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Onebeacon America Insurance Co. v. Narragansett Electric Co.

Appeals Court of Massachusetts, Suffolk

August 31, 2016

ONEBEACON AMERICA INSURANCE COMPANY
v.
NARRAGANSETT ELECTRIC COMPANY; AMERICAN HOME ASSURANCE COMPANY & others, [1] third-party defendants.

          Heard: June 3, 2014.

         Civil action commenced in the Superior Court Department on July 25, 2005.

         Motions for summary judgment regarding choice of law issues were heard by Allan van Gestel, J., and a motion for reconsideration was considered by him; motions for summary judgment were heard by Margaret R. Hinkle, J., and Peter M. Lauriat, J.; the remaining issues were tried in two phases before them; and entry of final judgment was ordered by Lauriat, J.

          Jay T. Smith, of the District of Columbia (A. Hether Cahill with him) for Narragansett Electric Company.

          Kevin J. O'Connor for OneBeacon America Insurance Company.

          David B. Chaffin for Century Indemnity Company.

          Eileen T. McCabe, of New York, & John T. Harding, for Certain Underwriters at Lloyd's, London, & others, were present but did not argue.

          Michael F. Aylward, for American Home Assurance Company & others, was present but did not argue.

          Present: Kantrowitz, Hanlon, & Carhart, JJ.[2]

          CARHART, J.

         This matter is before us pursuant to the December 28, 2015, order of the Supreme Judicial Court, remanding to this court for express consideration the substantive law to be applied to the interpretation of the insurance contracts at issue in OneBeacon America Ins. Co. v. Narragansett Elec. Co. (No. 2), 87 Mass.App.Ct. 1126 (2015) (OneBeacon No. 2). The plaintiff, OneBeacon America Insurance Company (OneBeacon), along with third-party defendants Certain Underwriters at Lloyd's, London and Certain London Market Insurance Companies (collectively, London), American Home Assurance Company (American Home), and Century Indemnity Company (Century) argued in their respective appeals that a Superior Court judge erred in determining that Rhode Island law would apply both in deciding whether the insured, Narragansett Electric Company (NEC), was entitled to coverage for environmental contamination at several Rhode Island sites, and in the allocation of damages on the jury's verdicts as to one of the sites.

         For background, we refer to OneBeacon America Ins. Co. v. Narragansett Elec. Co. (No. 1), 87 Mass.App.Ct. 417 (2015) (OneBeacon No. 1). Early in the litigation, a judge of the Superior Court ruled that the law of Rhode Island would apply to interpretation of the insurance contracts, reasoning that the sites involved were operated by a Rhode Island public utility (NEC) and were almost all located in Rhode Island (see OneBeacon [No. 1], 87 Mass.App.Ct. at 420; note 7, infra), and that Rhode Island utility customers had an interest in who would bear the clean-up costs. On appeal, OneBeacon presses for application of Massachusetts law, [3] as the State having the most significant contacts with the primary policies issued to the insured by OneBeacon's predecessor, [4] while London and American Home argue that New York law should apply to the excess policies issued by them. We resolve the choice-of-law debate in favor of the law of Massachusetts.

         1. Massachusetts choice-of-law principles.

         We begin with the conflict-of-law rules of the forum State. Clarendon Natl. Ins. Co. v. Arbella Mut. Ins. Co., 60 Mass.App.Ct. 492, 495 (2004). Massachusetts has adopted a functional choice-of-law analysis, guided by the Restatement (Second) of Conflict of Laws (1971) (Restatement). Bushkin Assocs. v. Raytheon Co., 393 Mass. 622, 631-632 (1985). When dealing with insurance contracts, we look to Restatement § 193, as well as § 188 and the principles delineated in § 6. Clarendon Natl. Ins. Co. v. Arbella Mut. Ins. Co., 60 Mass.App.Ct. at 496.

         "Section 193 [of the Restatement] provides that the rights created by a contract of casualty insurance are to be determined by the local law of the State that the parties to the insurance contract understood would be the principal location of the insured risk during the term of the policy, unless some other State has a more significant relationship under the principles of § 6." Ibid. Section 193 further provides that "[t]he location of the insured risk will be given greater weight than any other single contact in determining the state of the applicable law provided that the risk can be located, at least principally, in a single state." Restatement § 193 comment b. The insured risk generally will be located in the State where the policy holder is domiciled. Ibid.

         The identity of the policy holder in this case is not clear cut. NEC is a Rhode Island public utility. The first policy issued by OneBeacon, a primary comprehensive general liability policy for the period of October, 1972, to October, 1973, listed the "named insured" and address as follows:

"Eastern Utilities Associates, EUA Service Corporation, Brockton Edison Company, Blackstone Valley Electric Company and/or any Subsidiary, Associated, Allied or Affiliated Company which is Majority owned and now existing or which may hereafter ...

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