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FISCHER & PORTER CO. v. LIBERTY MUT. INS. CO.

December 5, 1986

FISCHER & PORTER COMPANY
v.
LIBERTY MUTUAL INSURANCE COMPANY



The opinion of the court was delivered by: GILES

 GILES, J.

 For the reasons which follow, summary judgment will be granted in favor of the insurer, Liberty Mutual Insurance Company, and against the insured, Fischer & Porter Company. Plaintiff has failed to adduce evidence from which a reasonable juror could find that there was a "sudden and accidental" pollution occurrence under the terms of the insurance policy in question. For the same reasons, the cross-motion of Fischer & Porter for partial summary judgment must be denied.

 1. Fischer & Porter Company brought this declaratory judgment action against Liberty Mutual Insurance Company seeking reimbursement of those costs it incurred in cleaning up groundwater pollution attributed by the United States Environmental Protection Agency ("EPA") to the Fischer & Porter site at County Line and Jacksonville Roads in Warminster Township, Bucks County, Pennsylvania. Fischer & Porter now seeks indemnity under a comprehensive general liability insurance policy.

 2. In October, 1980, the EPA initiated legal action against Fischer & Porter to clean up groundwater under and near its Warminster property, alleging that the property owner was responsible for contamination of the water by the chemical known as Trichloroethylene ("TCE"). U. S. v. Fischer & Porter Company, E.D. Pa., No. 80-3900 (E.D. Pa. 1980). The EPA charged that the source of the TCE contamination was the Fischer & Porter site. Fischer and Porter denied the allegation, contending that the source of contamination could have been from surrounding properties. However, without admitting liability for the contamination found under its property, it settled the EPA action by a Consent Decree which allowed for the purification of well and groundwater on its property and in acquifers which service the municipal water systems of Hatboro and Warminster Townships. The Consent Decree was entered of record November 4, 1984.

 3. In this declaratory judgment action, Liberty Mutual has moved for summary judgment, following the completion of discovery, contending that there is no evidence discovered, or to be adduced, which would show that under the terms of the policy of insurance there was an "occurrence", an occurrence that was "sudden and accidental" or "damage."

 4. Fischer & Porter has answered the summary judgment motion by contending that Liberty Mutual waived any argument that there was no "occurrence" since it afforded a defense under the policy to Fischer & Porter in the EPA action, thereby conceding that there had been an "occurrence." It further contends that Liberty Mutual waived the "lack of occurrence" argument when, in response to Fischer & Porter's demand for defense and indemnification, Liberty Mutual wrote by letter of March 24, 1981,

 
Please let this serve as formal notice that Liberty Mutual Insurance will defend and indemnify you for the above-captioned suit under the terms of your policies . . . This is based on the complaint and allegations as they stand now. If a final outcome of the case shows that the pollution was not sudden and accidental, but rather arose out of a longstanding discharge of pollutants, then there will be no coverage under the policy.

 (Appendix to Plaintiff's Response and Cross-Motion, A-64). Because the letter allegedly did not specifically contend that there had been no "occurrence," plaintiff argues that there was a promise to indemnify unless it was shown that the occurrence was sudden and accidental.

 Fischer & Porter contends that there was an "occurrence," in any event, because the TCE contamination was found in the groundwater under its property and its supervisors would testify that they knew of no intentional deliberate dumping of TCE and the resulting damage was not expected or intended.

 It submits that the pollution exclusion in the policy for other than sudden and accidental pollution occurrences is ambiguous and that Liberty Mutual bears the burden of proving that the TCE contamination did not occur by sudden and accidental means and that Liberty Mutual cannot carry that burden.

 Based upon these arguments, and affidavit evidence, Fischer & Porter sought summary judgment in its favor by way of a cross-motion.

