Continental Ins. Co. v. Beecham, Inc.

Decision Date31 August 1993
Docket NumberCiv. A. No. 88-2890(MTB).
Citation836 F. Supp. 1027
PartiesThe CONTINENTAL INSURANCE COMPANY, Plaintiff, v. BEECHAM, INC., Defendant.
CourtU.S. District Court — District of New Jersey

COPYRIGHT MATERIAL OMITTED

Bumgardner, Hardin & Ellis, P.C. by Janet L. Poletto, Springfield, NJ, Carr, Goodson & Lee, P.C. by Lawrence E. Carr, Jr., Washington, DC, for plaintiff.

Lowenstein, Sandler, Kohl, Fisher & Boylan by Michael Dore, Roseland, NJ, for defendant.

OPINION

BARRY, District Judge.

I. Introduction

This action involves an insurance coverage dispute between Beecham, Inc. ("Beecham") and its insurer, the Continental Insurance Company ("Continental"), with respect to the environmental contamination of a facility in Myerstown, Pennsylvania previously owned by Beecham. Presently before the court are cross-motions for summary judgment for declaratory relief concerning the rights and liabilities under the contracts of insurance entered into by the parties, which motions, almost by definition, raise a plethora of issues.

On an initial consideration of the motions but prior to this opinion, the court concluded that with respect to the parties' dispute as to whether the substantive law of Pennsylvania or New Jersey should be applied to this dispute, New Jersey law would govern. At the time the court made this determination, one of the central issues in this litigation, i.e. the meaning and interpretation to be given the "pollution exclusion" clause in the insurance policies at issue here, was before the Supreme Court of New Jersey in Morton International, Inc. v. General Accident Ins. Co. of America. Accordingly, by letter dated March 5, 1993, the court advised the parties that the choice of law determination had been made, that New Jersey law would be applied, and that the court would await the decision of the Supreme Court in Morton before determining the substantive issues in this litigation. That case now having been decided by the Supreme Court, this court reaffirms its initial conclusion that New Jersey law applies and considers the remaining issues in light of Morton. For the reasons which follow, Continental's motion for summary judgment will be denied and Beecham's cross-motion for summary judgment will be granted in part and denied in part.

II. Factual and Procedural History
A. The Myerstown Site Prior to Beecham's Ownership

The site of the contamination at issue is a 22 acre plant in Myerstown, Pennsylvania owned by Whitmoyer Laboratories, Inc. ("Whitmoyer"), an animal pharmaceutical company founded in 1934. Final Pretrial Order Stipulation of Facts (hereinafter "Stip.") ¶ 3; Plaintiff's Appendix in Support of Motion for Summary Judgment (hereinafter "Pl.App.") 2 at 1-4; Pl.App. 3 at B10361. In 1957, Whitmoyer began producing arsenic-based feed additives for animals. Pl.App. 2 at 1-4; Defendant's Appendix in Support of Motion for Summary Judgment (hereinafter "Def.App.") 2 at 1-4. In 1964, Whitmoyer was purchased by and became a wholly-owned subsidiary of Rohm & Haas Company. Stip. ¶ 8.

Shortly after Rohm & Haas acquired Whitmoyer, arsenic pollution was discovered in the soil and groundwater at the Myerstown plant. Pl.App. 2 at 1-6; Pl.App. 5 at R00002323; Def.App. 2 at 1-6; Def.App. 3 at R00368. Prior to 1964, Whitmoyer had loaded arsenic waste materials from the production of arsenical onto tanker trucks and transported the materials to an on-site lagoon where they were dumped. Stip. ¶ 6. In addition, as of 1963 the site had a sludge pile approximately 25 feet in diameter consisting of DDAA. Stip. ¶ 7.

Following the discovery of arsenic pollution, and under the guidance of Pennsylvania's Department of Health, Rohm & Haas began a remediation effort at the plant. Stip. ¶ 16. The remediation plan included, among other things, the termination of wastewater disposal in the lagoon and the excavation of lagoon sludges, groundwater pumping and treatment, and the provision of bottled water to the nearby residents with contaminated wells. Pl.App. 2 at 1-6; Def. App. 2 at 1-6. Rohm & Haas constructed an internal dike around the building in which arsenic production took place and placed sealing mechanisms on storm drains which flowed into Tulpehocken Creek so that they could be closed in the event of a spill. Dengler Dep.1, Def.App. 4 at 31; Stip. ¶¶ 5, 18. It constructed, as well, a concrete "vault," approximately 123 feet long, 83 feet wide, and 12 feet deep into which arsenic contaminated soil, the calcium arsenate from the lagoon, and other materials were placed, sealed, and "entombed." Pl.App. 2 at 1-6; Def.App. 2 at 1-6; Dengler Dep., Pl.App. 6 and Def.App. 4 at 38; Pl.App. 9 at B10072; Stip. ¶ 19. Monitoring and treatment wells were installed around the plant to facilitate groundwater testing and analysis and to prevent the flow of contaminants off the property. Def.App. 5 at 2; Croesus Dep., Pl.App. 8 at 334; Pl.App. 9 at B10072. The material in the sludge pile was drummed and stored in a barn near the plant property to be sold for product reclamation. Dengler Dep., Def. App. 4 at 39, 45. In 1976 or 1977, additional arsenic waste was consolidated from all the lagoons into certain "consolidated" lagoons. Def.App. 2 at 1-6; Pl.App. 2 at 1-6; Pl.App. 7 at B10337-B10338. All of the lagoons were later covered with topsoil and seeded with grass. Id.; Stip. ¶ 24.

