Therefore, the Court must choose the appropriate theory to apply in the instant case.
In Appalachian, the Third Circuit adopted the "manifestation" trigger of coverage rule in determining when the injurious effects of an insured's discriminatory employment practices took place. Relying on the peculiar nature of employment discrimination injuries and the difficulty in ascertaining when such injuries occur, the Third Circuit held that an "occurrence takes place when the injuries first manifest themselves." Id. at 62 (citing Bartholomew v. Insurance Co. of N.A., 502 F. Supp. 246, 254 (D.R.I. 1980), aff'd sub nom. Bartholomew v. Appalachian Ins. Co., 655 F.2d 27 (1st Cir. 1981)).
Until very recently, it appeared that Appalachian 's "manifestation" rule for triggering insurance coverage was limited to employment discrimination cases and similar situations where it is difficult to establish when the injurious effects of accidents occur. Appalachian, 676 F.2d at 62-63; see also Centennial Ins. Co. v. Lumbermens Mut. Cas. Co., 677 F. Supp. 342, 346-47 (E.D. Pa. 1987) (distinguishing Appalachian on the grounds that the time of occurrence was easily identifiable).
The Third Circuit, however, has recently revisited the issue of when an occurrence takes place triggering insurance coverage. In doing so, the court stated that "under Pennsylvania law, the general rule is that a tort 'occurs' for insurance coverage purposes when the injuries caused by the tort first become apparent or manifest themselves." City of Erie v. Guaranty Nat. Ins. Co., 109 F.3d 156 (3d Cir. 1997). Thus, the Third Circuit's most recent decision instructs district courts applying Pennsylvania law to employ the "manifestation" trigger as the general rule in tort actions.
The Third Circuit explained in City of Erie that the "law of Pennsylvania on the timing of the 'occurrence' of a tort for insurance purposes is rooted in the decision of our court in Appalachian." City of Erie, 109 F.3d at 162. The court noted that Pennsylvania's intermediate appellate courts have adopted Appalachian 's "manifestation" rule in other contexts in the fifteen years since Appalachian was decided. Id. at 162-63 (citing Keystone Automated Equip. Co., Inc. v. Reliance Ins. Co., 369 Pa. Super. 472, 535 A.2d 648, 651 (Pa. Super. 1988); D'Auria v. Zurich Ins. Co., 352 Pa. Super. 231, 507 A.2d 857 (Pa. Super. 1986)). Therefore, according to the Third Circuit, the manifestation/discovery rule now serves as the generally applicable rule in Pennsylvania for determining when an occurrence takes place triggering insurance coverage under occurrence-type CGL policies.
The generally applicable manifestation rule, however, is not the only triggering theory adopted in Pennsylvania and the Third Circuit. In asbestos cases, for example, Pennsylvania law provides a "continuous trigger" or "triple trigger" theory where coverage is triggered continuously from first exposure through manifestation of asbestosis. City of Erie, 109 F.3d at 164 (citing J.H. France Refractories Co. v. Allstate Ins. Co, 534 Pa. 29, 626 A.2d 502 (Pa. 1993); ACandS, Inc. v. Aetna Cas. & Sur. Co., 764 F.2d 968 (3d Cir. 1985) (applying Pennsylvania law)). Under this theory, bodily injury caused by asbestos occurs when a person is first exposed to asbestos, upon further progression of the disease, or upon manifestation of the disease. J.H. France, 626 A.2d at 507; ACandS, 764 F.2d at 973.
