1996 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

10-28-1996

Koppers Co Inc v. Aetna Cslty & Surety

Precedential or Non-Precedential:

Docket 95-3432,95-3461

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Recommended Citation

"Koppers Co Inc v. Aetna Cslty & Surety" (1996). 1996 Decisions. Paper 64.

http://digitalcommons.law.villanova.edu/thirdcircuit_1996/64
 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 

 N0S. 95-3432 and 95-3461 

 

 KOPPERS COMPANY, INC. 

 v. 

 THE AETNA CASUALTY AND SURETY COMPANY; 

 ZURICH INSURANCE COMPANY; THE TRAVELERS INDEMNITY CO.; 

 THE AMERICAN HOME ASSURANCE COMPANY; COMMERCIAL UNION 

 INSURANCE COMPANY; THE HOME INSURANCE COMPANY; 

 UNDERWRITER'S AT LLOYD'S OF LONDON 

 Certain Underwriters at Lloyd's, London; 

 Certain Insurance Companies in the 

 London Market, referred to in this 

 action as "Jackson and Companies",* 

 (*Pursuant to Rule 12(a), F.R.A.P.) 

 Appellants in No. 95-3432 

 

 KOPPERS COMPANY, INC. 

 v. 

 THE AETNA CASUALTY AND SURETY COMPANY; 

 ZURICH INSURANCE COMPANY; THE TRAVELERS INDEMNITY CO.; 

 THE AMERICAN HOME ASSURANCE COMPANY; COMMERCIAL UNION 

 INSURANCE COMPANY; THE HOME INSURANCE COMPANY; 

 UNDERWRITER'S AT LLOYD'S OF LONDON; CERTAIN INSURANCE 

 COMPANIES IN THE LONDON MARKET, REFERRED TO IN THIS 

 ACTION AS "JACKSON AND COMPANIES"* 

 (*Pursuant to Rule 12(a), F.R.A.P.) 

 KOPPERS COMPANY, INC., 

 Appellant in No. 95-3461 

 

 On Appeal From the United States District Court 

 For the Western District of Pennsylvania 

 (D.C. Civil Action No. 85-cv-02136) 

 
 Argued May 2, 1996 

 BEFORE: STAPLETON, COWEN, AND SEITZ, Circuit Judges 

 (Opinion Filed October 28, 1996) 

 

 

 Joseph W. Montgomery, 

III (Argued) 

 Jones, Day, Reavis & 

Pogue 

 500 Grant Street, 31st 

Floor 

 Pittsburgh, PA 15219 

 Attorney for 

Appellee/Cross-Appellant 

 

 Larry R. Eaton (Argued) 

 Gregory G. Smith 

 Blatt, Hammesfahr & 

Eaton 

 333 West Wacker Drive, 

Suite 1900 

 Chicago, IL 60606 

 and 

 William T. Hangley 

 Hangley, Aronchick, 

Segal & Pudlin 

 One Logan Square, 12th 

Floor 

 Philadelphia, PA 19103 

 and 

 Kent D. Syverud 

 Hutchins Hall 

 Ann Arbor, MI 48109-1215 

 Attorneys for 

Appellants/Cross-Appellee 

 

 

 OPINION OF THE COURT 

 

STAPLETON, Circuit Judge: 

 Koppers Company, Inc. ("Koppers"), asserts breach of 
contract and declaratory judgment claims against its liability 

insurers, based on their denial of coverage for various 

environmental property damage claims. Koppers entered into 

settlement agreements with several of its insurers prior to 

trial, leaving only certain excess liability insurers as 

litigating defendants. Following the jury's determinations that 

the occurrence-based policies had been triggered and that Koppers 

had incurred a total of about $70 million in property damage 

liability, the district court entered judgment for Koppers, 

holding its excess insurers liable for the full amount of the 

claim without reducing the verdict to account for Koppers' 

settlements with the other insurers. 

 On appeal, the excess insurers allege four errors under 

Pennsylvania law: (1) the court erroneously instructed the jury 

that the occurrence-based policies would be triggered if any 

property damage occurred during the policy period, even if the 

initial cause of that damage was an event (such as a chemical 

spill) that occurred prior to the policy period; (2) the court 

erroneously instructed the jury that the insurer has the burden 

of proving that the specific property damage that occurred was 

not fortuitous but was expected or intended by the insured; (3) 

the court abused its discretion by excluding proffered evidence 

of Koppers' failure to mitigate the damage; and (4) the court 

erroneously failed to reduce the judgment to account for the 

plaintiff's settlements with other insurers. We believe the 

district court committed reversible error with respect only to 

the last claim, and we will accordingly reverse and remand with 

instructions to reduce the judgment to account for the settling 

insurers' apportioned shares. 

