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Title Armotek Industries, Inc. v. Employer's Insurance of Wausau

Date 1991

By Alito

Subject Misc

Contents

Page 1

222 of 238 DOCUMENTS

ARMOTEK INDUSTRIES, INC. Appellant/Cross Appellee in 90-5969 v. EMPLOYERS INSURANCE OF WAUSAU Appellee/Cross Appellant in 90-6001

Nos. 90-5969 and 90-6001

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

952 F.2d 756; 1991 U.S. App. LEXIS 30342; 34 ERC (BNA) 1772; 22 ELR 20561

August 5, 1991, Argued

December 31, 1991, Filed

PRIOR HISTORY: **1 ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY. (D.C. Civil No. 88-

03110)

DISPOSITION: Affirmed.

CASE SUMMARY:

PROCEDURAL POSTURE: Plaintiff insured and de- fendant insurer appealed an order from the United States District Court for the District of New Jersey granting sum- mary judgment in defendant's favor in an action in which plaintiff sought insurance coverage for pollution clean- up on corporate property. Defendant claimed no coverage or duty to defend because the pollution occurred prior to the policy period and that the pollution did not constitute damages.

OVERVIEW: Plaintiff, a New Jersey corporation, pro- cured general liability policies through an agent in Pennsylvania from defendant Wisconsin insurer. A state environmental agency required performing remedial pol- lution clean-up for one of plaintiff's companies. Plaintiff sought coverage. Defendant denied coverage, claiming the chemical spill was not accidental. Plaintiff brought suit. The trial court ruled Pennsylvania law applied as the contract was formed and premiums were paid in Pennsylvania. Both parties brought motions for summary judgment. The trial court found for defendant, holding the policies did not cover a spill occurring before the policy was entered. Both parties appealed. The reviewing court affirmed, finding Pennsylvania law applied because the place of contracting occurred in Pennsylvania. Because the spill did not occur during the policy term, no coverage was warranted. Because the state environmental agency order referred to past pollution, no sudden accident under the policy occurred and no duty to defend arose.

OUTCOME: The court affirmed the judgment.

LexisNexis(R) Headnotes

Civil Procedure > State & Federal Interrelationships > Choice of Law

HN1 In a diversity case filed in the District of New Jersey, the federal court must apply New Jersey choice- of-law rules. The law of the place of the contract will govern the determination of the rights and liabilities of the parties under the insurance policy. This rule is applied unless the dominant and significant relationship of an- other state to the parties and the underlying issue dictates that this basic rule should yield.

Insurance Law > Claims & Contracts > Policy

Interpretation > Contract Interpretation Rules

Civil Procedure > State & Federal Interrelationships > Choice of Law

HN2 The law of the place of the contract governs the determination of the rights and liabilities of the parties under an insurance policy. This rule is applied unless the dominant and significant relationship of another state to the parties and the underlying issue dictates that this basic rule should yield.

Civil Procedure > State & Federal Interrelationships > Choice of Law

HN3 The following factors that should be considered as part of a court's conflict of laws analysis: (a) the place of contracting; (b) the place of negotiation of the contract;

(c) the place of performance; (d) the location of the sub- ject matter of the contract; and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties.

Contracts Law > Formation > Formation Generally Civil Procedure > State & Federal Interrelationships > Choice of Law

HN4 The place of contracting is the place where oc- curred the last act necessary to give the contract binding

952 F.2d 756, *; 1991 U.S. App. LEXIS 30342, **1;

34 ERC (BNA) 1772; 22 ELR 20561

Page 2

effect.

Insurance Law > Claims & Contracts > Contract

Formation

Civil Procedure > State & Federal Interrelationships > Choice of Law

HN5 The place of performance of an insurance con- tract, in the absence of a clause specifically dealing with the issue, is the place where the premiums are paid. Insurance Law > Claims & Contracts > Policy Interpretation > Contract Interpretation Rules

HN6 Under Pennsylvania law, when language in an in- surance policy is clear and unambiguous, a court must give effect to that language.

