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Catlin Specialty Insurance Co. v. J.J. White, Inc.

United States District Court, E.D. Pennsylvania

June 26, 2019

CATLIN SPECIALTY INSURANCE CO., Plaintiff/Counterdefendant,
v.
J.J. WHITE, INC., Defendant/Counterplaintiff, SUNOCO, INC., et al., Counterplaintiffs.

          MEMORANDUM OPINION

          Goldberg, J.

         This continuing insurance coverage dispute presents complicated questions regarding indemnification obligations stemming from a wrongful death settlement in the Philadelphia Court of Common Pleas. Through an Opinion issued on February 27, 2018, I resolved cross-motions for summary judgment. Defendant in this matter, J.J. White, Inc. (“J.J. White”), who was a settling party in the Common Pleas case, now understandably asks me to clarify an important portion of that Opinion dealing with proof issues on the coverage question. This follow-up Opinion sets forth that clarification.

         I. FACTUAL & PROCEDURAL BACKGROUND[1]

         The insurance policy at issue, issued to J.J. White by Catlin Specialty Insurance Company (“Catlin”), is entitled “Contractor's Protective Professional and Pollution Legal Liability Insurance Policy (hereinafter the “Pollution Policy”).[2] The relevant coverage provision of the Pollution Policy provides as follows:

The Insurer shall pay on behalf of Insured for a Pollution Loss . . . which the Insured has or will become legally obligated to pay as a result a [sic, read “as a result of a”] Pollution Claim first made against the Insured and reported to the Insurer, in writing, during the Policy Period . . . from Pollution Conditions . . ., provided that . . . the Pollution Conditions first occurred on or after the Retroactive Date . . . .

(Ford Decl., Ex. A § IV.Q.)

         The italicized text above is referred to as the “Retroactive Date Provision, ” and, as I concluded in the Previous Opinion, it limits coverage to injuries from toxic chemical exposures that occurred on or after April 30, 2002 (the “Retroactive Date”). (Previous Op. 2-3.)

         The underlying wrongful death suit was brought by the estate of a refinery worker, George Gans, who worked for J.J. White at a Sunoco refinery from 1986 until his diagnosis and death from leukemia in 2010. In the wrongful death suit, Gans' estate argued that Gans' leukemia was caused by exposure to certain toxic chemicals (termed “BTEX”) at the refinery. Because Gans worked at the refinery both before and after the Retroactive Date, the underlying suit created a risk for J.J. White of both covered and uncovered liability. If Gans' injuries were caused by pre-Retroactive-Date exposures, J.J. White's liability to Gans' estate would not be covered. On the other hand, if Gans' injuries were caused by exposures on or after the Retroactive Date, J.J. White's liability to Gans' estate would be covered.

         There was also a third possibility: Gans' leukemia might not have been caused by BTEX exposures at all. Instead, it could have been caused by genetics or some other cause, such as Gans' years of cigarette smoking. In that case, J.J. White would have no liability to Gans' estate, covered or uncovered. But, as noted below, because the underlying case settled before trial, none of these three possibilities was proven. (Previous Op. 4-6.)

         In the course of discovery in the underlying lawsuit, Catlin withdrew its defense of J.J. White, contending that there was no coverage. As I determined in my Previous Opinion, because J.J. White faced a risk of covered liability, Catlin was contractually obligated to defend the Gans suit, and breached that duty when it withdrew its defense.

         After Catlin withdrew its defense, J.J. White made the decision to settle with Gans' estate, even though J.J. White denied all liability to Gans' estate in the underlying suit. J.J. White then sought indemnity from Catlin for the amount of the settlement. Catlin refused and initiated this declaratory judgment action to establish that the policy did not provide coverage. J.J. White countersued.

         In the previously-decided cross-motions for summary judgment, Catlin sought a summary determination that it had neither a duty to defend nor indemnify J.J. White with respect to the Gans suit. J.J. White disagreed, urging that it had a right to a defense and indemnity of the settlement. Alternatively, J.J. White sought partial summary judgment that Catlin bore the burden of proving whether the Retroactive Date Provision would bar coverage. Because there was indisputably a possibility that Gans' suit could result in covered liability, I denied Catlin's motion in its entirety, and granted J.J. White's motion insofar as J.J. White argued that Catlin had breached its duty to defend.

         I also decided that New York law applied, and that, under Servidone Construction Corp. v. Security Insurance Company, 477 N.E.2d 441 (N.Y. 1985), the mere fact that Catlin breached its duty to defend did not entitle J.J. White to indemnity for amounts paid in the settlement. I determined that there was a factual dispute as to when, if ever, exposure to BTEX caused Gans' leukemia-and therefore whether the loss was covered. Consequently, I denied both Catlin's and J.J. White's motions for summary judgment on the issue of indemnity, concluding that this issue would have to be resolved by a factfinder. Finally, I decided that J.J. White, as the insured, bore the burden of proving at trial that there was coverage and that the Retroactive Date Provision did not preclude such coverage.

