*1 A.2d 1172 and and AND COMPANY Rohm ROHM HAAS Valley Inc., Appellants, Haas Delaware
v. COMPANY, al., et and CASUALTY CONTINENTAL Appellees. Company, Insurance The Home Company and and Haas nd Haas Rohm Rohm Valley Inc., Appellants, Delaware
v. al., Casualty Company, et Underwriters Certain Continental Lloyd’s, Insurance London Market London Certain Appellees. Companies, Pennsylvania. Supreme Court Argued 2000. Oct. Oct. Decided *4 Reed, Adams, Steven Andrew Arlin Harkins, M. John G. Gellman, Nancy O’Brien, J. William J. Philadelphia, Paul H. Titus, Pittsburgh, for Rohm and Haas Company and Rohm and Haas Valley, Delaware Inc. Larrimore,
Dale G. Philadelphia, Pennsylvania for Trial Lawyers Ass’n. Sonnenfeld,
Marc J. Philadelphia, for Pennsylvania Cham- Industry. ber of Business and Walliser, Glenshaw,
John J. Pennsylvania for Environmen- tal Council. MacDonald,
John Alexander Philadelphia, Policy- United holders. Brennan,
William J. Philadelphia, for Home Insurance Co. *5 Renzulli, Philadelphia, Elugene Noyes, Judith Nichols Frank Ass’n. Litigation for Insurance Environmental II., Felix, Elit R. Jerome J. Westerberg, Chicago, Gary Lloyd’s, for Shestack, Underwriters Philadelphia, Certain London. ZAPPALA, CAPPY, FLAHERTY, C.J., and
Before SAYLOR, CASTILLE, NIGRO, and NEWMAN JJ. THE JUDGMENT ANNOUNCING
OPINION OF THE COURT FLAHERTY, Chief Justice: of judgment from the appeal is an allowance
This reversing grant judgment trial court’s of superior court (JNOV) appellants, in favor of notwithstanding the verdict involving comprehensive general Haas. Rohm & In this case (CGL)1 of cleanup serious environ- soil, water of groundwater and surface mental appel- operated by manufacturing formerly a site owned and lants, issues for this court’s review. appellants present three with properly issue was entered The first is whether JNOV via companies’ respect appellee to the defense doctrine, impression a of first before this “known loss” matter granted properly JNOV was court. The second whether to The final issue is respect appellees’ with defense fraud. granted respect appel- properly whether JNOV was lees’ notice. defense late
Appellants specialty chemicals head- are manufacturers quartered Philadelphia. appellants, through In June Whitmoyer wholly subsidiary, purchased a owned Laborato- ries, veterinary pharmaceuticals company, contin- a small and thereafter, operations. Shortly appellants ued discovered that polluted waste, byprod- extensively with arsenic site Whitmoyer’s manufacturing processes.2 uct appellants’ policies provide coverage and are 1. CGL above a certain threshold liability policies. supplement coverage provided by primary meant to pervasiveness problem appellants supply of the caused drink- ing neighbors pay hospitalization costs of water several Although appellants undertook remedial to clean up measures site, arsenic continued to produced waste be result of appellants’ operations. In appellants sold the site to *6 Smith-Kline Beecham. 1964,
In appellants Whitmoyer December added the to site existing coverage it appellee CGL insurance held with insur- Appellants periodically purchased appellees ers. from addi- tional policies Whitmoyer throughout covered the time that they operated the and were site aware of the contamina- Although appellants tion. problem disclosed the to their coverage primary insurer and to their insurance broker as proper authorities, well as to the commonwealth there is no evidence that the excess insurers were ever notified of the pollution problem. 1980, Congress
In Comprehensive enacted Environmen- (CERCLA).3 tal Response, Compensation, Liability and Act retroactively This act strict imposes liability for environmental on cleanup present costs former operators and owners or polluting facilities to regard Subsequently, without fault. Agency appellants they Environmental Protection notified cleanup were liable for strictly costs with associated 1988, Whitmoyer twenty-four site. In years becoming after aware of the at pollution Whitmoyer, severe appellants noti- they fied their excess asserting insurers that were a claim to costs, Whitmoyer cleanup twenty-one cover the than more Appellees million dollars. appellants denied the claim and brought suit. parties agreed trial, to a bifurcated the liability with a jury any subsequent
trial damages before trial to be held before bench. After week nine-and-one-half liabili- trial, ty trial court appellants’ directed verdict in favor on of appellees’ the issue noticе late defense and submitted a containing questions verdict form jury’s seven for consid- jury, response eration. The special interrog- verdict legal one who against farmer fell ill. No claims filed were ever appellants. (1995). seq. § 3. 42 9601 et U.S.C.