COUNSEL: John P. O'Dea, Esq., (ARGUED), Craig

R. Blackman, Esq., Stradley, Ronon, Stevens & Young,

2600 One Commerce Square, Philadelphia, Pennsylvania

19103, Thomas P. Farnoly, Esq., Gruccio, Pepper, Giovinazzi & DeSanto, 538 Landis Avenue, CN 1501, Vineland, New Jersey 08360, Attorneys for Appellant

Janet L. R. Menna, Esq., (ARGUED), William Gerald McElroy, Jr., Esq., Zelle & Larson, 95 Sawyer Road, Three University Office Park, Suite 55, Waltham, Massachusetts 02154, Attorneys for Appellee

Peter J. Kalis, Esq., Kirkpatrick & Lockhart, 1500 Oliver Building, Pittsburgh, Pennsylvania 15222, Attorneys for Westinghouse Electric, Amicus-appellant

Dona S. Kahn, Esq., Anderson, Kill, Olick & Oshinsky, 1600 Market Street, Suite 1416, Philadelphia, Pennsylvania 19103, Attorneys for Commonwealth of Pennsylvania, Amicus-appellant

Thomas W. Brunner, Esq., Wiley, Rein, Fielding, 1776

K Street, N.W., Washington, D.C. 20006, Attorneys for

Insurance Environmental Litigation Association JUDGES: Before: MANSMANN and ALITO, Circuit Judges DIAMOND, District Court *

* Hon. Gustave Diamond, Judge of the United States District Court for the Western District of Pennsylvania, sitting by designation.

**2

OPINIONBY: ALITO

OPINION: *757 OPINION OF THE COURT

ALITO, Circuit Judge:

An insured sued to recover under general liability in- surance policies for costs related to a state-mandated cleanup of toxic waste at an industrial site. The district court granted summary judgment for the insurer, holding that Pennsylvania rather than New Jersey law should be applied, and that under the policies the insured's claims were not covered because, as defined *758 by the poli- cies, no occurrence caused property damage while the policies were in effect. We will affirm.

Armotek Industries, Inc. ("Armotek") was incorpo- rated under the laws of New York n1 but its principal place of business has always been in New Jersey. From

1979 to 1985, Armotek was covered by general liabil- ity insurance policies issued by Employers Insurance of Wausau ("Wausau"), a Wisconsin corporation. These po- lices obligated Wausau to pay "all sums which the insured shall become legally obligated to pay as damages because of . . . property damage . . . caused by an occurrence." The policies defined an "occurrence" as "an accident, includ- ing continuous or repeated exposure to conditions, which results in . . . property damage." "Property damage" was

**3 defined to include "physical injury to property which occurs during the policy period." The policies also contained a standard pollution exclusion clause that ex- cluded coverage for property damage caused by pollution unless the "discharge, disbursal, release or escape" of pol- lution was "sudden and accidental."

n1 After the events at issue here, Armotek be- came a New Jersey corporation.

Armotek procured these policies through the

Philadelphia office of an insurance brokerage, Alexander

& Alexander, Inc. ("A & A"). As directed by Armotek, A & A canvassed the market and recommended cover- age. A & A applied to Wausau in Philadelphia for the Armotek policies. A & A also conducted all negotiations with Wausau in Philadelphia. A & A, however, had no au- thority to secure coverage without express authorization from Armotek's chief financial officer. After the negotia- tions were completed, the policies were countersigned by Wausau in its Philadelphia office.

Wausau sent all premium bills to A & A's Philadelphia office; A & A then **4 sent its own invoices to Armotek in New Jersey; Armotek sent A & A's Philadelphia office checks payable to A & A; and A & A then sent its own checks to Wausau's Philadelphia office.

In 1979, after securing its first policy, Armotek ac- quired the Chambers - Storch Company ("CSC"), which operated a chromeplating plant in Norwich, Connecticut.

