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CHEMETRON INVS. v. FIDELITY & CAS. CO.

May 25, 1994

CHEMETRON INVESTMENTS, INC., Plaintiff,
v.
FIDELITY & CASUALTY COMPANY OF NEW YORK, et al., Defendants. ALLEGHENY INTERNATIONAL CANADA, LTD., Plaintiff, v. FIDELITY & CASUALTY COMPANY OF NEW YORK, et al., Defendants.



The opinion of the court was delivered by: ALAN N. BLOCH

 AND NOW, this 25th day of May, 1994, upon consideration of the Motion for Summary Judgment filed by defendant, Allstate Insurance Company, as successor-in-interest to Northbrook Excess and Surplus Insurance Company, formerly known as Northbrook Insurance Company (document No. 252) filed in the above captioned matters on March 16, 1994, and upon consideration of the Motion for Summary Judgment filed by defendant, Home Insurance Company (document No. 249) filed in the above captioned matters on March 16, 1994, and upon further consideration of Plaintiffs' Response thereto,

 AND, further, upon consideration of Plaintiffs' Motion for Partial Summary Judgment (document No. 246) filed in the above captioned matters on March 16, 1994, and upon further consideration of Defendants' Responses thereto,

 IT IS HEREBY ORDERED that said Motion is GRANTED in part and DENIED in part, to wit:

 
1. Said Motion is GRANTED, to the extent that the defendants are relying upon Part III of the nuclear energy liability exclusions; and
 
2. Said Motion is DENIED in all other respects.

 Summary judgment may be only be granted 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 judgment as a matter of law." Fed. R. Civ. P. 56(c). "Rule 56 mandates the entry of summary judgment, after adequate time for discovery and upon motion, against the 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, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). In considering a motion for summary judgment, this Court must examine the facts in a light most favorable to the party opposing the motion. International Raw Materials, Ltd. v. Stauffer Chemical Co., 898 F.2d 946, 949 (3d Cir. 1990).

 The burden is on the moving party to demonstrate that the evidence creates no genuine issue of material fact. Chipollini v. Spencer Gifts, Inc., 814 F.2d 893, 896 (3d Cir.) (en banc), cert. dismissed, 483 U.S. 1052 (1987). Where the non-moving party will bear the burden of proof at trial, the party moving for summary judgment may meet its burden by showing that "the evidentiary materials of record, if reduced to admissible evidence, would be insufficient to carry the non-movant's burden of proof at trial." Id.; Celotex, 477 U.S. at 322.

 In its motion for summary judgment, defendant Allstate/Northbrook raises four arguments. *fn1" First, Allstate/Northbrook asserts that the claims of the plaintiffs fall "within the pollution exclusions" contained in the insurance policies and argues that plaintiffs "cannot demonstrate that the pollution or contamination was 'sudden and accidental' to come within the exception to the pollution exclusion." *fn2" Second, Allstate/Northbrook maintains that the liabilities incurred by plaintiffs at seven sites are insufficient to "involve" the excess insurance policies. *fn3" Third, Allstate/Northbrook argues that the "nuclear exclusion" contained in the policies "excludes all damages" arising at the McGean site because those damages "result from the 'radioactive contamination of property.'" Finally, Allstate/Northbrook renews its contention, which was raised in a previous motion for summary judgment and denied, that it is entitled to judgment as a matter of law on the basis of the failure of the plaintiffs to provide notice of the underlying claims. *fn4"

 Defendant Home Insurance has joined Allstate/Northbrook's motion and additionally asserts that the policies, which it issued, *fn5" do not provide coverage for "owned property" and further that the evidence shows that there was "no occurrence" at any of these sites. *fn6"

 Plaintiffs have moved for partial summary judgment requesting that the Court dismiss defendants' "affirmative defense that there is no coverage for claims which fall within the nuclear energy liability exclusion" contained in the policies issued by the defendants. *fn7"

 A. Choice of law

 Where jurisdiction is based upon diversity of citizenship and amount in controversy, this Court must apply the choice of law rules of the forum state, Pennsylvania. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941); Shuder v. McDonald's Corp., 859 F.2d 266, 269 (3d Cir. 1988). "Before a choice of law question arises, however, there must actually be a conflict between the potentially applicable bodies of law." Lucker Manufacturing v. Home Insurance Co., 23 F.3d 808, 1994 WL 179135, at *4 (3d Cir. 1994) (citing Oil Shipping B.V. v. Sonmez Denizcilik Ve Ticaret A.S., 10 F.3d 1015, 1018 (3d Cir. 1993)). Therefore, this Court will first determine whether an actual conflict exists between the potentially applicable bodies of law and then, if such a conflict exists, analyze the relevant factors under Pennsylvania choice of law principles.

