KOPPERS COMPANY, INC.
v.
The AETNA CASUALTY AND SURETY COMPANY; Zurich Insurance
Company; The Travelers Indemnity Co.; The American Home
Assurance Company; Commercial Union Insurance Company; The
Home Insurance Company; Underwriter's At Lloyd's of London.
Certain Underwriters at Lloyd's, London; Certain Insurance
Companies in the London Market, referred to in
this action as "Jackson and
Companies",*
(* Pursuant to Rule 12(a), F.R.A.P.) Appellants in No. 95-3432.
KOPPERS COMPANY, INC.
v.
The AETNA CASUALTY AND SURETY COMPANY; Zurich Insurance
Company; The Travelers Indemnity Co.; The American Home
Assurance Company; Commercial Union Insurance Company; The
Home Insurance Company; Underwriters's at Lloyd's of
London; Certain Insurance Companies in the London Market,
referred to in this action as "Jackson and Companies."
*
(* Pursuant to Rule 12(a), F.R.A.P.)
Koppers Company, Inc., Appellant in No. 95-3461.
Nos. 95-3432, 95-3461.
United States Court of Appeals,
Third Circuit.
Argued May 2, 1996.
Decided Oct. 28, 1996.
Joseph W. Montgomery, III (argued), Jones, Day, Reavis & Pogue, Pittsburgh, PA, for Appellee/Cross-Appellant.
Larry R. Eaton (argued), Gregory G. Smith, Blatt, Hammesfahr & Eaton, Chicago, IL, and William T. Hangley, Hangley, Aronchick, Segal & Pudlin, Philadelphia, PA, and Kent D. Syverud, Ann Arbor, MI, for Appellants/Cross-Appellees.
Before: STAPLETON, COWEN, and SEITZ, Circuit Judges.
OPINION OF THE COURT
STAPLETON, Circuit Judge:
Koppers Company, Inc. ("Koppers"),1 asserts breach of contract and declaratory judgment claims against its liability insurers, based on their denial of coverage for various environmental property damage claims. Koppers entered into settlement agreements with several of its insurers prior to trial, leaving only certain excess liability insurers as litigating defendants. Following the jury's determinations that the occurrence-based policies had been triggered and that Koppers had incurred a total of about $70 million in property damage liability, the district court entered judgment for Koppers, holding its excess insurers liable for the full amount of the claim without reducing the verdict to account for Koppers' settlements with the other insurers.
On appeal, the excess insurers allege four errors under Pennsylvania law: (1) the court erroneously instructed the jury that the occurrence-based policies would be triggered if any property damage occurred during the policy period, even if the initial cause of that damage was an event (such as a chemical spill) that occurred prior to the policy period; (2) the court erroneously instructed the jury that the insurer has the burden of proving that the specific property damage that occurred was not fortuitous but was expected or intended by the insured; (3) the court abused its discretion by excluding proffered evidence of Koppers' failure to mitigate the damage; and (4) the court erroneously failed to reduce the judgment to account for the plaintiff's settlements with other insurers.2 We believe the district court committed reversible error with respect only to the last claim, and we will accordingly reverse and remand with instructions to reduce the judgment to account for the settling insurers' apportioned shares.
I.
Koppers is a large, diverse manufacturing company based in Pittsburgh, Pennsylvania that has been conducting manufacturing operations in locations throughout the United States since the early part of this century. In the 1980s, federal and state agencies brought claims against Koppers demanding remediation for environmental contamination at some 150 plant sites and disposal sites. This environmental contamination included property damage to third-party soil, subsoil and groundwater. Koppers then sought a defense and indemnification from its various liability insurers, all of whom initially denied coverage.
Appellants, defendants below, are a group of certain underwriters for Lloyd's of London and certain London market insurance companies (hereinafter the "London Insurers"). Over the years, the London Insurers have issued a number of excess liability insurance policies to Koppers.
Koppers commenced this action in 1985 against two of its primary insurers, and has since amended its complaint several times to add other primary and excess insurers, including the appellant insurers. All of the defendant insurers except for the London Insurers settled with Koppers before trial. Koppers, alleging that the London Insurers breached their contracts of insurance, sought damages and a declaratory judgment regarding Koppers' right to indemnification under those policies.