952 F.2d 756, *758; 1991 U.S. App. LEXIS 30342, **4;

34 ERC (BNA) 1772; 22 ELR 20561

Page 3

In 1984, the Connecticut Department of Environmental

Protection ("DEP") inspected the Norwich facility, and in

1985 the Connecticut DEP ordered Armotek to remedi- ate pollution at the plant. Armotek sought recovery under its Wausau policies for costs related to the DEP order, but Wausau denied any obligation to provide a defense or indemnification.

Armotek then filed this action in the United States District Court for the District of New Jersey, seeking to recover the costs incurred as a result of the DEP or- der. Wausau moved to transfer venue to the District of Connecticut, but Armotek opposed transfer, and the dis- trict court denied Wausau's motion. In ruling on this mo- tion, the district court considered the choice-of--law ques- tion that would have to be decided by the court that ulti- mately adjudicated the case. The district court noted that neither **5 Wausau nor Armotek was claiming that Connecticut law should apply. The court observed that the parties' choice-of--law dispute centered on whether Pennsylvania or New Jersey was the place of contracting. In a later opinion, the district court ruled that Pennsylvania rather than New Jersey law would be ap- plied. Applying the choice-of--law rules of the forum

(New Jersey), the district court stated that the law of the place of contracting presumptively governs contract disputes, and the court concluded that the contracts in question had been formed in Pennsylvania, because the last act necessary to give the contracts binding effect, Wausau's countersignature, occurred in Philadelphia. The court then considered whether any factors other than the place of contracting were sufficient to require a choice of New Jersey law. The court noted that the policies had been negotiated in Pennsylvania and were "performed" in Pennsylvania, since that is where the premiums were paid. The court *759 acknowledged that the location of Armotek's principal place of business weighed in favor of New Jersey law, but the court concluded that this lone factor was outweighed by the others.

On cross-motions for summary **6 judgment, the court granted summary judgment for Wausau. The court observed that Armotek was seeking coverage for expenses incurred as a result of a spill of chromic acid that oc- curred in 1977. The court rejected Wausau's argument that government-mandated cleanup costs are not "damages" within the meaning of the policies, but the court held that the policies, which as noted were in effect from 1979 to

1985, did not cover property damage caused by the 1977 spill. The court also held that Wausau had not breached its duty to defend because nothing in the order issued by the Connecticut DEP "remotely suggested a 'sudden and accidental' release of pollution." Finally the court held that Wausau was not obligated to reimburse Armotek for

costs incurred by Armotek in suing the prior owner of the Norwich plant and that Wausau had not violated 42

Pa. Cons. Stat. Ann. § 8371 (1991), which provides re- lief in cases in which an insurer "has acted in bad faith toward the insured." Armotek appealed, n2 and Wausau cross-appealed, contesting the district court's holding that cleanup costs constitute "damages." n3

n2 We have jurisdiction with respect to

Armotek's appeal under 28 U.S.C. § 1291.

**7

n3 Wausau's cross-appeal must be dismissed. Ordinarily, a party may appeal only if aggrieved by the district court's judgment. While in rare cases a party who has prevailed on the merits may be able to appeal if that party still retains a personal stake in the appeal which satisfies Article III, a non-aggrieved party with no personal stake in the appeal may never do so. Deposit Guaranty Nat'l Bank v. Roper, 445 U.S. 326, 333-334, 63 L. Ed.

2d 427 , 100 S. Ct. 1166 (1980); Cobb v. Aytch, 539

F.2d 297, 300 (3d Cir. 1976), cert. denied, 429 U.S.