Quarry urges the Court to apply a triple trigger theory to the instant case. Quarry contends that the settlement of the foundation, like asbestosis, is an event that first occurred during the policy period but did not become apparent or discovered until after the policy expired. Despite any possible similarity between the two injuries, however, the triple trigger theory is inapplicable to this case. Under Pennsylvania law, the triple trigger theory is limited to asbestos injuries and other cases involving latent diseases because of the unique difficulty in determining when such injuries occur and because of the risk of insurers terminating coverage during the disease's latency period. City of Erie, 109 F.3d at 164-65; Armotek Indus., Inc. v. Employers Ins. of Wassau, 952 F.2d 756, 763 (3d Cir. 1991) (applying Pennsylvania law). In contrast, the parties have stipulated in the present case that "the foundation system and piles in the rear of the building settled during the period November, 1985 through September 1, 1986 while the subject insurance policy was in effect." See Stipulation P 33. Accordingly, the Court declines to adopt the triple trigger theory.
In addition to rejecting the triple trigger theory, the Court also finds that the unique facts of this case warrant departure from the generally applicable manifestation rule stated in City of Erie. Quarry and Marine have stipulated that the foundation settled during the period of November, 1985 through September 1, 1986. Thus, unlike in City of Erie and Appalachian, there is no dispute about when the injurious effects of the insured's actions took place. They occurred from November, 1985 through September 1, 1986, while the policy was in force. There can be no question that the effect of Brenneman's alleged negligence is that Quarry's foundation settled. Both parties have stipulated that this damage occurred while the insurance policy was in force. Therefore, the time of damage is easily ascertainable as having occurred during the policy period. Although Quarry neither discovered the foundation's settling nor completed construction of its building until after the policy had expired, it suffered actual property damage as soon as the foundation piles began to settle.
"Property damage" is clearly and unambiguously defined in the policy as "physical injury to or destruction of tangible property which occurs during the policy period." The foundation system is certainly tangible property that suffered damage, as the parties stipulate, within the policy period. This is a single "occurrence" permitting Quarry to recover, in the event Brenneman is found negligent in the state court action, any damages proximately caused by Brenneman's negligence which are not excluded from coverage by the policy's exclusions, as hereinafter discussed. As the Pennsylvania Supreme Court has explained:
Being defined as one "occurrence," the entire injury, and all damages resulting therefrom, fall within the indemnification obligation of the insurer. In other words, once the liability of a given insurer is triggered, it is irrelevant that additional exposure or injury occurred at times other than when the insurer was on the risk. The insurer in question must bear potential liability for the entire claim.
J.H. France, 626 A.2d at 508 (quoted in Koppers, 98 F.3d at 1451). Of course, it is possible that Quarry's recovery from Brenneman might be reduced in the state court action by Quarry's own or by others' negligence in continuing to construct the building after discovering the foundation had settled.
For the foregoing reasons, this Court concludes that, in the event Brenneman is found negligent in the Delaware County Court of Common Pleas action captioned Quarry Associates v. J.E. Brenneman Company (Civil Action No. 88-13409), such finding of negligence sets forth an "occurrence" under Continental Policy No. L2927679 during the period the policy was in effect.
B. Exclusions from Coverage
Having determined that an occurrence took place within the insurance policy period, the Court must next address whether any policy exclusions limit coverage. In counts six and seven of it declaratory judgment complaint, Marine contended that the "Broad Form Property Damage Endorsement," containing what are called the "work product" or "work performed" exclusions, excludes coverage for all of Quarry's damages. However, in its brief for summary judgment, Marine now claims that the Broad Form Property Damage Endorsement only excludes coverage for the costs of repairing or replacing the foundation piles installed by Brenneman. In its own brief for summary judgment, Quarry agrees with Marine's recent position that the policy exclusions only exclude coverage for damage to Brenneman's own work, and not for damage to work performed by other contractors resulting from Brenneman's alleged negligence.
The Court has reviewed all of the exclusions in the insurance policy at issue and has determined that only exclusions Y and Z of the Broad Form Property Damage Endorsement are applicable. Exclusion Y applies:
to property damage . . . [to] that particular part of any property, not on the premises owned by or rented to the insured . . . the restoration, repair, or replacement of which has been made or is necessary by reason of faulty workmanship thereon by or on behalf of the insured.