 I. 

 Koppers is a large, diverse manufacturing company based 

in Pittsburgh, Pennsylvania that has been conducting 

manufacturing operations in locations throughout the United 

States since the early part of this century. In the 1980s, 

federal and state agencies brought claims against Koppers 

demanding remediation for environmental contamination at some 150 

plant sites and disposal sites. This environmental contamination 

included property damage to third-party soil, subsoil and 

groundwater. Koppers then sought a defense and indemnification 

from its various liability insurers, all of whom initially denied 

coverage. 

 Appellants, defendants below, are a group of certain 

underwriters for Lloyd's of London and certain London market 

insurance companies (hereinafter the "London Insurers"). Over 

the years, the London Insurers have issued a number of excess 

liability insurance policies to Koppers. 

 Koppers commenced this action in 1985 against two of 

its primary insurers, and has since amended its complaint several 

times to add other primary and excess insurers, including the 

appellant insurers. All of the defendant insurers except for the 

London Insurers settled with Koppers before trial. Koppers, 

alleging that the London Insurers breached their contracts of 

insurance, sought damages and a declaratory judgment regarding 
Koppers' right to indemnification under those policies. 

 The district court limited the scope of the trial to 

twelve specific policies, which provided multiple layers of 

occurrence-based, excess liability coverage for third-party 

property damage. Five of these policies were in effect between 

late 1953 and January 1957, and the remaining seven policies were 

in effect between January 1957 and January 1960. Thus, although 

Koppers had insurance from at least the 1940s through at least 

the 1970s, the trial was limited to a roughly six-year period. 

The district court further limited the scope of the trial to only 

18 of the contaminated sites. Finally, the trial was limited to 

determining liability and damages for cleanup and response costs 

incurred at these sites through the end of 1993, and to 

determining whether Koppers was entitled to a declaratory 

judgment for the period thereafter. 

 After a three-week trial, the jury found by special 

verdict that, during the applicable policy periods, (1) an 

"occurrence" had triggered coverage under all of the policies at 

issue at each site, and (2) Koppers had neither expected nor 

intended to cause damage to third-party property at any site. 

The jury awarded some $70 million in damages, and the court 

entered judgment in May 1995. Pursuant to the court's 

instructions, the jury's damages figure represents the total 

costs Koppers had incurred because of third-party property damage 

at the eighteen focus sites through the end of 1993, without 

regard to the sums of money Koppers received from the settling 

insurers. The court explained to the jury that the court would 

adjust the damages award according to rules of law after the jury 

determined the total damages figure. 

 Both parties moved to alter or amend the judgment under 

Fed. R. Civ. P. 59(e). The district court, in its July 1995 

order, granted Koppers' motion and granted the London Insurers' 

motion in part but denied it in part. Specifically, as relevant 

here, the court: (1) granted Koppers' motion to reduce the 

judgment to about $66 million, but denied the London Insurers' 

motion to reduce the judgment further to account for Koppers' 

settlements with the other insurers; (2) granted a declaratory 

judgment (limited to the twelve policies and eighteen focus sites 

at issue) that Koppers is entitled to indemnification under the 

London Insurers' policies for the period following 1993; and 

(3) certified the July 1995 order as final under Fed. R. Civ. 

P. 54(b). This timely appeal followed. 

 II. 

 The district court had jurisdiction over this diversity 

action pursuant to 28 U.S.C. § 1332. We have appellate 

jurisdiction over the final order pursuant to 28 U.S.C. § 1291. 

 The parties agree, as do we, that Pennsylvania law 

governs this case. We review the district court's interpretation 

and prediction of state law de novo. Wiley v. State Farm Fire & 

Cas. Co., 995 F.2d 457, 459 (3d Cir. 1993). In adjudicating a 

case under state law, we are not free to impose our own view of 

what state law should be; rather, we are to apply existing state 

case law as interpreted by the state's highest court in an effort 
to predict how that court would decide the precise legal issues 

before us. Kowalsky v. Long Beach Township, 72 F.3d 385, 388 (3d 

Cir. 1995). In the absence of guidance from the state's highest 

court, we must look to decisions of state intermediate appellate 

courts, of federal courts interpreting that state's law, and of 

other state supreme courts that have addressed the issue. Wiley, 

995 F.2d at 459-60. We must also consider "analogous decisions, 

considered dicta, scholarly works, and any other reliable data 

tending convincingly to show how the highest court in the state 

would decide the issue at hand." McGowan v. University of 

Scranton, 759 F.2d 287, 291 (3d Cir. 1985) (quoting McKenna v. 

Ortho Pharmaceutical Corp., 622 F.2d 657, 663 (3d Cir. 1980)) 

(internal quotation marks omitted). 

