguing that such
an approach would "eviscerate the exclusion for pollution." Id. at 1428. Various
courts have characterized the so-called "microanalysis" approach as attempting
to "break down [regular polluting activities] into temporal components in order
to find coverage where the evidence unequivocally demonstrates that the
pollution was gradual," Smith v. Hughes Aircraft, 22 F.3d 1432, 1438 (9th
Cir.1993) (internal quotation marks omitted); see American States Ins. Co. v.

Sacramento Plating, Inc., 861 F.Supp. 964, 971 (E.D.Cal.1994), or as "an illfated effort to distinguish between virtually indistinguishable occurrences."
Lumbermens Mut. Cas. Co., 938 F.2d at 1428; see also Charter Oil Co. v.
American Employers' Ins. Co., 69 F.3d 1160, 1170 (D.C.Cir.1995) (describing
approach as attempt to "disaggregate" "an activity occurring over an extended
period"). The facts of this case do not invoke any of those perils. This is not an
instance of attempting to parse a sequence of events in regular polluting
activities into component parts and then arguing whether each part is sudden
and accidental. Rather, there was a massive, sudden and accidental event in the
perc spill and it was up to the jury to decide whether that, or the ongoing
pollution, led to the property damage for which indemnification is sought. The
short answer to Northbrook's first "microanalysis" argument is then that this
case does not raise that issue at all.
96

The second concept Northbrook raises under the label of "microanalysis" is

whether damages for sudden and accidental releases may be parsed out from
damages caused by routine, regular pollution within the exclusion.
Massachusetts law, for example, allows for this possibility where the damage
from sudden and accidental releases are identifiable and are themselves
appreciable (or not de minimis) and compensable. See Highlands Ins. Co. v.
Aerovox, Inc., 676 N.E.2d 801, 806, 424 Mass. 226, 234 (1997); Nashua Corp.
v. First State Ins. Co., 648 N.E.2d 1272, 1275-76, 420 Mass. 196, 202-203
(1995); see also Millipore Corp. v. Travelers Indem. Co., 115 F.3d 21, 34 (1st
Cir.1997). In those cases it was in the interest of the insured companies to try to
identify and carve out a portion of the damages as being attributable to sudden
and accidental events (for which there was coverage) when the general damage
suffered was attributable to regular polluting activities which were subject to
the pollution exclusion (for which there was no coverage). But the doctrine is a
two-way street: here, it may have been in the insurer's interest to carve out a
portion of CPC's claim as attributable to regular pollution activities (and thus
not coverable) against a backdrop of an overall damages landscape a jury could
have viewed as shaped by one sudden and accidental event. But, as a matter of
trial tactics, the insurer chose not to raise the issue, and it is waived.14 We thus
have no occasion to predict whether Rhode Island law, which governs this case,
will adopt a rule similar to the Massachusetts rule.

97

The decision of the district court is affirmed.15

*
1

Of the District of Massachusetts, sitting by designation

We have commented earlier on the enormous financial and human resources

which are expended in environmental litigation and Congress' concern about

this. See United States v. Charter Oil Co., 83 F.3d 510, 520 n. 14 (1st Cir.1996)
(recounting studies). The specific reasons for complexity, cost and delay in
environmental insurance litigation are discussed in K. Abraham, The Maze of
Mega-Coverage Litigation, 97 Colum. L.Rev. 2102 (1997). While many view
this expenditure of resources on transaction costs rather than on remediating
contaminated sites as a significant social problem, no solution has been
forthcoming. Neither the Environmental Insurance Resolution Fund bill nor
other legislation proposed by the insurance industry has been enacted. Id. at
2115
2

From July 1, 1979, to July 1, 1980, Northbrook served as CPC's first layer
excess insurance carrier, with a $25 million umbrella liability policy.
Northbrook is now owned by Allstate

In turn, CPC cross-appeals, saying that the district court erred in interpreting
the policy to mean that Northbrook was obligated to defend CPC in the EPA
administrative proceeding, and seeking as a remedy that the insurer be barred
from contesting the reasonableness of the clean-up costs. CPC cross-appeals
only as a method of supporting the jury verdict on other grounds. As explained
infra, we do not reach the question of whether the cross-appeal is proper

ABB, like Malcolm Pirnie, agreed with GZA's conclusion that the pump action,
and thus the cone of influence of the well, drew the contamination into the
Quinnville Wellfield:
During pumping of the Quinnville Wellfield prior to 1979, groundwater
contaminants on the east side of the river were drawn under the river to the
municipal wells. Contaminants originating in the Primary Source Area, migrate
to the southwest, under the Blackstone River, to the Quinnville Wellfield when
the latter is in operation. Since the Quinnville Wellfield's closure in 1979,
contaminated groundwater in the wellfield has moved toward the river.
ABB concluded that contaminant concentrations had decreased at
Peterson/Puritan since the early 1980's, although the area along the tank farm,
where the 1974 perc spill occurred, continued to show high concentrations of
VOC contamination.