atories, no as it found determined that existed on, alia, following questions appellees favor of inter That Rohm Question No. 7: & by Jury answer to Verdict material facts about the arsenic Haas failed disclose purchased poli- pollution Whitmoyer at when excess issue]; fraud [the [and] cies Question Verdict No. 3: That the time Jury answer insurers, Rohm &
it contracted the excess for which would be damage injury Haas knew of or there policies legal liability large enough [the to reach the excess issue].... known loss Co., Casualty
Rohm and Haas v. 732 A.2d Co. Continental (Pa.Super.1999). post-trial motions were After filed, jury’s the court JNOV on the verdict with entered respect questions among 3 and others.4 Court respect questions reversed the trial court with to both *7 defense, respect timely appeal with to the late and a to notice this court followed. scope respeсt
Our review with whether JNOV appropriate plenary, any questions is as with is review Co., 124, Phillips law. v. A-Best Products 542 Pa. 665 A.2d (1995). 1167, that, 1170 It is axiomatic are two bases “[t]here one, upon which a judgment n.o.v. can be entered: the movant law, two, judgment entitled as a matter the and/or that no minds could dis evidence such two reasonable was agree that the should in favor of outcome have been rendered Raeuchle, 394, 1003, the movant.” Moure v. 529 Pa. 604 A.2d (1992) (citations omitted). uphold 1007 To on first JNOV the Among post-trial by appellees seeking these motions were motions judge’s ruling post-trial the trial recusal from on the and both motions presiding damages from over the trial. The recusal motions were based upon post-trial meeting judge jury a that the held with the where it is that, alleged among things, jurors they that other he informed had decision; wrong appellees made the had lost a similar trial in Pittsburgh; very good company; that. Rohm & Haas is a and he not, changed they had seen evidence that had which would have their Court, Superior admitting verdict. The motions were denied. while might differently, that the nrotions been handled conclud- recusal have аny judge’s ed that trial disavowal of bias was sufficient and that he motions; objectively post-trial determined the this matter has not been appealed. 472
basis, must and conclude “that even with we review the record movant all the factual inferences decided adverse to the favor, a in requires law nonetheless verdict his whereas evidentiary record and [conclude] the second review [we] was such that a verdict for the movant the evidence Id. beyond peradventure.” JNOV, must con we review a motion for we
When most to the verdict light sider the evidence favorable winner, every who must “the benefit of reasonable receive therefrom, conflict in arising any inference of fact and Broxie v. his favor.” Id. (citing must be resolved evidence Co., 741, (1977)). Finance 373, Household 472 Pa. 372 A.2d winner, Any in favor of verdict doubts must be resolved be entered in a clear case. Id. only Finally, should JNOV on how judge’s appraisement “a of evidence is not be based jury, had of the but on he would have voted he been member they through jury’s the facts as come the sieve delibera Id. Brown v. Motor Express, Shirks 393 Pa. (citing tions.” (1958)). 143 A.2d court, imрression of first this we As raises matter before entry respect will first turn our attention to the of JNOV with observed, question no. 3. As Court ‘known “[t]he loss’ has not been tested in the state courts of doctrine Pennsylvania, courts of recognized has been other [but] Haas, supra, Corp. states.” Rohm UTI (quoting at 1256 Co., (D.N.J. 362, 375 v. Fireman’s Fund Ins. F.Supp. 1995)(a predicted court case which the federal district law)). Pennsylvania Superior Court described the known loss doctrine as follows: *8 concept known is a law that loss doctrine common fortuity requirement
derives from the fundamental in Essentially, that provides insurance law. the doctrine one already may not obtain insurance for a loss that either has recognized, in place progress. taken or is As we have purpose of insur- rule is based on the realization against risks. protect ance is to insureds unknown State scope courts divided as to the of the known loss doc- are narrowly, barring quite trine. have construed it Some certainty of dam- insured knew coverage only when the find refused to liability. Others have ages and of loss. substantially of a risk aware the insured was when Haas, Co. Ultra (quoting at 1256 Pittston supra Rohm and Co., 517 3d Ins. F.3d Ltd. v. Allianz mar America omitted). (citations questions Cir.1997) quotations recognized this doctrine is are whether presented here narrowly should be so, broadly or and if how Pennsylvania, construed. employ all, should that if it exists at courts argue
Appellants
its
They urge
doctrine.
of the
narrow construction
a
knowledge of
of certain
requires the existence
application
excess
enough to reach the
legal liability large
particular
example, an
contracting;
time
layers of insurance at the
against the
party
claim
a third
judgment on a
entry of
on the
Appellees,
the CGL threshold.
that exceeds
insured
employ a broad construc-
hand,
courts should
argue that
other
of a
is,
awareness
That
an insured’s mere
of the doctrine.
tion
to reach the
liability large enough
probability of
substantial
contracting
is suffi-
insurance at the time
layers of
excess
of the doctrine.
satisfy
requirements
cient
formally
has not been
known loss doctrine
While the
insur
long required
court has
Pennsylvania,
this
adopted
things
fair
of all
full and
disclosure
applicants
ance
make
v. Northwestern Mut.