 A timely appeal from the denial of a Rule 59 motion to 

alter or amend the judgment brings up the underlying judgment for 

review, so that our standard of review varies with the underlying 

judicial decision. Federal Kemper Ins. Co. v. Rauscher, 807 F.2d 

345, 348 (3d Cir. 1986). 

 We exercise plenary review in determining whether a 

jury instruction misstates a legal standard. Savarese v. Agriss, 

883 F.2d 1194, 1202 (3d Cir. 1989). We consider the jury 

instructions as a whole to determine whether they fairly and 

adequately contain the law applicable to the case. See Douglas 

v. Owens, 50 F.3d 1226, 1233 (3d Cir. 1995); Savarese, 883 F.2d 

at 1202. 

 "We review pre-trial and trial court rulings concerning 

the admission of evidence for abuse of discretion," but "error 

may not be predicated upon a ruling which admits or excludes 

evidence unless a substantial right of the party is affected." 

Glass v. Philadelphia Elec. Co., 34 F.3d 188, 191 (3d Cir. 1994) 

(internal quotation marks omitted). "[I]f we find nonconstitutional error in a civil suit, such error is harmless only 

if it is highly probable that the error did not affect the 

outcome of the case." Id. (internal quotation marks omitted). 

 III. 

 A. 

 We will address first the London Insurers' argument 

that the district court gave erroneous jury instructions 

regarding the trigger of coverage under their policies. The 

district court instructed the jury that the policies could be 

triggered in either of two ways: 

 These policies are triggered if either, one, the cause 

 of the property damage or, two, the property damage 

 itself took place during the policy period for each 

 site. Thus, if an event or events that eventually led 

 to property damage took place during the policy period, 

 or if . . . the property damage itself took place 

 during the policy period, the policies have been 

 triggered. 

App. at 2046. The London Insurers argue, however, that their 

policies could be triggered only by a causative event taking 

place during the policy period, not by the resulting property 

damage alone if the causative event occurred pre-policy. 
 We need not predict how the Supreme Court of 

Pennsylvania would interpret these particular insurance 

contracts, however. Koppers introduced uncontroverted evidence 

that the property damage (mostly groundwater contamination 

through leaching) was continuous, progressive, and indivisible 

throughout the relevant policy periods. It also introduced 

uncontroverted evidence that the causes of the contamination 

(e.g., leaks, drips, spills, or disposals) existed at each site 

during each policy period. Based on this evidence, the jury 

found that each of the policies had been triggered. While such a 

finding could theoretically have been made under the court's 

instruction based solely on the jury's acceptance of Koppers' 

uncontradicted evidence regarding the occurrence of property 

damage, we perceive no basis on which the jury might have 

accepted that evidence yet rejected Koppers' uncontroverted 

evidence regarding the occurrence of the causes of that damage. 

Accordingly, we find it more than highly probable that the 

district court's charge on this point did not affect the outcome 

of the case. In short, the charge, even if erroneous, was 

harmless error. 

 B. 

 1. 

 The London Insurers next argue that the court erred in 

instructing the jury that the insurers had the burden of proving, 

as an affirmative defense, that the losses were not fortuitous-- 

i.e., that Koppers expected or intended the third-party property 

damage. The London Insurers argue that, because a plaintiff 

insured must prove that it is entitled to coverage, and because 

only fortuitous losses are covered, Koppers had the burden of 

proving that it neither expected nor intended the harm. 

 The question of which party bears the burden of proof 

in a diversity case is a matter of state substantive law. Blair 

v. Manhattan Life Ins. Co., 692 F.2d 296, 299 (3d Cir. 1982). In 

Pennsylvania, the insured bears the burden of proving facts that 

bring its claim within the policy's affirmative grant of 

coverage. See, e.g., Riehl v. Travelers Ins. Co., 772 F.2d 19, 

23 (3d Cir. 1985). By contrast, the insurer bears the burden of 

proving the applicability of any exclusions or limitations on 

coverage, since disclaiming coverage on the basis of an exclusion 

is an affirmative defense. See, e.g., Aetna Life & Cas. Co. v. 

Barthelemy, 33 F.3d 189, 194 (3d Cir. 1994); Compagnie des 

Bauxites de Guinee v. Insurance Co. of N. Am., 551 F. Supp. 1239, 

1243 (W.D. Pa. 1982). Our research has revealed no Pennsylvania 

case allocating the burden of proof on the fortuity requirement. 

We nonetheless predict that the Pennsylvania Supreme Court would 

place the burden on the insurer in this case. 

