Plaintiff seeks a declaration that Liberty Mutual is obligated, under these terms, to indemnify it for its Swope Site liabilities. Liberty Mutual has moved for summary judgment on three grounds: First, it asserts there was never an "occurrence" so as to trigger coverage by the Triangle-Liberty Mutual contracts. In the alternative, Liberty Mutual asserts that plaintiff has not been "damaged," within the meaning of the CGL policy, since clean up costs are equitable-in-nature. Finally, Liberty Mutual argues that it has no obligation to Triangle, even if a policy coverage was triggered, because Triangle breached the contract by failing to provide timely notice of the occurrence.
At the outset, this court is faced with the possible conflict among the laws of Massachusetts, New Jersey, and Pennsylvania.
The parties assert, for different reasons, that no conflict exists regarding the meaning of "occurrence," and that Pennsylvania law applies. Defendant's concession, that no conflict exists between Massachusetts and Pennsylvania law, is based upon its contention that the courts of both states use the "first discovery" trigger-of-coverage analysis.
Plaintiff's concession, on the other hand, is premised upon the conclusion that the "continuous trigger" rule is applied in Pennsylvania, as well as in New Jersey.
Since the parties conclude that Pennsylvania law controls for totally different reasons, I find it necessary to independently determine which state's law applies in this action.
This court must apply the choice-of-law rule of the forum state since jurisdiction, in this case, is based on diversity. See Klaxon Co. v. Stentor Electric Mfgr. Co., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941). The Pennsylvania courts use a flexible choice-of-law rule. In Griffith v. United Airlines, 416 Pa. 1, 13-23, 203 A.2d 796, 802-06 (1964), the Pennsylvania Supreme Court adopted a combination of the "interest analysis," and the Restatement (Second) of Conflict of Laws ("Restatement II") approach in determining which state's law should be applied in a tort claim. The test in Griffith has been extended to contract actions. See American Contract Bridge v. Nationwide Mutual Fire Ins. Co., 752 F.2d 71, 74-5 (3d Cir. 1985); Melville v. American Home Assurance Co., 584 F.2d 1306, 1313 (3d Cir. 1978). Accordingly, the test announced in Griffith will determine the appropriate state law to be applied in this case.
Under the "interest analysis" arm of the test, I am to examine the competing interests of the states involved, and determine which state has the most significant contacts with the controversy. The interests of Massachusetts, Liberty Mutual's domicile, are insignificant. Massachusetts' only contact with the controversy is based on the fact that Liberty Mutual is incorporated in that state. New Jersey is also only incidentally connected with the controversy. New Jersey is involved simply because Swope Oil and Chemical Company chose Pennsauken as a place for storage. Pennsylvania clearly has the most significant interest in the controversy. The contract was negotiated and entered into in Pennsylvania. Triangle's domicile, and the site of all of its property, is located in Pennsylvania. Under the basic tenets of contract law, these factors are most important when weighing the competing interests of the states. See generally R. Weintraub, Commentary of the Conflict of Laws, at 348 (2d ed. 1980).
Pennsylvania is also the state most connected with the controversy under the second part of the Griffith test. Based on the Restatement II analysis, the principal location of the risk should "be given greater weight than any other single contact." Restatement (Second) of Conflict of Laws § 193 comment b (1971). In this case, at the time the policies were purchased, Pennsylvania was the site of all of Triangle's property. The risk that Triangle sought to shift, by way of insurance coverage, was its potential liability for injury to person or property as a result of its Pennsylvania base of operation. Therefore, I find that the correct choice-of-law is indeed the law of Pennsylvania.
The central issue in this declaratory judgment action is whether the Triangle-Liberty Mutual insurance contracts were triggered 1) when Swope Oil and Chemical Company exposed the property to damage by storing the waste in the lagoon; 2) during the time of storage after the initial exposure; 3) upon discovery of the ultimate environmental injury; or 4) at any interval between exposure and manifestation. Liberty Mutual asserts that the coverage is triggered only upon discovery of the injury. It contends that since the damage at Swope Site was discovered in 1975, well after the Triangle-Liberty Mutual contracts expired, none of its policies were triggered. Plaintiff's principal argument, in opposing Liberty Mutual's first summary judgment motion, is that the contract provision regarding "occurrence" is ambiguous and thus, must be construed against the insurer. The construction urged by plaintiff is that coverage must necessarily be triggered, at any point in time, from the date of exposure to the date of manifestation. I reject both arguments, and find that the plain language of the CGL contract supports only one construction: the injury-in-fact analysis.