1103, 97 S. Ct. 1130, 51 L. Ed. 2d 554 (1977). Here, the district court granted summary judgment for Wausau, and therefore Wausau is obviously not ag- grieved by the district court's judgment. Acceptance of Wausau's argument concerning the meaning of the term "damages" in the policies would not re- quire any alteration of the district court's judgment; instead, Wausau's argument, if correct, would pro- vide an alternative ground on which the district court's judgment could be affirmed. An appellee may make such an argument without filing its own appeal. Schweiker v. Hogan, 457 U.S. 569, 585, 73

L. Ed. 2d 227 , 102 S. Ct. 2597 n.24 (1982); Blum v. Bacon, 457 U.S. 132, 137, 72 L. Ed. 2d 728 , 102

S. Ct. 2355 n.5 (1982). As noted below (see n.10, infra), however, we find it unnecessary to reach this issue.

**8 II.

We turn first to the choice-of--law argument pressed by Armotek. Armotek contends that the district court should have applied New Jersey law. Wausau main- tains that the district court correctly decided to apply Pennsylvania law. Neither party argues that the law of Connecticut, the site of the Norwich plant, should be applied. We generally decide only those issues raised by parties, Winston v. Children & Youth Servs., No. 90-1788,

948 F.2d 1380, 1991 U.S. App. LEXIS 26510 at *13 (3d

952 F.2d 756, *759; 1991 U.S. App. LEXIS 30342, **8;

34 ERC (BNA) 1772; 22 ELR 20561

Page 4

Cir. Nov. 7, 1991); Beaver Valley Power Co. v. National Eng'g & Contracting Co., 883 F.2d 1210, 1217 n.6 (1989), and accordingly we confine our analysis here to the ques- tion whether New Jersey rather than Pennsylvania law

**9

or New Jersey law is applicable.

should govern. n4

n4 Amicus curiae Westinghouse Electric Corporation argues that New Jersey choice-of-- law rules in environmental coverage actions give substantial weight to the interests of the state in which the cleanup site is located. The Appellate Division's recent decision in Johnson Matthey Inc. v. Pennsylvania Mfgs.' Ass'n Ins. Co., 250 N.J. Super. 51, 593 A.2d 367 (App. Div. 1991), held that New Jersey law, rather than the law of the place of contracting, should be applied in a case in which an insured sought to recover for cleanup costs at a site in New Jersey. Other decisions in- volving New Jersey sites have reached similar con- clusions. See, e.g., Hatco Corp. v. W. R. Grace & Co., No. 89-1031, 1991 U.S. Dist. LEXIS 6479

(D.N.J. May 18, 1991); Leksi, Inc. v. Federal Ins. Co., 736 F.Supp. 1331, 1335-37 (D.N.J. 1990). The opinion in Johnson Matthey Inc. stated, however, that its "holding is not in harmony with" another Appellate Division opinion, Westinghouse Elec. Corp. v. Liberty Mutual Ins. Co., 233 N.J. Super.

463, 559 A.2d 435, (App. Div. 1989). Johnson Matthey Inc., 593 A.2d at 373. Moreover, we are not aware of any decision under New Jersey law ex- tending the rule adopted in Johnson Matthey Inc. to a case involving a site outside New Jersey. In sum, it is far from clear that the New Jersey Supreme Court would apply Connecticut law under the cir- cumstances of the present case.

As previously noted, neither Armotek nor Wausau contends that Connecticut law should ap- ply. Indeed, the parties have agreed since before the district court's ruling on Wausau's March 1989 motion to transfer venue that either Pennsylvania or New Jersey law should govern. The parties' agree- ment on this question appears to have substantially affected the proceedings since that point. The dis- trict court's denial of Wausau's March 1989 motion to transfer venue appears to have been influenced by the parties' agreement that Connecticut law was inapplicable. Moreover, in ruling on the choice-of-- law question in November 1989, the district court selected between Pennsylvania and New Jersey law and noted that neither party contended that Connecticut law should govern. Under the circum- stances, we see no reason to go beyond the issue presented by the parties, i.e., whether Pennsylvania

*760 Since this is HN1 a diversity case filed in the District of New Jersey, we must apply New Jersey choice-of--law rules. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 85 L. Ed. 1477

, 61 S. Ct. 1020 (1941); Shuder v. McDonald's Corp.,

859 F.2d 266, 268-69 (3d Cir. 1988). In State Farm

Mutual Automobile Insurance Co. v. Estate of Simmons,

84 N.J. 28, 37, 417 A.2d 488, 493 (1980), the New Jersey

Supreme Court held:

HN2 The law of the place of the contract will govern the determination of the rights and liabilities of the parties under the insurance policy. This rule is to be applied un- less the dominant and significant relationship of another state to the parties and the underlying issue dictates that this basic rule should yield.