 The terms of the policies do not mention fortuity. The 

portions of the policies defining the scope of coverage state 

that the London Insurers will "indemnify the Assured for all sums 

which the Assured shall be obligated to pay by reason of the 

liability imposed upon the Assured . . . for damages . . . on 

account of . . . property damage." App. at 141. There is no 

requirement in the coverage provisions that the loss be 
fortuitous or "unexpected and unintended." Nor do the exclusion 

provisions of any of the policies expressly exclude losses that 

are non-fortuitous or "expected and intended." 

 In Intermetal Mexicana v. Insurance Co. of N. Am., 866 

F.2d 71, 72 (3d Cir. 1989), the insurance policy at issue covered 

"'all risks of direct physical loss or damage from any external 

cause except hereinafter excluded.'" The insurer acknowledged 

that the loss claimed was within the scope of coverage as so 

stated but denied coverage because that loss was not fortuitous. 

The policy exclusions contained no reference to the fortuity of 

the loss. This court there predicted that the Supreme Court of 

Pennsylvania would recognize a "judicially created 'fortuity' 

exclusion from coverage." Id. at 76. Our prediction was based 

on the generally accepted principle that "every 'all risk' 

contract of insurance contains an unnamed exclusion -- the loss 

must be fortuitous in nature." Id. at 75. We recognized that 

this generally recognized principle had a "public policy" basis. 

Id. at 77. 

 The rationale supporting the generally accepted rule 

against indemnity for non-fortuitous losses is succinctly 

explained in Robert E. Keeton & Alan I. Widiss, Insurance Law 

§ 5.3(a), at 476-77 (student ed. 1988): 

 [The concept of fortuity], which 

 expresses the concern that insurance 

 arrangements should be limited to the 

 transfer of economic detriments that are 

 fortuitous, is generally regarded as a 

 principle that is central to the basic 

 determination of what risks may or should be 

 transferred by an insurance arrangement. In 

 most circumstances, it is contrary to public 

 policy to permit the enforcement of an 

 insurance contract if it would provide 

 indemnification for losses that are not 

 fortuitous. . . . 

 . . . The [rule requiring fortuity] embodies 

 a fundamental and significant public policy 

 interest that in some contexts is 

 sufficiently important to preclude coverage 

 claims even when there are explicit 

 agreements to the contrary, but in any case 

 is a very compelling public interest in 

 regard to coverage questions when there is no 

 applicable provision in the insurance 

 agreement. 

 Consistent with Intermetal Mexicana, we predict that it 

is the public policy of Pennsylvania not to enforce an insurance 

coverage contract providing coverage for a non-fortuitous loss. 

As with exclusions stated in an insurance policy itself, when an 

insurer relies on public policy to deny coverage of a claim, the 

insurer must bear the burden. See, e.g., Butterfield v. 

Giuntoli, 670 A.2d 646, 654 (Pa. Super. 1995) (finding no 

exclusion for punitive damages in insurance policy, burden 
shifted to insurer to prove that punitive damages are excluded as 

against public policy in Pennsylvania); Princeton Ins. Co. v. 

Chunmuang, 678 A.2d 1143, 1147 (N.J. Super. 1996) ("Whether the 

exclusion is based on an expressed provision or on the public 

policy prohibition of insurance against criminal conduct, the 

insurer bears a substantial burden of demonstrating that the loss 

falls outside the scope of coverage."); Continental Cas. Co. v. 

Fibreboard Corp., 762 F.Supp. 1368, 1373 (N.D. Cal. 1991), appeal 

dismissed and remanded, 4 F.3d 777 (9th Cir. 1993) (burden on 

insurer to prove damages at issue fall within California public 

policy exclusion). In particular, if an insurer has issued a 

policy that on its face covers the loss at issue and seeks to 

deny coverage on the basis that enforcing the policy as written 

would offend the public policy against indemnification of nonfortuitous losses, we predict that the Pennsylvania Supreme Court 

would place on the insurer the burden of proving that the 

circumstances of the loss were such that coverage would be 

inconsistent with that public policy. We therefore conclude that 

the district court did not erroneously allocate the burden of 

proof as to whether Koppers' losses were expected and intended. 

 2. 

 In addition to challenging the district court's 

fortuity instruction for misallocating the burden of proof, the 

London Insurers argue that the instruction improperly limited 

this public policy affirmative defense to situations in which the 

insured "expected or intended" the specific harms that occurred. 

They insist that, under Pennsylvania law, coverage is defeated if 

the insured expected or intended a harm of the same general typeas the 

harm that occurred. Koppers does not contest this 

proposition; it does dispute, however, that the court's 

instructions were inconsistent with this proposition. 

