Techalloy Co., Inc. v. Reliance Ins. Co.

• Decision Date: 21 February 1985
• Citation: 487 A.2d 820,338 Pa.Super. 1
• Parties: TECHALLOY COMPANY, INC., Appellant, v. RELIANCE INSURANCE COMPANY and Planet Insurance Company.
• Court: Pennsylvania Superior Court

Page 820

487 A.2d 820

338 Pa.Super. 1

TECHALLOY COMPANY, INC., Appellant, v. RELIANCE INSURANCE COMPANY and Planet Insurance Company.

Superior Court of Pennsylvania.

Argued May 8, 1984.

Filed Dec. 28, 1984.

Reargument Denied Feb. 21, 1985.

William J. Lehane, Philadelphia, for appellant.

Jan E. DuBois, Philadelphia, for appellees.

Before WICKERSHAM, WIEAND and LIPEZ, JJ.

LIPEZ, Judge.

This is an appeal from the Order of the Court of Common Pleas of Montgomery County, granting the preliminary objections of the defendants/appellees, Reliance Insurance Company and Planet Insurance Company (hereinafter "Reliance"), and dismissing the complaint of plaintiff/appellant, Techalloy Company, Inc., (hereinafter "Techalloy") for failure to state a cause of action.

I.

The facts underlying Techalloy's complaint developed as follows: On May 20, 1981, James Peterman filed a class action suit against Techalloy, a corporation engaged in the business of cutting and stripping steel, alleging Techalloy had recklessly dumped or stored trichloroetheline (TCE), a chemical used by Techalloy in that process. Peterman claimed that exposure to, contact with or ingestion of TCE, a hazardous and toxic chemical, may have caused serious injury, including neurological, pulmonary, hepatic and renal damage with possible mutagenic, teratogenic and carcinogenic results. In addition, Peterman alleged that as a result of Techalloy's negligence, the plaintiff class suffered an increased risk of serious illness or death due to actual ingestion and/or use of contaminated water and suffered from high anxiety because of the awareness of this risk. Peterman sought the creation of a trust fund for the payment of present and future medical expenses, as well as compensatory damages.

Relying on the comprehensive general liability policy which Techalloy had procured from Reliance in 1976, Techalloy submitted to its insurance carrier a copy of the Peterman complaint, requesting that Reliance defend Techalloy in accordance with the terms of the policy. Reliance denied coverage on the ground that the complaint alleged neither property damage nor bodily injury, and also incorporated by reference a letter sent to Techalloy more than a year earlier which set forth additional reasons for the denial. Consequently, Techalloy employed private counsel who successfully defended that suit, and then initiated the action preceding this appeal seeking as damages the expenses incurred in the Peterman defense plus costs of the present appeal.

Before trial, Reliance filed preliminary objections in the nature of a demurrer to Techalloy's complaint maintaining that there was no duty to defend Techalloy in the Peterman action because the Peterman complaint did not specifically allege present bodily injury in conformance with the policy definition of personal injury. Reliance also invoked a policy exclusion which was first brought to Techalloy's attention in a letter dated April 28, 1980, and which informed Techalloy that the water contamination caused by the TCE was not sudden and accidental and therefore would not be covered by that particular policy. In support of its argument, Reliance referred to several allegations in the Peterman complaint which described in detail the nature of the damages incurred and the circumstances surrounding the chemical discharge.

The court below granted Reliance's preliminary objections and dismissed Techalloy's complaint on the premise that the insurer had no duty to defend the action when the underlying complaint did not allege actual personal injury. The court did not address the issue of the policy exclusion. It is upon that basis, however, which we affirm the decision of the trial court. We disagree with the opinion of the court below that the Peterman complaint failed to allege personal injury within the boundaries of an insurance policy. Because the personal injury issue before us is one of first impression for our courts, we discuss both that and the policy exclusion in this opinion.

II.

The procedural disposition of this case binds us to a stringent standard of review. If the facts pleaded in the complaint, together with all inferences reasonably deducible therefrom, are sufficient to support a finding that a claim for personal injury was made, no matter how tenuous, we should refuse to sustain the demurrer on that basis. Gray v. Gray, 275 Pa.Super. 131, 134, 418 A.2d 646, 648 (1980); Girard Trust Bank v. Life Ins. Co. of North America, 243 Pa.Super. 152, 157, 364 A.2d 495, 498 (1976) (allocatur refused). We are also mindful of the special context in which insurance contracts are scrutinized and remain careful in this case to assess the facts in view of the general principles of insurance law which apply.