insurable risk. Smith
material to the
(1900),
Co.,
See also American
196 Pa.
Furthermore, if to employ urged even we were the standard by appellants appears they prevail would not on this issue. No matter which applied, question standard is of properly whether was respect question JNOV entered with no. 3 at lies the heart of this issue. That question reads as follows: that, proven
Have the insurers at contracting the time of any following of the policies, CGL excess Rohm and Haas had certain knowledge damage injury or for which there legal liability would be large enough to exceed the underlying layers and would reach the excess layer any following policies? CGL excess Form for Whitmoyer Site, Question Verdict Laboratories No. added). 3 (emphasis Relying upon the evidence introduced at sides, trial by jury both affirmatively answered regard policy to each at issue. included,
That evidence inter alia: undisрuted testimo ny that Rohm & Haas first became of catastrophic aware 1964; levels arsenic at Whitmoyer site in testimony that Rohm & Haas faced under the 1937 Law;5 Clean Streams evidence that Rohm legal & Haas’ § seq.; provided: 5. 35 P.S. 691.1 et section of which discharge sewage or any industrial waste or noxious and Commonwealth, deleterious substances into the waters of this which health, may injurious is or become public inimical and to the or to life, aquatic animal or or to the uses of such waters for domestic or legal liability potential with the was concerned department testimony that Whitmoyer; of the situation arising out bills of its the medical paid supplied Haas water Rohm & *10 testimony that and liability; potential neighbors to avert a Whitmoyer to be at the situation Rohm & Haas considered light in most Viewing this evidence emergency. grave (the winner), resolving con- verdict to the insurers favorable favor, allowing and them in their in the evidence flicts fact, easily the evidence inferences of all reasonable benefit certainly Haas that Rohm & jury’s conclusion supports the legal would be for which there damage injury or knew of insurance. layers large enough to reach the excess liability requires conclude that the law cannot either Consequently, we favor or that no two reasonable in Rohm Haas’ a verdict & pre- Rohm Haas should have disagree could & minds case to mandate the sufficiently not a clear vailed. This is JNOV; resolved this correctly Court entry of thus issue. closely fraud and is related
The issue deals with next JNOV was loss must decide whether to the known issue. We 7, which reads: granted respect question no. properly issue], that, at the insurer you policies Do find as to [the by following facts clear issuing policy proven has convincing evidence: recreation, hereby declared not to be consumption, or for industrial water, public against policy of such to be a reasonable or natural use public be a nuisance. and to as follows: Section 3 was amended any discharge sewage or substance into the or industrial waste pollu- contributes to which causes or waters of this Commonwealth hereby danger pollution is creates a of such tion as herein defined or waters, to be reasonable or natural usе such declared not to be a public against policy nuisance. public and to be time, private right of action at the the act did and While there was no nuisance; gave provide of the in 1964 the act still does for abatement compel companies power Environmental Administrator the Chief damage remedy caused up pollution and environmental to clean 691.501, 691.503, 691.5, 691.316, §§ operations. e.g., their See 35 P.S. 691.605, 691.601, 691.602, 691.604, Notwithstanding and 691.610. statutory might of state or federal any arise as a result enactments, gross certainly that the should have realized Rohm & Haas likely Whitmoyer have constituted a of the site would contamination nuisance, liability. recognized law public long source of common A. That in with buying specific connection policy, Rohm and employees agents Haas’ or of Rohm and issuing Haas who were contact with the insurer inten- tionally failed disclose material information about Whit- and, so, moyer, if employees
B. That Rohm and Haas agents or deliber- ately concealed material information with the intent insurer; or, persons deceive the CGL excess that other at Haas, part plan Rohm and of an intentional to conceal deceive, kept material information from employ- agents or ees contact with the so that insurer information not would be disclosed? jury affirmatively with respect policy. answered to each
The trial court respect entered JNOV with to the three policies already in existence the time Rohm & Haas ac- quired Whitmoyer on the basis that Rohm & Haas could not *11 problem prior have been aware of the to acquiring Whitmoyer policies, thus, when it contracted for those could not have had an intent to or deceive conceal material from information the insurers. That court granted respect further with JNOY remaining policies on the basis that the evidence presented at trial was jury insufficient for the to find a “deliberate, Haas, fraudulent intent to deceive.” Rohm and at 1251. supra
When an insured
an
policy by
secures
misrepresentations,
means of
may
fraudulent
the insurer
avoid
ux.,
that policy. New York
Ins. Co. v. Brandwene et
316
Life
(1934).
218,
Pa.
477 It must by proof. if shown direct rarely be fraud can ever surrounding circum- from the largely inferred necessarily be 753, Shechter, 30, A.2d 755 Pa. 76 v. 366 stances.” Shechter (1950). case, prove must fraud the insurer
In an insurance
misrepresentations were material
fraudulent
that the
v. Penn Mutual
Ins.
by the insurer. Evans
risk assumed
Life
(1936).
547,
Pa.
In at present evidence Whitmoyer. It the calamitous nature shortly problem Haas this undisputed that Rohm & learned Rohm Haas did not purchasing after the site. & disclose adding Whitmoyer either when to the problem to the insurers *12 coverage. purchasing subsequent when policies existence or Indeed, problem not made aware of the the insurers were Haas twenty-four years when Rohm & filed a until some later Furthermore, at coverage. evidence was introduced claim for Whitmoyer at was mate- trial which showed that the provide coverage. to rial to insurers’ the decision showing presented chronology of The insurers events pervasive- increasingly Rohm Haas aware of the & became liability, its risk of the problem, ness of the concomitant company purchased increasing coverage.6 amounts of excess company’s was also adduced of the of Evidence awareness the Furthermore, potential liability neighbors. to its while Rohm cooperated fully openly & appropriate Haas with the agencies problems Whitmoy- commonwealth to address the er, company deliberately keep the also undertook the becoming public knowledge. situation from Examining required this evidence under the standard JNOV, in a of review conclude that we there sufficient support question the jury’s answer no. 7. Rohm & Haas argues that their evidence shows that the failure disclose purchases was and that the of unintentional excess insurance were situation at Whitmoyer. Essentially unrelated they asking are this court to reexamine the evidence and findings However, our of jury. substitute for those factual determinations are the it province jury sole and was for jury interpreted. to decide how the evidence should be Here, jury weighed and, drawing permissible the evidence inferences, concluded that the failure to was not disclose merely inadvertent Whitmoyer, and unrelated to but knowing jury and deliberate. The determined that at the times that Whitmoyer existing policies added to or in newly included purchased policies deliberately Rohm Haas& withheld infor mation it knew would be material to the insurers’ decision to provide coverage. We conclude that therefore Court appropriately entry reversed the of JNOV on this issue.