The district court limited the scope of the trial to twelve specific policies, which provided multiple layers of occurrence-based, excess liability coverage for third-party property damage. Five of these policies were in effect between late 1953 and January 1957, and the remaining seven policies were in effect between January 1957 and January 1960. Thus, although Koppers had insurance from at least the 1940s through at least the 1970s, the trial was limited to a roughly six-year period. The district court further limited the scope of the trial to only eighteen of the contaminated sites. Finally, the trial was limited to determining liability and damages for cleanup and response costs incurred at these sites through the end of 1993, and to determining whether Koppers was entitled to a declaratory judgment for the period thereafter.
After a three-week trial, the jury found by special verdict that, during the applicable policy periods, (1) an "occurrence" had triggered coverage under all of the policies at issue at each site, and (2) Koppers had neither expected nor intended to cause damage to third-party property at any site. The jury awarded some $70 million in damages, and the court entered judgment in May 1995. Pursuant to the court's instructions, the jury's damages figure represents the total costs Koppers had incurred because of third-party property damage at the eighteen focus sites through the end of 1993, without regard to the sums of money Koppers received from the settling insurers. The court explained to the jury that the court would adjust the damages award according to rules of law after the jury determined the total damages figure.
Both parties moved to alter or amend the judgment under Fed.R.Civ.P. 59(e). The district court, in its July 1995 order, granted Koppers' motion and granted the London Insurers' motion in part but denied it in part. Specifically, as relevant here, the court: (1) granted Koppers' motion to reduce the judgment to about $66 million,3 but denied the London Insurers' motion to reduce the judgment further to account for Koppers' settlements with the other insurers; (2) granted a declaratory judgment (limited to the twelve policies and eighteen focus sites at issue) that Koppers is entitled to indemnification under the London Insurers' policies for the period following 1993; and (3) certified the July 1995 order as final under Fed.R.Civ.P. 54(b). This timely appeal followed.II.
The district court had jurisdiction over this diversity action pursuant to 28 U.S.C. § 1332. We have appellate jurisdiction over the final order pursuant to 28 U.S.C. § 1291.
The parties agree, as do we, that Pennsylvania law governs this case. We review the district court's interpretation and prediction of state law de novo. Wiley v. State Farm Fire & Cas. Co.,
A timely appeal from the denial of a Rule 59 motion to alter or amend the judgment brings up the underlying judgment for review, so that our standard of review varies with the underlying judicial decision. Federal Kemper Ins. Co. v. Rauscher,
We exercise plenary review in determining whether a jury instruction misstates a legal standard. Savarese v. Agriss,
"We review pre-trial and trial court rulings concerning the admission of evidence for abuse of discretion," but "error may not be predicated upon a ruling which admits or excludes evidence unless a substantial right of the party is affected." Glass v. Philadelphia Elec. Co.,
III.
A.
We will address first the London Insurers' argument that the district court gave erroneous jury instructions regarding the trigger of coverage under their policies. The district court instructed the jury that the policies could be triggered in either of two ways:
These policies are triggered if either, one, the cause of the property damage or, two, the property damage itself took place during the policy period for each site. Thus, if an event or events that eventually led to property damage took place during the policy period, or if ... the property damage itself took place during the policy period, the policies have been triggered.
App. at 2046. The London Insurers argue, however, that their policies could be triggered only by a causative event taking place during the policy period, not by the resulting property damage alone if the causative event occurred pre-policy.
We need not predict how the Supreme Court of Pennsylvania would interpret these particular insurance contracts, however. Koppers introduced uncontroverted evidence that the property damage (mostly groundwater contamination through leaching) was continuous, progressive, and indivisible throughout the relevant policy periods. It also introduced uncontroverted evidence that the causes of the contamination (e.g., leaks, drips, spills, or disposals) existed at each site during each policy period.4 Based on this evidence, the jury found that each of the policies had been triggered. While such a finding could theoretically have been made under the court's instruction based solely on the jury's acceptance of Koppers' uncontradicted evidence regarding the occurrence of property damage, we perceive no basis on which the jury might have accepted that evidence yet rejected Koppers' uncontroverted evidence regarding the occurrence of the causes of that damage. Accordingly, we find it more than highly probable that the district court's charge on this point did not affect the outcome of the case. In short, the charge, even if erroneous, was harmless error.