 Plaintiffs contend that Illinois law controls the insurance "coverage issues" in this case, including the applicability of any exclusions and/or exceptions to those exclusions. *fn8" Defendant Allstate/Northbrook, however, argues that Pennsylvania law controls these issues. Defendant Home Insurance appears to agree with plaintiffs that Illinois law should be applied to the coverage issues. A central issue with respect to the scope of coverage in the instant case involves the application of the "pollution exclusion" and the "sudden and accidental" exception to that exclusion.

 Under Pennsylvania law, "the exception for 'sudden and accidental' discharges applies only to discharges that are abrupt and last a short time." Northern Insurance Co. of New York v. Aardvark Associates, Inc., 942 F.2d 189, 193 (3d Cir. 1991) (following Lower Paxon Township v. United States Fidelity and Guaranty Co., 383 Pa. Super. 558, 557 A.2d 393 (Pa. Super.), appeal denied, 567 A.2d 653 (Pa. 1989), and Techalloy Co. v. Reliance Insurance Co., 338 Pa. Super. 1, 487 A.2d 820 (Pa. Super.), appeal denied, (Pa. Oct. 31, 1985); accord Gould, Inc. v. Continental Casualty Co., 822 F. Supp. 1172, 1175 (E.D. Pa. 1993).

 
According to the Pennsylvania Superior Court:

 Lower Paxton Township, 557 A.2d at 402.

 In contrast, the sudden and accidental exception under Illinois law "retriggers coverage under the pollution exclusion if the damages resulting from pollution discharges are unexpected or unintentional" without regard to the abruptness of the discharge. Gould, 822 F. Supp. at 1175 (citing Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 607 N.E.2d 1204, 180 Ill. Dec. 691 (Ill. 1992).

 Thus, Pennsylvania law and Illinois law conflict on this issue and the Court must apply Pennsylvania choice of law rules to ascertain the applicable body of law. Gould, 822 F. Supp. at 1175.

 The Supreme Court of Pennsylvania has adopted a flexible approach to the choice of law, combining a relationship and interest analysis. Griffith v. United Airlines, Inc., 416 Pa. 1, 203 A.2d 796, 805 (Pa. 1964). Both the Superior Court of Pennsylvania and the Court of Appeals for the Third Circuit have applied the Griffith approach to contract actions, even though Griffith involved only a tort action. Hughes v. Prudential Lines, Inc., 425 Pa. Super. 262, 624 A.2d 1063 (Pa. Super.), appeal denied, 633 A.2d 152 (Pa. 1993); McCabe v. Prudential Property and Casualty Insurance Co., 356 Pa. Super. 223, 514 A.2d 582, 585 (Pa. Super. 1986); Compagnie des Bauxites v. Argonaut-Midwest Insurance, 880 F.2d 685, 688 n. 9 (3d Cir. 1989); American Contract Bridge League v. Nationwide Mutual Fire Insurance Co., 752 F.2d 71, 74 (3d Cir. 1985).

 Under the Griffith approach, the Court "'takes into account both the grouping of contacts [listed in Restatement (Second) of Conflict of Laws § 188(2) (1971)] with the various concerned jurisdictions and the interests and policies that may be validly asserted by each jurisdiction.'" Compagnie des Bauxites, 880 F.2d at 689 (quoting Melville v. American Home Assurance Co., 584 F.2d 1306, 1311 (3d Cir. 1978)).

 Section 188 of the Restatement (Second) of Conflict of Laws provides in pertinent part:

 
In the absence of an effective choice of law by the parties (see § 187), the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:
 
(a) the place of contracting,
 
(b) the place of negotiation of the ...

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