Sunoco Inc v. IL Natl Ins Co, (3rd Cir. 2007)

Federal Circuits

Linked as:

Text


NOT PRECEDENTIAL

U N IT E D STATES COURT OF APPEALS

F O R THE THIRD CIRCUIT

N o s . 05-4992 and 06-1295

S U N O C O , INC.;

S U N O C O , INC. (R&M),

F O R M E R L Y SUN COMPANY INC. (R&M)

v. IL L IN O IS NATIONAL INSURANCE COMPANY,

Appellant

O n Appeal from the United States District Court

f o r the Eastern District of Pennsylvania

(D .C . No. 04-cv-04087)

D is tric t Judges: Honorable Charles R. Weiner

a n d Honorable John R. Padova

A rg u e d December 13, 2006

B e f o re : FISHER, CHAGARES and GREENBERG, Circuit Judges.

(F ile d : January 31, 2007)

E d w a rd P. Krugman

C a h ill, Gordon & Reindel

8 0 Pine Street

N e w York, NY 10005

T h o m as G. Wilkinson, Jr.

S te p h e n A. Cozen J o h n J. Dwyer C o z e n & O'Connor 1 9 0 0 Market Street, 3rd Floor P h ila d e lp h ia , PA 19103 L a u ra A. Foggan (Argued) K a ra lee C. Morell W ile y, Rein & Fielding 1 7 7 6 K Street, N.W.

W a sh in g to n , DC 20006 A tto r n e y s for Appellant P e te r Buscemi M o rg a n , Lewis & Bockius 1 1 1 1 Pennsylvania Avenue, N.W.

W a sh in g to n , DC 20004 R ich a rd F. McMenamin M o rg a n , Lewis & Bockius 1 7 0 1 Market Street P h ila d e lp h ia , PA 19103 D a v id A. Luttinger, Jr. (Argued) M o rg a n , Lewis & Bockius 1 0 1 Park Avenue N e w York, NY 10178 A tto r n e y s for Appellees O P IN I O N OF THE COURT F IS H E R , Circuit Judge.

T h is case comes to us on appeal from the District Court's grant of partial summary ju d g m e n t and entry of declaratory judgment in favor of Sunoco, Inc. and Sunoco, Inc.

(R & M ) (hereinafter "Sunoco"), plaintiffs in this case. The District Court determined that Illin o is National Insurance Company ("Illinois National") had a duty to defend Sunoco a g a in s t approximately seventy-seven suits arising from Sunoco's use of a gasoline a d d itiv e . Illinois National appealed. For the reasons set forth below, we will reverse only s o that the District Court may reconsider its decision in light of our holding that one of th e seventy-seven cases presented did not arise from the same occurrence as the other s e v e n t y- s i x .

I.

B ec au se we write only for the parties, we will set forth only those facts necessary f o r our analysis. The factual background of this case is undisputed. Sunoco is part of a g l o b a l petrochemical corporation that manufactures and markets petroleum products, in c lu d in g gasoline. Since the late 1970s, Sunoco, along with numerous other p e tro c h e m ic a l producers, has been using a gasoline enhancer known as methyl tertiaryb u tyl ether ("MtBE"), an additive that was originally thought to reduce the amount of c a rb o n released into the air during the burning of gasoline.

A s of the filing of this appeal, Sunoco was a named defendant in seventy-seven la w s u its asserting claims based on Sunoco's manufacture and distribution of gasoline c o n ta in in g MtBE. Sixty of those lawsuits were consolidated into Multi-District Litigation (" M D L " ) 1358. The other seventeen remain pending individually.