Words of an insurance policy which are unambiguously written should be construed according to their plain and ordinary meaning, Pennsylvania Manufacturers' Ins. Co. v. Aetna Casualty and Surety Ins. Co., 426 Pa. 453, 457, 233 A.2d 548, 551 (1967), and we should give effect to that language. Standard Venetian Blind Co. v. American Empire Ins. Co., 503 Pa. 300, 305, 469 A.2d 563, 566 (1983). If, however, a term is susceptible to two interpretations or subject to reasonable question, it should be liberally construed in favor of the insured. C. Raymond Davis & Sons, Inc. v. Liberty Mutual Ins. Co., 467 F.Supp. 17, 20 (E.D.Pa.1979); Hofing GMC Truck, Inc. v. Kay Wheel Sales Co., Inc., 543 F.Supp. 414, 419 (E.D.Pa.1982). Most importantly, in close or doubtful cases, we should find coverage for the insured, and if we err in interpreting a policy provision, we should err in favor of the insured. Motley v. State Farm Mutual Automobile Ins. Co., Inc., 502 Pa. 335, 340, 466 A.2d 609, 611 (1983).

A. Interpretation of "Personal Injury"

Because words which are unambiguous in one context may become susceptible to more than one interpretation when applied to a particular set of facts, it is incumbent upon the insurance company, as draftor of the policy, to delineate as precisely as possible the full extent of coverage or bear the consequences for failing to do so. Collister v. Nationwide Ins. Co., 479 Pa. 579, 388 A.2d 1346 (1978) cert. denied, 439 U.S. 1089, 99 S.Ct. 871, 59 L.Ed.2d 55 (1979). Precise definition is particularly important in cases in which an insured purchases a comprehensive general liability policy to protect a business which entails the use of potentially harmful substances possessing debilitating qualities of unknown parameters. In that instance, the insurance company providing coverage should take extra care to assure that the policy leaves no room for question, at peril of being forced to pay for greater coverage than anticipated. Delaware County Construction Co. v. Safeguard Ins. Co., 209 Pa.Super. 502, 509, 228 A.2d 15, 18 (1967).

While an insurer is not required to defend an insured against every claim, it is firmly established that an insurer must defend any suit in which from the face of the complaint there exists actual or potential coverage. Gedeon v. State Farm Mutual Automobile Ins. Co., 410 Pa. 55, 58, 188 A.2d 320, 321-22 (1963). The dispute here encountered is whether the allegations set forth in the Peterman complaint sufficiently raise claims of personal injury to fall within the meaning of the policy. It is at this juncture that we disagree with the decision of the lower court and agree with Techalloy.

Given the particular considerations which obtain to insurance contracts, we believe the only fair conclusion to be that Peterman alleged personal injury. Even if the allegations were not of sufficient particularity to be cognizable and compensable under Pennsylvania tort law, they were sufficient at least in the context of the contractual obligation of "bodily injury, sickness or disease" as defined in the policy. While "personal injury" may be most traditionally construed as a physical injury overtly manifested, that is not its exclusive construction. Furthermore, it is hardly speculative to say that Techalloy reasonably expected, by purchasing the policy, to be insured against financial obligations stemming from charges such as those raised by Peterman. Unfortunately, the only construction of the policy which is consonant with that objective is the one which the lower court denied.

In the original Peterman action, the trial judge held for Techalloy on the basis that "[e]ven if plaintiff's allegation at paragraph 4 of his complaint that he may possibly have sustained some injury is read to allege that he may have a present injury, such a claim is palpably insufficient to meet the requirement of present injury." (emphasis in original). As we understand this, Peterman alleged insufficient present injury upon which to sustain his cause of action. This assessment is proper when the cause of action alleged is negligence. It should not be the standard, however, for determining the rights and duties of parties to an insurance contract. Such a strict construction of personal injury would result in the insured's being denied coverage when he would most reasonably expect it and would defeat in total the purpose of the policy. It also would equate the duty to defend with the duty to indemnify, which is contrary to the law in cases such as the present in which the insurer contracted to defend even "groundless, false or fraudulent" accusations. See Gedeon, 410 Pa. at 58, 188 A.2d at 321-22, (The obligation to defend arises whenever the complaint may potentially come within coverage of the policy, even if the actual outcome requires no indemnification.); C. Raymond Davis & Sons, Inc., 467 F.Supp. at 19, (An insurer must defend its insured if there is potential coverage because the duty to defend is broader than the duty to indemnify.).

It is apparent that the policy before us is thus susceptible to the following two interpretations: (1) personal injury means physical injury caused by external...