Pa. Manufacturers' Ass'n Ins. Co. v. Johnson Matthey, Inc.
| Citation | 243 A.3d 298 |
| Decision Date | 19 November 2020 |
| Docket Number | No. 330 M.D. 2015,330 M.D. 2015 |
| Parties | PENNSYLVANIA MANUFACTURERS’ ASSOCIATION INSURANCE COMPANY, Petitioner v. JOHNSON MATTHEY, INC. and Pennsylvania Department of Environmental Protection, Respondents Johnson Matthey, Inc., Third-Party Petitioner v. Continental Casualty Company, American Casualty Company of Reading, PA, and Federal Insurance Company, Third-Party Respondents |
| Court | Commonwealth Court of Pennsylvania |
OPINION BY JUDGE BROBSON
Presently before the Court are cross-applications for partial summary relief in this insurance coverage dispute between Pennsylvania Manufacturers’ Association Insurance Company (PMA), as insurer, and Johnson Matthey, Inc. (Johnson Matthey), as insured.1 PMA seeks a judicial determination that its duty to defend Johnson Matthey did not arise until May 12, 2010, the date on which the Pennsylvania Department of Environmental Protection (DEP) filed an amended complaint in Department of Environmental Protection v. Whittaker Corporation and Johnson Matthey , (E.D. Pa., No. 08-cv-06010) (Underlying Action), naming Johnson Matthey as an additional defendant. PMA also seeks a judicial declaration that all remedial investigation (RI) and feasibility study (FS) expenses incurred by Johnson Matthey are indemnity, not defense, costs. In its application, Johnson Matthey seeks summary relief on its claims2 that PMA has breached its duty to defend by failing to pay in full Johnson Matthey's counsel fees from May 31, 2015, forward. For the reasons that follow, this Court denies the cross-applications for summary relief.
The record reveals the following facts. In a May 24, 2006 letter, DEP notified Johnson Matthey that it had been identified as a potentially responsible person (PRP) with respect to environmental contamination at a 13.7-acre parcel of land known as the Bishop Tube Site (Site), located in Chester County, which was owned by Johnson Matthey's predecessors. (Johnson Matthey Amended Counterclaims ¶10.) DEP alleged that from 1951 through April 1, 1969, Johnson Matthey's predecessors used hazardous substances to manufacture metal alloy tubes, which substances contaminated the Site. Johnson Matthey denied liability and engaged legal counsel to defend it. On November 7, 2006, Johnson Matthey notified PMA of DEP's action.
From April 1, 1969, to April 1, 1979, PMA issued a series of commercial general liability policies to cover the liability of Johnson Matthey's predecessors for, inter alia , property damage. The coverage limits of $100,000 under the policies issued for periods from April 1, 1971, and April 1, 1979, have been exhausted. Coverage remains available, however, under two policies: the one covering April 1, 1969, to April 1, 1970, and the one covering April 1, 1970, to April 1, 1971. PMA did not insure Johnson Matthey or its predecessors after April 1, 1979.
On August 18, 2008, Johnson Matthey entered into a consent order and agreement with DEP, by which Johnson Matthey agreed to undertake certain actions at the Site, including preparation of a site investigation report, work plans, and an FS. The consent order was amended on August 4, 2009. The amended consent order authorized DEP to terminate the agreement, if not satisfied, and to "take over" the remediation and recover its costs from Johnson Matthey. (PMA Application for Partial Summary Relief, Ex. F, Dustin Armstrong Deposition, at 72, 76.)
Johnson Matthey hired Roux Associates, Inc. (Roux) to do the agreed-upon site studies, and Roux submitted an RI report to DEP in 2010 and in 2015. (Id . at 127.) DEP provided comments and demanded more investigation. (Id . at 128-129.) On June 10, 2019, Roux submitted a new RI report, to which DEP offered more comments. (Id . at 81-82.) Johnson Matthey's amended counterclaims aver that Johnson Matthey has sought payment from PMA for invoices totaling over $2.84 million for work done by Roux. As of the December 17, 2019 deposition of its corporate counsel, Johnson Matthey posited that the Roux invoices exceed $3 million. (PMA Application for Partial Summary Relief, Ex. G, Amy Donahue-Babiak Deposition, at 274.)