P r io r to the filing of these suits, Sunoco purchased an insurance policy from Illin o is National which covers lawsuits based on damage to persons or property. The p o lic y imposes on Illinois National a duty to defend against any claims to which the p o licy might apply. However, before the policy applies, Sunoco must satisfy two separate s e lf -in s u re d retentions, which are essentially like deductibles. The language regarding the s e lf - in s u r e d retentions reads: In consideration of the premium charged, it is agreed that the Limits of In s u ra n c e for each of the coverages provided by this policy will apply [in] e x c es s of a $250,000 Self-Insured Retention (hereinafter referred to as the P e r Occurrence Retention Amount) and an additional Self Insured R e ten tio n of $5,000,000 (hereinafter referred to a [sic] the Aggregate R e te n tio n Amount.) T h e Per Occurrence Amount: (a ) s h a ll apply only to occurrences covered under this policy; and (b ) s h a ll apply separately to each such occurrence arising out of such o c c u rre n c e, and (c ) s h a ll include all amounts under the Supplementary Payments section o f the policy.[] T h e Aggregate Retention Amount: (a ) s h a ll apply only to occurrences covered under this policy; and (b ) s h a ll apply to amounts which are greater than the Per Occurrence R e te n tio n Amount; and (c ) s h a ll not include any amount within the Per Occurrence Retention A m o u n t.

In short, Sunoco must meet two spending thresholds before coverage begins. First, S u n o c o must spend $250,000 on each individual occurrence. Then Sunoco must spend an a g g re g a te amount of $5,000,000 in addition to the $250,000 spent on each individual o c c u rr e n c e .

T h e contract defines "occurrence" as "an accident, including continuous or r e p e a te d exposure to substantially the same general harmful conditions." The policy also in c lu d e s a pollution exclusion, which excludes from coverage any damage which would n o t have occurred but for the discharge of pollutants. However, the policy also contains a n exception to the pollution exclusion. The policy will cover damage caused by the d is c h a rg e of a pollutant if the discharge of pollutants caused damage away from premises o w n e d or rented by Sunoco.

S u n o c o filed this suit after Illinois National refused to defend it against the u n d e rlyin g suits, claiming that Sunoco had failed to meet the self-insured retentions and that coverage was barred under the pollution exclusion. On a motion for partial summary ju d g m e n t on the issue of duty to defend, the District Court found that all seventy-seven c a se s constituted a single occurrence. Therefore, Sunoco had met its self-insured re te n tio n s . It also stated that coverage was not excluded on the basis of the pollution e x c lu s io n . This timely appeal followed.

II.

B e f o re we can reach the substance of Illinois National's appeal, we must satisfy o u rs e lv e s that we have jurisdiction. Generally, only final orders are appealable. 28 U .S .C . § 1291. A final and appealable order "is one `which terminates the litigation b e tw e e n the parties on the merits of the case and leaves nothing to be done but to enforce b y execution what has been determined.'" Dotzel v. Ashbridge, 438 F.3d 320, 323 (3d C ir. 2006) (quoting Richerson v. Jones, 551 F.2d 918, 922 (3d Cir. 1977)). As the D is tric t Court's order only granted partial summary judgment, it is not a final order for p u rp o s e s of section 1291.

H o w e v e r, a district court may certify an order that disposes of fewer than all of the c la im s in an action pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. Fed.

H o m e Loan Mortgage Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 440 (3d Cir. 2003).

When ruling on a 54(b) certification, a district court must satisfy itself that two re q u ire m e n ts have been met: first, that the judgment on the particular issue is final and, s e c o n d , that there is no just reason for the delay. In reaching that conclusion, the district co u rt should avoid boilerplate approval and "clearly articulate the reasons and factors u n d e rlyin g its decision to grant 54(b) certification." Anthuis v. Colt Indus. Operating C o r p ., 971 F.2d 999, 1003 (3d Cir. 1992). However, the statement of reasons is not a ju ris d ic tio n a l requirement. If the district court's statement of reasons is lacking, we may re v ie w the record and satisfy ourselves that the 54(b) certification was properly granted.

Carter v. Philadelphia, 181 F.3d 339, 345 (3d Cir. 1999).

T h e District Court's explanation and a review of the record satisfies us that it p ro p e rly certified its decision under Rule 54(b). Therefore, we exercise jurisdiction p u rs u a n t to section 1291.1 I I I.

