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AMERICAN MUT. LIAB. INS. CO. v. NEVILLE CHEM. CO.

January 7, 1987

AMERICAN MUTUAL LIABILITY INSURANCE COMPANY, Plaintiff,
v.
NEVILLE CHEMICAL COMPANY v. Hartford Accident and Indemnity Co., National Union Fire Insurance Co. of Pittsburg, Pa., Defendant



The opinion of the court was delivered by: ZIEGLER

 ZIEGLER, District Judge

 Plaintiff, American Mutual Liability Insurance Company, was the liability insurer of defendant, Neville Chemical Company, from January 1, 1971 to January 1, 1977. Plaintiff brings this action for additional premiums of $140,951.00 predicated on a retrospective rate adjustment, $28,670.00 in estimated dividends which were cancelled as a result of Neville's failure to pay premiums, plus interest, costs and attorney's fees.

 Neville denies that it owes American Mutual any sum and defendant has filed a counterclaim for legal expenses incurred when American Mutual allegedly failed to properly assume the legal defense of Neville in two pending state court actions brought by the Municipal Authority of the Borough of West View, alleging chemical pollution of ground water by Neville.

 Neville amended its answer and counterclaim and among other allegations and requests, demanded a judgment declaring that American Mutual has a duty to defend and indemnify Neville in the two cases brought by West View.

 Pursuant to Rule 14 of the Federal Rules of Civil Procedure, American Mutual was granted leave to commence a third party action against two other insurers of Neville, alleging that in the event plaintiff is held to have a duty to defend and indemnify Neville or found liable for damages, plaintiff is entitled to indemnification, contribution, subrogation or apportionment from the other two insurers. American Mutual thereafter filed a third party complaint.

 Plaintiff has now moved for partial summary judgment pursuant to Rule 56 on the issues of its alleged duty to defend and indemnify Neville against the suits brought by West View. The question before this court is whether there exists any genuine issue of material fact regarding the duty to defend and indemnify. We hold that there are no claims asserted by West View that potentially fall within the policy coverage. American Mutual has no duty to defend or indemnify Neville. There being no genuine issue of any material fact, plaintiff's motion for partial summary judgment will be granted.

 History of Case

 Beginning in February of 1973, West View discovered that one of its wells was polluted by Neville and notified Neville of the contamination soon after. Further discoveries were made in January, 1975 and early 1980, and Neville was duly notified of the contamination. West View charges that until 1979, Neville continued to cause further contamination and continued disposing of harmful wastes in the same manner, despite notice of the harm that it caused. The first complaint in state court sets forth three counts of nuisance, i.e., negligent, reckless or intentional conduct resulting from an abnormally dangerous activity. The second complaint was filed after West View discovered contamination of wells other than those set forth in Complaint I and it alleges negligent and intentional nuisance.

 American Mutual defended Neville pursuant to a reservation of rights and filed a motion for partial summary judgment, which was granted by the Court of Common Pleas of Allegheny County, which ruled that all claims against Neville prior to or on October 30, 1978 were barred by the statute of limitations. Within one month of that ruling, American Mutual informed defendant that it was withdrawing from Neville's defense because coverage had expired on January 1, 1977. Defendant alleges in its amended counterclaim that plaintiff's withdrawal was contrary to the terms of the policy and in bad faith.

 Discussion

 "The obligation to defend is determined solely by the allegations of the complaint in the action." Pacific Indemnity v. Linn, 766 F.2d 754, 760 (3d Cir. 1985). "Under Pennsylvania law, an insurance company is obligated to defend an insured whenever the complaint filed by the injured party may potentially come within the policy's coverage." Pacific Indemnity, supra, at 760. However, the insurer is obligated to defend its insured only "until it can confine the possibility of recovery to claims outside the coverage of the policy." Commercial Union Insurance v. Pittsburgh Corning Corporation, 789 F.2d 214, 218 (3d Cir. 1986). "The insurer is . . . entitled to withdraw when a claim clearly within the policy coverage is withdrawn and one outside the policy coverage remains." Id. at 218.

 We turn to the allegations of the complaint which are not barred by the statute of limitation. The ultimate issue of plaintiff's duty to defend turns on whether any of the claims ...


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