McDowell Oil Service v. Interstate Fire and Cas., 3:CV-92-699.

• Citation: 817 F. Supp. 538
• Decision Date: 25 March 1993
• Docket Number: No. 3:CV-92-699.,3:CV-92-699.
• Parties: McDOWELL OIL SERVICE, INC., Plaintiff, v. INTERSTATE FIRE AND CASUALTY COMPANY, Defendant.
• Court: United States District Courts. 3th Circuit. United States District Court of Middle District of Pennsylvania

817 F. Supp. 538

McDOWELL OIL SERVICE, INC., Plaintiff, v. INTERSTATE FIRE AND CASUALTY COMPANY, Defendant.

No. 3:CV-92-699.

United States District Court, M.D. Pennsylvania.

March 25, 1993.

Steven E. Angstreich, Levy, Angstreich, Finney, Mann & Burkett, P.C., Philadelphia, PA, for plaintiff.

Mitchell S. Pinsly, Margolis, Edelstein, Scherlis, Sarowitz & Kraemer, Philadelphia, PA, for defendant.

MEMORANDUM

McCLURE, District Judge.

BACKGROUND

This declaratory judgment action was originally filed on May 28, 1991 in the Court of Common Pleas of Snyder County, Pennsylvania to Civil No. 154 of 1991. Plaintiff McDowell Oil Service, Inc. ("McDowell") sued its insurance carriers, defendants Northbrook Property and Casualty Insurance Company ("Northbrook"), Reliance Insurance Company ("Reliance"), Interstate Fire and Casualty Company ("Interstate") and Federal Mutual Insurance Company ("Federated") to obtain a declaration of insurance coverage.

The case was removed to this court pursuant to a notice of removal filed by Interstate on May 22, 1992.¹ 28 U.S.C. §§ 1332, 1441, and 1446. Plaintiff filed a motion to remand to state court for lack of complete diversity (Record Document No. 3) which the court denied in an order dated October 22, 1992 (Record Document No. 14).

McDowell filed this action to gain assurance of coverage for claims asserted in a consolidated class action filed against it and other defendants in Snyder County by residents of the Snyder County village of Kreamer for alleged personal injury and property damage.² The class action plaintiffs alleged that the activities of McDowell and others were responsible for the contamination of the Kreamer municipal water supply with gasoline and other contaminants during the winter of 1984-85 as a result of leaks from underground storage tanks owned or maintained by the various defendants. (See: (Record Document No. 1, exhibit 1, paras. 25-49)

The class action plaintiffs settled their claims against McDowell pursuant to a stipulation and agreement of settlement dated April 8, 1992. The settlement agreement was approved by the Court of Common Pleas of Snyder County, the Honorable Jay W. Myers, S.J., Specially Presiding, in an order dated April 21, 1992.³ McDowell's share of the settlement was funded, at least in part, by Northbrook and Reliance pursuant to separate confidential settlement agreements. The class action settlement agreement further provided that McDowell transferred and assigned to the class action plaintiffs all rights, claims, causes of action, etc., which it held against Interstate, with the result being that McDowell's interest in this action has been assigned to, and is now being litigated by counsel for, the representative plaintiffs in the underlying class action, John and Mary Kay McLaughlin.⁴ (See: Record Document No. 1, exhibit "B", pp. 20-23) Following issuance of the April 21, 1992 order approving settlement of the underlying class action claims against McDowell, the instant action was removed to this court.

Subsequent to removal, plaintiff's claims against Northbrook, Reliance, and Federated were dismissed with prejudice pursuant to a stipulation of dismissal dated December 7, 1992 (Record Document No. 24). Plaintiff's claims against Interstate remain.

Based on the allegations against McDowell in the underlying environmental class actions, plaintiff asserts an obligation on the part of Interstate to pay defense costs incurred in the two underlying class action suits.

Plaintiff's claims against Interstate are based on two commercial umbrella liability insurance policies issued to McDowell. The first (Policy No. 55C-0028806) was issued for the period from March 1, 1984 to March 1, 1985 (hereafter "1984-85 Interstate policy"). The second (Policy No. 55C-0031374) was issued for the period from March 1, 1985 to March 1, 1986 (hereafter "1984-85 Interstate policy"). Both policies provided excess coverage for claims in excess of the policy limits of McDowell's primary coverage with Northbrook (in the case of the 1984-85 policy) and McDowell's primary coverage with Reliance (in the case of the 1985-86 policy). (See: (Record Document No. 1, exhibit 1, paras. 133-54).

Plaintiff seeks to recover necessary defense costs incurred 1) in connection with the investigation and work plan, including costs required to gain access to adjacent properties; and 2) in connection with the cleanup of the site conditions as determined by the investigation and work plan to the extent that Northbrook and/or Reliance are not obligated to pay such costs.

