PECO Energy Co. v. Boden

Finally, proffered the Professor’s testimo- reliability

ny highly rеlevant to the PECO ENERGY COMPANY Bonjour’s testimony. criticisms of Ms. His analysis handwriting generally, the field of as Henry BODEN; Kenneth Edmund London case, Bonjour’s analysis in this well as Ms. Company & Hull Maritime Insurance determining would have assisted the Limited; Company Insurance of North Bonjour’s proper weight to accord Ms. (U.K.) Limited; The America Yorkshire testimony. testimony facts of His “fits” the Limited; Indemnity Company Insurance criticizing opinions, the case because his Company Limited, Maritime Assurance handwriting analysis Bonjour’s con- and Ms. Appellants. clusions, connect to thе of whether issue continuing enterprise Defendant’s criminal No. 94-1883. people. involved at least five other Appeals, United States Court of light of the liberal standard Third Circuit. admissibility of Rule Professor Den- Argued June 1995. testimony should have been admit- beaux’s Moreover, testimony ted. because his bore Aug. Decided Bonjour’s on the critical issue of Ms. identifi- persons required

cation of the who were to “continuing participated Velasquez’s

have enterprise,” testimony might

criminal his

very jury’s well have affected the verdict on VIII. cannot

Count conclude

district court’s decision to exclude that evi-

dence was harmless error.

IV. CONCLUSION

The district court erred а matter of law as refusing permit Professor Denbeaux

testify handwriting as to the limitations of

analysis. Accordingly, we will vacate Velas-

quez’s judgment engaging of conviction for continuing ‍‌‌‌‌‌‌‌‌‌‌​‌​​‌‌‌‌‌‌​​‌‌​​​‌‌​​​​‌​​‌‌​​‌​‌​‌‌‌​‍enterprise, criminal in violation §

21of U.S.C. and we will remand to the

ease district court for new trial on

that count.

854 Henry representing Boden

Kenneth Edmund Underwriters, Lloyds London & Hull Mari- Limited, Company time Insurance Insurance (U.K.) Company Limited, of North America Limited, Company The Yorkshire Insurance Indemnity Company Maritime Assurance Underwriters). (collectively Limited timely appealed. We vacate and remand.

I. Pennsylvania utility is a PECO electric principal place with its of business in Phila- delphia. In September it contracted Services, (DSI), with Inc. indepen- Diеsel an trucking company, dent haul its fuel oil to generating various PECO facilities. DSI Mattioni, Mattioni, Dante Mattioni & Mat- transported PECO oil until November 1990 tioni, PA, Chalos, Philadelphia, Michael G. when PECO discovered that DSI had been (ar- Gavalas, Harry A. Martin F. Marvet stealing portion regular of the oil on a Brown, gued), City, Chalos & New York basis.