W e next address whether the District Court erred in determining that Illinois N a tio n a l had a duty to defend. When considering whether there is a duty to defend, a c o u rt must first determine the scope of coverage under the policy and then examine the a lleg a tio n s of the underlying complaints to determine whether those allegations are within th e scope of coverage. Lucker Mfg. v. The Home Ins. Co., 23 F.3d 808, 813 (3d Cir. 1 9 9 4 ). "[T]he factual allegations of the underlying complaint against the insured are to b e taken as true and liberally construed in favor of the insured." Frog Switch & Mfg. Co. v . Travelers Ins. Co., 193 F.3d 742, 746 (3d Cir. 1999).2 Illin o is National only has a duty to defend if Sunoco has met the self-insured reten tio n s. As previously indicated, the Sunoco policy included a $250,000 pero c c u rre n c e retention and an aggregate $5,000,000 self-insured retention. Sunoco has a g re e d that it has not spent more than $250,000 on each of the underlying seventy-seven la w s u its . Therefore, Illinois National has a duty to defend only if the seventy-seven cases c o n s titu te a single occurrence under the policy. In order to determine whether there is a single occurrence under Illinois National's p o lic y with Sunoco, we must inquire as to whether there is "one proximate, uninterrupted a n d continuing cause which resulted in all of the injuries and damage." Donegal Mut.

I n s . Co. v. Baumhammers, 893 A.2d 797, 813 (Pa. 2006). This "cause test," which we o rig in a lly set forth in Applachian Insurance Co. v. Liberty Mutual Insurance Co., 676 F .2 d 56, 61 (3d Cir. 1982), holds that "[a]s long as the injuries stem from one proximate c a u se there is a single occurrence." Id. The number and magnitude of injuries and the n u m b e r of plaintiffs do not affect the determination. Id.

C o u rts applying Pennsylvania law in the toxic tort setting have repeatedly found th a t the negligent inclusion of a potentially dangerous chemical constitutes a single o c c u rre n c e. For example, in Liberty Mutual Insurance Co. v. Treesdale, Inc., we found a s in g le occurrence that resulted in numerous personal injury claims for asbestos-related in ju rie s. 418 F.3d 330 (3d Cir. 2005). Treesdale manufactured a product known as " S o f f ele x ," which contained asbestos. In the typical case filed against Treesdale, steel w o rk e rs who worked in the open hearth of steel mills which produced Soffelex sued after b e in g exposed to asbestos. The Treesdale policy defined occurrence as "all personal in ju ry and property damage arising out of continuous or repeated exposure to su b sta n tially the same general conditions." We found "[t]hat section unambiguously a d d re ss e s the situation where, as here, many people allege personal injuries arising from o n e occurrence." Id. at 336. All of the injuries stemmed from a common source ­ the p ro d u c tio n and distribution of asbestos-containing products. Id. at 335. Therefore, there w a s a single occurrence that caused multiple injuries. See also Union Carbide Corp. v. T r a v e le rs Indemnity Co., 399 F. Supp. 12, 21 (W.D. Pa. 1975) (holding that there was a s in g le occurrence where a manufacturer was sued by numerous plaintiffs after it included a resin in its product that produced an intolerable stench, as the cause of the stench was th e inclusion of the resin in the product, not the individual use of the product by the p l a i n t if f s ) .

T h e underlying seventy-seven cases before us are not identical. They allege c o n ta m in a tio n in different geographic regions, they resulted from a variety of sources in c lu d in g gas tank leaks and accidental spills from pipelines, and the plaintiffs vary from in d iv id u a ls to governmental entities. However, despite these differences, all of the in ju rie s alleged, save one, arose from a single occurrence. Each of the plaintiffs in the c a se s presented in the record allege the same cause of action: injuries resulting from the h a z a rd o u s manufacture of gasoline containing MtBE and failure to warn. Just as we d e te rm in e d in Treesdale, each plaintiff suing Sunoco was exposed to the same general h a rm f u l condition ­ gasoline containing MtBE ­ which resulted in contaminated ground w a te r. Treesdale, 418 F.3d at 336. It is irrelevant how each plaintiff came into contact w ith the MtBE as the same alleged negligent act of using MtBE was the proximate cause o f the harm. Union Carbide, 399 F. Supp. at 21.