Interstate denies coverage on several grounds. It denies receiving timely notice of the claim or the underlying actions. It states, in its answer, that "it advised plaintiff upon receipt of notice of the action ... that any compensatory award in excess of coverage limits would be the personal responsibility of plaintiff, that punitive damages are not covered under the policy in question, and that the right to disclaim coverage and indemnification is reserved for claims outside the scope of the policy coverage and policy period." (Record Document No. 1, exhibit 4, para. 151)

It disputes coverage under the policy, stating that it advised plaintiff "upon receipt of notice of the action in question that the existence of an occurrence or property damage during the policy period in question was questionable, that whether civil penalties and the cost of clean-up constituted property damage was questionable, that the right to disclaim coverage was thus reserved, and that no liability under the policy in question attaches to answering defendant until the amount of the underlying limits of insurance coverage have been paid by or on behalf of the insured." (Record Document No. 1, exhibit 4, para. 151.) Interstate states as well that it "declared a full and complete reservation of its rights under the policy in question and denied waiver of any rights hereunder or under any law or statute ... Thus ... effectively reserving all of its rights to disclaim coverage under the policy in question for all pollution-related claims set forth in all of the underlying actions at issue." (Record Document No. 1, exhibit 4, para. 152)

It stated as well that it "advised plaintiff upon receipt of notice of the actions in question that Endorsement No. 1, entitled `Pollution Endorsement—Absolute,' excludes coverage for any pollution-related claims for the policy period in question and that punitive damages are also not covered." (Record Document No. 1, exhibit 4, para. 153)

Plaintiff concedes that Interstate notified it that it reserved the right 1) to disclaim coverage and indemnification for property damage claims (Snyder County Master File No. 336-1985) outside the scope of the policy and the coverage period; 2) to decline coverage for claims asserted in Snyder County Civil No. 11-1990 related to the issue of whether there was an occurrence or property damage resulting from an occurrence as defined in the policy; and 3) to decline coverage under the 1985-86 policy for claims asserted in Snyder County Civil Nos. 336-1985 and 11-1990 based on Policy Endorsement No. 1 ("Pollution Endorsement—Absolute"). (Record Document No. 1, exhibit 1)

Before the court are: 1) Interstate's motion to compel plaintiff to answer interrogatories pursuant to Fed.R.Civ.P. 37(a) and requests for production of documents (Record Document No. 10); and 2) plaintiffs motion (Record Document No. 23) for reconsideration of the court order dated October 22, 1992 denying plaintiffs motion to remand this action to state court.

For the reasons set forth below, the court will grant plaintiffs motion for reconsideration and remand the action to state court. Accordingly, the court will take no action on the pending motion to compel, deferring that and all other discovery issues to the state court.

Motion for reconsideration

A motion for reconsideration is governed by the Rule 59(e) standards governing a motion to alter or amend a judgment. Such a motion must rely on at least one of three grounds: (1) intervening change in controlling law; (2) availability of new evidence not previously available, or (3) need to correct a clear error of law or prevent manifest injustice. Atkins v. Marathon LeTourneau Co., 130 F.R.D. 625, 626 (S.D.Miss. 1990) and Natural Resources Defense Council, Inc. v. U.S. E.P.A., 705 F.Supp. 698, 702 (D.D.C.), vacated on other grounds, 707 F.Supp. 3 (1989). "With regard to the third ground, the Court cautions that any litigant considering bringing a motion to reconsider based upon that ground should evaluate whether what may seem to be a clear error of law is in fact simply a point of disagreement between the Court and the litigant." Atkins, supra, 130 F.R.D. at 626. Moreover, a Rule 59(e) motion is not to be used as a means "to reargue matters already argued and disposed of" by prior rulings "or to put forward additional arguments which it could have made but neglected to make before judgment." Davis v. Lukhard, 106 F.R.D. 317, 318 (E.D.Va.1984), judgment vacated on other grounds, 788 F.2d 973 (4th Cir.1986).

Although plaintiffs motion for reconsideration does not rely upon any of the three grounds which are a proper basis for a Rule 59(e) motion, we will, nevertheless address the grounds raised. Plaintiff's motion raises two issues, only one of which is new. It disputes this court's choice of precedent on the non-diversity issue and raises, for the first time, the argument that the court should decline to exercise jurisdiction under the Declaratory Judgment Act (DJA), 28 U.S.C. §§ 2201-2202.

For the reasons discussed below, we decline to reconsider our ruling on the non-diversity issue, but will consider, for the first time, plaintiffs contention that we should decline to exercise our jurisdiction under the DJA.

Plaintiff's motion to deny removal on non-diversity grounds

For the reasons stated in our memorandum dated October 22, 1992 d...