B.
1.
The London Insurers next argue that the court erred in instructing the jury that the insurers had the burden of proving, as an affirmative defense, that the losses were not fortuitous--i.e., that Koppers expected or intended the third-party property damage. The London Insurers argue that, because a plaintiff insured must prove that it is entitled to coverage, and because only fortuitous losses are covered, Koppers had the burden of proving that it neither expected nor intended the harm.
The question of which party bears the burden of proof in a diversity case is a matter of state substantive law. Blair v. Manhattan Life Ins. Co.,
The terms of the policies do not mention fortuity. The portions of the policies defining the scope of coverage state that the London Insurers will "indemnify the Assured for all sums which the Assured shall be obligated to pay by reason of the liability imposed upon the Assured ... for damages ... on account of ... property damage." App. at 141.5 There is no requirement in the coverage provisions that the loss be fortuitous or "unexpected and unintended." Nor do the exclusion provisions of any of the policies expressly exclude losses that are non-fortuitous or "expected and intended."
In Intermetal Mexicana v. Insurance Co. of N. Am.,
The rationale supporting the generally accepted rule against indemnity for non-fortuitous losses is succinctly explained in Robert E. Keeton & Alan I. Widiss, Insurance Law § 5.3(a), at 476-77 (student ed. 1988):
[The concept of fortuity], which expresses the concern that insurance arrangements should be limited to the transfer of economic detriments that are fortuitous, is generally regarded as a principle that is central to the basic determination of what risks may or should be transferred by an insurance arrangement. In most circumstances, it is contrary to public policy to permit the enforcement of an insurance contract if it would provide indemnification for losses that are not fortuitous....
... The [rule requiring fortuity] embodies a fundamental and significant public policy interest that in some contexts is sufficiently important to preclude coverage claims even when there are explicit agreements to the contrary, but in any case is a very compelling public interest in regard to coverage questions when there is no applicable provision in the insurance agreement.
Consistent with Intermetal Mexicana, we predict that it is the public policy of Pennsylvania not to enforce an insurance coverage contract providing coverage for a non-fortuitous loss. As with exclusions stated in an insurance policy itself, when an insurer relies on public policy to deny coverage of a claim, the insurer must bear the burden. See, e.g., Butterfield v. Giuntoli,
2.
In addition to challenging the district court's fortuity instruction for misallocating the burden of proof, the London Insurers argue that the instruction improperly limited this public policy affirmative defense to situations in which the insured "expected or intended" the specific harms that occurred. They insist that, under Pennsylvania law, coverage is defeated if the insured expected or intended a harm of the same general type as the harm that occurred. Koppers does not contest this proposition; it does dispute, however, that the court's instructions were inconsistent with this proposition.
We agree that the district court's instructions on this issue did not limit the fortuity defense to those harms specifically expected or intended by the insured. As the London Insurers point out, the district court instructed the jury: "If you find that Koppers intentionally or knowingly caused property damage for which it seeks coverage, then Koppers may not recover for that specific damage." App. at 1013. However, the court concluded this instruction by stating: "To lose coverage, Koppers must have intended the same general type of property damage that occurred." Id. We think that the instructions on this point, when read as a whole, fairly conveyed to the jury what the parties agree is the correct legal standard. See Douglas v. Owens,
C.
The London Insurers' third claim is that the district court abused its discretion by excluding their proffered evidence of Koppers' failure to mitigate the property damage. The insurers argue that, under Pennsylvania law, an insured has an ongoing duty to mitigate its losses, and that Koppers' recovery must be reduced by the amount of loss which could have been prevented if Koppers had undertaken reasonable efforts to mitigate the property damage.
The district court ruled, as a general matter, that evidence of Koppers' failure to mitigate damages would be admissible. Although the precise basis for the district court's decision to exclude the London Insurers' proffered evidence is not clear from the record, we find no reversible error.