While I agree with plaintiff that the term "occurrence," standing alone, could give rise to two conflicting reasonable interpretations, see Little v. MGIC Indemn. Corp., 836 F.2d 789, 794 (3d Cir. 1987), it is clear that the term does not stand alone. In fact, the term is expressly defined in the contract.
Under the contract, an "occurrence" is defined as
an accident, including injurious exposure to conditions, which results, during the policy period in bodily injury or property damage neither expected nor intended by the parties from the standpoint of the insured.
The plain meaning of the term "occurrence," as used in the CGL policy, is clear. It is (1) an accident (2) which results (3) in property damage (4) during the policy period. Stated another way, an actual injury must occur during the time the policy is in effect in order to be indemnifiable or compensable. Any other interpretation is simply not supported by the CGL policy language. See generally American Home Products Corporation v. Liberty Mutual Insurance Company, 565 F. Supp. 1485, 1500-03 (S.D.N.Y. 1983), affirmed as modified, 748 F.2d 760 (2d Cir. 1984) (where the district court discusses the history of the CGL policy).
Other courts have found that the term "occurrence," as defined, unambiguous under Pennsylvania law. In Appalachian Insurance Company v. Liberty Mutual Insurance Co., 676 F.2d 56, 62 (3d Cir. 1982), the Third Circuit, applying Pennsylvania law, found that "there can be no question but that the aspect of the occurrence which must take place within the policy period . . . is the 'result', that is, the time when the accident or the injurious exposure produces . . . injury." (Citations omitted) (Emphasis supplied). A Pennsylvania trial court adopted the Appalachian Insurance Company test in Metal Bank of America v. Liberty Mutual, No. 861, slip opinion (C.C.P. Phila. County June 8, 1986), aff'd, 360 Pa. Super. 350, 520 A.2d 493 (1987), to determine liability under a CGL identical to the one in this case. There, the court agreed with, what it labeled to be the Appalachian court's definition of "occurrence," and found it to be
an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage or advertising liability during the policy period.
Id. at 6 (quoting Appalachian Insurance Company v. Liberty Mutual Insurance Company, 676 F.2d at 59) (emphasis supplied).
See also Centennial Ins. Co. v. Lumbermens Mutual Casualty Co., 677 F. Supp. 342, 347 (E.D. Pa. 1987) (where Judge Newcomer found that the "'actual damage' approach to the trigger of coverage analysis of an occurrence-type insurance policy" was recognized in Pennsylvania).
While the Pennsylvania Supreme Court has not decided this particular issue, it is well established, under Pennsylvania law, that where the language of a contract is clear and unambiguous, the court is bound to its plain meaning. St. Paul Fire and Marine Insurance Co. v. United States Fire Insurance Co., 655 F.2d 521, 524 (3d Cir. 1981); Standard Venetian Blind Co. v. American Empire Ins. Co., 503 Pa. 300, 305, 469 A.2d 563, 566 (1983); Pennsylvania Manufacturers' Assoc. Insurance Co. v. Aetna Casualty and Surety Insurance Co., 233 A.2d 548, 551, 426 Pa. 453, 457 (1967). In such cases, a court is not free to rewrite the contract to promote desirable social policy, nor empowered to disregard the language because the plain meaning would be impracticable. "A court should read policy provisions to avoid ambiguities, and not torture the language to create them." St. Paul Fire and Marine Insurance Co. v. United States Fire Insurance Co., 655 F.2d at 524.
Having concluded that the provision is unambiguous, under the express language of the CGL policy, Triangle must prove that actual damage occurred during Liberty Mutual's coverage in order to be indemnified. In reaching this conclusion, I reject Triangle's argument that an event other than an actual injury will create an "occurrence" within the meaning of the CGL policy. More importantly, for purposes of this motion, I reject Liberty Mutual's contention that the policy is triggered only upon the manifestation of an injury. When the environmental damage to Swope Site first occurred cannot be determined as a matter of law on summary judgment.
