Hyde Athletic Industries v. Continental Cas. Co.

• Decision Date: 16 June 1997
• Docket Number: Civil Action No. 95-5822.
• Citation: 969 F.Supp. 289
• Parties: HYDE ATHLETIC INDUSTRIES, INC., and Saucony Shoe Manufacturing Company, Inc., Plaintiffs, v. CONTINENTAL CASUALTY COMPANY, Continental Insurance Company, Greater New York Mutual Insurance Company, Lumbermens Mutual Insurance Company, Federal Insurance Company, and Highlands Insurance Company, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

Page 289

969 F.Supp. 289

HYDE ATHLETIC INDUSTRIES, INC., and Saucony Shoe Manufacturing Company, Inc., Plaintiffs, v. CONTINENTAL CASUALTY COMPANY, Continental Insurance Company, Greater New York Mutual Insurance Company, Lumbermens Mutual Insurance Company, Federal Insurance Company, and Highlands Insurance Company, Defendants.

Civil Action No. 95-5822.

United States District Court, E.D. Pennsylvania.

June 16, 1997.

COPYRIGHT MATERIAL OMITTED

Paul W. Kisslinger, Anderson, Kill, Olick & Oshinsky, P.C., Philadelphia, PA, Catherine C. Pyune, Obermayer, Rebmann, Maxwell and Hippel, Philadelphia, PA, Eugene R. Anderson, Steven J. Dolmanisth, Anderson, Kill and Olick and Oshinsky, P.C., New York

City, Clare Marie Diemer, Joseph J. McGovern, Obermayer, Rebmann, Maxwell & Hippel, Philadelphia, PA, for Plaintiffs.

James E. Brown, Thomas G. Wilkinson, Jr., Cozen & O'Connor, Philadelphia, PA, for Continental Cas. Co. and Continental Ins. Co.

Thomas Paschos, John Gerard Devlin, John Gerard Devlin & Assoc. Philadelphia, PA, for Greater New York Mutual Insurance Company.

Joseph P. Sullivan, Joseph P. Klein, Law Office of Joseph P. Sullivan, Philadelphia, PA, Susan K.B. Urbas, Michael W. Morrison, Tressler, Soderstrom, Maloney & Priess, Chicago, IL, Lawrence A. Monte, Law Office of Joseph P. Sullivan, Philadelphia, PA, for Lumbermens Mutual Casualty Company.

James B. Burns, Deasey, Mahoney & Bender, Ltd., Philadelphia, PA, for Federal Ins. Co.

Mitchell S. Pinsly, Philadelphia, PA, Marjorie H. Mintzer, Ellen G. Margolis, Sheft and Sheft, New York City, for Highlands Ins. Co.

MEMORANDUM

CAHN, Chief Judge.

Plaintiffs Hyde Athletic Industries, Inc. ("Hyde") and Saucony Shoe Manufacturing Company, Inc. ("Saucony") have sued several of their insurance carriers, seeking, inter alia, the costs of defense and indemnity related to an environmental action. Before the court are Plaintiffs' motion for partial summary judgment against one of their insurers for breach of the duty to defend, and motions by three of the insurers for summary judgment on all counts. For the reasons explained below, Plaintiffs' motion is DENIED and Defendants' motions are GRANTED.

I. BACKGROUND

A. The Underlying Action

This insurance coverage action arises from a cost recovery and contribution action brought by the United States Environmental Protection Agency ("EPA") pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq. ("CERCLA") and its Pennsylvania counterpart, the Hazardous Sites Cleanup Act, 35 Pa.S.A. § 6020.101 et seq. ("HCSA"). The environmental cost recovery action, United States v. Atlas Minerals and Chemicals, Inc. et al. (the "Atlas action"), filed in this court as Civil Action No. 91-5118, involved the cleanup of the Dorney Road Landfill (the "Site") in Lehigh County, Pennsylvania. The complete factual history of the Atlas action can be found in United States v. Atlas Minerals and Chemicals, Inc. v. Mabry, Civ. A. No. 91-5118, 41 ERC 1417, 1995 WL 510304 (E.D.Pa. Aug.22, 1995), and the court will not restate that extensive and complicated history here. However, a brief synopsis of the history of the Site and Plaintiffs' involvement with it is required for a full understanding of this insurance dispute.

From 1958 through 1978, the Site was used as a landfill for the disposal of municipal solid waste and industrial hazardous waste. Atlas, 1995 WL 510304, at *3-4. The Pennsylvania Department of Environmental Resources ("PaDER") cited the owner of the landfill for violations and ordered that landfilling operations cease by January 1, 1979. Id. at *4. In 1979, the EPA began investigating contamination at the Site, leading to the Site's placement on the National Priorities List and the preparation of a remedial investigation and feasibility study. Id. at *4-5. The EPA and PaDER conducted a Superfund-financed emergency removal action at the Site in 1986. Id. at *5. The EPA determined that unacceptable health hazards existed at the Site, and identified Potentially Responsible Parties ("PRPs") for the environmental damage. Id. at *6-7.