H o w e v e r, the complaint in the case of West Hazelton Hospitality Corp. v. Sunoco, In c ., does not allege the same products liability and failure to warn claims. The West H a z e lto n plaintiffs are suing Sunoco based on the negligent maintenance of a Sunoco gas sta tio n that resulted in contamination of the ground water surrounding their hotel. While th e complaint in that case refers to the inherent dangerousness of MtBE, it is not the d a n g e ro u s nature of MtBE that gives rise to the complaint, but a gasoline product that c o n ta m in a te d the ground water surrounding the hotel. Therefore, we will reverse the D is tric t Court's decision as to the West Hazelton case and remand to the District Court so th a t it might determine if Sunoco has met its self-insured retentions without its e x p e n d itu re s on West Hazelton.

IV .

A s a final effort to sidestep its duty to defend, Illinois National claims that the c a se s brought against Sunoco fall under the pollution exclusion and are, therefore, outside th e purview of coverage. Illinois National claims that because the harm occurred due to a re le a se of pollutants, it need not defend Sunoco. Sunoco has responded by stating that the e x c e p tio n to the pollution exclusion applies as the damage occurred away from property it o w n e d or rented.

" G e n e ra lly speaking, under Pennsylvania law, the issuer of a general liability in s u ra n c e policy has a duty to defend its insured when the allegations in the complaint a g a in s t it could potentially fall within the coverage of the policy." Air Prods. & C h e m ic a ls , Inc. v. Hartford Accident & Indem. Co., 25 F.3d 177, 179 (3d Cir. 1994). An in s u re r must defend if any claim included in the complaint may potentially fall under the p o lic y and must continue to defend until it can confine the complaint to a claim that has n o possibility of falling under the policy. American States Ins. Co. v. Md. Cas. Co., 628 A .2 d 880, 887 (Pa. Super. Ct. 1993). An insurer seeking to avoid its duty to defend based o n a policy exclusion has the burden of proving the applicability of that exclusion. Id.

Once the insurer has met that burden, the insured bears the burden of proving the a p p lic a b ility of an exception to that exclusion. Air Products, 25 F.3d at 180.

A s the District Court correctly noted, while some of the complaints allege harm c a u se d by leaks on Sunoco's property, none of the complaints allege that the damage o c c u rre d on Sunoco's property. Therefore, the exception to the exclusion applies and the p la in tif f s in the underlying seventy-seven cases have asserted claims that might fall under th e policy. Until Illinois National defends the suits to such an extent that there is no lo n g e r a claim that may fall into the exception to the exclusion, it must defend Sunoco.

American States Ins. Co., 628 A.2d at 887.

V.

F o r the reasons set forth above, we agree with the District Court's decision that the p o llu tio n exclusion does not excuse Illinois National from its duty to defend. However, w e will reverse its decision as the West Hazelton case did not arise from the same o c c u rre n c e as the other seventy-six cases. We will remand the case so that the District C o u rt may consider whether Sunoco has met its self-insured retentions without the in c lu s io n of expenses from the West Hazelton case.

1 The District Court properly applied Pennsylvania law in this diversity action.

2 Illinois National argues that the District Court erred when refusing to allow d is c o v e ry into the facts underlying the seventy-seven lawsuits filed against Sunoco. However, in Pennsylvania, a court should look only to the four corners of the complaint to determine whether an insurer has a duty to defend. Madison Const. Co. v. Harleysville M u t. Ins. Co., 735 A.2d 100, 109 (Pa. 1999). Therefore, the District Court appropriately r e f u s e d to allow discovery into the underlying facts.


This document cites




See other documents that cite the same legislation

ver las páginas en versión mobile | web

ver las páginas en versión mobile | web

© Copyright 2014, vLex. All Rights Reserved.

Contents in vLex United States

Explore vLex

For Professionals

For Partners

Company