The opinion of the court was delivered by: SHERIDAN
This is an action by an insured against his insurance company under a comprehensive liability policy for refusal to defend 26 trespass actions brought against the insured in the Common Pleas Court of Lackawanna County, Pennsylvania, and for the failure to pay judgments entered in 25 of the actions.
Plaintiff is Robert Y. Moffat (Moffat), a citizen of Pennsylvania. Defendant is The Metropolitan Casualty Insurance Company of New York (Metropolitan), a corporation incorporated under the laws of the State of New York with its principal place of business in Newark, New Jersey.
The actions in the State court (smog cases) were brought by property owners of the Borough of Taylor, Lackawanna County, Pennsylvania. The defendants were Moffat and the Glen Alden Coal Co. (Glen Alden). In these actions the property owners sought to recover for damages to their properties caused by the emanation of destructive gases from culm banks created and maintained by Moffat and Glen Alden. The litigation resulted in judgments in favor of 25 of the property owners and against Moffat, only. In one action there was a judgment in favor of Moffat. There were judgments in favor of Glen Alden in all 26 actions.
The policy contained the following provisions:
'I Coverage B -- Property Damage Liability
'To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by accident. 'II Defense, Settlement, Supplementary Payments
'(a) defend any suit against the Insured alleging such injury, * * * or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; * * *.'
Metropolitan's defenses are that the claims and the recoveries in the smog cases are not within the coverage of the policy because the damages were the result of intentional conduct by Moffat, and were not the result of an accident; the Statute of Limitations; and Collateral Estoppel.
Moffat seeks to recover from Metropolitan $ 75,254.07 as the fair and reasonable cost of defending the smog cases, and $ 62,870.40 paid by Moffat to satisfy the judgments.
The policy was delivered to Moffat in Pennsylvania and was intended to be performed in Pennsylvania. The law of Pennsylvania controls. Newspaper Readers Service, Inc. v. Canonsburg Pottery Co., 3 Cir. 1945, 146 F.2d 963.
Culm banks are refuse banks resulting from the mining and preparation of coal. Usually they contain rock, shale, bone, iron pyrites and other waste products, as well as reclaimable coal. The complaints charged that the banks oxidized and produced hydrogen sulphide and other destructive gases which caused the property damage. The culm banks were located on property owned by Glen Alden but leased to Moffat in 1937. At the time of the leasing there was a burning culm bank on the property. Subsequently, Moffat started four additional banks known as the Washington Street, Main Street, Fourth Street banks and a silt dam. The purpose of the latter was to separate silt waste from water used in the breaker before discharging the water into natural streams, as provided under Pennsylvania law.
There were two trials in the State court. The first was a jury trial -- Waschak v. Moffat. In the second, the other 25 cases were consolidated for trial before the court without a jury -- Evans v. Moffat.
1. WASCHAK. -- In Waschak the jury returned a verdict for the plaintiff and against Moffat and Glen Alden. Judgment n.o.v. was entered for Glen Alden. The case was tried on the theory of absolute nuisance. The Superior Court affirmed.
The Supreme Court reversed.
In doing so it held that the strict rule of Rylands v. Fletcher, L.R. 3 H.L. 330 has not been followed in Pennsylvania, and refused to apply the Absolute Nuisance Doctrine. Instead, it adopted Section 822 of the Restatement of Torts
as setting forth the principles for determining liability resulting from a private nuisance. Then it proceeded to apply § 822(d)(i) to the facts and held: '* * * it is evident the invasion of plaintiffs' land was clearly not intentional. And even if it were, for the reasons above stated, it was not unreasonable.' The Superior Court was reversed and judgment entered for Moffat and Glen Alden.
2. EVANS. -- In Evans the trial was by the court without a jury. The defendants were allowed to file amended answers which raised the defense of res judicata on the basis of Waschak. By pretrial agreement, approved by the court, the record in Waschak was admitted in evidence on the question of liability. The records in Evans and Waschak on liability are in all respects identical. They differ only on damages. The trial court said that since evidence as to liability in the 25 cases was identical with Waschak, the law was firmly fixed by the Supreme Court decision in Waschak. It decided that the statement in the Supreme Court opinion in Waschak that invasion of the property owners' land was not intentional was a conclusion of the opinion writer, and, therefore, was not res judicata. It then found as a fact that the invasion was intentional. The trial court concluded, however, that the Supreme Court holding that the invasion, even if intentional, was not unreasonable, was a flat declaration of law, and determined there was no liability on the basis of res judicata. Judgments nisi were entered for Moffat and Glen Alden.
After final judgments were entered, the court made absolute a rule to open the judgments and permit the property owners to file exceptions to the adjudication and decree nisi. Moffat and Glen Alden appealed to the Supreme Court. They argued it was futile to open the judgments because Waschak was controlling. The Supreme Court affirmed the opening of the judgments and remanded to the trial court for further proceedings.
In doing so it held Waschak was not res judicata, but that it was at most stare decisis as to the applicability of § 822(d). Upon remand the trial court made a supplemental adjudication in which it revoked some ...