See also First State Underwriters Agency v. Travelers

Insurance Co., 803 F.2d 1308, 1316 (3d Cir. 1986).

The State Farm court (417 A.2d at 491) cited with ap- proval Restatement (Second) Conflict of Laws § 188(2)

(1971), which HN3 lists the following factors that should be considered as part of a court's conflict of laws analysis:

(a) the place of contracting;

**10

(b) the place of negotiation of the contract;

(d) the location of the subject matter of the contract;

and

(e) the domicile, residence, nationality, place of incorpo- ration and place of business of the parties.

Applying these factors, the district court concluded that Pennsylvania law should be applied in this case. Armotek relies on the same factors, but contends that they were misapplied by the district court. We hold, however, that these factors weigh strongly in favor of Pennsylvania, rather than New Jersey, law. n5

n5 This is a question of law with respect to which we exercise plenary review. Matter of Resyn Corp., 945 F.2d 1279, 1280 (3d Cir. 1991).

Place of contracting. HN4 The "place of contract- ing is the place where occurred the last act necessary . . . to give the contract binding effect." Restatement (Second)

952 F.2d 756, *760; 1991 U.S. App. LEXIS 30342, **10;

34 ERC (BNA) 1772; 22 ELR 20561

Page 5

Conflict of Laws § 188, comment c (1971); see also Fimbel

Door Corp. v. United States Fidelity & Guaranty Co., No.

90-1187, 1990 U.S. Dist. LEXIS 16032 **11 at *19-

20 (D.N.J. Nov. 5, 1990); Crawford v. Manhattan Life Ins. Co., 208 Pa. Super. 150, 154, 221 A.2d 877, 880 (Pa. Super. Ct. 1966); Varas v. Crown Life Ins. Co., 204 Pa. Super. 176, 183, 203 A.2d 505, 508 (Pa. Super. Ct. 1964), cert. denied, 382 U.S. 827, 15 L. Ed. 2d 72, 86 S. Ct. 62

(1965); McCrea v. Automatic Heat , Inc., 161 Pa. Super.

545, 547, 55 A.2d 564, 565 (Pa. Super. Ct. 1947). The parties agree that the Wausau employees' countersigna- tures on the policies were the last acts necessary to make the policies valid and binding. Brief of Appellant at 16; Brief of Appellee at 23. A. 114-115. See also Appleman, Insurance Law and Practice § 7133 at 508 (1991). Here, it is not disputed that Wausau employees who countersigned the Armotek policies did so in Philadelphia. Therefore, as the district court concluded, the place of contracting was in Pennsylvania.

Armotek argues that under N.J.S.A. 17:22-6.14 and

6.15 (repealed 1987) the policies had to be countersigned in New Jersey by Wausau's resident authorized repre- sentatives. This argument misinterprets the New Jersey statutes. While N.J.S.A. **12 17-22--6.15 required that the policies be countersigned by an agent licensed in New Jersey, the statute did not state that this *761 agent's signature had to be affixed in New Jersey. Under this provision, an agent licensed in New Jersey could countersign by an "attorney in fact." n6 According to an affidavit submitted by Wausau (App. 83), that is precisely what occurred here, and Armotek's brief does not dispute this fact. Thus, it is apparent both that the countersig- natures were affixed in Pennsylvania and that N.J.S.A.