The final issue is
was properly
whether JNOV
entered with
respect to the insurers’ “late notice” defense.
haveWe
stated
judge
One of the reasons the
entered
trial
JNOV was that he believed
jury
improperly
post
ergo propter
reasoning
had
utilized
hoc
hoc
(after
this;
consequence
fallacy
this and therefore in
false
cause)
chronology
when
inferred fraudulent
intent from the
of events
presented showing
purchased
coincidentally
that Rohm & Haas
in-
creasing
magnitude
amounts of CGL
as its awareness of the
grew.
problem
single
While a
isolated incident of some event
may
followed
second event
render tenuous an inference that the
second,
accompanied by
first event caused the
a series
such incidents
may
other
compelling
circumstantial evidence
result in a much more
Here,
jury’s
conclusion.
review of all the
led
evidence
them to the
permissible
intentionally
inference that
& Haas
Rohm
undertook to
withhold
material
information.
*13
past
in the
that
an
policy
provisions
when
contains
requiring timely
policy,
written notice of claims under that
the
provision
breach of that
releases
from
obli-
the insurer
the
Brakeman v. Potomac Ins.
gations imposed
policy.
the
Co.,
(1977).
472 Pa.
Id. at
In present case the trial court properly observed dissipation disappearance of evidence occurs over the passage of time and that witnesses become unavailable and memories fade. These are some of prejudicial effects sought to mitigated by be provisions. Nonetheless, notice trial court directed the verdict in Rohm & Haas’ favor on this claiming issue present the insurers failed to sufficient demonstrating they evidence how prejudiced had been by a twenty-four year delay in problems notification Whitmoyer.
Twenty-four years elapsed had between acquisition the site and the claim for coverage; thirty-three years had elapsed by the time the case trial, went trial. At evidence many adduced that of the Rohm & employees Haas purchase invоlved and operation and cleanup of Whit- moyer likelihood, were deceased. In all those who had sur- vived to trial had experienced some diminution of their recol- lection of thirty-three years the events Finally, by earlier. insurers, claim to its gave Haas notice of the Rohm &
time Therefore, destroyed. lost or had been relevant documents of fact disputed issues Court agree we *14 by the prejudiced the insurers were as to whether existed fact that should have a triable issue of presented This delay. jury. to presented the been Court judgment Superior foregoing
For the reasons respects. in all is affirmed concurring opinion. files a
Mr. Justice NIGRO in which dissenting opinion files Mr. Justice CASTILLE join. and Mr. Justice SAYLOR Mr. CAPPY Justice NIGRO, Justice, concurring. properly that the Court majority
I with the agree notwithstanding grant judgment the trial court’s reversed clearly because the evidence Appellants in favor of the verdict Appellees’ to defense jury’s respect verdict with supported the fraudulently pollu- fraud, i.e., concealed Appellants that Appellees demonstrated Whitmoyer. Given tion at Appellants on the indemnifying for they responsible not were however, majority for the fraud, I see no need basis of known Appellees’ additional defenses the merits of address 579, 763 Corry, Lindstrom v. 563 Pa. and late notice. loss (2000). A.2d Justice,
CASTILLE, dissenting. respectfully
I dissent. here liability insurers comprehensive general The excess indemnify appellants obligation avoid sought to their retroac- costs which resulted from the cleanup environmental statute, Comprehensive of a new federal application tive Act Liability Compensation, Response, Environmental seq. 9601 et (CERCLA), insurers raised § U.S.C. appeal. of this subject defenses are three affirmative notice, actual insurance defense, from the late derives One defenses, two parties. The other between the agreement recognized by (which previously has not been “known loss” not; (which do Court) recognized), has been and fraud this loss and fraud doctrines. Known they are extra-contractual or failures to disclose misrepresentations alleged focus on both important questions appeal presents This insured. three affirma- proper resolution conсerning only not case, questions also broader concern- in this but tive defenses Pennsylvania under contours of the defenses ing proper law. complexity, the resolu-