As a matter of general contract law, the Pennsylvania Supreme Court has held that a plaintiff's duty to mitigate its damages arises upon the defendant's breach of the contract. E.g., Bafile v. Borough of Muncy,
Mitigation is an affirmative defense, so the burden of proving a failure to mitigate is on the defendant. See Williams v. Masters, Mates and Pilots of Am.,
The London Insurers' evidence would not have satisfied any of these three elements, as it merely purports to show that Koppers was aware of property damage in the 1960s and 1970s but failed to correct the problem until the 1980s.7 The London Insurers offered no evidence of what reasonable actions Koppers might or ought to have taken,8 no evidence tending to show that any actions would have measurably reduced the harm, and, thus, no evidence from which the jury could have determined how much damages could have been reduced by mitigation. For this reason, the court's exclusion of the London Insurers' evidence was not reversible error.
D.
The London Insurers' final claim is that the district court erroneously saddled them with liability for the entire loss by improperly failing to reduce the judgment to account for Koppers' settlements with the other defendant insurers. We agree.
1.
In J.H. France Refractories Co. v. Allstate Insurance Co.,
The next question, naturally, was "how to allocate the liability of each insurer when, as is commonly the case, more than one insurer was on the risk at one time or another during the development of a claimant's disease." Id. The superior court had held that the several insurers must share the obligation to indemnify on a pro rata basis, apportioned upon the amount of time each policy was in effect. Id. Declining to adopt that approach, the supreme court held instead that the insurers whose coverage had been triggered were jointly and severally liable for the full amount of the claim up to policy limits, and that the insured was entitled to select the policy or policies under which it would be indemnified. Id. at 508. As the supreme court explained:
When the policy limits of a given insurer are exhausted, J.H. France is entitled to seek indemnification from any of the remaining insurers which was on the risk during the development of the disease [i.e., the remaining triggered policies]. Any policy in effect during the period from exposure through manifestation must indemnify the insured until its coverage is exhausted.
Id. at 509. The supreme court added, however, that its holding "does not alter the rules of contribution or the provisions of 'other insurance' clauses in the applicable policies," so that an insurer who is saddled with more than its fair share of liability may seek to obtain "a share of indemnification or defense costs from other insurers." Id.9
In the instant case, the district court predicted that the Pennsylvania Supreme Court would extend its holding on the allocation issue in J.H. France to cases involving environmental property damage claims, such that all insurers whose policies were triggered to cover an indivisible loss would be jointly and severally liable, up to policy limits, for the full amount of that loss. Although we conclude that J.H. France does not completely control the disposition of this case, we agree as a general matter with this prediction.
The Pennsylvania Supreme Court's reasons for adopting the joint and several approach in J.H. France are fully applicable to the case before us. "First, and most compelling, is the language of the policies themselves." Id. at 507. In J.H. France, "[e]ach insurer obligated itself to 'pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury to which this insurance applies.' " Id. (emphasis in original). Thus, as the supreme court explained, "each insurer contracted to pay all sums which the insured becomes legally obligated to pay, not merely some pro rata portion thereof." Id. (emphasis in original).
Similarly, the policy at issue here obligated the London Insurers "to indemnify the Assured for all sums which the Assured shall be obligated to pay by reason of the liability imposed upon the Assured ... for damages ... on account of ... property damage." App. at 141 (emphasis added).10 We accordingly believe the Pennsylvania Supreme Court would interpret the London Insurers' policies here, as it did the policies at issue in J.H. France, to "cover [the insured's] entire liability once they are triggered."
The second reason the supreme court gave for adopting the joint and several approach in J.H. France is the indivisibility of asbestos-related bodily injury. No medical evidence was presented to substantiate the assumption, implicit in the superior court's allocation method of pro rata by time on the risk, "that the progression of asbestos-related disease is linear in character."