17:22-6.14 and 6.15 gave Armotek no reasonable basis for believing otherwise.

n6 This case is not controlled by Wootton Hotel Corp. v. Northern Assurance Co., 155 F.2d 988 (3d Cir.), cert. denied, 329 U.S. 758, 91 L. Ed. 654 , 67

S. Ct. 111 (1946). In that case, applying the parol evidence rule, we deemed that an insurance pol- icy had been countersigned in New Jersey by the insurer's New Jersey resident agent as indicated in the policy itself, rather than in Pennsylvania, as a witness had testified at trial. We did not hold that the signature of the New Jersey agent had to be affixed in New Jersey under the New Jersey statute then in effect. See 155 F.2d at 990 n.2. Moreover, the statute then in force, unlike N.J.S.A. 17:22-

6.15 (repealed 1987), did not expressly authorize countersignature by an attorney in fact.

**13

Place of negotiation. The district court stated that A

& A negotiated with Wausau on Armotek's behalf and that all of the negotiations between Wausau and A & A occurred in Philadelphia. Armotek does not contend that negotiations with Wausau took place in New Jersey.

Place of performance. HN5 The place of perfor- mance of an insurance contract, in the absence of a clause specifically dealing with the issue, is the place where the premiums are paid. Equitable Life Assurance Society v. Nikolopulos, 86 F.2d 12, 14 (3d Cir. 1936), cert. denied,

300 U.S. 660, 81 L. Ed. 869 , 57 S. Ct. 436 (1937). Here, the manner in which Armotek's premiums were billed and paid is undisputed. Wausau sent invoices to A & A in Philadelphia; A & A then sent its own invoices to Armotek in New Jersey; Armotek sent checks payable to A & A; and A & A sent its own checks to Wausau. As the dis- trict court concluded, these facts show that Armotek paid the premiums in Pennsylvania. The district court believed that A & A was Armotek's agent; if the district court's view was correct, Armotek's premiums were clearly paid in Pennsylvania, since A & A's checks were drawn and received by Wausau in Philadelphia. **14 Armotek contends that A & A was Wausau's agent for the pur- pose of receiving the premiums; if Armotek is correct, its premiums were paid when they were received by A

& A in Philadelphia. In either event, the premiums were paid -- and the contract was therefore performed -- in Pennsylvania. n7

n7 In the absence of a provision in a policy to the contrary, the place of performance is where the premiums are received. Hartford Accident & Indemnity Co. v. Cooper Park Dev. Corp., 169 F.2d

803 (3d Cir. 1948).

The location of the subject matter of the contract. When the first policy was issued, all of Armotek's facili- ties were in New Jersey. Armotek subsequently acquired facilities in Pennsylvania and Connecticut, and the latter facility gave rise to the claims at issue here. Under these circumstances, this factor does not weigh substantially in favor of New Jersey law.

The domicile, residence, nationality, place of incorpo- ration, and place of business of the parties. Here, Armotek during the time **15 in question was a New York cor- poration with its principal place of business in New Jersey. Wausau was and is a Wisconsin corporation. The district court correctly reasoned that this factor weighed in favor of applying New Jersey law.

Other factors. Armotek relies heavily on several ad- ditional factors, but we agree with the district court that these factors have little if any significance for present

952 F.2d 756, *761; 1991 U.S. App. LEXIS 30342, **15;

34 ERC (BNA) 1772; 22 ELR 20561

Page 6

purposes. Armotek contends that a New Jersey surcharge under N.J.S.A. 17:30A-16 (1991) was imposed on the policies in question. This surcharge applies to any policy, no matter where it is formed, if the policy covers any risk in New Jersey; the amount of the surcharge varies de- pending on the percentage of the risk located in the state. Thus, this provision merely shows that New Jersey law asserted an interest in the Armotek policies insofar as they covered risks in the state. Since New Jersey choice-of-- law rules clearly do not dictate that New Jersey law must apply to every *762 policy subject to the surcharge and since the facility that gave rise to the claims at issue here was not located in New Jersey, we fail to see what relevance this statute has to the choice-of--law question presented **16 in this case.

