("PaDER"), observed a bluish discharge from a pipe into a swale. The discharge was traced back to a broken pipe underneath the floor in UTI's pickle house. UTI took action to correct the problem. In September, 1977, Mr. Knorr returned to UTI's facility, having obtained the results of a water sample taken from a neighbor's well during the July inspection. The results of the water sample showed the presence of TCE and TCA in the neighbor's well water. The suspected source of the leak was UTI's USTs.
UTI engaged an expert, one Roy F. Weston, who concluded that the source of the groundwater contamination was a TCE/TCA leak from the USTs. After a letter was sent to Alexander & Alexander ("A&A"), UTI's insurance broker, apprising defendants of the groundwater contamination and the possibility of claims, Fireman's Fund advised plaintiff, on November 30, 1978, that is was denying coverage. Thereafter, on December 18, 1978, UTI commenced an action in the United States District Court for the Eastern District of Pennsylvania against Fireman's Fund and Home Insurance Company, seeking coverage under one of the Fireman's Fund policies for coverage connected with the groundwater contamination. That matter was settled pursuant to a Settlement and Release Agreement dated June 16, 1982.
On April 22, 1981, the Collegeville-Trappe Joint Water System, a neighboring public water authority ("water authority"), sued UTI in the Court of Common Pleas in Montgomery County, Pennsylvania for contaminating groundwater as a result of a TCE leak. The complaint in the water authority action referred to a TCE leak from UTI's USTs in May, 1979 "and for some period prior thereto," which contaminated the groundwater supply. Coverage was denied for that claim by letter dated May 14, 1981 from Fireman's Fund. Home Insurance Company undertook the defense of UTI in the water authority action. During the latter part of 1991, settlement discussions between UTI and the water authority intensified; apparently the action had lied relatively dormant for some length of time. It became clear, according to UTI, that the water authority action could not be settled by UTI within the asserted $ 500,000 limits of the Home policy. After sending a letter to Fireman's Fund requesting that the insurer acknowledge coverage to UTI for the claims asserted in that action in excess of Home's $ 500,000 limit, UTI was advised by Fireman's Fund to "take appropriate steps to protect" its interests, Pl. 12G Statement at P 34, and UTI settled the water authority action by agreement dated July 2, 1992 for $ 900,000, $ 500,000 of which was paid by Home. UTI tendered the remaining $ 400,000 to settle the case.
In 1978 the Collegeville site was treated with a "pump and treat" system to extract TCE and TCA from the groundwater under the facility. UTI operated the groundwater remediation system under PaDER's authority. Id. at P 38. In the 1980s, the United States Environmental Protection Agency ("EPA") asserted jurisdiction over the remediation activities, and asserted claims against UTI under the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. § 9601 et seq. Id. P 39. Two administrative consent orders were negotiated. The first, dated July 6, 1988, required UTI, inter alia, to complete its ongoing hydrogeologic evaluation and propose remedial alternatives. Id. P 41. The second administrative consent order, signed March 31, 1992, required UTI, inter alia, to implement selected groundwater treatment remedies. Id. P 42. UTI seeks reimbursement from Fireman's Fund for costs incurred to perform the groundwater cleanup under EPA's jurisdiction.
The policies issued by Fireman's Fund, or its wholly-owned subsidiary, American Insurance Company, to UTI at issue in the instant case are as follows:
CGL Coverage n1
Term Policy Number
Term Policy Number
6/7/73-4/7/74 XLB-1069383 *
n1 Comprehensive general liability coverage.
n2 The policies marked with a "*" are the so-called "lost policies" whose existence is not admitted by defendants.
Against this factual backdrop, I proceed to treat each of the arguments advanced in defendants' motions, and plaintiff's cross-motion, for summary judgment in turn. The motions, which are voluminous,
raise multiple issues, most of which involve disputed factual questions of a type which cannot be resolved on a motion for summary judgment.
A. Summary Judgment Standards
The court's jurisdiction is based upon diversity of citizenship under 28 U.S.C. § 1332(a).
The summary judgment movant must "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). See Hersh v. Allen Products. Co., Inc., 789 F.2d 230, 232 (3d Cir. 1986); Lang v. New York Life Ins. Co., 721 F.2d 118, 119 (3d Cir. 1983). In deciding whether there is a disputed issue of material fact the court must view all inferences, doubts and issues of credibility in favor of the non-moving party. See Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 n.2 (3d Cir. 1983), cert. denied, 465 U.S. 1091, 79 L. Ed. 2d 910, 104 S. Ct. 2144 (1984); Hancock Industries v. Schaeffer, 811 F.2d 225, 231 (3d Cir. 1987) (citation omitted). The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).
Supreme Court decisions mandate that "a motion for summary judgment must be granted unless the party opposing the motion can produce evidence which, when considered in light of that party's burden of proof at trial, could be the basis for a jury finding in that party's favor." J.E. Mamiye & Sons, Inc. v. Fidelity Bank, 813 F.2d 610, 618 (3d Cir. 1987) (Becker, J., concurring) (citing Anderson, 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505, and Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)). Moreover, once the moving party has carried its burden of establishing the absence of a genuine issue of material fact, "its opponent must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). Thus, if the non-movant's evidence is merely "colorable" or is "not significantly probative," the court may grant summary judgment. Anderson, 477 U.S. at 249. Nonetheless, defendants, as the moving party on the motion, and plaintiff, as the moving party on the cross-motion, bear, respectively, the initial responsibility of demonstrating the absence of a genuine issue of material fact. Celotex, 477 U.S. at 325.
B. Defendants' Motion for Summary Judgment on Statute of Limitations Grounds
Defendants move for summary judgment on the ground that the statute of limitations bars plaintiff's claims. It is defendants' position that Counts II, IV and V of plaintiff's complaint (counts regarding breach of contract in connection with the water authority action, declaratory judgment, and bad faith conduct of the insurance company) are untimely because the underlying causes of action accrued more than four years before November 2, 1992, the date plaintiff commenced the instant action.
Defendants are correct that the applicable statute of limitations for contract actions under Pennsylvania law is four years.
42 Pa.C.S.A. § 5525(8). They are incorrect, however, to argue that the statute had long run by the time the instant action was filed based upon the facts that (1) A. Brooke Aker, as counsel for UTI, tendered the water authority action complaint by letter dated April 30, 1981, and (2) coverage was denied by Mary Butter's letter, on behalf of Fireman's Fund, dated May 14, 1981. The problem with defendant's reasoning is that the May 14, 1981 denial of coverage letter does not trigger the running of the statute in this coverage action.
Rather, under Pennsylvania law, the statute of limitations does not begin to run against an insurer until the conclusion of the litigation against the insured by the injured party. Prior to that time, the defense and indemnity expenses incurred for which the insurer sues are not determined. As the court recognized in Moffat v. Metropolitan Cas. Ins. Co. of New York, 238 F. Supp. 165, 175 (M.D.Pa. 1964), in rejecting the insurer's argument that the statute began to run on the date of its disclaimer of coverage:
The result contended for by Metropolitan is absurd. In this day of crowded court calendars and delays of years before trial, an insured could find that the statute had run long before he had incurred his trial and appellate expenses. Also it would lead to a multiplicity of suits, long in disfavor in law. There would be a suit for costs and expenses and then, after judgment against the insured, a suit for indemnity. The latter cannot be started until there is a final judgment against the insured.