Centennial Ins. Co. v. Lumbermens Mut. Cas. Co.

• Decision Date: 17 November 1987
• Docket Number: Civ. A. No. 86-6064.
• Citation: 677 F. Supp. 342
• Parties: CENTENNIAL INSURANCE COMPANY, et al. v. LUMBERMENS MUTUAL CASUALTY COMPANY.
• Court: U.S. District Court — Eastern District of Pennsylvania

677 F. Supp. 342

CENTENNIAL INSURANCE COMPANY, et al. v. LUMBERMENS MUTUAL CASUALTY COMPANY.

Civ. A. No. 86-6064.

United States District Court, E.D. Pennsylvania.

November 17, 1987.

William G. Cilingin, Philadelphia, Pa., for plaintiffs.

T. Andrew Culbert, Timothy C. Russell, Philadelphia, Pa., for defendant.

MEMORANDUM

NEWCOMER, District Judge.

I have before me the parties' motions¹ for summary judgment in this action for a declaratory judgment. This case involves a dispute over an insurer's duty to defend and indemnify its insured.

I. Factual Background

The facts that follow are not in dispute.² Plaintiff Centennial Insurance Company (Centennial) is an insurance company which is incorporated in the State of New York, and which has its principal place of business in New York, New York. Plaintiff Jordan Chemical Company (Jordan) is a Pennsylvania Corporation with its principal place of business in Folcroft, Pennsylvania. Defendant Lumbermens Mutual Casualty Company (Lumbermens) is an insurance company organized and existing under the laws of the State of Illinois with its principal place of business located in Long Grove, Illinois.

Both Centennial and Lumbermens insured Jordan under comprehensive general liability insurance policies. The policies were very similar in terms but they covered different time periods. Lumbermens insured Jordan from August 15, 1976 to August 15, 1977. Centennial insured Jordan from August 15, 1977 to August 15, 1978.

As a by product of its normal course of business, Jordan generates industrial waste that it generally deposits into the local sewage treatment authority's sewage system. On two separate occasions, in November 1976 and May 1977, the local sewage treatment authority refused to accept Jordan's waste for a short period of time. Jordan contacted a waste hauler known as ABM Disposal Service Company (ABM) and arranged for ABM to dispose of the waste that Jordan had accumulated while it was not depositing the waste in the local authority's sewage system.

During the period from November 12, 1976 to December 21, 1977, ABM disposed of industrial wastes by transporting the wastes in 55 gallon metal drums or simply by tanker truckloads.³ One of the main dumping sites utilized by ABM was an area located at 1 Flower Street, Chester, Pennsylvania that will be referred to as the Wade site. Wastes brought to the Wade site were frequently dumped directly onto the soil from either the 55 gallon barrels or the tanker trucks. On February 2, 1978 a fire occurred at the Wade site. The fire lead to an investigation of the Wade site and ultimately to an action⁴ brought by the United States government under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).⁵

On or about July 11, 1983, Jordan was severed with an amended third party complaint joining them in the Wade CERCLA action. The amended third party complaint, which incorporated the terms of the third amended complaint in the action, alleged that Jordan endangered health and environment at the Wade site as a result of the depositing of its industrial waste at the site.

Subsequent to its joinder in the Wade CERCLA action, Jordan presented a claim to Lumbermens on July 19, 1983. In a letter dated August 22, 1983, Lumbermens informed Jordan that it was reserving its rights under the insurance policy pending an investigation of the case.⁶ By letter dated December 28, 1983 Lumbermens advised Jordan that it was disclaiming coverage.

Jordan also presented a claim to defend and indemnify to Centennial. Centennial responded to the claim by defending the action and ultimately settling all claims against Jordan. The settlement required Jordan to pay $94,000.00 to the Commonwealth of Pennsylvania.

Centennial and Jordan brought this declaratory judgment action requesting that the Court declare that Lumbermens was obligated to defend and indemnify Jordan against the claims raised in the Wade CERCLA action.⁷

II. Standard for Summary Judgment

A trial court may enter summary judgment if, after a review of all evidentiary material in the record, there is no genuine issue as to any material facts, and the moving party is entitled to judgment as a matter of law. Bank of America Nat. Trust and Sav. Ass'n v. Hotel Rittenhouse Associates, 595 F.Supp. 800 (E.D.Pa.1984). Where no reasonable resolution of the conflicting evidence and inferences therefrom could result in a judgment for the non-moving party, the moving party is entitled to summary judgment. Tose v. First Pennsylvania Bank, N.A., 648 F.2d 879, 883 (3rd Cir.1981), cert. denied 454 U.S 893, 102 S.Ct. 390, 70 L.Ed.2d 208 (1981).