appellants. In November 1985 PECO entered into a (argued), Elizabeth K. Ainslie Ainslie & covering contract property insurance Bronson, PA, Philadelphia, appellee. year independent losses for one frоm four companies syndicates insurance and six STAPLETON, McKEE, Before: Lloyds of London. Between November 1986 ROSENN, Judges. Circuit and October PECO and the Underwrit- one-year ers policies. renewed five insurance OPINION THE OF COURT The Underwriters for each varied year year, from policies but the remained ROSENN, Judge. Circuit essentially policies the same. The insured appeal primarily This raises a number of “GOODS MERCHANDISE OF EV- and/or intriguing questions, insurance law one of ERY DESCRIPTION WHATSOEVER inci- which, the allocation of a among dental to consisting [PECO’s] business but carriers, several insuranсe is novel. The in- principally shipped ... FUELS and/or sured entered into a series of “all risks” ... [ajgainst physical over all risks of losses policies covering property losses damage however caused.” Both rejected When the insurers agree policies that these cover the theft of insured, the claim of the Energy PECO fuel oil. (PECO), Company brought it diversity ac- policy provided Each that covered losses tion in the United States District Court for subject were to a deductible. The 1985-86 Pennsylvania. the Eastern District оf policy states that: jury found that PECO sustained theft losses aggregating $1,229,029 period ‍‌‌‌‌‌‌‌‌‌‌​‌​​‌‌‌‌‌‌​​‌‌​​​‌‌​​​​‌​​‌‌​​‌​‌​‌‌‌​‍over a of six from the amount of each loss or combina- years. arising any tion of losses out of one occur- rence, an equal amount to 1% of the total The district court held that the combined value of the to which loss or thefts constituted a occurrence and damage occurred shall be deducted. This place that it took in the sixth deductible, however, shall not be than less coverage. The court ap- therеfore $10,000, $20,000. nor more than plied the deductible set forth in the year. Accordingly, for that it remaining policies provided entered Each of the $1,129,029 judgment of for PECO there shall be “from deducted the amount of arising Pennsylvania. Additionally, out con- of losses each loss or combination US$100,000 any designating one tain a choice of law clause Penn- any one sylvania controlling any law occurrence.” law as the dis- loss or putes policies. which arise under the There- trial, acknowledged did At PECO fore, correсtly the district concluded thefts, evidence of DSI not have direct applies law to this case. limited number observed except for a Nonetheless, investigators in 1990. PECO Pennsylvania, interpreting an in posited at trial that DSI had been question surance contract is a of law to be the con- stealing from it for the duration of resolved a court. Vale Chemical Co. v. these thefts tract between them and Pa.Super. Indem. Acci. & Hartford of the oil aggregated between 9.1% 20% (1985), n. 4 490 A.2d rev’d on by during the 62 month transported DSI 290, grounds, 512 other Pа. 516 A.2d 684 insured PECO. period that the Underwriters (1986). apply plenary legal to review $1,229,- jury found that the DSI stole by made determinations the district court. PECO, equal to of fuel from 6.1% 029 worth Family Partnership Epstein Louis W. DSI, that transported and the of the fuel (3d 762, Corp., Kmart 13 F.3d 765-766 Cir. single plan part of a continuous thefts were 1994). jury also determined or scheme. The appeal, On the Underwriters contend that: had not acted in bad faith the Underwriters (1) occurrence; the series of thefts is not one district court held toward the insured. The (2) occurrence, if all of the thefts are one the thefts constituted one occurrence DSI’s place occurrence took in when the Un- part single were of continuous because (3) PECO; derwriters did not insure a full place took scheme and that this occurrence applies deductible to each theft in which policy period. The court the 1990-91 liability event the defendants would have no provided for applied the deductible alternatively applies or a full judgment in and entered the 1990-91 policy period whiсh would reduce liabili- $1,129,029 of for PECO the 1990-91 (4) ty substantially; the made mathe- The Underwriters then Underwriters. calculating matical errors in PECO’s dam- judgment to amend or correct the moved (5) awarding ages; the district court erred in judgment for a new trial or a as a and/or damages to PECO for oil stolen after March denied matter of law. The district court 1988 because PECO failed to take reasonable timely these motions and the Underwriters stop stealing having measures to DSI after appealed.1 (6) thefts; and been warned of DSI by admit- district court abused its discretion II. testimony into ting certain evidence. A court must federal of the forum state when it choice law rules III. diversity. sitting in Klaxon Co. v. Stentor is Co., Mfg. 85 Elec. 313 U.S. S.Ct. A. (1941). Pennsylvania pro law L.Ed. 1477 appeal question on is wheth- place having that “the the most interest The threshold vides six-year multitude of thefts over the problem and which is the most inti er the In a period constituted a occurrence. mately with the outcome is the concerned denying opinion In re careful and exhaustive applied.” forum whose law should be motions, post-trial district Underwriters’ Complaint Bankers Trust Cir.1984). thefts in this case consti- and the court held that the Un single occurrence. Whether the loss- insurance contracts tuted a derwriters executed the one occurrence or and the es here constituted at issue this case occurrences, as amounted to a number of transported stole was within oil which DSI judgment under 28 U.S.C. possessed subject jur- court's final matter district 1. The district pursuant to 28 U.S.C. section 1332. isdiction section 1291. jurisdiction appellate over the This сourt has Underwriters, proxi- contended can have a the scheme to steal was the significant impact mate cause of each theft. on the amount of the liabil- We therefore hold ity, any. Unfortunately, property if that when a scheme to steal do not continuing proximate cause of a series or provide relevant definition of occurrence.2 thefts, occurrence, If combination of each theft amounted to an the losses for subject purposes part constitute оf a then each became the deductible If, however, Accordingly, provisions policy. of the all of occurrence. the district court concluding the thefts constituted a committed no error that nu- provision then the deductible merous thefts DSI amount to one occur- surfaced once. We therefore look to rence. defining