As with asbestos-related bodily injury, environmental property damage is a progressive harm that, as a practical matter, is indivisible. See, e.g., New Castle County v. Continental Cas. Co.,
Finally, the supreme court in J.H. France relied on the fact that, according to the policies' terms, each of the several policies triggered to cover a specific claim was potentially liable for the entire claim. The policies provided insurance against "occurrences" and, as defined in the policies, an "occurrence" included " 'continuous or repeated exposure to conditions which result in bodily injury.' "
Being defined as one "occurrence," the entire injury, and all damages resulting therefrom, fall within the indemnification obligation of the insurer. In other words, once the liability of a given insurer is triggered, it is irrelevant that additional exposure or injury occurred at times other than when the insurer was on the risk. The insurer in question must bear potential liability for the entire claim.
Id.; see also ACandS,
Like the CGL policies in J.H. France, the London Insurers' policies provided occurrence-based coverage11 and defined an "occurrence" to mean either "a series of occurrences arising out of one event," App. at 158, or "one happening or series of happenings, arising out of or due to one event taking place during the term of this policy." App. at 149. Under either definition, then, all of the effects resulting from a single causative event are considered a single occurrence. As in J.H. France, because the entire injury is defined as one "occurrence," a triggered policy must indemnify the insured for all damages resulting from that injury.12
For these reasons, we predict that if the Pennsylvania Supreme Court were faced with this case it would apply the J.H. France allocation approach, holding jointly and severally liable all policies triggered to cover a single, indivisible loss. We note that other courts have similarly taken the joint and several approach where multiple policies cover an indivisible loss. See, e.g., Keene Corp. v. Insurance Co. of N. Am.,
2.
Given this prediction, if this case, like J.H. France, involved several triggered primary policies where none of the insurers had settled, J.H. France would dictate our resolution of this appeal. But this is not such a case. We must consider several complicating factors that were not present in J.H. France, namely, the presence of excess insurers, the insured's settlements with some primary and some excess insurers, and the district court's decision to limit the trial to a certain period of years at certain sites. We believe that, if presented with the complicating factors in our case, the Pennsylvania Supreme Court would not simply apply J.H. France and hold that the appellant excess insurers are jointly and severally liable, up to policy limits, for the entire property damage liability at the focus sites. Instead, as explained below, we predict that the supreme court would modify the J.H. France rule to hold the London Insurers jointly and severally liable for the amount of the loss in excess of the settling insurers' pro rata shares of liability.
We begin with the principle of indemnity, a fundamental principle of insurance law which prohibits insurance contracts from conferring a benefit greater than the insured's loss (i.e., a "double recovery"). See, e.g., J.H. France,
Because we cannot permit a double recovery, and because several insurers have already paid money to Koppers in complete settlement of Koppers' claims against them, we must either (1) reduce the judgment to account for the settling insurers' apportioned shares of liability, or (2) permit the non-settling insurers to seek contribution from the settling insurers and, in turn, permit the settling insurers to seek reimbursement from Koppers. We predict that the Pennsylvania Supreme Court would choose the former rule: reducing the judgment to account for the settling insurers' apportioned shares of liability. That is, we predict that the supreme court would adopt the "apportioned share set-off rule."13
Although the Pennsylvania Supreme Court has not had occasion to decide how to allocate coverage responsibility where some of the defendant insurers have settled, the Pennsylvania Superior Court has reached this issue and has resolved it by applying the apportioned share set-off rule. In Gould, Inc. v. Continental Cas. Co.,
The superior court affirmed. The court held that, where two insurers are obligated to cover the same loss and one insurer settles but one does not, the litigating insurer cannot seek contribution from the settling insurer. Id.
Had the Gould decision been issued by the supreme court, it would be controlling. Absent some reason to believe that the supreme court would reach a different result, the superior court's holding is entitled to great deference in our endeavor to predict state law. See, e.g., Rolick v. Collins Pine Co.,
The superior court's decision in Gould, insofar as it requires the amount for which the litigating insurers are liable to be reduced by the settling insurers' apportioned shares, is in no way inconsistent with J.H. France, which involved no settling insurers. Moreover, the Pennsylvania Supreme Court has had occasion to decide the effect of a plaintiff's settlement with fewer than all jointly and severally liable defendants outside of the environmental liability insurance context, and there the supreme court has adopted the apportioned share set-off rule, rejecting any right of contribution against settling defendants because such an action would defeat the finality of the settlement. See Charles v. Giant Eagle Mkts.,
We accordingly predict that, if presented with our case, the Pennsylvania Supreme Court would hold that each non-settling insurer whose policy was triggered to cover an indivisible loss is jointly and severally liable, up to the limits of its policy, for the full amount of the judgment, less the settling insurers' apportioned shares.