The moving party must initially show an absence of a genuine issue concerning any material fact. Adickes v. S.H. Kress & Co., 398 U.S 144, 159, 90 S.Ct. 1598, 1609, 26 L.Ed.2d 142 (1970). The moving party's burden may be discharged by demonstrating that there is an absence of evidence to support the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed 2d 265, 275 (1986). Once the moving party has pointed out the absence of a dispute as to a material fact, the non-moving party must go beyond its pleadings and designate specific facts by use of affidavits, depositions, admissions or answers to interrogatories showing there is a genuine issue for trial. Celotex, at 324, 106 S.Ct. at 2553, 91 L.Ed. 2d at 274.

In this case, both parties have filed motions for summary judgment. Because I find that genuine issues of material fact do not exist in this case, summary judgment is appropriate where Lumbermens is entitled to recover as a matter of law.⁸

III. Discussion

Centennial and Jordan ask this Court to declare that Lumbermens had a duty to defend and indemnify Jordan in the Wade CERCLA action.⁹ An insurer must defend an insured whenever the complaint filed by the injured party potentially states a claim within the policy's coverage. Pacific Indemnity Company v. Linn, 766 F.2d 754, 760 (3rd Cir.1985); C.H. Heist Caribe Corporation v. American Home Assurance Company, 640 F.2d 479, 483 (3rd Cir.1981); Techalloy Company Inc. v. Reliance Insurance Company, 338 Pa.Super. 1, 8, 487 A.2d 820, 824 (1984). The factual allegations of the complaint create the duty to defend which continues until the insurer can confine the claim to a recovery that is not within the scope of the policy.¹⁰ Pacific Indemnity Company, at 760.

The allegations in the third party complaint against Jordan incorporated the allegations made against the defendants/third party plaintiffs in the government's third amended complaint in the Wade CERCLA action. To determine whether the allegations potentially state a claim within the insurance policy coverage, various questions of insurance contract interpretation must be resolved.

A. An Occurrence Within the Policy

Lumbermens argues that it was not required to defend or indemnify Jordan because property damage was not caused by an occurrence within the policy period of August 15, 1976 to August 15, 1977. Lumbermens, instead, asserts that the occurrence that caused the underlying CERCLA claim was the February 2, 1978 fire that sparked the investigation into the Wade site.

The Lumbermens insurance policy states as follows:

"Occurrence" means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected or intended from the standpoint of the insured.

It seems unquestionable that an occurrence within the policy took place.¹¹ The general rule requires the Court to determine an occurrence by the cause or causes of the resulting injury. Appalachian Insurance Company v. Liberty Mutual Insurance Company, 676 F.2d 56, 61 (3rd Cir.1982). The release of toxic industrial waste onto the land at the Wade site caused the property damage to the land at that location. The source of the harm was the dumping of the waste. The dumping of the waste is an occurrence within the policy because it was an accident from the insured's standpoint. The facts do not indicate that Jordan expected or intended illegal and harmful dumping of its toxic waste. Jordan hired ABM Disposal Company to dispose of its toxic waste during a period of time that it could not utilize the local authority's sewage system. Jordan naturally expected and intended that ABM would legally dispose of its waste.

The more difficult question that must be resolved in determining potential insurance coverage is when the occurrence arose triggering coverage. The rule in this Circuit is clear. "The determination of when an occurrence happens must be made by reference to the time when the injurious effects of the occurrence take place." Appalachian Insurance Company, 676 F.2d at 61-62.¹² In Appalachian, and also Riehl v. Travelers Insurance Company, 772 F.2d 19 (3rd Cir.1985), the Court of Appeals held that the occurrence arose when the injuries first manifested themselves. Appalachian, 676 F.2d at 62; Riehl, 772 F.2d at 23. Lumbermens argues that the manifestation rule is applicable in this case, and that the injuries did not manifest themselves until the February 2, 1978 fire at the Wade site. Since its insurance policy expired August 23, 1977, Lumbermens claims that an occurrence did not arise during its policy period and no coverage existed.

Centennial and Jordan argue that an occurrence arose each time the toxic waste was dumped onto the Wade site.¹³ Centennial and Jordan claim that on sixteen (16) separate occasions, between November 12, 1976 and December 21, 1977,¹⁴ toxic wastes were released onto the Wade site causing property damage.

I agree with Centennial and Jordan. An occurrence arose each instance the wastes were released onto the Wade site. This is the time that the injurious effect took place because this is the time that the property was actually damaged. Appalachian and Riehl do not require a contrary result. These cases involved facts where...