other sources for assistance bodily injury

term. To determine “whether B. property damage or is the result of one poli The district court concluded occurrences, multiple or ma- occurrenсe policies. cies in this case were “occurrence” jority of courts have looked to the cause or policy provides “An coverage occurrence injury bodily causes dam- place during ‘occurrence’ which takes ” Newman, age Ostrager .... B.R. & T.R. type policy, Under this it is Coverage Disputes Handbook on Insurance resulting irrelevant whether claim is (7th 1994) (internal § quotation, 9.02 ed. em- brought against the insured or after omitted). phasis and brackets policy period, long ‍‌‌‌‌‌‌‌‌‌‌​‌​​‌‌‌‌‌‌​​‌‌​​​‌‌​​​​‌​​‌‌​​‌​‌​‌‌‌​‍injury-caus as as the ing hаppens during policy event period.” Appalachian Liberty Ins. Co. v. 8.03(a). Ostrager § Co., B.R. & T.R. Newman Mut. Ins. we held that “an occurrence is Co., Indemnity See Home 119 determined the cause or causes of the Gereboff 814, 1024, (1978), R.I. 383 A.2d 1026 n. 1 resulting injury” and noted that a court quoting Appleman, 7A Insurance Law and proxi should “if there determine was but one § mate, (Cum.Supp. Practice 4504.3 at 104^15 uninterrupted, continuing and cause 1974). The district court therefore injuries followed which resulted in all of the and dam (3d Cir.1982) (citations holding Appalachian, this court’s in 56, 676 F.2d аge.” 676 F.2d 61 61-62, omitted). and held that “the quotation occurrence took and internal If there is 21, place 1990,” on November only losses, the date the one for all of cause are jury found that PECO first Id.; knew part single of a occurrence. see also accordingly thefts. The Industries, court ruled that the Employers Armotek Inc. v. Ins. Wausau, (3d Cir.1991) policy liability subject 1990-91 756, bore the to a 952 F.2d 762 “ $100,000 deduction. (policy accident, defined “occurrence” ‘an as including repeated exposure continuous or case, howevеr, policies in The conditions, which results in ... “[ajgainst insured physical all risks of losses ”); Interiors, damage-’ Business Inc. v. damage or (emphasis however caused.” add (10th Aetna Cas. & Sur. 751 F.2d 361 ed). Thus, policies in this case are “all Cir.1984) (series forty forgery by acts of policies, risks” policies, “occurrence” employee dishonest are deemed a oc- provided coverage for all which losses took currence). place during e.g. See In Mexicana, jury