On May 12, 2010, DEP added Johnson Matthey as a defendant in the Underlying Action, which DEP had initiated against Whittaker Corporation (Whittaker) on December 29, 2008, under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA)3 and the Hazardous Sites Cleanup Act (HSCA)4 for the cost of remediating the Site. The Underlying Action was then assigned to a suspended docket, when "certain aspects of the technical investigation were performed." (Johnson Matthey Amended Counterclaims ¶15.) In June 2017, the Underlying Action returned to the active docket. (Id .)
On June 2, 2010, PMA agreed to defend Johnson Matthey in the Underlying Action subject to a reservation of rights, including its right to assert the following defenses: "lost policies, exhaustion, owned property, voluntary payments and pre-tender costs, allocation, and other insurance." (Johnson Matthey Answer to PMA Motion for Summary Judgment (8/15/2016), John M. Hagan Affidavit, Ex. 3.) Thereafter, PMA advised that it would abandon the following defenses: "late notice, failure to cooperate, pollution exclusion (in the 4/1/70 – 4/1/71 policy), trigger-of-coverage, and the definition of occurrence." (Id. ) PMA defended Johnson Matthey in the Underlying Action from 2010 until 2015.
On April 23, 2015, PMA notified Johnson Matthey that it would no longer provide a defense in the Underlying Action and would not pay the invoices of Johnson Matthey's legal counsel, Saul Ewing Arnstein & Lehr LLP (Saul Ewing) after May 31, 2015. PMA filed a declaratory judgment action with this Court to excuse it from Johnson Matthey's defense, asserting that it did not owe Johnson Matthey a defense under the two policies.5
PMA moved for summary relief on the duty to defend question. On April 21, 2017, this Court denied PMA's motion for summary relief. We concluded that under its "occurrence policies," PMA was obligated to provide Johnson Matthey a defense. In J.H. France Refractories Company v. Allstate Insurance Company , 534 Pa. 29, 626 A.2d 502 (1993), our Supreme Court held that occurrence policies provide protection from the date of the exposure to the date of first manifestation. Accordingly, multiple policies can be triggered by a single loss. Relying on J.H. France Refractories , this Court observed that the "multiple trigger of coverage" is due to "the long latency of the claim for which coverage was sought." Pa. Mfrs.’ Ass'n Ins. Co. v. Johnson Matthey, Inc. & Pa. Dep't of Envtl. Prot. , 160 A.3d 285, 292 (Pa. Cmwlth. 2017). DEP's amended complaint in the Underlying Action alleged that contamination at the Site occurred gradually at indefinite points of time, with the first manifestation of injury in 1980. This triggered PMA's 1969-1970 and 1970-1971 policies because "undetected environmental contamination occurred during the policy period." Id . at 294. PMA's evidence did not rule out contamination during the policy periods, and it did not show manifestation before the policy periods. Where litigation involves facts potentially within the scope of the policy's coverage, the insurance company has a duty to defend the action until all covered claims are removed from the action. Am. & Foreign Ins. Co. v. Jerry's Sport Ctr., Inc ., 606 Pa. 584, 2 A.3d 526, 541 (2010).
On March 3, 2020, PMA filed an application for partial summary relief, seeking the following declaratory rulings: (1) that any expenses incurred by Johnson Matthey related to the Site prior to May 12, 2010, when it was added as defendant by DEP in the Underlying Action, shall not be deemed defense costs under the applicable PMA policies; and (2) that all RI and FS expenses incurred by Johnson Matthey pursuant to the amended consent order dated August 4, 2009, are indemnity, not defense, costs under the applicable PMA policies.
PMA argues that the costs Johnson Matthey incurred prior to May 12, 2010, are not reimbursable as defense costs because they predated any "suit." The policies at issue provide, inter alia :
(PMA Amended Petition for Review ¶16, Ex. C at 2, § I (emphasis added).) PMA argues that the term "suit" must be understood as a proceeding in a court of law. It is undisputed that DEP did not name Johnson Matthey as defendant in the Underlying Action until May 12, 2010. (PMA Brief at 15 (citing Simon Wrecking Co. v. AIU Ins. Co. , 350 F. Supp. 2d 624 (E.D. Pa. 2004) ).)
In response, Johnson Matthey urges this Court to follow the majority of jurisdictions in this country, which have held that PRP letters are the "functional equivalent of suits" for purposes of triggering the insurance company's coverage under a commercial general liability policy. (Johnson Matthey Brief at 6 n.8 ().) Alternatively, Johnson Matthey contends that discovery is needed on PMA's "understanding,...
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