 We agree that the district court's instructions on this 

issue did not limit the fortuity defense to those harms 

specifically expected or intended by the insured. As the London 

Insurers point out, the district court instructed the jury: "If 

you find that Koppers intentionally or knowingly caused property 

damage for which it seeks coverage, then Koppers may not recover 

for that specific damage." App. at 1013. However, the court 

concluded this instruction by stating: "To lose coverage, Koppers 

must have intended the same general type of property damage that 

occurred." Id. We think that the instructions on this point, 

when read as a whole, fairly conveyed to the jury what the 

parties agree is the correct legal standard. See Douglas v. 

Owens, 50 F.3d 1226, 1233 (3d Cir. 1995); Savarese v. Agriss, 883 

F.2d 1194, 1202 (3d Cir. 1989). 

 C. 

 The London Insurers' third claim is that the district 

court abused its discretion by excluding their proffered evidence 

of Koppers' failure to mitigate the property damage. The 

insurers argue that, under Pennsylvania law, an insured has an 

ongoing duty to mitigate its losses, and that Koppers' recovery 
must be reduced by the amount of loss which could have been 

prevented if Koppers had undertaken reasonable efforts to 

mitigate the property damage. 

 The district court ruled, as a general matter, that 

evidence of Koppers' failure to mitigate damages would be 

admissible. Although the precise basis for the district court's 

decision to exclude the London Insurers' proffered evidence is 

not clear from the record, we find no reversible error. 

 As a matter of general contract law, the Pennsylvania 

Supreme Court has held that a plaintiff's duty to mitigate its 

damages arises upon the defendant's breach of the contract. 

E.g., Bafile v. Borough of Muncy, 588 A.2d 462, 464 (Pa. 1991). 

The superior court has applied this rule in the context of an 

insurance contract, holding that, upon the insurer's breach by 

refusing to indemnify the insured, the insured has a duty to 

mitigate its damages. See Forest City Grant Liberty Assocs. v. 

Genro II, Inc., 652 A.2d 948, 952 (Pa. Super. Ct. 1995) (holding 

that insurer, once found to be liable, need not reimburse 

insured for unnecessary roof repairs). Here, the defendant 

insurers breached by refusing to indemnify Koppers in the 1980s, 

but all of the proffered "mitigation" evidence concerned the 

prior two decades. Even assuming, however, that the Pennsylvania 

Supreme Court would require an insured to mitigate its damages 

prior to the insurer's breach of contract, the district court's 

exclusion of the proffered evidence was proper because the 

evidence was legally insufficient to make out a claim of failure 

to mitigate damages. 

 Mitigation is an affirmative defense, so the burden of 

proving a failure to mitigate is on the defendant. See Williams 

v. Masters, Mates and Pilots of Am., 120 A.2d 896, 901 (Pa. 

1956); Ecksel v. Orleans Constr. Co., 519 A.2d 1021, 1028 (Pa. 

Super. 1987). To prove a failure to mitigate, a defendant must 

show: (1) what reasonable actions the plaintiff ought to have 

taken, (2) that those actions would have reduced the damages, and 

(3) the amount by which the damages would have been reduced. 

See, e.g., Ecksel, 519 A.2d at 1021 (finding defendant's failure 

to mitigate defense unproven because defendant did not show how 

plaintiff could have mitigated damages or how damages were made 

worse by alleged inaction); State Pub. Sch. Bldg. Auth. v. W.M. 

Anderson Co., 410 A.2d 1329 (Pa. Commw. Ct. 1980) (affirming 

judgment for contractor where breaching school district failed to 

show that contractor's work was unreasonable and avoidable); see 

also New Castle County v. Hartford Accident & Indem. Co., 685 F. 

Supp. 1321, 1332 (D. Del. 1988) (holding that, where insurance 

policy contained express mitigation provision, insurer must 

specify what further injury occurred as result of the insured's 

lack of mitigation). 

 The London Insurers' evidence would not have satisfied 

any of these three elements, as it merely purports to show that 

Koppers was aware of property damage in the 1960s and 1970s but 

failed to correct the problem until the 1980s. The London 

Insurers offered no evidence of what reasonable actions Koppers 

might or ought to have taken, no evidence tending to show that 

any actions would have measurably reduced the harm, and, thus, no 
evidence from which the jury could have determined how much 

damages could have been reduced by mitigation. For this reason, 

the court's exclusion of the London Insurers' evidence was not 

reversible error. 

 D. 

 The London Insurers' final claim is that the district 

court erroneously saddled them with liability for the entire loss 

by improperly failing to reduce the judgment to account for 

Koppers' settlements with the other defendant insurers. We 

agree. 

 1. 

