Rohm & Haas Co. v. Continental Cas. Co.
Citation: 32 ELR 20255
No. No. J-147-00, 781 A.2d 1172/(Pa., 10/18/2001)
The court upholds the reversal of a trial court's grant of judgment notwithstanding the verdict (JNOV) in favor of a chemical manufacturer that was denied insurance coverage for soil, groundwater, and surface water pollution at one of its sites. Shortly after purchasing the site in 1964, the manufacturer discovered that the site was extensively contaminated with arsenic. Although the manufacturer undertook remedial measures, arsenic waste continued to be produced. Later that same year the manufacturer added the site to existing comprehensive general liability insurance coverage it held with an insurer. Once the Comprehensive Environmental Response, Compensation, and Liability Act was enacted, the U.S. Environmental Protection Agency notified the manufacturer that it was strictly liable for the cleanup costs associated with the site. In 1988, the manufacturer notified its insurer that it was asserting a claim to cover the cleanup costs but the insurer denied the claim. After a jury found in favor of the insurer, the trial court granted a JNOV to the manufacturer. In a case of first impression in Pennsylvania, an appellate court reversed pursuant to the known loss doctrine, which provides that one may not obtain insurance for a loss that either has already taken place or is in progress.
The court first holds that the appellate court correctly determined that the standard for the known loss defense in this case should be whether the evidence shows that the insured was charged with knowledge that reasonably demonstrates that it was or should have been aware of likely exposure to losses that would reach the level of coverage. The court next holds that the reversal of the JNOV was appropriate. Viewing the evidence in the light most favorable to the insurer, the evidence easily supports the jury's conclusion that the manufacturer knew of damage or injury for which there would be legal liability large enough to reach the excess layers of insurance. Similarly, the jury reasonably determined that the manufacturer intentionally and fraudulently withheld information concerning contamination at the site from the insurer, and, therefore, the appellate court did not err in reversing the trial court's grant of JNOV to the manufacturer on this issue. Finally, the court holds that the appellate court correctly determined that a triable issue of fact existed as to whether the insurers were prejudiced by the 24-year delay between the purchasing of the insurance and the resulting claim for coverage and discovery of contamination at the site.
A dissenting judge would affirm the trial court's grant of JNOV on the known loss issue, the fraud issue, and the late notice issue.
Counsel for Appellants
Frank E. Ferruggia
McCarter & English
100 Mulberry St., Newark NJ 07101
Counsel for Appellees
Herbert M. Wachtell
Wachtell, Lipton, Rosen & Katz
51 W. 52d St., New York NY 10019
Flaherty, J. Before Nigro, J., concurring, and Castille, J., dissenting, joined by Cappy and Saylor, JJ.