Finally, Armotek notes that these policies bore a New Jersey "Amendatory Endorsement." As the district court observed, however, these policies also bore special pro- visions for other states, including Pennsylvania and New York. These provisions show that several states asserted a right to regulate these policies, but none of these pro- visions demonstrates that any one state had a dominant interest.

In sum, we agree with the district court that a consid- eration of all of the relevant factors, particularly the place of contracting, shows that Pennsylvania rather than New Jersey law should be applied here. We will therefore con- sider the pertinent policy provisions as construed under Pennsylvania law.

III.

The policies involved in this case obligated Wausau to pay "all sums which Armotek shall become legally obligated to pay as damages because of . . . property damage . . . caused by an occurrence." The policies de- fined an occurrence as "an accident, including continuous or repeated exposure to conditions, which results in . . . property damage neither expected nor intended from the standpoint of the insured." The term "property damage" was defined in pertinent part as "physical **17 injury to or destruction of tangible property which occurs dur- ing the policy period." In addition, the policies excluded coverage for property damage caused by a "discharge, disbursal, release or escape" of pollution that was not

"sudden and accidental." In Northern Insurance Co. v. Aardvark Associates, Inc., 942 F.2d 189 (3d Cir. 1991), we predicted that the phrase "sudden and accidental" in this standard clause would be interpreted by the Supreme Court of Pennsylvania to mean "abrupt" and lasting a short time.

HN6 Under Pennsylvania law, when language in an insurance policy is clear and unambiguous, a court

must give effect to that language. Northern Insurance Co., 942 F.2d at 193; 12; Gene & Harvey Builders, Inc. v. Pennsylvania Manufacturers' Assoc. Ins. Co., 512 Pa.

420, 517 A.2d 910, 913 (1988). Putting together all of the elements in the policy provisions noted above, it is appar- ent that Armotek could not recover for pollution damage under its policies unless:

1) there was an "occurrence," that is, an "accident," which may be a single discrete event, a repeated series of events, or a continuous event;

2) **18 this accident was "sudden," that is, abrupt and lasting only a short time;

3) the accident resulted in injury to property; and

4) the injury to property "occurred" during the policy period.

See also Triangle Publications, Inc. v. Liberty Mutual

Insurance Co., 703 F.Supp. 367, 370 (E.D. Pa. 1989). Armotek argues that it may recover for injury to prop- erty caused by a 1977 spill of up to 1600 gallons of chromic acid, but we hold that this claim was properly rejected by the district court in granting summary judg- ment for Wausau. n8 Armotek, which bore the burden of proving coverage ( Northern Insurance Co., 942 F.2d at

195), failed to point to facts in the summary judgment record that could establish (see Celotex Corp. v. Catrett,

477 U.S. 317, 322, 91 L. Ed. 2d 265 , 106 S. Ct. 2548

(1986)), that the 1977 spill satisfied the fourth element noted above, i.e., that the injury to property "occurred" during the policy term. Triangle Publications, Inc., 703

F.Supp. at 370; Centennial Insurance Co. v. Lumbermens

Mutual Casualty Co., 677 F.Supp. 342, 346 (E.D. Pa.

1987). See also Riehl v. Travelers Insurance Co., 772

F.2d 19, 23 (3d *763 Cir. 1985); **19 Appalachian

Insurance Co. v. Liberty Mutual Insurance Co., 676 F.2d

56, 61 (3d Cir. 1982). Much, if not all of the injury to the property resulting from the 1977 chromic acid spill must have occurred at the time of the spill or at some other point prior to 1979, when the first Wausau policy took effect. Armotek might have attempted to prove that sepa- rable injury to property occurred after 1979 as the chromic acid migrated underground, but Armotek's brief does not appear to make such an argument, and it certainly does not identify any factual support for such an argument in the summary record. n9 Thus, summary judgment against Armotek was properly granted. n10

n8 Our standard of review with respect to the construction of the insurance policies is plenary.