 In J.H. France Refractories Co. v. Allstate Insurance 

Co., 626 A.2d 502 (Pa. 1993), the Pennsylvania Supreme Court was 

called upon to allocate coverage responsibility among six primary 

insurers, each of which was obligated to cover an indivisible 

loss. J.H. France had brought a declaratory judgment action to 

determine its insurers' duty to defend and indemnify against 

lawsuits involving asbestos-related bodily injury claims. The 

insurance policies at issue were all pre-1986 comprehensive 

general liability ("CGL") policies which would be triggered by 

the occurrence during the policy period of "bodily injury." 

Affirming the lower court's application of the "multiple-trigger" 

or "continuous-trigger" theory of determining liability of the 

insurers, under which all phases of the disease--exposure, 

progression, and manifestation--independently constitute "bodily 

injury" triggering coverage, the supreme court held that "every 

insurer which was on the risk at any time during the development 

of a claimant's asbestos-related disease has an obligation to 

indemnify J.H. France." Id. at 507. 

 The next question, naturally, was "how to allocate the 

liability of each insurer when, as is commonly the case, more 

than one insurer was on the risk at one time or another during 

the development of a claimant's disease." Id. The superior 

court had held that the several insurers must share the 

obligation to indemnify on a pro rata basis, apportioned upon the 

amount of time each policy was in effect. Id. Declining to 

adopt that approach, the supreme court held instead that the 

insurers whose coverage had been triggered were jointly and 

severally liable for the full amount of the claim up to policy 

limits, and that the insured was entitled to select the policy or 

policies under which it would be indemnified. Id. at 508. As 

the supreme court explained: 

 When the policy limits of a given insurer are 

 exhausted, J.H. France is entitled to seek

 indemnification from any of the remaining insurers 

 which was on the risk during the development of the 

 disease [i.e., the remaining triggered policies]. Any 

 policy in effect during the period from exposure 

 through manifestation must indemnify the insured until 

 its coverage is exhausted. 

Id. at 509. The supreme court added, however, that its holding 

"does not alter the rules of contribution or the provisions of 
'other insurance' clauses in the applicable policies," so that an 

insurer who is saddled with more than its fair share of liability 

may seek to obtain "a share of indemnification or defense costs 

from other insurers." Id. 

 In the instant case, the district court predicted that 

the Pennsylvania Supreme Court would extend its holding on the 

allocation issue in J.H. France to cases involving environmental 

property damage claims, such that all insurers whose policies 

were triggered to cover an indivisible loss would be jointly and 

severally liable, up to policy limits, for the full amount of 

that loss. Although we conclude that J.H. France does not 

completely control the disposition of this case, we agree as a 

general matter with this prediction. 

 The Pennsylvania Supreme Court's reasons for adopting 

the joint and several approach in J.H. France are fully 

applicable to the case before us. "First, and most compelling, 

is the language of the policies themselves." Id. at 507. In 

J.H. France, "[e]ach insurer obligated itself to 'pay on behalf 

of the Insured all sums which the Insured shall become legally 

obligated to pay as damages because of bodily injury to which 

this insurance applies.'" Id. (emphasis in original). Thus, as 

the supreme court explained, "each insurer contracted to pay all 

sums which the insured becomes legally obligated to pay, not 

merely some pro rata portion thereof." Id. (emphasis in 

original). 

 Similarly, the policy at issue here obligated the 

London Insurers "to indemnify the Assured for all sums which the 

Assured shall be obligated to pay by reason of the liability 

imposed upon the Assured . . . for damages . . . on account of . 

. . property damage." App. at 141 (emphasis added). We 

accordingly believe the Pennsylvania Supreme Court would 

interpret the London Insurers' policies here, as it did the 

policies at issue in J.H. France, to "cover [the insured's] 

entire liability once they are triggered." 626 A.2d at 508 

(quoting Keene Corp. v. Insurance Co. of N. Am., 667 F.2d 1034, 

1048 (D.C. Cir. 1981), cert. denied, 455 U.S. 1007 (1982)) 

(alteration in original omitted); see ACandS, Inc. v. Aetna Cas. 

& Sur. Co., 764 F.2d 968, 974 (3d Cir. 1985) (predicting 

Pennsylvania Supreme Court would interpret "the phrase 'all sums' 

to provide for full coverage once coverage under a policy was 

triggered"). 

 The second reason the supreme court gave for adopting 

the joint and several approach in J.H. France is the 

indivisibility of asbestos-related bodily injury. No medical 

evidence was presented to substantiate the assumption, implicit 

in the superior court's allocation method of pro rata by time on 

the risk, "that the progression of asbestos-related disease is 

linear in character." 626 A.2d at 508. The supreme court 

elaborated: "To apportion liability among the insurers on a 

strictly temporal basis in direct proportion to the length of 

time each insurer was on the risk, . . . notwithstanding its 

surface attractiveness, assumes a linearity of disease 

progression which this record does not support." Id. 