 5. Fischer & Porter's contention that there was a waiver of the "no occurrence" defense is frivolous and must be denied. Affording a defense to an insured does not constitute an admission that there is underlying claim liability. Here, Liberty Mutual's March 24, 1981 letter advised the insured that it would indemnify "under the terms of [the] policies", provided the allegations in the EPA Complaint were true, that is, that there was a determination that Fischer & Porter was the source of the TCE contamination and that the pollution was not "sudden and accidental." The requirement that the insured show that there was an "occurrence" is one of the terms and conditions of policy coverage.

 6. In the policy "occurrence" is defined as ". . . an accident, including continuous or repeated exposure to conditions which results in bodily injury, or property damage neither expected nor intended from the standpoint of the insured."

 7. Fischer & Porter does not admit that there was any event which occurred in its facilities or operations that accounts for the TCE contamination as found by the EPA. In the EPA action it denied that it was the source of the pollution. Its position in this declaratory judgment action is that because the TCE contamination was found in its soil and the groundwater contiguous to its site that it may be presumed that the pollution that it undertook to clean up did, in fact, emanate from its operations. Therefore, it argues, there was accidental pollution for which it could be held liable. Further, it contends that because its supervisory and managerial witnesses would testify that they were unaware of any deviation by employees from established procedures for the safe use and handling of TCE, when delivered to the site and during use and disposal, any spillage had to have been unintended and unexpected; no spillage was authorized or intentionally permitted by management. Because the pollution was claimed by the EPA and the Hatboro Township to cause damage to the municipal water system and to the wells of adjoining property owners, Fischer & Porter argues that all the criteria have been met for proof of an "occurrence" as that term is defined in the policy.

 8. On the other hand, Liberty Mutual contends that the evidence it discovered of Fischer & Porter's operations and continuous "sloppy housekeeping" of TCE explains the TCE contamination in the places and at the pollution levels found by the EPA. These failures to follow safe procedures for the use and disposal of TCE establish, it submits, that the discovered pollution was not unexpected, but was the predictable result of regular business activities. It charges that Fischer & Porter knew or should have known what was occurring with the TCE usage in its plant and permitted the "sloppy housekeeping" and disregard for, or lack of supervision of, safe means and methods of TCE handling.

 9. "Occurrence" is defined under the policy as "physical injury to or destruction of tangible property or the loss of use of tangible property which has not been physically injured or destroyed . . . ". Liberty Mutual contends that the relief accorded under the Consent Decree is all injunctive and is not covered under the policy. The Consent Decree requires Fischer & Porter to take remedial steps to isolate and treat groundwater under its site through aeration processes at wells on its property to reduce the TCE and PCE contamination to levels acceptable to the EPA, to adhere to specified plans for storage, handling treatment and disposal of TCE and other chemical containers, to install a groundwater recovery system and to monitor that system to insure that the contamination levels are being decreased. The Consent Decree also provides that Fischer & Porter contribute funds to the Hatboro Borough Authority and the Warminster Heights Water Authority to enable them to purchase and operate necessary water purification equipment to filter, aerate, or otherwise treat the water before it enters the public drinking water systems.

 10. Under Fed. R. Civ. P. 56, the movant has the initial burden of showing that the pleadings, depositions, answers to interrogatories, admissions and affidavits demonstrate an absence of a genuine issue of material fact. It is not the movant's responsibility to file supporting materials which negate the nonmovant's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2552-53, 91 L. Ed. 2d 265 (1986). However, the movant must demonstrate that the non-moving party has failed to establish the existence of an element essential to his case. Id. A party resisting a motion cannot rely upon bare assertions, conclusory allegations or suspicions. Fireman's Ins. Co. of Newark, N.J. v. DuFresne, 676 F.2d 965, 969 (3d Cir. 1982). The non-moving party must establish by affidavit or other affirmative evidence each element of his case upon which he will bear the burden of proof at trial. Id. at 2552.

 11. Fischer & Porter bears the burden of showing that there was an "occurrence", that is, that there was an accident which resulted in property damage which was neither expected nor ...


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