3.
Having predicted how the supreme court would modify its holding in J.H. France to accommodate the problem of the settling insurers, we note that there are two additional rules of Pennsylvania insurance law that must guide our resolution of the case at hand. These rules are relevant because, unlike J.H. France, this case involves excess as well as primary policies.
First, a true excess or secondary policy is not "triggered" or required to pay until the underlying primary coverage has been exhausted. See, e.g., Occidental Fire & Cas. Co. v. Brocious,
Second, if the underlying primary insurer is solvent but the policyholder settles its claim against that primary insurer for less than policy limits, we predict the Pennsylvania Supreme Court would adopt the widely-followed rule that the policyholder may recover on the excess policy for a proven loss to the extent it exceeds the primary policy's limits. See Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes § 13.04, at 575-77 (7th ed. 1994) (citing, inter alia, Stargatt v. Fidelity & Cas. Co.,
Accordingly, because all of the London Insurers' policies provided layers of excess liability coverage over certain specified, underlying policy limits, no London Insurer policy would be triggered until the underlying coverage has been "exhausted," either by settlement or by payment. With respect to this exhaustion requirement, the London Insurers argue that all applicable primary coverage must be exhausted before any excess insurer will be obligated to pay. This argument is predicated on the policies' "other insurance" clauses, which state essentially that all other available insurance must be exhausted first. Under J.H. France, however, a policy which promises to pay "all sums" must provide for full coverage once triggered, without regard for such "other insurance" clauses.
In sum, taking all of the above rules together, we predict that the Pennsylvania Supreme Court would hold that the non-settling excess insurers are jointly and severally liable for the full amount of the loss in excess of: the sum of (1) the policy limits of the directly underlying, "exhausted" primary policies, and (2) the combined pro rata shares of other settling (primary and excess) insurers. The beneficent consequences of this formula are that the insured bears the risk of settling too low while the non-settling insurers bear the risk of being unable to redistribute equitably among themselves the burden of paying the balance (if, for example, some of their number are insolvent).
4.
During the period litigated at trial in this case, 1953-1960, there were two primary policies directly underlying the twelve excess policies issued by the London Insurers. There were no other policies involved in that period. Prior to trial, Koppers settled with the insurer that had issued both primary policies. Accordingly, coverage under these two primary policies has been "exhausted"--regardless of the amount Koppers received in settlement--and the London Insurers' excess policies are obligated to pay.
If Koppers had not settled with any other insurers (insurers which had issued policies outside of the 1953-1960 litigation period), that would be the end of the matter: the judgment would be reduced simply by the combined limits of the two underlying primary policies, and the London Insurers would be jointly and severally liable for the balance (although they would be free subsequently to seek contribution from the other insurers, all of whom would be non-settlers). But our case is not so simple: Koppers settled with several other primary and excess insurers that had issued policies in effect both before and after the litigation period. On remand, the district court must therefore apply the apportioned share set-off rule for these settled policies as well.
Determining the apportioned share of a settling insurer requires consideration of the "other insurance" clauses of the policies found to cover the loss and the applicable state law governing the interpretation of those clauses and the resolution of any conflicts among them.17 See Gould,
Our first observation relates to the primary policies that do not directly underlie the London Insurers' excess policies (i.e., those that cover a period outside of 1953-1960).18 We have today held that the London Insurers' liability under their excess policies was triggered as soon as the two directly underlying primary policies were settled, and that the existence of other primary policies applicable to the indivisible loss was irrelevant for the purpose of resolving the threshold issue of whether the London Insurers' policies were triggered. This does not necessarily mean, however, that the existence of other primary policies applicable to the indivisible loss is irrelevant for the purpose of determining the extent of the London Insurers' liability under their excess policies. The "other insurance" clauses of the relevant policies and the Pennsylvania law applicable thereto may require that, as between a primary policy and an excess policy triggered to cover the same loss, the primary policy must pay first and, accordingly, that the apportioned share of a settled primary policy covering the same indivisible loss is its full policy limits. See, e.g., Ostrager & Newman, supra, § 11.03[e]. Thus, the district court may be required to deduct from the total loss the combined limits of all settled primary policies.
