not "any liability," as in the First State policy.
Having determined that the Wausau policy incorporates the language of the First State policy, which in turn directs the reader to the underlying CNA policy, our previous Memorandums and Orders (See Memorandum and Orders dated June 25, 1993, September 3, 1993, and April 12, 1994) remain operative.
Thus, CNA's pollution exclusion clause applies only to the policy's property damage and bodily injury provisions. As we have stated many times previously, one can reasonably interpret the entire CNA policy as providing coverage for personal injury damages which are not subject to the exclusions contained in the property damage or bodily injury portion of the policy.
Since the First State policy directs the reader to the underlying CNA policy, the personal injury endorsement of the CNA policy is applicable. Thus, the personal injury endorsement with its coverage for "wrongful entry" and "other invasion of the right of private occupancy", is, in the context of the entire policy, specifically the pollution exclusion clause, ambiguous.
The "any liability" language contained in First State's pollution exclusion is inapplicable. The prefatory language of First State's exclusions section directs us to the CNA policy. As that policy is ambiguous as it relates to the personal injury coverage, we must resolve the ambiguity in favor of the insureds. Therefore, the loss suffered by Plaintiff Gould potentially falls within the insured risk and thus summary judgment based on the pollution exclusion is denied to Defendant Wausau.
B. Known Loss Doctrine
Defendant Wausau argues that its policy issued to Plaintiff Gould for the period of March 1, 1982 - March 1, 1983, does not afford coverage or specifically that they are relieved from providing coverage because of the Known Loss Doctrine. In short, they assert that Plaintiff Gould had knowledge of the March 7, 1969 PADER Order; the January 27, 1976 PADER Order; and the March 10, 1980 PADER Order, as well as all DER correspondence leading up to each Order. (Doc.No. 551, pp. 2-5 & Doc.No.541, pp. 13-37). Defendant Wausau avers that Plaintiff Gould should not be allowed to recover, or more accurately, receive coverage after they improperly or perhaps deceptively contracted with the insurance companies, while knowing with certainty that significant pollution had already occurred. Wausau contends that Gould knew or should have known that it would suffer a loss as of January 27, 1976, the date the Pennsylvania DER confirmed the fugitive emissions of lead and the potential for off-site contamination from the Marjol site.
Invoking the "Known Loss" Doctrine, Wausau contends that Gould cannot receive insurance coverage for losses that it knew about at the time it obtained the insurance. Specifically, Wausau contends that because it is clear that Gould knew it had at least some contamination prior to May 1, 1980, the date Gould acquired the Marjol site, coverage under the policy which took effect at that time, must be barred, because the resulting "losses" suffered by Gould as successor to Marjol were already a known certainty.
To date, the cases within and without this circuit that have addressed the known loss defense have been clear in reminding us that the defense is one that is grounded in policy considerations. The case sub judice is not one in which the insurers have alleged fraud on the part of the insured in the application process. Instead, in seeking protection via the "known loss" defense, Wausau asks the Court to insulate it from paying claims on the ground that the risk which came to pass was uninsurable at the time the insurance policy was sold. Wausau asserts, at the time the policy was issued there was no risk, as the pollution did, in fact, happen. Although the insurer was presumably free to inquire about pollution or at least the potential for what DER considers pollution, in the course of the application process to obtain insurance, there is no mention of this in the documents submitted to the Court. Perhaps at trial the parties will delve into that vein of inquiry, but for today we must temper Defendants' assertion of Plaintiff's knowledge with the reality that despite such "obvious pollution", Defendants issued the policies.
At the time of writing of this opinion, we can find no case in which the State Courts of Pennsylvania have addressed the Known Loss Doctrine. It is clear, however, from the documents submitted and the cases cited therein, that the known loss defense has been recognized to different degrees by the Courts of other States. Accordingly, we must now make a prediction about how the Supreme Court of Pennsylvania would rule on the issue of known loss. UTI Corporation v. Fireman's Fund Insurance Company, 896 F. Supp. 362, 1995 WL 505370 (D.N.J. 1995) (citing Hakimoglu v. Trump Taj Mahal Associates, 876 F. Supp. 625, 1994 WL 749487 (D.N.J. 1994). See also McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 661 (3rd Cir., cert. denied, 449 U.S. 976, 66 L. Ed. 2d 237, 101 S. Ct. 387 (1980)).
We hold, if presented with the matter before us, the Pennsylvania Supreme Court would recognize the "known loss" defense in some form. We turn our attention to what specifically has to be known prior to a liability policy's inception date for purposes of denying coverage under general insurance principles. Plaintiff Gould asserts that although the source of some of the losses ultimately sustained may have been known to the insured (Gould) prior to May 1, 1980, the actual acquisition of the Marjol site, the financial injury which forms the basis for the instant claim for insurance coverage was not yet known. For direction on this critical point, and because we cannot find and the parties have not pointed us to any other case in the Third Circuit conclusively addressing the Known Loss Doctrine, we turn to the UTI Corp. case, supra, in which the District Court of New Jersey made clear the distinction between first party insurance policy liability and third party liability. The Court in UTI Corp. held:
In the context of first party insurance policies, once the unfortunate event occurs [ ], there remains no statistical uncertainty of risk to be appropriately insured against. By contrast, however, the occurrence of the event [ ] does not destroy the requisite element of statistical uncertainty in the third party liability context, as the relevant events remain to be determined, including: is there any harm to off site locations; will claims be filed at all; what number of claims will be filed; what sums of money will the claims demand. In other words, Plaintiff did not purchase liability insurance to compensate it for all property damage, but rather to compensate it for all sums for which it is held liable as a result of claims in which damage to property of third parties is alleged. (In layman's terms, "in excess" of the primary policy).
The relevant "loss" to Plaintiff is not the property damage itself, but rather the company's legal liability arising therefrom. (emphasis and parenthetical added).
UTI Corp. v. Firemen's Fund Insurance Company, 1995 WL 505370, *12 (D.N.J.).