The found that DSI instituted termetal S.A. v. Insurance Co. of America, 71, Cir.1989); its scheme to steal from in PECO 1984 and N. 866 F.2d 74-75 stealing continued Group from PECO until it discov Rorer v. Insurance North Co. of America, jury 69, 123, 124 ered the thefts in Pa.Super. 1990. The also found 655 A.2d (1995).3 part larger each theft was a of a law, policies language The first two do state that an occur- 3. "Under when in an loss, "any casually policy rence is one unambiguous, disaster or is clear and losses, arising give language.” series of disasters or casualties out court must effect to that Armo However, Indus., of one event.” (citing this definition tek 952 F.2d at 762 Northern In risks, applied Associates, building to additional construction surance Co. v. Aardvark (3d Cir.1991); Builders, policy. Harvey not the entire Gene and represents. percentage We then need not consider Un This court district court policy contention that the thus derived to the deductible for each derwriters’ holding at issue resulting figure that the occurrence erred and the deducted place in because the year. in this ease took particular from the loss for that The is irrelevant. Under date of the occurrenсe policy of each annual thus are policy, the Underwrit an all risks insurance percentage for a of PECO’s total loss liable liable for all losses which PECO ers are percentage of the stated de- less policy periods, during the relevant suffered ductible. occurrence which regardless of when the jury The found that the total loss suffered place. took triggered those losses by PECO between November 1985 and De- placing total court erred in liabili district $1,229,029. They cember 1990 was then on the 1990-91 ty for all of PECO’s lоsses on allocated this loss an annual basis and underwriters. $142,218 1985-86; in found that PECO lost: $371,287 1986-87; $202,561 1987-88; C. $235,008 1988-89; $241,933 1989-90; losses The calculated PECO’s $36,022 in 1990-91. policy period. The Underwrit during each percentage of the total losses sus- losses minus the ers are liable for those years foregoing respec- in each of the tained The district court appropriate deductible. tively, commencing in November was: correctly applied a 11.6%, 30.2%, 16.5%, 19.1%, 19.7%, and 2.9%. However, ap total loss. PECO’s percentage Applying this to the deductible full plied the deductible produces following figures: on the imposed for all of PECO’s losses $2,320 1985-86;4 1986-87;5 $30,200 for divide 1990-91 Underwriters. 1987-88; $19,100 1988-89; liability on an annual basis because their $19,700 1989-90; $2,900 for for 1990-91. they call for one language, “all but risks” agree with per occurrence. We consequence, a that the As we concluded jury that the entire the district court and the $139,898 liability policy is under the 1985-86 single occur of thefts constituted succeeding poli- and the liabilities under the rence. $341,087 1986-87; $186,061 are for for cies 1987-88; $215,908 1988-89; $222,233 that appeal, On the Underwriters contend 1989-90; $33,122 applies Alter- a full deductible to each loss. for 1990-91. they natively, argue that a full deductible equitably provide calculations each These reject policy year. these applies to each We with a deductible group of Underwriters it inconsistent arguments because would be as the on a based multiple into to break a occurrence provide. purpose applying for the occurrences however, dissent, ag- deductible. The would D. gregate and arrive at a total six deductibles $520,000 for a occurrence. The argue that next The Underwriters for such a result. never contracted jury through a strict reached its verdict in that it erred equitable and mathematical formula and It seems to us that the most calculating that formula. The district logical application policies’ language jury’s damage award to disturb the this case is to take the loss refused the realities of shockingly excessive. The because it was not and determine sustained PECO presented three dif- loss it court noted that PECO percentage what of the tоtal insured $20,000. Therefore, Co., this court exceeds Asso. Ins. 512 Pa. which Inc. v. Mfrs’ $20,000 910, (1986)). use a deductible to calculate will 517 A.2d 913 poli- the underwriters for the 1985-86 $20,000. p. cy- See 4. The deductible for 1985-86 3, supra, specific demon- for its terms. PECO $2,331,442 remaining policies provide shipped and the worth of fuel This strated that it $100,000 equals deductible. for a of this amount in 1985-86. 1% 858 damage pass; may

ferent calculation methods and that be within the control of third jury’s light persons; provided verdict was ... reasonable that the is un- fact agree. the evidence at trial. pаrties. submitted known ‍‌‌‌‌‌‌‌‌‌‌​‌​​‌‌‌‌‌‌​​‌‌​​​‌‌​​​​‌​​‌‌​​‌​‌​‌‌‌​‍to the (quoting § Id. Restatement of Contracts 291 The that Underwriters concede courts nor- (1932)) (emphasis original); comment a mally shockingly use the excessive standard Mexicana, accord Intermetal 866 F.2d at 77. verdicts, jury argue to review but that courts review the should calculation methods of a jury The found that PECO had no jury “susceptible in cases which are to math- knowledge prior actual of DSI’s thefts Chuy Philadelphia ematical formula.” November, 1990 but should have known of Club, Eagles Football 595 F.2d n. 1279 March, the thefts as of 1988. The Under Cir.1979). The Underwriters state argue writers that had PECO constructive correctly, the law but it does not to this knowledge of DSI’s thefts after March 1988 special interrogatories ease. submit- and that the losses after that date were not court, jury ted found that PECO Proving fortuity particular fortuitous. is not $1,229,029. suffered losses of pre- Mexicana, ly difficult. Intermetal 866 F.2d sented three ranging measures of loss from party at 77. A must show that a loss approximately 9.1% of DSI’s deliveries to unplanned and unintentional. See Peters jury 20%. The concluded that PECO had Township School Dist. v. Acci. and Hartford $1,229,029. equal lost This is to 6.1% of the Co., (3d Cir.1987). Indem. 833 F.2d DSI, oil delivered but the Underwriters simply present any Underwriters do not do show that arrived suggests law which risks about which a damage figure through a strict mathematical party should have known are not fortuitous. misapplied calculation or that it a mathemati- essentially argue Underwriters determining cal formula the amount of negligent discovering PECO was in not loss. The district court did not err refus- parties agree DSI’s thefts. Both ing jury’s damage calculations, to review the policies in this case are “all cargo risks” except excessiveness, in concluding trial, transit citing insurance. At Commodi that the award this case was not excessive. ties Reserve Co. v. St. Paul Fire & Marine (9th Cir.1989), Ins. E. agreed would be lia argue The Underwriters also that the dis- ble for policies provided losses if the trict court awarding damages erred in to coverage proximate for the cause of those March, PECO for oil stolen They after 1988. losses, even if precipitated by the losses were contend that PECO’s failure to discover a combination jury’s of causes. the DSI’s thefts after that date was a violation of determination that the DSI thefts were the obligation PECO’s policy under the insurance proximate cause of PECO’s losses renders to avert minimize loss. negligence the element of the Underwriters’ argument Therefore, irrelevant. the district predicted This court has that Penn properly court ruled that PECO was not sylvania adopt will the Restatement of Con legally barred from recovering damages for requirement tracts’ thаt an insured must March, losses after prove that losses were fortuitous before it can recover poli under an all risks insurance F. cy. Compagnie des Bauxites de Guinee v. Am.,