Our second observation relates to the settled excess policies. Koppers settled with some, but not all, of the excess insurers that issued policies in effect outside of the litigation period. Therefore, there are some non-settled, excess policies for which the threshold triggering question has not been answered.
It may be that, under the applicable law, the apportioned share of a settling excess insurer--and, accordingly, the extent of the London Insurers' liability--cannot be determined without identifying all policies that are triggered and cover the indivisible loss, whether they were in force during or outside the litigation period.19 This will be true, for example, if the applicable rule of allocation among excess policies here is found to be a pro rata allocation based on the limits of each policy and the total limits of all triggered policies. See Gould,
IV.
For the foregoing reasons, we will reverse and remand for the sole purpose of allowing the district court to mold the verdict to take account of the settling insurers' apportioned shares of liability.
Notes
Although Koppers has been known since 1988 as Beazer East, Inc., the district court and the parties have consistently referred to the plaintiff as "Koppers." We will follow suit
On cross-appeal, Koppers argues only that the court failed to grant all the pre-judgment interest to which it is entitled. At the time of breach, however, the amount of coverage in dispute was not readily ascertainable with mathematical precision or by definite standards, and so the district court properly declined to award the pre-judgment interest sought by the plaintiff. See Black Gold Coal Corp. v. Shawville Coal Co.,
This request to modify the judgment included (1) deduction of the limits of the underlying primary policies, and (2) adjustment to limit recovery to one occurrence limit per site for each triggered policy, in accordance with a prior ruling of the district court. App. at 1105-06
At the wood treating sites, for example, expert testimony indicated that lagoons used to contain wastewater were in use continuously during each policy period and that these lagoons leached contaminants into the groundwater. Koppers also presented uncontradicted evidence that spills, drips, and leaks occurred continually during each applicable policy period, causing independent plumes of soil and groundwater contamination
The scope of coverage language differs slightly in some of the policies. See infra n. 10. However, none of the policies mention any fortuity requirement
Since the mid-1960s, standard-form comprehensive general liability ("CGL") policies have expressly excluded harms either "expected or intended" from the standpoint of the insured. See Kenneth S. Abraham, Environmental Liability Insurance Law 129-30 (1991). Although the "expected or intended" clause initially appeared as part of the definition of an "occurrence" in CGL policies, and as such was incorporated into the insuring agreement (which promised coverage for harms caused by an "occurrence"), the clause has appeared as an express exclusion in CGL policies since 1986. "[T]he 'expected or intended' clause has always functioned as a limitation on coverage very similar to an exclusion," id. at 130, even when it was not listed as such in CGL policies, and we accordingly predict that the Pennsylvania Supreme Court would hold that an implied fortuity requirement functions as an exclusion as well
We say "purports to show" because the proffered evidence indicates little awareness of off-site property damage--the harm or loss Koppers allegedly ought to have mitigated--or any "reasonable" steps available to correct the problem. Most of the documents relate to on-site pollution, including "poor yard appearance" concerns, or efforts to work with state and federal agencies to comply with existing permits. See App. at 1165, 1192, 1196, 1200-04, 1236. Indeed, one of the defendants' allegedly damning exhibits is in fact an entirely positive report, indicating that wastewater runoff had been cleaned to drinking water standards. App. at 1312
The record evidence on the point suggests that there were no economically reasonable alternatives. See, e.g., App. at 1195 (emphasizing that future monitoring for pollution should be minimized due to prohibitive cost)
As one commentator has noted, the major difference between the J.H. France joint and several approach and an approach where coverage responsibility is apportioned immediately on the basis of "other insurance" clauses, is this: "Under the former, solvent insurers bear the risk that one of their number will be insolvent; under proportional liability schemes, the ... [insured] bears this risk." Abraham, supra, at 122. "A related advantage of ... [the joint and several liability] approach to insureds, and disadvantage to insurers, is that under it the insured may be able to ... avoid the effect of deductibles, retroactive premiums, self-insured retentions and the like under the other triggered policies which otherwise would reduce the amount of available coverage." Id. at 121 n. 45
Alternatively, in some of the policies, the London Insurers agreed:
to indemnify the Assured for ultimate net loss the excess of the retained limit hereinafter stated ... which the Assured may sustain by reason of the liability imposed upon the Assured by law, or assumed by the named Assured under contract or agreement:
...