B. Beecham's Acquisition of Whitmoyer from Rohm & Haas

On March 31, 1978, Beecham purchased the stock of Whitmoyer from Rohm & Haas. Certification of Albert J. White, dated February 28, 1982 (hereinafter "White Cert.") ¶ 2. Beecham's purchase of this stock was part of a larger transaction in which Beecham acquired various assets of Rohm & Haas located around the world. Of the total purchase price of $18.5 million, $13.1 million was attributable to the purchase of Whitmoyer's stock. See Certification of Albert J. White, dated February 28, 1992, Exh. A and Pl.App. 20 (hereinafter "Purchase Agreement") at B10602. As part of the Purchase Agreement, Rohm & Haas warranted that the property sold was in good condition and in compliance with all federal, state, and local laws. White Cert., Exh. A., at 32, 36. Continental points out that this warranty was general in nature and, in any event, could not have taken into consideration the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. § 9601 et seq., which was not enacted until several years after the acquisition.

Prior to the Whitmoyer acquisition, Beecham representatives Fred Bledsoe and Robert McEntee2 were taken on tours of the Myerstown plant and facilities. McEntee Dep., Pl.App. 12 at 31; Bledsoe Dep., Pl.App. 13 at 36; Ambrogi Dep., Pl.App. 4 at 117-120; King Dep., Pl.App. 16 at 22. These tours consisted of walking around the plant site to each of the production areas. King Dep., Pl.App. 16 at 24. Lloyd Croesus, Whitmoyer's Safety and Environmental Manager, testified that the subject of arsenic contamination at the plant was raised during a tour with Beecham representatives and that those representatives were informed not only that contamination had occurred prior to Rohm & Haas' purchase of the plant but that there was still some groundwater and soil arsenic contamination. Croesus Dep., Pl.App. 8 at 118-19. In addition, Whitmoyer's President, William Ambrogi, recalled discussing the history of the contamination problems at the plant "to convince Beecham and Bledsoe in particular that ... we were convinced that the problem was solved." Ambrogi Dep., Pl.App. 4 at 117. Continental also cites to a document entitled "Subjects for Discussion with R & H" which lists as a topic "Identity of Current and Potential EPA Problems." Pl.App. 18 at B10483.

Beecham attacks the cited portion of Croesus' testimony because he did not specify to whom at Beecham he spoke concerning the Myerstown facility's history of contamination.3 Croesus Dep., Pl.App. 8 at 118-19. Moreover, all four Beecham employees who were substantially involved in the Whitmoyer acquisition, Bledsoe, McEntee, General Counsel and Secretary Albert White, and Assistant Insurance Manager Paul Pfeffer, have denied that they were told about the arsenic contamination or the remediation efforts undertaken by Rohm & Haas at the Myerstown plant. See Certification of Fred Bledsoe, dated March 25, 1992, ¶¶ 3-4; Certification of Robert McEntee, dated March 25, 1992, ¶¶ 2-3; Certification of Albert J. White, Esq., dated March 25, 1992, ¶ 5; Certification of Paul Pfeffer, dated March 31, 1992, ¶ 4.

In support of its position that Rohm & Haas represented to it that the Myerstown plant had no environmental problems, Beecham points to the testimony of Fred Bledsoe that he was told that the Myerstown site had been inspected and approved by the Pennsylvania Department of Environmental Resources ("PADER"). Bledsoe Dep., Def. App. 51 at 39-41. In addition, Beecham cites to a portion of Bledsoe's handwritten notes from 1977: "Reported — the Myerstown Penna plant had been inspected by EPA, OSH, etc. — and no problems had been encountered." Def.App. 6 at B11543; Bledsoe Dep., Pl.Opp.App. 1 at 100. Continental counters that because the notations are from 1977, they are most likely from a preliminary stage of the acquisition talks and likely predate plant tours and other investigations undertaken by Beecham personnel.

Beecham also notes that the annual reports of Rohm & Haas for 1976 and 1977 disclose what they term as "less extensive" environmental efforts but fail to make mention of those efforts undertaken at the Myerstown facility. See Def.App. 7 at B04656B; Def.App. 8 at B04700B. Beecham asserts that the deposition testimony of William Ambrogi and Frantz Dengler supports its position that the absence of any reference to remediation efforts at the Myerstown plant is attributable to Rohm & Haas' belief that remediation had been successfully completed. Ambrogi Dep., Def.App. 9 at 45-47; Dengler Dep., Def.App. 4 at 74....

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