Gen. Ceramics v. Fireman's Fund

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
9-21-1995
Gen. Ceramics v Fireman's Fund
Precedential or Non-Precedential:
Docket 94-5371
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Recommended Citation
"Gen. Ceramics v Fireman's Fund" (1995). 1995 Decisions. Paper 259.
http://digitalcommons.law.villanova.edu/thirdcircuit_1995/259
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
N0. 94-5371
GENERAL CERAMICS INC., National Beryllia Division
v.
FIREMEN'S FUND INSURANCE COMPANIES; THE ST. PAUL PROPERTY AND
LIABILITY INSURANCE COMPANY; HOME INSURANCE COMPANY;
MARINE INSURANCE COMPANY; HARTFORD INSURANCE COMPANY;
UNION INDEMNITY, C/O STATE OF NEW YORK INSURANCE DEPARTMENT
LIQUIDATION BUREAU; GREATER ATLANTIC INSURANCE COMPANY
GENERAL CERAMICS, INC.,
NATIONAL BERYLLIA DIVISION
a Corporation of the State
of New Jersey,
Appellants
On Appeal From the United States District Court
For the District of New Jersey
(D.C. Civil Action No. 92-cv-03292)
Argued February 14, 1995
BEFORE: STAPLETON, GREENBERG and COWEN, Circuit Judges
(Opinion Filed September 21, 1995)
David C. Dixon (Argued)
Scangarella & Feeney
565 Newark Pompton Turnpike
P.O. Box 216
Pompton Plains, N.J. 07444
Attorneys for Appellant
Wendy L. Mager (Argued)
Jay M. Tuckerman
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Smith, Stratton, Wise, Heher & Brennan
600 College Road East
Princeton, N.J. 08540
Attorneys for Appellee
Home Insurance Co.
Laura A. Foggan
Daniel E. Troy
Stephen D. Goldman
Tanja E. Hens
Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, D.C. 20006
Attorneys for Amicus Curiae
Insurance Environmental Litigation
Association
OPINION OF THE COURT
STAPLETON, Circuit Judge:
This is an action for a declaratory judgment that a
standard comprehensive liability insurance policy covers a
liability incurred under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42
U.S.C. §§ 9601-9675. Central to its resolution is a choice-of-
law issue governed by New Jersey's choice-of-law rules. We must
decide whether New Jersey or Pennsylvania law controls the
interpretation of an exception to a pollution-exclusion clause
when New Jersey has significant contacts with the insurance
contract and the insured but Pennsylvania is the site of the
hazardous waste site giving rise to the liability for which
coverage is sought. Based on the strong public policy that
2
underlies New Jersey's broad interpretation of the pollution-
exclusion exception, we conclude that the Supreme Court of New
Jersey would hold the New Jersey law governs this dispute.
Because the district court applied Pennsylvania law and granted
summary judgment in favor of the insurer on that basis, we will
reverse.
I.
The insured, General Ceramics, Inc.,1 is a New Jersey
company that manufactures high temperature beryllium oxide
ceramics at its main manufacturing plant in Haskell, New Jersey.
Until 1991, all of General Ceramics's corporate, manufacturing,
marketing, and sales operations were located at the Haskell, New
Jersey facility. Between December 1977 and October 1978,
approximately five shipments of contaminated waste from the
Haskell facility were transported by private waste haulers to a
resource recovery and processing facility in McAdoo, Pennsylvania
("the McAdoo site").
In 1981, General Ceramics received notice from the
United States Department of Environmental Protection ("EPA") and
the Pennsylvania Department of Environmental Resources that these
agencies were investigating contamination at the McAdoo site.
This investigation led to a request that General Ceramics remove
from the site approximately 115 drums allegedly containing toxic
1
General Ceramics was formerly known as National Beryllia
Corporation and is so identified on the relevant insurance
policies.
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waste. General Ceramics complied with that request. In 1987, a
proposed consent decree for clean-up, monitoring, and remediation
of the McAdoo site was filed with the District Court for the
Eastern District of Pennsylvania. The EPA then filed a civil
action in that court, pursuant to CERCLA, against General
Ceramics and others, seeking damages and injunctive relief, and
incorporating the provisions of the consent decree. Through
September 1991, General Ceramics had expended approximately
$132,000 in clean-up and remediation costs pursuant to the McAdoo
site consent decree. In October 1992, General Ceramics notified
its insurers of the environmental claims pending against it.
Between December 1972 and December 1978, Home Indemnity
Company (referred to in the caption as "Home Insurance Company"
and in this opinion as "Home" or "the insurer") had issued seven
liability polices to General Ceramics, each covering
approximately a one year period. Home is incorporated in New
Hampshire and has its principal place of business in New York.
The policies were obtained through a New York insurance broker.
All of the policies listed Haskell, New Jersey as the insured's
address; all policies were maintained and counter-signed there;
and all premium notices were sent to and paid from that address.
The Home policies provided coverage for "bodily injury
[or] property damage . . . caused by an occurrence." (See, e.g.,
app. at 84.) "Occurrence" was defined in the policies as "an
accident, including continuous or repeated exposure to
conditions, which results in bodily injury or property damage
neither expected nor intended from the standpoint of the
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insured." (See, e.g., app. at 78.) The policies also contained
the following standard exclusion clause applicable to bodily
injury and property damage resulting from pollution:
This insurance does not apply:
. . .