Notwithstanding overall factual its legal consequences of perceived turns on the tion of this case argument and the insurers’ single fact crucial both affirmance,1 single statute crucial and to a federal majority’s appellants’ That fact consists of argument. appellants’ 1960s to their excess information to volunteer failure Whitmoyer at the facili- concerning arsenic insurers *15 undisputed that in 1964. It ty, they purchased which misrepresentations regard: in this The no appellants made approv- asked about environmental insurers never liability policies, and comprehensive ing issuing and the excess legal theory, accepted not tell. The insurers’ appellants did Court, that, notwithstanding insurers’ was the by comprehensive cover- to condition their excess failure information, particular of this kind of age disclosure upon the extra-contractual, an de charged be appellants should volunteer it. jure obligаtion to they appellants’ crucial to claim that are federal statute
The a of law on the three affirma- judgment as matter entitled CERCLA, in 1980. Appel- which was enacted tive defenses is clean-up liability for the environmental lants note that their remotely any not even at issue here did arise time costs they that there period when failed volunteer near Instead, Whitmoyer facility. at the was arsenic contamination Nigro’s "majority” only. for ease of reference Justice I use the term rather, opinion; agrees concurring opinion join in the lead does not theory on alone Superior Court should be affirmed the fraud two theories of late notice and not address the additional and would is, strictly speaking, majority Consequently, there no true known loss. opinion. clean-up liability only pas- arose after the environmental It this sage application and retroactive CERCLA. was fortuity appellants, Whitmoy- which made as former owners of er, retroactively strictly and liable to remediate the contamina- Whitmoyer facility, majority tion at had which purchase facility. Appellants occurred before their of the no longer Whitmoyer even owned the site when CERCLA by enacted much less the time the Environmental (EPA) Agency they Protection notified them 1986 that were potentially responsible party under CERCLA. view, law, my appellants’ In as a matter of mere failure unrequested concerning volunteer information contamina- Whitmoyer they comprehensive tion at when secured excess coverage against liability, a risk of such as the massive envi- cleanup costs that retroactively ronmental were mandated subsequent passage interpretation CERCLA, pro- no basis for an finding vides extra-contractual forfeiture of coverage. majority overlooks the insurers’ failure to issuing make the mere fact of contamination relevant to coverage and also fails to factor in controlling importance disagree of CERCLA. I majority’s ap- Because with the here, proach I deeper inquiry because believe result, respectfully commands a I different dissent.
I. Known Loss majority summarily concludes that the extra-contractu- al “known loss” now а doctrine is viable defense to an other- valid claim in Pennsylvania separate wise from the *16 “closely related” and well-defined defense of fraud. The majority approves also of a formulation of adopted known loss by Superior permits Court that the new defense swallow expand and Simply even the well-settled fraud doctrine. quoting elaboration, from opinion the Court without majority articulates a broad known loss standard as follows: “whether the evidence shows that the insured was, charged knowledge reasonably which shows that it been], or of likely exposure should aware a [have losses which of coverage.” Majority Op. would reach the level
488
Casualty
v. Continental
Haas Co.
1177,
Rohm and
quoting
majority re
The
1236,
(Pa.Super.1999).
Co.,
1258
A.2d
732
among
standard
prevailing
explanation,
without
jects,
per
This formulation
loss.
known
recognizing
courts
those
liability insur
third-party
of
under
forfeiture
mits a
contracting,
legal
where,
time of
at the
“only
policies
ance
(rather
proper
than the
sought
coverage is
for which
liability)
is
give rise
may
later
occurrence
damage or
ty
claims
pay’ third-party
i.e.,
obligation to
‘legal
a
certainty,
a
inception of the
before
has been established
damages
(emphasis
n. 15
25-26 &
Appellant,
of
Brief
policy.”
alia,
Corp.
Chem.
Montrose
citing, inter
original),
Califor
645,
324,
Cal.Rptr.2d
42
Co., 10 Cal.4th
Admiral Ins.
nia v.
Ltd. v.
Am.
(1995); Pittston Co. Ultramar
878
913 P.2d
Cir.1997)
(3d
508,
(predicting
Co.,
518
124 F.3d
Ins.
Allianz
Int’l,
Indem.
v.
Acc. &
law);
Inc.
Jersey
CPC
New
Hartford
appeal
(App.Div.1998),
Co.,
720 A.2d
N.J.Super.
(1999).
