Antrim Min., Inc. v. Pennsylvania Ins. Guar. Ass'n

• Decision Date: 21 October 1994
• Citation: 648 A.2d 532,436 Pa.Super. 522
• Parties: ANTRIM MINING, INC., Appellant v. PENNSYLVANIA INSURANCE GUARANTY ASSOCIATION, Rockwood Insurance Company, and Cynthia Maleski, Pa. Insurance Commissioner.
• Court: Pennsylvania Superior Court

Page 532

648 A.2d 532

436 Pa.Super. 522

ANTRIM MINING, INC., Appellant v. PENNSYLVANIA INSURANCE GUARANTY ASSOCIATION, Rockwood

Insurance Company, and Cynthia Maleski, Pa.

Insurance Commissioner.

Superior Court of Pennsylvania.

Argued April 7, 1994.

Filed Aug. 11, 1994.

Reargument Denied Oct. 21, 1994.

Dean Piermattei, Lancaster, for appellant.

Michael M. Badowski, Harrisburg, for appellees.

Before ROWLEY, President Judge, and KELLY and POPOVICH, JJ.

ROWLEY, President Judge:

Antrim Mining, Inc. (hereinafter "Antrim") appeals from a trial court order sustaining preliminary objections in the nature of a demurrer filed by the Pennsylvania Insurance Guaranty Association (hereinafter "PIGA"). The main issue which has been presented for our review is whether the trial court erred in deciding that PIGA was not liable for the failure of Antrim's insurance carrier to defend or indemnify Antrim against a suit brought by the Pennsylvania Environmental Defense Foundation (hereinafter "PEDF") after Antrim's insurance carrier became insolvent. In deciding this issue, we have carefully reviewed the record and the relevant legal principles, and we now conclude that the trial court did not err. Accordingly, we affirm the trial court's order sustaining PIGA's preliminary objections in the nature of a demurrer.

The factual and procedural background of this case is as follows: At all times relevant to this appeal, Antrim operated a surface mining concern in Tioga County, Pennsylvania. In the course of its mining operation, Antrim purchased several insurance policies from Rockwood Insurance Company (hereinafter "Rockwood"). Specifically, in 1988, Antrim purchased a Commercial General Liability Policy (hereinafter "CGL policy") covering the period of January 1, 1988 to January 1, 1989, which was then renewed for the period of January 1, 1989 to January 1, 1990. Antrim also bought a Pollution Liability Insurance Policy (hereinafter "POL policy") which covered the period from January 1, 1988 to January 1, 1989. The CGL policies carried coverage limits of $600,000.00 per occurrence and a $1,000,000.00 aggregate limit, while the POL policy coverage was limited to an aggregate of $500,000.00, as well as a per occurrence limit of $500,000.00.

The portion of Antrim's surface mining operations which are relevant to this appeal were located on top of a large underground mine complex, which had been operated during the late 1800's and early 1900's by mining companies other than Antrim. The underground mine complex measures between 1,200 and 1,500 acres. Antrim does not own the underground mine complex, but only the right to mine coal on the surface of the land above that complex. Antrim's surface mining operation is connected with the underground mine complex by Antrim Deep Mine Tunnel Number One. A polluting discharge of mine drainage has flowed by force of gravity from the mouth of the underground mine complex into the Babb's Creek Watershed since before the commencement of Antrim's surface mining operations.

On December 2, 1988, PEDF, a non-profit organization of approximately 70 members which exists for the purpose of conserving and maintaining the environment in Pennsylvania, gave notice to Antrim that it intended to file suit against the mining concern pursuant to the Federal Clean Water Act (hereinafter "FCWA"), 33 U.S.C. § 1365 et seq., and the Pennsylvania Clean Streams Law (hereinafter "CSL"), 35 P.S. § 691.601 et seq., because, allegedly, Antrim's surface mining operation had further polluted the existing underground mine complex discharge without the proper discharge permits.

An amended complaint was filed by PEDF against Antrim on August 26, 1989. Antrim, in turn, notified its liability insurance carrier, Rockwood, of the PEDF claim; but Rockwood refused to defend and/or indemnify Antrim in that action because it maintained that the PEDF claim was not within the coverage provided by any of the Rockwood policies.

Thereafter, on January 12, 1990, Antrim entered into a Modified Consent Decree with the PEDF, which was approved by the United States District Court for the Middle District of Pennsylvania. In the decree, Antrim agreed to the following:

(1) to pay $10,000.00 to the United States Treasury for civil penalties;

(2) to cause payments to be made to the Babb's Creek Watershed Pollution Abatement Fund (3) to pay $25,000.00 to the Babb's Creek Fund to provide immediate funding for a water quality improvement project on the Babb's Creek Watershed and to make payments of $.25 per ton of waste disposed of at certain waste disposal facilities;

(4) to pay $17,500.00 to PEDF in full and complete settlement of the costs and fees incurred by PEDF in this matter;

(5) to cease coal extraction on areas overlaying the underground mine complex;

(6) to immediately commence reclamation of its surface mining operations;

(7) to complete backfilling of affected areas and to plant trees to complete the reclamation of that area; and

(8) to monitor and sample the water flowing from the underground mine complex on a quarterly basis, and if necessary, to select and implement abatement or treatment projects if the quality of the water should deteriorate any further.