(f) to bodily injury or property damage
arising out of the discharge, dispersal,
release or escape of smoke, vapors, soot,
fames, acids, alkalis, toxic chemicals,
liquids or gases, waste materials or other
irritants, contaminants or pollutants into or
upon land, the atmosphere or any water course
or body of water; but this exclusion does not
apply if such discharge, dispersal, release
or escape is sudden and accidental.
(See, e.g., app. at 84 (emphasis added).)
After giving Home notice of the EPA claims against it,
General Ceramics filed an action in the Superior Court of New
Jersey against Home and a number of other insurers seeking a
declaration that any liability in connection with the McAdoo site
environmental claims was covered by General Ceramics's insurance
policies. After removal to the United States District Court for
the District of New Jersey, summary judgment was granted in favor
of Home, and General Ceramics's cross-motion for summary judgment
was denied. The district court determined that Pennsylvania law
applied, that the discharge of the pollution in this case had
been gradual and not abrupt, and that under Pennsylvania law the
gradual discharge of pollutants was not covered under the "sudden
and accidental" exception to the pollution-exclusion clause.
Accordingly, the damage at the McAdoo site resulting from General
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Ceramics's delivery of waste over a one year period was not
covered. General Ceramics promptly filed a notice of appeal.
Both before and shortly after the district court
granted summary judgment to Home, the other defendant insurance
companies were voluntarily dismissed from the action with
prejudice.
The district court had jurisdiction over this diversity
action pursuant to 28 U.S.C. § 1332. We have jurisdiction over
the appeal pursuant to 28 U.S.C. § 1291. Although at the time
General Ceramics filed its notice of appeal on June 21, 1994,
claims remained pending against other defendant insurers, General
Ceramics's premature notice of appeal ripened when the remaining
defendants were dismissed from the action on July 25 and July 26,
1994. Because this court had not yet taken any action on the
appeal at that time, we may assert appellate jurisdiction over
the prematurely filed appeal. See New Castle County v. Hartford
Accident & Indem. Co., 933 F.2d 1162, 1178 (3d Cir. 1991) (citing
Cape May Greene, Inc. v. Warren, 698 F.2d 179 (3d Cir. 1983)).
General Ceramics raises three issues on appeal: (1)
whether the district court erred when it determined under New
Jersey's choice-of-law rules that Pennsylvania law applies to the
interpretation of the insurance contract provisions, (2) whether
under Pennsylvania law the pollution-exclusion clause bars
recovery, and (3) whether there existed substantial issues of
material fact precluding summary judgment. Because we conclude
that application of New Jersey's choice-of-law rules require
application of New Jersey law, we do not reach the second issue.
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Because the district court granted summary judgment on the basis
of Pennsylvania substantive law and because genuine issues of
material fact preclude summary judgment under New Jersey law at
this juncture, we will reverse and remand for application of New
Jersey law in further proceedings.
In reviewing a grant of summary judgment, we apply the
same test that the district court should have used initially.
Public Interest Research Group of New Jersey, Inc. v. Powell
Duffryn Terminals, Inc., 913 F.2d 64, 76 (3d Cir. 1990), cert.
denied, 498 U.S. 1109 (1991). Summary judgment is appropriate
where "there is no genuine issue as to any material fact and . .
. the moving party is entitled to judgment as a matter of law."
Fed. R. Civ. P. 56. The allegations of the party opposing the
motion are taken as true and inferences are drawn in a light most
favorable to the non-movant. Goodman v. Mead Johnson & Co., 534
F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038 (1977).
In responding to a motion for summary judgment, however, the
nonmoving party must "go beyond the pleadings and by her own
affidavits, or by the 'depositions, answers to interrogatories,
and admissions on file,' designate 'specific facts showing that
there is a genuine issue for trial.'" Celotex Corp. v. Catrett,
477 U.S. 317, 324 (1986) (quoting Fed. R. Civ. P. 56(e)). The
district court's application of New Jersey's choice-of-law rules
involves the application of legal principles and therefore is
subject to plenary review.
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II.
A choice-of-law issue arises in this case because
Pennsylvania and New Jersey law differ regarding the
interpretation to be given the "sudden and accidental" discharge
exception found in the pollution-exclusion clause of standard
comprehensive liability policies like those issued by Home to
General Ceramics.2 Pennsylvania's intermediate appellate courts
have consistently held that the "sudden and accidental" exception
does not extend coverage for gradual discharges of pollution.
See, e.g., O'Brien Energy Sys., Inc. v. American Employers Ins.
Co., 629 A.2d 957, 962 (Pa. Super. Ct. 1993), appeal denied, 642
A.2d 487 (Pa. 1994); Lower Pe Goodman v. Mead Johnson & Co., 534
F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038
(1977).__
2
The parties do not contend that the law of Home's state of
incorporation, New Hampshire, or its principal place of business,
New York, should apply. We accordingly do not consider the law
of those states.
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