also Amicus
denied,
74,
Appellants accurately argue that the formulation of the known loss majority simply doctrine embraced “bypas- standard, permitting ses” the fraud coverage forfeiture of pursuant to a proof, lesser standard of and “without proof of a faith, false statement or statement in bad made an intent to deceive, or Appellants, detrimental reliance.” Brief of Appellants accurately majority’s further note that new contrary rule is to the policy well-established law and in this Commonwealth, which disfavors of general application rules See, in result the forfeiture of e.g., coverage. Co., Brakeman v. Potomac Ins. 472 Pa. 371 A.2d 196- (1977). Appellants argue also this formulation is (as “unprecedented” is), in Pennsylvania certainly it and is far (as out step with decisions of other courts it nationwide is). certainly most unprecedented When such an new doctrine resulting in a applied forfeiture of retroactively, as majority here, appellants rightly does note that it at expectations “strike[s] the heart the settled many under existing third-рarty liability insurance contracts in the Com- monwealth.”, of Appellants, majority Brief 29-30. does legitimate not address these concerns. The Court should ably come to terms with argued and, these realities at a minimum, attempt course, make some justify the néw approving change before such a radical apply- the law and ing retroactively agreements the insurance in this case. doctrine, if known I loss my recognize would part, For standard. all, our settled fraud only conjunction sort sounds the same defense Since misconduct/mis- *18 fraud, a of a also forfeiture as and involves representation intervention, be I it should right judicial believe contractual subject to a clear and similarly, including being its evaluated respect to the proof. standard of With convincing evidence defense, undisclosed require I that the would elements of of actual knowledge should consist triggers defense liability, legal (not existing of which imputed) knowledge here, the of for subject the later claim is the indemnification — It retroactively arising after CERCLA’s enactment. liability being legal which the risk of loss insured is this is thus, loss only existing it is a as to this against; nondisclosure misrepresentation. that could said to amount to a material be very protect against of is to identifi purpose able, degrees predictability. In varying risks of of known deed, of risk an of the perception a is ineluctable element of Recognizing specific peril, for the risk a desire insurance. wager against an occurrence or both insurer and insured nonoccurrence; insuring against the of the carrier is thus risk Services, occurrence, certainty not See an thereof. SCA Co., 528, Ins. 419 Mass. 646 N.E.2d Transportation Inc. v. (1995). 394, only risk 397 This insurable is eliminated where disclose, fails purchases insured knows and to when it “has policy, already that it suffered the threat of an immediate event, loss, a of of reality as some and that the economic result occurring certainty.” that loss is a Insurance Co. North of al., et 770 415 Kayser-Roth Corp., America v. A.2d (R.I.2001), Holmes, citing Appleman 3 Eric Holmes’s on Mills (known 2d, (1998) 16.4, § at Insurance 290 loss doctrine of is of threat loss so “applies only where insured aware might already immediate that be stated that the loss was application such at of or progrеss was known the time prevent to policy designed issuance of the since this is doctrine coverage fraud is to to insure a sought when be misused certainty fortuity”). rather than a
486 risk of economic loss issue in the context of third party insurable, any intelligible insurance should remain under doctrine, known loss version whenever “there is uncer tainty imposition ‘legal obligation about the no liability Montrose, yet 42 pay Kayser-Roth, quoting established.” Cal.Rptr.2d 324, 913 (emphasis original). P.2d at 905-06 Pittston, also (certainty legal liability See F.3d at 518 damage, certainty damage, rather than required doctrine). trigger application of loss of a Knowledge known risk enough negate policy mere cannot and should not be of insurance. See Aluminum Co. America v. Aetna Cas. & Co., (2000) (although Sur. 998 P.2d Wash.2d pollution insured failed advise insurers about known dam policies to its age property, were not void where damage was not material factor insurers’ decision to in sure); (“known Montrose will not loss” defeat *19 uncertainty as long damage may there remains about that during policy period). occur
By an permitting explicit to avoid insurer its contractuаl obligation “likely where there a mere awareness of a exposure to losses” of a magnitude, majority certain misapprehends very of party liability nature third insur- loss, It of very ance. is that risk varying degrees of likelihood, which creates the market for this insurance insurer, place. first a powerful sophisticated And the and party, well that. peril being against by knows insured policies not here was the certain arsenic at damage Whitmoyer site, party but rather the risk of attenuated third legal liability for government-ordered remediation —here arising pollu- the contamination —later from ex-post that facto loss, extent, tion. That and its catastrophic was not at all or policies “known” knowable the time I these were issued. that appellants prevail against believe entitled to were loss as known defense law. matter undisputed that, early It is appellants voluntarily as disclosed to Commonwealth arsenic authorities the contamina- at Whitmoyer tion an cleanup pro- conducted extensive gram at expense. Appellants their own also disclosed the сontamination in primary their insurance carrier and their insurance broker. Although it is unclear whether the contamination, record, environmental which public was of was specifically relayed carriers, to the excess indisputably was by appellants. not hidden appellants At times secured coverage their excess appellants failing to volunteer the —with fact contamination and their failing insurers to ask about or condition the issuance of policies upon the absence of appellants were not with any faced actual contamination — existing lawsuits or other bases of that threatened trigger the various policies. excess insurance Nor was there any evidence to suggest appellants had knowledge actual or “could charged knowledge” be pollution they discovered was at that remotely likely time to result in third party liability that would primary exhaust their trigger escalating their various and excess com- prehensive liability policies. point fact, In throughout appellants’ ownership facility, of the no claim arose from the arsenic trigger contamination to coverage. the excess notion that the mere pollution fact of at Whitmoyer would inevitably lead to a legal liability reaching the excess carriers is so that it attenuated cannot said appellants be “knew” of that “loss.”