         In the Motion for Clarification or Reconsideration of the Previous Opinion currently before me, J.J. White does not challenge any of these conclusions. Rather, J.J. White challenges part of a single sentence in the Previous Opinion that it contends incorrectly sets out the specific facts that it will be required to prove in order to establish coverage. This sentence reads, in relevant part: “J.J. White . . . bear[s] the burden of proving that the Retroactive Date Provision is inapplicable-i.e. that Gans' leukemia was caused by exposures to BTEX occurring on or after the Retroactive Date [April 30, 2002.] (Previous Op. 29 (emphasis added.))

         J.J. White argues that this sentence imposes an improper burden on it, because it requires it to prove that exposure to BTEX was actually the cause of Gans' leukemia. J.J. White asserts that the previously-decided summary judgment motions did not address this issue and that this sentence is an incorrect expression of the law. J.J. White contends that, under applicable New York law, it is not required to prove actual liability to Gans' estate, but rather potential liability is enough. J.J. White accordingly requests that I either: (1) strike the above sentence, leaving the question as to what exactly it must prove to establish coverage open, or, alternatively, (2) rephrase the sentence to accord with its view of the law.

         Catlin opposes either form of relief. In Catlin's view, the issue was presented in the previous summary judgment motions and the Previous Opinion conclusively resolved it in Catlin's favor, by noting that J.J. White cannot show a right to indemnity unless it can prove that it was actually liable to Gans' estate.

         For the reasons set out below, I agree with J.J. White that it need not establish that it was, in fact, liable in the underlying suit. Accordingly, I will strike the sentence from my Previous Opinion suggesting otherwise. Going forward, and for the reasons set out below, in order to establish coverage, J.J. White will be required to prove the following: First, at the time it settled with the worker's estate, there was a possibility that the underlying trial verdict could have resulted in a covered loss. This is required because, if there was no possibility that the death was caused by exposure to chemicals during a covered time period, Catlin had no coverage obligations whatsoever. I note that, in my Previous Opinion, I found that there was evidence in the record of the underlying suit that fatal exposures could have occurred during a covered time period (i.e., on or after the Retroactive Date), such that Catlin was required to defend. (See Previous Op. 23 (concluding that a “factfinder could . . . have reasonably found [in the underlying suit] that [the worker] was exposed . . . in substantial amounts after the retroactive date, and that it was this later exposure that caused his [death]-in which case there would be coverage.”)) Second, J.J. White must establish that, given the evidence available to it at the time of settlement, it was reasonable to enter into the settlement in the underlying case. And lastly, assuming that exposure to chemicals was the cause of the worker's death, J.J. White must prove that the fatal exposures occurred on or after the Retroactive Date.

         II. LEGAL STANDARD

         “The general purpose of a motion for clarification is to explain or clarify something ambiguous or vague, not to alter or amend.” Resolution Trust Corp. v. KPMG Peat Marwick, No. 92-cv-1373, 1993 WL 211555, at *2 (E.D. Pa. June 8, 1993). By contrast, “[t]he purpose of a motion for reconsideration . . . is to correct manifest errors of law or fact or to present newly discovered evidence.” Max's Seafood Cafe ex rel. Lou-Ann, Inc. v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999) (quoting Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985)). A motion for reconsideration must rely upon one of the following grounds: “(1) an intervening change in controlling law; (2) the availability of new evidence that was not available when the court [rendered its decision]; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice.” Id. (citing N. River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995)).

         III. CLARIFICATION - WHAT J.J. WHITE MUST PROVE IN ORDER TO OBTAIN INDEMNIFICATION

         J.J. White's clarification motion presents the following issue: Under New York law, when an insurer breaches its duty to defend its insured against a claim carrying a risk of both covered and uncovered liability, and the insured has settled with the claimant, what must the insured prove to establish its right to indemnity? This issue can be broken into two subsidiary questions. First, must the insured prove actual liability to the claimant? That is, must the insured prove that, had the underlying suit proceeded to trial, the insured would have been found liable to the claimant? And if the answer to that question is “no, ” the remaining question is how to determine coverage for a settled claim, where the insured contested liability in the underlying case, and that issue was not resolved by a factfinder.

         As noted above, as to the first question, I conclude that J.J. White need not prove that it was actually liable in the underlying action. The answer to the second question is more nuanced and complicated. It requires the factfinder to assume that the deceased refinery worker's death was caused by exposure to harmful chemicals. Under this scenario, in which the factfinder must make that assumption, J.J. White must then prove that the fatal chemical exposures occurred on or after the Retroactive Date of April 30, 2002.

         A. Question 1: Under New York Law, Must the Insured Prove Actual Liability?

         Although no case of the New York Court of Appeals is directly on point, there is persuasive precedent suggesting that, should the question ever come before it, [3] that court would conclude that an insured that enters into a reasonable settlement with a claimant for a covered claim is entitled to ...


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