In August 1991, the United States filed a cost recovery action against ten PRPs in this court pursuant to CERCLA and the Pennsylvania HSCA, seeking to recover the EPA's response costs incurred in the removal action. In 1994, the parties entered into, and this court approved, a consent decree between the original PRP defendants and the United States. The defendants agreed to pay approximately $1.2 million to reimburse the United States for its response costs, and agreed to pay for future oversight costs at the Site. United States v. Atlas Minerals and Chemicals, Inc., 851 F.Supp. 639, 647 (E.D.Pa.1994).

In 1992, the original PRP defendants became third-party plaintiffs by filing complaints for contribution against approximately sixty third-party defendants, including Saucony.¹ Following entry of the consent decree, each third-party defendant either settled with the third-party plaintiffs or was dismissed from the action, with the exception of Saucony and one other party. Atlas, 1995 WL 510304, at *2. This court held a nonjury trial in the third-party action, leading to the lengthy Atlas opinion. The court found that Saucony "generated, owned or possessed hazardous substances, and arranged by contract, agreement, or otherwise for the disposal of hazardous substances at the Site." Id. at *111. The court assigned Saucony a 0.44 percent share of the total liability for remediation at the Site. Id. at *113 (Appendix E-3). Plaintiffs estimate that the remediation costs at the Site will total approximately $22.7 million; Plaintiffs' share of the costs is 0.44 percent of that total, or approximately $100,000. Am.Compl. ¶ 36.

B. This Insurance Coverage Action

On September 15, 1995, Hyde and Saucony commenced this action against six insurance companies. The Amended Complaint, filed in November 1995, contains seven counts. Count I seeks a declaration that the insurers owed a duty to defend Hyde and Saucony in the Atlas action; Count II seeks a similar declaration regarding the duty to indemnify Plaintiffs for the liability imposed in Atlas. Count III seeks damages for the insurers' alleged breach of their duties to defend and indemnify. Count IV seeks relief for violations of the Pennsylvania Unfair Insurance Practices Act, 40 Pa.S.A. § 1171.1 et seq., for allegedly (1) denying insurance coverage on the basis of policy language which the insurers knew to be ambiguous, (2) destroying expired policies in an effort to disavow insurance obligations, and (3) misrepresenting to the public and policyholders the scope of the coverage under comprehensive general liability policies. Count V asserts a conspiracy by and among Defendants and the insurance industry to misrepresent or conceal facts relating to the pollution exclusion clause in general liability policies. In Count VI, Plaintiffs seek damages pursuant to Pennsylvania's bad faith statute, 42 Pa.C.S.A. § 8371, for the insurers' alleged breach of the duty of good faith and fair dealing in handling Plaintiffs' insurance claims. Finally, in Count VII, Plaintiffs seek reformation of the insurance policies at issue.

The Policies at Issue

Hyde and Saucony allege that two of the insurer defendants issued comprehensive general liability ("CGL") coverage: Continental Casualty Company ("Continental") and Greater New York ("GNY").² Continental sold Plaintiffs CGL policy number CCP 857-76-97, providing coverage between September 18, 1973 and September 18, 1974, with a limit of $100,000 of liability per occurrence. Am.Compl. ¶ 16. GNY sold Plaintiffs CGL policy numbers 1703-200-731, 1703-200-911, 1703-201-121, 1703-201-450, 1703-201-837, providing coverage from September 26, 1974 until September 26, 1979; each of those CGL policies had a limit of $100,000 per occurrence. Am.Compl. ¶ 17.

Plaintiffs allege that four of the insurer defendants provided excess, or umbrella, coverage: Lumbermens Mutual Casualty Company ("Lumbermens"), Federal Insurance Company ("Federal"), Highlands Insurance Company ("Highlands"), and Continental. Lumbermens umbrella policy number 4SX-002-421 covered the period of April 18, 1974 until April 18, 1977, and provided $5,000,000 per occurrence. Id. at ¶ 18. The Lumbermens policy responds when the underlying general liability insurance is exhausted. Five Federal umbrella policies covered "some time period beginning on February 6, 1976," and two Highlands excess policies covered the period between April 18, 1977 and April 18, 1979. Id. at ¶¶ 19-20.³ Continental excess policy numbers RDX-893-58-47 and RDX-893-86-65 covered the period of April 18, 1977 until April 18, 1979 with a limit of $5,000,000 per occurrence. Id. at ¶ 21. The Continental policies are second-layer excess policies, meaning that they do not respond until the underlying general and excess policy limits are exhausted.

II. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate when the record shows that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The court's role is to determine whether the evidence is such that a reasonable jury could return a verdict for the non-moving party, with all reasonable inferences viewed in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 255, 106 S.Ct. 2505, 2510-11, 2513-14, 91 L.Ed.2d 202 (1986). The moving party has the burden of demonstrating that no genuine issue of material fact exists, but if the non-moving party fails to produce sufficient evidence in connection with an essential element of a claim for which it has the burden of proof, then the moving party is entitled to summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).

III. CHOICE OF LAW

As a federal court sitting in...