952 F.2d 756, *763; 1991 U.S. App. LEXIS 30342, **19;

34 ERC (BNA) 1772; 22 ELR 20561

Page 7

Northern Insurance Co., 942 F.2d at 191 n.2. Our standard for determining whether summary judg- ment should have been granted is the same as the district court's. Waldorf v. Shuta, 898 F.2d 723, 728

(3d Cir. 1990).

n9 Armotek's brief states (at 32):

In this case and under Pennsylvania law, contami- nation to the surface and groundwater began upon initial release of the pollutant, and continues un- til such time as the pollutants are removed. Thus every policy in effect from the time that Armotek took over control of the Plant in 1979 through to remediation - end affords coverage.

**20

n10 Since we hold that Armotek cannot re- cover for this reason, we need not consider whether the district court was correct in holding that state- mandated cleanup costs are "damages" under these policies.

Armotek argues that we should apply cases such as

ACANDS, Inc. v. Aetna Casualty and Surety Co., 764 F.2d

968 (3d Cir. 1984), which predicted that the Supreme Court of Pennsylvania would adopt the so-called "triple trigger" or "continuous trigger" approach for determining when bodily injury caused by asbestos exposure occurs. ACANDS, Inc. held that such bodily injury occurs at the time of exposure to asbestos, at the time of "exposure in residence" (i.e., "'the further progression of injury that oc- curs even after exposure has ended'" ( id. at 971 n.2)), and at the time when the injury is manifested. The holding in ACANDS, Inc. was informed by "the unique character of the problem created by the policy language in the context of diseases with long latency periods" ( id. at 973), and we see little if any similarity between ACANDS, **21 Inc. and the present case. Persons who suffer from as- bestos-related diseases are often exposed to asbestos for some period and generally do not manifest symptoms un- til some later point. Here, a large spill of chromic acid allegedly occurred in 1977. To use the terminology of ACANDS, Inc., both "exposure" and "manifestation" oc- curred at the time of the spill, before the policies took effect. And, as discussed above, Armotek has not pointed

to facts that could establish "exposure in residence," i.e., that the property damage caused by the spill progressed further during the policies' terms.

IV.

Armotek contends that Wausau breached its duty to defend. Under Pennsylvania law the duty to defend is a separate obligation. Erie Insurance Exchange v. Transamerica Insurance Co., 516 Pa. 574, 533 A.2d

1363v (1987). "'If the complaint filed against the insured avers facts which would support a recovery that is cov- ered by the policy, it is the duty of the insurer to defend until such time as the claim is confined to a recovery that the policy does not cover.'" Northern Insurance Co., 942

F.2d at 195, quoting Erie Insurance Exchange, 533 A.2d at 1363. **22

Here, the Connecticut DEP order referred to "past chemical storage, handling and disposal activities" at the Norwich facility. As the district court wrote, nothing in the order "remotely suggests a 'sudden and accidental' release of pollution that would trigger Wausau's duty to defend." Moreover, Armotek does not argue that the Connecticut DEP ever suggested that contamination at the site resulted from a sudden and accidental discharge during the policy period; nor does Armotek contend that it informed Wausau or that Wausau had any basis for sus- pecting that such a discharge occurred during the policy term. Accordingly, we hold that Wausau did not breach its duty to defend. n11

n11 It follows that Armotek may not recover the costs it incurred in suing the prior owner of the facility. Armotek contends that Wausau's breach of its duty of indemnification forced Armotek to com- mence that suit. Because we hold that Wausau did not breach this duty, Armotek may not recover these costs.

*764 Finally, we agree with the district court **23 that Armotek has not adduced any evidence that Wausau violated 42 Pa. Cons. Stat. Ann. § 8371 (1991).

The order of the district court will therefore be af- firmed.


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