Insurance N. Co. 12AF.2d Lastly, the Underwriters maintain that the (3d Cir.1983). The restatement defines a district court by abused its discretion admit- fortuitous event as: ting testimony certain into evidence. At trial an event which so Chiu, as the to the a investigator, PECO Ed testified to a far aware, contract are dependent is on conversation Joyce, between him and Bill a may beyond chance. It power be the Joyce DSI driver.6 Chiu testified that told any being human bring to the event to him Joyce that the owner of DSI instructed trial, Joyce 6. At privilege asserted his Fifth Amendment testify. and refused to The district Further, multiple policies we hold that when this evi- from PECO. PECO used to steal provide per for one deductible implemented long- to show that DSI dence appropriate equitable and manner of The Un- to steal from PECO. term treating the deductible under such circum- of this contend that the admission derwriters percentage stances is to calculate the prejudicial error. was statement in each to the loss sustained total court de court reviews district This par- for that loss ascertain evidence regarding the admission of cisions year. ticular re Merritt an abuse of discretion. Accordingly, judgment of the district Cir.1990). Inc., Logan, court will be vacated and the case remanded here. find no abuse of discretion judgment in with directions to enter favor that: Chiu testified against appellants consistent by Joyce that hе was told informed me Mr. opinion. with this Danny to steal on Jackson [DSI owner] Each side to bear its own costs. and he 75% of the approximately deliveries supposed to steal for three between was STAPLETON, Judge, dissenting Circuit five minutes. part. as a admitted this evidence district court The way The court reads the interest under Rule against statement syndicate’s make the extent of each 804(b)(3), Fed.R.Evid.7 experience be- depend on the insured’s loss a statement argue that this statement by period covered its fore and аfter the does not fall Joyce’s interest and thus clearly I policy. believe this was Because person’s A admission exception. within parties, respectfully I not intended much for someone else is as that he stole dissent. as an he against his interest admission syndicate agree court that the I with the subjects possible It for himself. him stole particular poli- issued each underwriters that liability. civil responsibility and criminal cy for the harms that should be held liable discretion court did not abuse its district during period that PECO suffered Joyce’s concluding that statement part I policy was effect. The court and admitting Chiu’s tes- against his interest and reading company on our of the deductible Joyce’s timony pertaining to statement. clauses, I hold that PECO’s would however. recovery during policy period should be

