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RHONE-POULENC RORER INC. v. HOME INDEM. CO.

August 2, 1993

RHONE-POULENC RORER INC. and ARMOUR PHARMACEUTICAL COMPANY, Plaintiffs,
v.
THE HOME INDEMNITY COMPANY, Defendant and Third-Party Plaintiff, v. AETNA CASUALTY & SURETY COMPANY, et al., Third-Party Defendants, and REVLON, INC., Third-Party Defendant and Fourth-Party Plaintiff, v. CITY INSURANCE COMPANY, PACIFIC EMPLOYERS INSURANCE COMPANY, et. al., Fourth-Party Defendants.



The opinion of the court was delivered by: BY THE COURT; JAMES MCGIRR KELLY

 J. M. KELLY, J.

 August 2, 1993

 Presently before the court are Defendant, Third-Party Plaintiff and Counterclaim The Home Indemnity Company's ("The Home") Motion for Summary Judgment against Plaintiffs Rhone-Poulenc Rorer, Inc. ("Rorer") and Armour Pharmaceutical Company ("Armour")(collectively "Plaintiffs"), Fourth-Party Defendant Pacific Employers Insurance Company's ("PEIC") Motion for Summary Judgment as to Policy No. XMO 01 1108. The parties have extensively briefed these matters and a hearing was held on July 19, 1993. This Court has subject matter jurisdiction over this case under 28 U.S.C. § 1332 as the parties are in complete diversity and the amount in controversy is in excess of $ 50,000.00.

 Plaintiffs seek declaratory relief as to the obligations of its insurance carriers, in connection with the claims filed by hemophiliacs (the "underlying claims") resulting from their use of Factor VIII manufactured and sold by Armour as FactorateTM and H.T. FactorateTM. The Factor VIII Concentrates were contaminated with HIV resulting in the transmission of AIDS in many hemophiliacs.

 The Home and PEIC contend that Rorer did not purchase insurance for which it now seeks coverage. The policies excluded coverage for products and operations. Two exclusionary clauses were included in the policies, the "products hazard" and the "completed operations". Each exclusion operates to bar coverage for the underlying AIDS claims.

 In response, Plaintiffs assert that the underlying AIDS claims are not precluded under the policies. Plaintiffs cite the Pennsylvania Blood Shield Statute in support of their position. Although the Blood Shield Statute does not specifically define blood and blood products as "services", it does restrict claims arising under products liability. Plaintiffs surmise that the underlying AIDS claims do not fit within the products hazard exclusion. In addition, the completed operations exclusion is inapplicable to businesses engaged in manufacturing.

 Under Fed. R. Civ. P. 56(c), summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." This Court is required, in resolving a motion for summary judgment pursuant to Rule 56, to determine whether "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). In making this determination, the evidence of the nonmoving party is to be believed, and the district court must draw all reasonable inferences in the nonmovant's favor. See id. at 255.

 While the movant bears the initial responsibility of informing the court of the basis for its motion, and identifying those portions of the record which demonstrate the absence of a genuine issue of material fact, Rule 56(c) requires the entry of summary judgment "after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Therefore, the party opposing the motion must come forward with "more than a mere scintilla of evidence in its favor" and "'cannot simply reassert factually unsupported allegations contained in its pleading.'" Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir. 1989)(citing Anderson, 477 U.S. at 249 and 325).

 Pennsylvania law applies the basic principles of contract interpretation to insurance policies. Little v. MGIC Indemnity Corp., 836 F.2d 789, 793 (3d Cir. 1987). If the policy language is clear and unambiguous, the court must enforce that language. Id., (citing Standard Venetian Blind Co. v. American Empire Ins. Co., 503 Pa. 300, 469 A.2d 563, 566 (1983). A policy susceptible to more than one interpretation is ambiguous. Id. Courts construe ambiguities in insurance contracts against the insurers. Id. ; Pacific Indemnity Co. v. Linn, 766 F.2d 754, 761 (3d Cir. 1985). The same principles apply where the insured is a commercial entity. Id.

 Discussion

 The parties dispute the applicability of two contractual provisions, the "products hazard" and the "completed operations", to the underlying HIV claims. The court addresses each of these provisions. Initially, it shall be noted that ...


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