Summary judgment is inappropriate where a genuine issue of material fact exists. Fed. R. Civ. P. 56(c). Here, a dispute exists regarding the date of actual injury. Liberty Mutual argues that damage occurred, at the earliest, upon manifestation, a time after the expiration of the Triangle-Liberty Mutual policies. Triangle, on the other hand, contends that "damage did take place from discharge, escape or release of pollutants to some degree in all the years between 1965 and 1983." Plaintiff's Response to Liberty Mutual Insurance Company's First Set of Requests for Admissions, para. 16. Triangle points to the fact that EPA alleged "from the moment of deposit into the lagoon [an injurious exposure] existed." Legal Memorandum of Plaintiff Triangle Publications, Inc. Opposing the Four In Limine Motions of Defendant Liberty Mutual Insurance Company, p. 19. Since Triangle may be able to prove that property damage did occur during a policy term, summary judgment is inappropriate. Thus, Liberty Mutual's first motion for summary judgment must be denied.
Liberty Mutual argues, in its second motion for summary judgment, that plaintiff has not been "damaged" within the meaning of the policy.
It contends that "the CERCLA action cannot be characterized as a "damage" action within the settled and generally recognized meaning of the word." Memorandum of Defendant Liberty Mutual Insurance Company in support of its Second Motion for Summary Judgment, p. 3.
Under Pennsylvania law, the term "damages" has been held to include certain equitable relief. See Consolidated Rail Corp. v. Certain Underwriters at Lloyds of London, No. 84-2609, slip opinion (E.D. Pa. June 3, 1986) (and cases cited therein), aff'd, 853 F.2d 917 (3d Cir. 1988). Liberty Mutual may be correct that, under the law of this state, pure injunctive relief directed solely at preventing future harm is not encompassed by the word "damages." The record here, however, does not conclusively show that Triangle's expenditures were solely equitable in nature. It may have indeed experienced the type of "damages" recognized by the Pennsylvania courts. In light of this, I am unable to conclude, as a matter of law, that Triangle has not been damaged within the meaning of the CGL policy. Therefore, Liberty Mutual's second motion for summary judgment is denied.
Finally, in its third motion for summary judgment, Liberty Mutual contends that it has no obligation to Triangle, under the policies, even if there was an "occurrence" resulting in damage. According to Liberty Mutual, Triangle breached the contract by its late notification of the occurrence, thus relieving Liberty Mutual of its contractual obligations. This issue cannot be decided as a matter of law.
At trial, Triangle will bear the burden of proving that notice was given "as soon as practicable."
Triangle has pointed to sufficient evidence of timely notification to withstand the summary judgment motion. See Plaintiff's Exhibits E, H. Thus, whether Triangle breached the contract cannot be decided on summary judgment. See Anderson v. Liberty Lobby, 477 U.S. 242, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).
Furthermore, as defendant concedes, the "insurance company must show prejudice if it seeks to avoid its obligation on the basis of late notice." Compagnie des Bauxites v. Insurance Company of North America, 794 F.2d 871, 875 (3d Cir. 1986) (citing Brakeman v. Potomac Ins. Co., 472 Pa. 66, 371 A.2d 193 (1977). It is not clear that Triangle's acceptance of EPA's Order on Consent, prior to notification, prejudiced Liberty Mutual. Arguably, the resolution Triangle obtained by way of settlement may have been better than any solution Liberty Mutual could have achieved. Absent a showing of prejudice, Liberty Mutual cannot avoid its obligations even if notification was untimely. Accordingly, Liberty Mutual's third motion for summary judgment must be denied.
Liberty Mutual's first, second, and third motions for summary judgment are denied. An appropriate order follows.
AND NOW, this 4th day of January, 1989, for the reasons stated in the attached memorandum, IT IS ORDERED that defendant's motions for summary judgment are DENIED. A pretrial conference is scheduled for February 23, 1989, at 4:00 p.m. in Chambers.