In August of 1991, Rockwood, Antrim's insurance carrier, was declared insolvent and the company was liquidated; PIGA then undertook the adjustment and payment of Rockwood's claims. Antrim filed suit on May 8, 1992 against PIGA, pursuant to 40 P.S. § 1701.201(b). Also named in the suit were Rockwood, and the Pennsylvania Insurance Commissioner, Cynthia Maleski. In this action, Antrim sought to recover damages suffered by it in settlement of the PEDF claim. PIGA filed preliminary objections to Antrim's complaint on June 17, 1992 and on August 7, 1992, Antrim filed an amended complaint.

On August 26, 1992, PIGA filed preliminary objections to Antrim's amended complaint, as well as a praecipe requesting the prothonotary to list the matter for oral argument. In its preliminary objections to Antrim's amended complaint, PIGA claimed, inter alia, that coverage of the PEDF claim is excluded by the terms of the Rockwood insurance policies. Thereafter, on September 9, 1992, the parties filed a stipulation that the action filed by Antrim would be discontinued as to Rockwood and Cynthia Maleski. On October 30, 1992, Antrim filed a memorandum in opposition to PIGA's preliminary objections. PIGA's preliminary objections in the nature of a demurrer were ultimately sustained by the trial court on August 13, 1993, and Antrim then timely filed the instant appeal contending that the trial court abused its discretion and erred as a matter of law by deciding that the CGL and POL policies did not provide coverage with regard to the PEDF action against Antrim.

Initially, we note the standard of review to which we must adhere in this case, as it has been previously stated by this Court:

In reviewing an order sustaining preliminary objections in the nature of a demurrer, it is necessary for this [C]ourt to accept as true all well-pleaded facts and the reasonable inferences therefrom, and only sustain the demurrer if it is certain that no recovery is permitted.

Humphreys v. Niagara Fire Insurance Co., 404 Pa.Super. 347, 353, 590 A.2d 1267, 1270 (1991), appeal denied, 528 Pa. 637, 598 A.2d 994 (1991). We also observe the well-established principle that "the burden of establishing a valid policy claim falls upon the insured." Riehl v. Travelers Insurance Co., 772 F.2d 19, 23 (3rd Cir.1985).

In addressing the merits of appellant's arguments in the instant case, we note that there are really two separate issues before this Court, which are: (1) whether there was a duty on the part of Rockwood to defend Antrim against the PEDF action under either the CGL or POL policies; and (2) if so, whether Rockwood had the further duty to indemnify Antrim for the damages it incurred in resolving the PEDF action under the terms of those same policies. Our decision on these issues will depend upon our interpretation of the insurance policies issued to Antrim by Rockwood. ¹ As this Court stated in D'Auria v. Zurich Insurance Co., 352 Pa.Super. 231, 507 A.2d 857 (1986):

The duty to defend is separate from and greater than the duty to indemnify. [citation omitted]. In purchasing insurance, the appellant here purchased not only the insurer's duty to indemnify when claims which fall within the policy's coverage are successful, but also protection against those groundless, false or fraudulent claims regardless of the insurer's ultimate liability to pay. [citation omitted].

Id. at 233-34, 507 A.2d at 859 (emphasis added).

In order to determine whether Antrim is or is not entitled to recover from PIGA for Rockwood's failure to defend under the facts alleged in the instant claim, we must focus solely on the factual allegations appearing on the face of the complaint filed by PEDF against Antrim in the underlying action.

Not all claims asserted against an insured, however, activate the insurer's duty to defend. In analyzing whether the insurer has a duty to defend, we must first look to the [underlying] complaint filed against the insured. [citation omitted]. "It is not the actual details of the injury, but the nature of the claim which determines whether the insurer is required to defend." [citations omitted]. After discerning the facts alleged in the [underlying] complaint, we then must decide whether, if those facts were found to be true, the policy would provide coverage. If it would, then there is a duty to defend.

* * * * * *

If the factual allegations of the [underlying] complaint on its face state[ ] a claim to which the policy potentially applies, the insurer must defend. [citations omitted].

* * * * * *

Thus, the insurer owes a duty to defend if the [underlying] complaint against the insured alleges facts which would bring the claim within the policy's coverage if they were true. It is the face of the [u...