IY. the deductible full amount of offset reject Summarizing, we Underwriters’ applicable to be to losses stated in the misapplied that the district claims arising out of policy period refusing to its discretion in law or abused one occurrence. award, allowing damages jury’s reduce $20,- policy, a certain should have Under each the date when PECO after amount — “from the be deducted of 000 or of the thefts and the admission known —must loss or combination of losses testimony. The court also conclud- amount of each the Chiu (See, arising any one occurrence.” correctly multitude thefts con- out ed that the of of E-252.) way, Put another hold, app. e.g., how- Ill a occurrence. stituted requires that the amount recover- ever, policy or eаch group that when a of underwriters during policy against for suffered all risks able losses write insurers by the total place during a must reduced losses which take be term, led to the losses. for those for each “occurrence” which policy the insurers are liable me, preclude the policy provisions period. For during policy these sustained losses subject or criminal declarant to civil liabili- “unavailable” therefore found that he was court as 804(a)(1). ty, a claim the declarant a witness. See Fed.R.Evid. or to render invalid finding. another, person this do not contest underwriters a reasonable that position would not have made the declarant's provides that: 7. The rule believing [are it to be true unless the statement was at the of its mak- A statement which time hearsay rule if the declar- not excluded pecuniary ing contrary to the so far declarant's witness]. as a ant is unavailable interest, proprietary far tended to or so or only court’s conclusion that one deductible Following approach, hоwever, the court’s applicable syndicate to the losses incurred over the six- sued in the first case would be year period. liability entitled to a only reduction for a certain fraction of bargained the deductible Suppose, example, that some for and that depend fraction would on the only syndicate ‍‌‌‌‌‌‌‌‌‌‌​‌​​‌‌‌‌‌‌​​‌‌​​​‌‌​​​​‌​​‌‌​​‌​‌​‌‌‌​‍reason had decided to sue total losses during periods PECO suffered that had covering issued the PECO’s both before and after the 1989-1990 losses between November 1989 and October period. This regardless result would follow $241,933 1990. PECO suffered losses of of whether PECO decided to sue the other period syndicate that time and the 1989-1990 syndicates in subsequent five suits. The end accordingly pay would be liable to effect of this is that syndi- the 1989-1990 applicable amount minus the deductible. To cate’s would be increased to reflect deductible, calculate the the court would be during periods harms PECO suffered simple question: faced with the are the loss- policy period; is, covered es here due to one occurrencе or are syndicate’s liability depend would on losses due to more than one occurrence? As the during periods PECO suffered which the cogently explains, the covered losses syndicate agreed never to insure. policy period each had one cause—-the truck- ing firm’s pursuant to which This cannot be what the intended. the drivers were continually instructed to view, my syndicate In each contracted for a syphon in the accordingly same manner —and deductible from covered losses which took viеw, are all due to my one occurrence. place during policy period, and each is the court in hypothetical case would be entitled to one. I would instruct the required to deduct a deductible of district court to deduct the full amount of the $100,000 from the total amount of PECO’s deductible for each losses, producing $141,933. judgment

I analysis would a similar if PECO

then syndicate decided to sue the in-

sured its losses for the 1985 to 1986 time

period year-long other period. time case, In that second PECO would be entitled BOOKER, III, Leatch to recover the losses suffered year-long covered period, time аp- minus the plicable deductible. To calculate the deduct- COMPANY, INC.; TAYLOR MILK Rus- ible, again the court would have to decide Morgan; Timothy Garcia; sell M. Diane that the losses for particular year all had Petcash; Joseph Taylor; S. Phil F. Rich- one cause and accordingly there ardson; Richardson; Dick Richardson only one occurrence. For the 1986 to 1987 & Associates.

period, for example, the court would subtract Booker, III, Appellant Leatch $100,000 No. deductible from PECO’s losses Cross-appellee 94-3503 and yield judgment $271,287. No. 94-3525. analysis

This same govern would how the court should calculate the amount of PECO’s Taylor Company, Inc., Appellant Milk recovery if it decided to sue each of the six Cross-appellee in No. 94-3525 and syndicates in separate six cases. The in No. 94-3503. difference here is that suing rather than 94-3503, Nos. 94-3525. syndicate separately, PECO decided to sue syndicates together in one United Appeals, case. That all States Court of syndicates together are Third here as defen- Circuit. dants change should not analysis, the above Argued June 1995. however, nor should it affect the amount of Aug. Decided syndicate’s each liability. view, my syndicate’s liability should be reduced by the applicable to that

period.

Case Details

Case Name: PECO Energy Co. v. Boden

Court Name: Court of Appeals for the Third Circuit

Date Published: Aug 31, 1995

Citation: 64 F.3d 852

Docket Number: 94-1883

Court Abbreviation: 3rd Cir.