For damages, direct or consequential, and expenses as more fully defined by the term "ultimate net loss", because of injury to or destruction of property.
App. at 155 (emphasis added). These policies define "ultimate net loss" to mean "the total sum which the Assured ... becomes obligated to pay by reason of ... property damage claims." App. at 158 (emphasis added). We believe the term "ultimate net loss" is equivalent to the term "all sums" for purposes of the present analysis.
Two of the policies obligated the London Insurers "to indemnify the Assured for all sums which the Assured shall be obligated to pay by reason of the liability imposed upon the Assured ... for damages ... on account of ... property damage, caused by or arising out of each occurrence happening during the Policy Period." App. at 141. Each of the remaining 10 policies similarly promised indemnification for property damage liability, and specified that the policy applied "to occurrences which happen during the currency hereof." E.g., App. at 157
The J.H. France court gave a fourth reason for adopting the joint and several allocation approach. Because the insured, J.H. France, was uninsured during some periods, the superior court's pro rata approach created an unsupported "judicial fiction" that J.H. France was self-insured under a policy with ascertainable terms during the uninsured periods.
Our confidence in this prediction is strengthened by the absence of any Pennsylvania case supporting the right of settling co-defendants to recover from the plaintiff policyholder. While an unjust enrichment claim could be pursued if apportionment were denied here, that is a path that has not yet been traveled in Pennsylvania
We note that, in our case, there is no functional difference between a cross-claim for contribution and a subsequent contribution action. An insurer does not "waive" a contribution claim by failing to bring a cross-claim because the claim does not accrue until money is actually paid out. See, e.g., Fleck v. KDI Sylvan Pools, Inc.,
As the U.S. Supreme Court has recognized in another context, the apportioned share set-off rule is superior to a rule permitting (or requiring) suits for contribution and indemnity because the former rule promotes both judicial economy and settlement--while also avoiding collusive settlement by placing the burden of a low settlement on the plaintiff. McDermott, Inc. v. AmClyde,
As explained above, some of the policies promised indemnification for the "ultimate net loss," which is equivalent to "all sums" for present purposes. See supra n. 10
This determination is similar to the determination a court would make in the contribution action envisioned by the court in J.H. France except that, where some otherwise jointly and severally liable defendants settle, the apportioned share set-off is in lieu of a separate contribution action. See Charles,
The district court granted Koppers' motion to reduce the judgment to account for the limits of the "underlying" primary policies, but it is not clear from the record on appeal whether this reduction accounted for all of the primary policies or only the two directly underlying the London Insurers' 1953-1960 policies involved at trial. See Koppers v. Certain Underwriters at Lloyd's London, C.A. No. 85-2136, Order and Judgment at 6 (W.D.Pa. July 20, 1995); App. at 1105-06 (Plaintiff's Motion Under Rule 59(e) to Alter or Amend the Judgment). Our first observation assumes that the district court reduction accounted only for the two directly underlying primary policies and is intended to provide guidance on how to account for the other settled primary policies
Of course, many of the policies have already been determined to have been triggered either through settlement or litigation. The district court has not determined, however, whether all possibly applicable, non-settled policies covering periods outside the litigation period have been triggered
It is in the London Insurers' interests to argue for as few policies as possible to have been triggered, because then the ratio of the settling excess insurers' policy limits to the total policy limits of all triggered excess policies will be greater. The London Insurers' concession against interest--that all of the pre-1971 excess policies were triggered--is sufficient to resolve the matter of which pre-1971 excess policies were triggered
We recognize that some of Koppers' insurers are not part of this action because they are non-diverse with the plaintiff. Under Gould, however, these insurers need not participate in the case in order for the district court to determine their apportioned shares of liability for purposes of reducing the judgment against the London Insurers. See