To borrow an apt phrase from Justice Holmes’ view of the Amendment, First mere fact of in the instant presented situation no present “clear and danger” that the actual being harm against insured already in existence such toas render that harm Nor uninsurable. does it lead *20 the conclusion that there was no insurable risk. costly The environmental remediation loss here was not something that all along, existed known to and by appellants, undisclosed and sprung then upon their sophisticated, but understandably unsuspecting, Instead, insurers. controlling fact is one that majority inexplicably to deems be irrelevant: passage, years later, unforeseeable of CERCLA. It was liability CERCLA’s strict provisions and its appli- retroactive cation alone that liability created the appellants for which sought coverage. passage The of effect CERCLA was it any more than was appellants
not known or knowable that, under majority simply grasp fails to their insurers. The existing purchase, affairs at the of the law and state of times no that would had suffered known relevant loss appellants of Passage CERCLA implicate coverage. excess their controlling event. knowl- majority “charges” appellants in with essence revolutionary statute that was not edge of a environmental later, knowledge that many years and with passed until for potential liability its only not would affect CERCLA in a of sufficient cleanup, but that it would also result thresholds of the excess magnitude as to reach substantial adopt, and majority, casually I would not policies. Unlike the that judicial doctrine retroactively apply, an extra-contractual failing fault for appellants retrospect would foresee This passage unprecedented implications CERCLA. that was, my view, sort of uncertain risk precisely the against. The courts appellants rightly insured themselves not with that should interfere contract.2 only to confront It should noted that ours is not the court be liability. the known loss doctrine connection CERCLA Kayser-Roth, swpra, instance, in Island Su- For Rhode pecuniary impact preme Court addressed unforeseeable purchased The insured there insurance CERCLA. any government indication that the federal before received for remedia- would seek to hold it liable the costs CERCLA nothing before the tion. court noted occurred possible responsible notifica- receipt party the insured that it liable tion from EPA alerted insured would be or, scale, on cleanup grand such a for environmental where, here, particularly compelling the insurer This conclusion is to the of the contract has raised several defenses enforcement seeking equitable rather than relief in the form reformation. Cf. Co., Reynolds Indemnity *2 Travelers v. Metals 1995 WL Co. 2, 1995) (Del. juris- Chancery (Chancery Ct. Oct. Court does not have cognizable equitable diction insurer failed to claim for where state that, intend, contracting parties predicated relief "the did not on notion intended, against arising future and could not have insure liabilities new, (CERC- statutory entirely unprecedеnted under an scheme LA)....”).
489
If not for the strict
matter,
II. Fraud again Superior majority, following the lead Court, finds sufficient evidence to sustain the fraud verdict appellants favor of insurers on the basis that failed to contamination at volunteer the excess insurers the Whit- moyer. majority apparently deems this failure to disclose convincing misrepresenta- clear and evidence of a “fraudulent deliberately tion” that was intended to on deceive insurers material to the decision to issues issue the insurance place. disagree majority’s judgment first I in this regard.
Appellants acсurately argue im- Court posed upon “unprecedented duty unrequest- it an to volunteer They long ed information.” claim that is has been the law Pennsylvania duty “mere silence is not fraud absent a 14, Wilson, speak.” Appellants, v. citing, Brief Morrow 266 (1920). 394, 632, Appellants Pa. 109 A. 633 further cite cases jurisdictions recognizing, general proposition, from other aas requested that information not by presumptively the insurer and, thus, See, e.g., not material need not be volunteered. Co., v. 142 Southard Occidental Ins. 31 Wis.2d Life (1966) (no duty beyond N.W.2d 844 volunteer information asked); scope questions Greensboro Nat’l Ins. Co. v. Life (1965) (if Bank, Southside 206 Va. no S.E.2d inquiry property, made insurer as status of insured occurred, in-
cannot, recovery has defeat because after loss information). did not volunteer certain sured *22 approach Although majority adopts the the Court ad- by appellants, majority squarely criticized the does not Furthermore, appellants’ arguments. the cases the dress outlining merely recognize general in fraud majority cites a “suppression” that “concealment” or of material proposition than, fact, of misrepresentation no an affirmative material less fact, duty question can to fraud. But the of the a amount in identify has to on its own material facts prospective insured into, inquired has not and then to volunteer areas the insurer insurer, to has not been addressed in these those facts an properly preserved point directly. I cases. would address the undisputed It that the insurers here never asked about is contamination, they much less did condition environmental liability comprehensive general policies of the excess issuance presence or absence of environmental contamina- upon the merely possible of countless bases of under one tion— retroactively impose It to policies inequitable at issue.3 is concerning information duty upon appellants a to disclose Whitmoyer pollu- contamination at when such information of requested by insurer. tion or contamination was never “sophisticated” of Although appellants may purchasers be insurance, certainly sophisticat- no the insurers here were less only powerful. importantly, ed or More аn insurer is the know, dictate, is party position fully in a to fact what coverage. material to its decision to issue hand, is, prospective general On the other insured as matter, position any certainty in no to know with kind of what might information an insurer later deem relevant unidentified Hence, to its to insure. the insured should be under decision extra-contractual, judicial obligation speculate no to as to what coverage, argue they require, did 3. The insurers that as condition writing appellants there "no losses" and affirm that were known subsequent appellants’ affirmation to that effect was false since they Whitmoyer. Appellees, Brief knew of the contamination at losses," inquiry purposes party into "known for of excess third liability coverage, hardly encompassed inquiry there an into whether any appellants’ then mere environmental facilities.