 As with asbestos-related bodily injury, environmental 
property damage is a progressive harm that, as a practical 

matter, is indivisible. See, e.g., New Castle County v. 

Continental Cas. Co., 725 F. Supp. 800, 811-12 (D. Del. 1989) 

(concluding "it would be impossible in this case to determine 

when the first molecule of contaminant damaged neighboring 

property, or at what rate the contamination spread"), aff'd and 

rev'd in part on other grounds, 933 F.2d 1162 (3d Cir. 1991); 

Abraham, supra, at 120 ("Given the progressive nature of the 

environmental harms in question, finding the facts necessary [to 

hold each policy liable only for those harms that occurred during 

the policy period] usually would be administratively difficult, 

scientifically impossible, or both."); John H. Mathias, Jr. et 

al., Allocation: J.H. France and the Insureds' Right to Select 

from Multiple-Triggered Policies, Coverage (A.B.A. Sec. Litig.), 

Mar.-Apr. 1994, at 19-20 ("Like the progression of asbestosis or 

other insidious diseases, the migrations of contaminants over 

years or decades may result not from a predictable, linear 

process, but rather from sporadic or periodic events or 

conditions that vary in magnitude and frequency over the 

years."). Accordingly, it is appropriate to hold the triggered 

policies jointly and severally liable here, given that "because 

each has been triggered to provide coverage against liability for 

a single indivisible injury, there is no basis for apportioning 

responsibility among them." Abraham, supra, at 120-21. 

 Finally, the supreme court in J.H. France relied on the 

fact that, according to the policies' terms, each of the several 

policies triggered to cover a specific claim was potentially 

liable for the entire claim. The policies provided insurance 

against "occurrences" and, as defined in the policies, an 

"occurrence" included "'continuous or repeated exposure to 

conditions which result in bodily injury.'" 626 A.2d at 508. 

Thus, the entire "process of exposure [would] constitute one 

occurrence." Id. The supreme court 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. 

Id.; see also ACandS, 764 F.2d at 974 (noting that, "if a 

plaintiff's damages are caused in part during an insured period, 

it is irrelevant to [the insured's] legal obligations and, 

therefore, to the insurer's liability that they were also caused, 

in part, during another period"). 

 Like the CGL policies in J.H. France, the London 

Insurers' policies provided occurrence-based coverage and 

defined an "occurrence" to mean either "a series of occurrences 

arising out of one event," App. at 158, or "one happening or 

series of happenings, arising out of or due to one event taking 

place during the term of this policy." App. at 149. Under 

either definition, then, all of the effects resulting from a 

single causative event are considered a single occurrence. As in 
J.H. France, because the entire injury is defined as one 

"occurrence," a triggered policy must indemnify the insured for 

all damages resulting from that injury. 

 For these reasons, we predict that if the Pennsylvania 

Supreme Court were faced with this case it would apply the J.H. 

France allocation approach, holding jointly and severally liable 

all policies triggered to cover a single, indivisible loss. We 

note that other courts have similarly taken the joint and several 

approach where multiple policies cover an indivisible loss. See, 

e.g., Keene Corp. v. Insurance Co. of N. Am., 667 F.2d 1034, 

1047-50 (D.C. Cir. 1981), cert. denied, 455 U.S. 1007 (1982); 

Dayton Indep. Sch. Dist. v. National Gypsum Co., 682 F. Supp. 

1403, 1410-11 (E.D. Tex. 1988), rev'd on other grounds sub nom.W.R. Grace 

& Co. v. Continental Cas. Co., 896 F.2d 865 (5th Cir. 

1990). 

 2. 

 Given this prediction, if this case, like J.H. France, 

involved several triggered primary policies where none of the 

insurers had settled, J.H. France would dictate our resolution of 

this appeal. But this is not such a case. We must consider 

several complicating factors that were not present in J.H. 

France, namely, the presence of excess insurers, the insured's 

settlements with some primary and some excess insurers, and the 

district court's decision to limit the trial to a certain period 

of years at certain sites. We believe that, if presented with 

the complicating factors in our case, the Pennsylvania Supreme 

Court would not simply apply J.H. France and hold that the 

appellant excess insurers are jointly and severally liable, up to 

policy limits, for the entire property damage liability at the 

focus sites. Instead, as explained below, we predict that the 

supreme court would modify the J.H. France rule to hold the 

London Insurers jointly and severally liable for the amount of 

the loss in excess of the settling insurers' pro rata shares of 

liability. 