As to the Lenox Street Well, GZA hypothesized that a single source could be
responsible for the contamination of both the Quinnville Wellfield and the
Lenox Street Well, although GZA acknowledged that information about the
flow regime around the Lenox Street Well was insufficient to confirm the
hypothesis. Malcolm Pirnie disputed this contention, saying that the data on
area groundwater flows suggested that the contaminated groundwater under the

Peterson/Puritan site would not likely have reached the Lenox Street Well
given the low pumping rate of that supply well. The ROD did not include the
Lenox Street Well within OU-1
6

Rhode Island imposes an obligation of "reasonable" diligence under its

discovery rule. The reasonable diligence test is largely what the party "should
have known." See Zuccolo v. Blazar, 694 A.2d 717 (R.I.1997); Kougasian v.
Davol, Inc., 687 A.2d 459 (R.I.1997)

The court instructed the jury: "Property damage is detectable for the first time
when it first (1) manifests itself, or (2) is discovered by any person, or (3) in the
exercise of reasonable diligence would be discoverable by any person."

The court entered summary judgment in favor of the insurers on the basis that
CPC had failed to show an "occurrence" within the applicable policy periods.
See Hartford Accident & Indemnity Co., Bergen No. L-37236-89, slip op. at 23. CPC is appealing that judgment

After a trial on liability, the court held that CPC was liable under 107(a)(2) of
CERCLA as an operator of the plant through its subsidiary. See CPC Int'l, Inc.
v. Aerojet- General Corp., 777 F.Supp. 549, 574-75 (W.D.Mich.1991). The
Sixth Circuit, sitting en banc, reversed this decision, holding that CERCLA
does not authorize liability of a parent company that makes proper use of the
corporate form. See United States v. Cordova Chemical Co., 113 F.3d 572, 581
(6th Cir.) (en banc), cert. granted sub nom., United States v. CPC Int'l, Inc., --U.S. ----, 118 S.Ct. 621, 139 L.Ed.2d 506 (1997)

10

Other circuits have affirmed the exclusion of prior judicial opinions on Rule
403 grounds, all of them citing the danger of jury confusion and prejudice to
the party as bases for their decision. See Carter v. Burch, 34 F.3d 257, 265 (4th
Cir.1994) (affirming exclusion of judicial letter opinion); Johnson v. Ford
Motor Co., 988 F.2d 573, 579-81 (5th Cir.1993) (affirming trial court's
exclusion of evidence of five other complaints filed against manufacturer);
Mendenhall v. Cedarapids, Inc., 5 F.3d 1557, 1566-70 (Fed.Cir.1993)
(affirming exclusion of evidence of prior decision in subsequent related
litigation); Johnson v. Colt Indus. Operating Corp., 797 F.2d 1530, 1533-34
(10th Cir.1986) (admission of prior judicial opinion brought against
manufacturer was erroneous, but harmless error)

11

To the extent that Northbrook argued that there was no occurrence until after
the policy period because of its expert's view that the spill-generated
contaminants did not arrive at the wellfield by October 1979, the jury could, on
the evidence, disagree with that testimony

12

Northbrook's own expert testified that there is a distinction between

contamination and damage. Damage, the expert opined, does not necessarily
occur where there is contamination; rather the contamination "has to affect [the
property] to the point where it can't be used for its intended purpose." Here, the
jury could have found that the shutdown of the wellfield on account of
groundwater contamination was the property damage at issue, and that the
contamination around Peterson/Puritan contributed to that damage but did not
constitute damage in of itself

13

Dr. Delaney testified to this effect, using a computer animation program to

demonstrate to the jury the progress of the perc through the soil layers. The
perc, a dense liquid, would "pancake" out when it encountered areas of less
permeability as the perc descended through the soil layers. The perc would also
form a vapor cloud in the soil replacing the oxygen in the soil. Because perc is
a solvent, "it picked up the material coming from the leeching manhole" that it
came into contact and carried it down into the groundwater

14

Northbrook could have requested that the jury be given a special verdict form
that required the jury to consider different aspects of the pollution at the
Peterson/Puritan plant and determine exactly which portions of the pollution
clean-up costs Northbrook was required to cover. Such a strategy might have
reduced Northbrook's ultimate liability, as the jury might have decided that
some, but not all, of the pollution at the plant was not covered. But Northbrook
decided as a matter of trial strategy to proceed with a general verdict form,
playing for all or nothing. It must live with its choice

15

CPC's cross-appeal asks as a remedy that Northbrook should be estopped from

challenging the reasonableness of the settlement CPC made with the EPA, and
thus CPC's remediation costs. Indeed, CPC says it makes this argument simply
to support the jury's verdict. At trial, the jury awarded CPC its full damages.
We are affirming that award. Under this circumstance, there is no need to
address this argument, as it is disposed by our resolution of the case