491 to volunteer deem relevant might later its insurer ago in years over this Court stated As information. Miller, 504, 516, Pa. New York v. Ins. Co. Niagara Fire knowledge (1888): has “unless the [insured] 14 A. risk, not is [the insured] fact will increase particular that a very “It is a [insurer].” such fact to the report bound [insured], by the inform the simple [insurer] matter an otherwise, regards increase or what policy of its terms Id. of risk.” loosening of unprecedented join majority’s in the
I cannot require- by creating an extra-contractual fraud standard might insurer speculate as to what its the insured ment that fully The insurer and material. deem relevant later application pro- own protect its interests equipped judiciary imprimatur I not use the cess. would *23 protect its adequately to insurer for its failure absolve an interests. majority’s new event, agree if I could with the any
In even now are that insureds this Commonwealth requirement might someday insurers speculate to as to what their required to material, information relevant and then volunteer claim is appellants hold that were I would still speculations, those on fraud defense. a matter of law the judgment to entitled finding, by clear view, support not proof In here does my evidence, volunteer here that failure to convincing by a “de- information or was motivated “material” concerned liberate, to fraudulent intent deceive.” noted, no direct evidence that court there was
As the trial “Notably, in insurers. to deceive their appellants planned throughout the over nine produced amount of documents vast introduced into trial, not one exhibit there was weeks super- any Rohm and Haas which demonstrated evidence plan in a to deceive employee was involved visory or executive Furthermore, Opinion, ... insurers.” Trial Court to deceive. any claim intent evidence belied circumstantial immediately Rohm and Haas prompting, external Without Whitmoyer contamination existence of the disclosed the (who promptly public), made it authorities Commonwealth neighbors, primary its to its and to its insurer arranged who appellees. broker the excess primary reject coverage fact that their insurer did not after objective proof appellants the disclosure is had no reason that the fact of believe material issuance coverage. appellants the excess Nor did ever fail to answer accurately any question actually posed by their insurers re- specting facility; simply the insurers failed to ask. This objective hardly warranting evidence constitutes conduct jury finding convincing of clear and evidence of an intent to deceive.
Furthermore, view, my any appel- accurate assessment of alleged change lants’ intent to deceive must account for the wrought liability CERCLA scheme for environmen- If tal contamination. CERCLA had existed in failure to volunteer information of contamination would be exponentially suspicious suspicious more still than less —but inquire would be a failure the insurers even to into the pollution. of such existence But CERCLA did not then exist. that, It throughout period appellants is also a fact when general purchasing increasing were their excess policies, they any pre-CERCLA were never faced with non- or claim that remotely implicated coverage. their excess It is that, also a fact at the time the insurers policies, issued these they not enough were concerned with environmental contami- nation possible third-party liability as a basis for toas make specific inquiries into pollution. the existence of environmental indisputable landscape existing policies at the times the *24 issued, abrupt change were as contrasted with the risk the CERCLA, by passage application of occasioned of facts, objective majority are further unaccounted for in the opinion, preclude any finding that of an to intent deceive the to any insurers as material fact.
All that post (fallacy is left is the hoc hoc of ergo propter cause) arising equivocal false inference from the fact that appellants coverage by. increased their as time went As the majority recognizes, Majority op. itself at 1179 n. that alone uphold jury’s is insufficient on the verdict this issue. on grant of JNOY I affirm the trial court’s Accordingly, would fraud issue. the Late
III. Notice trial court erred Finally, majority the finds that the late notice The directing a verdict on the insurers’ defense. elapsed twenty-four years between majority states that claim Whitmoyer appellants’ of for acquisition prejudice resulting sufficient evidence of and that there was died, (in had delay witnesses potential this that certain from dimmed, alleged- likely had and relevant documents memories presentation its destroyed) as to warrant had been lost or ly jury. view, regard in this is flawed my majority’s analysis In because, of importance it fails to for the again, once account notice at issue specific The contractual clause CERCLA. as reads follows: upon knowledge any
Notification of Claims—The Assured likely give rise claim hereunder shall occurrence to a person(s) to the or give immediate written advice thereof purpose (Emphasis named firm for the the Schedule. supplied.) contamination, majority’s upon opposed focus prospect party liability, of third which was the actual risk
being against, betrays misapprehension insured the same policies analysis that its known loss renders flawed. ineluctably suggest fact of contamination did not that mere all, party liability there would be a third claim much less a likely policies. point claim that was to reach In the excess fact, prospect there was no under the until policy a claim earliest, very 1986 at after which is when EPA notified they potentially responsible appellants parties werе site, costs with a at the cleanup associated under liability provisions application retroactive of the strict time, was no basis to conclude CERCLA. Before there likely there was to be a claim that would reach the excess policies. *25 speculative prejudice majority identified accrued
in period the time Rohm and any before Haas had basis or duty notify likely the insurers that there was to be a claim implicating coverage. the excess Accordingly, the trial court properly directed verdict on this claim. summary,
In majority only not has erroneously decided but, the three issues on this appeal, what is troubling, more process summarily approved has expansions unwise extra-contractual defenses that will result the unforeseeable legitimately forfeiture of bargained-for otherwise Accordingly, countless other cases. I respectfully dissent. Justices join CAPPY SAYLOR this dissenting opinion.
v. COMPANY, LIBERTY MUTUAL INSURANCE First In State Company, Lexington Company, surance Insurance and Penn sylvania Company, Manufacturers Association Insurance Cor porations, Appellees.
Supreme Pennsylvania. Court of 5,
Argued March 2001. Decided Oct. 2001. Reargument Denied Dec.