 We begin with the principle of indemnity, a fundamental 

principle of insurance law which prohibits insurance contracts 

from conferring a benefit greater than the insured's loss (i.e., 

a "double recovery"). See, e.g., J.H. France, 626 A.2d at 508 

(stating principle that insured "cannot collect more than it owes 

in damages") (quoting Keene, 667 F.2d at 1050); Keeton & Widiss, 

supra § 3.1(a), at 135. We must apply this principle of 

indemnity -- barring recoveries greater than losses -- in 

conjunction with the J.H. France rule -- holding that where 

multiple insurance policies are triggered to cover an indivisible 

loss, each insurer may be called upon to cover the entire loss up 

to policy limits. J.H. France does not, of course, hold that an 

insured, having recovered part of its loss from one insurer, can 

recover an amount equal to its entire loss from another. 

 Because we cannot permit a double recovery, and because 

several insurers have already paid money to Koppers in complete 

settlement of Koppers' claims against them, we must either 

(1) reduce the judgment to account for the settling insurers' 

apportioned shares of liability, or (2) permit the non-settling 
insurers to seek contribution from the settling insurers and, in 

turn, permit the settling insurers to seek reimbursement from 

Koppers. We predict that the Pennsylvania Supreme Court would 

choose the former rule: reducing the judgment to account for the 

settling insurers' apportioned shares of liability. That is, we 

predict that the supreme court would adopt the "apportioned share 

set-off rule." 

 Although the Pennsylvania Supreme Court has not had 

occasion to decide how to allocate coverage responsibility where 

some of the defendant insurers have settled, the Pennsylvania 

Superior Court has reached this issue and has resolved it by 

applying the apportioned share set-off rule. In Gould, Inc. v. 

Continental Cas. Co., 585 A.2d 16 (Pa. Super. Ct. 1991), Gould, 

the insured, sued several insurers seeking indemnification for 

sums paid in settlement of its employees' claims of injury from 

exposure to toxic metals and chemicals in Gould's lead smelting 

facility. One of the insurers, National Union, joined an 

additional insurer, Travelers, claiming entitlement for 

contribution. Because Travelers had previously paid money to 

Gould in settlement of Gould's claims for indemnification, 

however, the trial court granted an order dismissing the crosscomplaint against Travelers. National Union appealed from that 

order. 

 The superior court affirmed. The court held that, 

where two insurers are obligated to cover the same loss and one 

insurer settles but one does not, the litigating insurer cannot 

seek contribution from the settling insurer. Id. at 19 

("Travelers is not 'contributorily' liable to National Union in 

this action."). Rather, the litigating insurer "will be entitled 

to prorate the amount of coverage" based on the settling 

insurer's proportionate share of coverage responsibility as 

determined by the terms of the two policies, especially the 

"other insurance" provisions. Id. The court stated that the 

proration of a litigating insurer's liability will not be 

impaired by the dismissal of any settling insurers because "the 

applicable limits and pro rata shares pertaining to the policies 

issued by [the settling insurers] will be examined and their 

proportionate share of liability determined, even if they are no 

longer parties to the action." Id. (internal quotation marks 

omitted; alteration in original). 

 Had the Gould decision been issued by the supreme 

court, it would be controlling. Absent some reason to believe 

that the supreme court would reach a different result, the 

superior court's holding is entitled to great deference in our 

endeavor to predict state law. See, e.g., Rolick v. Collins Pine 

Co., 925 F.2d 661, 664 (3d Cir. 1991) (predicting Pennsylvania 

law, and stating that we cannot disregard decision of 

intermediate appellate court unless we are convinced that 

state's highest court would establish different rule). 

 The superior court's decision in Gould, insofar as it 

requires the amount for which the litigating insurers are liable 

to be reduced by the settling insurers' apportioned shares, is in 

no way inconsistent with J.H. France, which involved no settling 

insurers. Moreover, the Pennsylvania Supreme Court has had 
occasion to decide the effect of a plaintiff's settlement with 

fewer than all jointly and severally liable defendants outside of 

the environmental liability insurance context, and there the 

supreme court has adopted the apportioned share set-off rule, 

rejecting any right of contribution against settling defendants 

because such an action would defeat the finality of the 

settlement. See Charles v. Giant Eagle Mkts., 522 A.2d 1, 2-3 

(Pa. 1987) (holding, in context of joint and several tort 

liability, verdict amount against litigating defendants shall be 

reduced by amount of settling defendants' apportioned share of 

liability, regardless of amount received by plaintiff in 

settlement). The decisions in Charles and Gould are readily 

applicable in a case in all respects like J.H. France except for 

the existence of some settling insurers; there must be a set-off, 

rather than a subsequent contribution action, to avoid a double 

recovery. 

 We accordingly predict that, if presented with our 

case, the Pennsylvania Supreme Court would hold that each nonsettling insurer whose policy was triggered to cover an 

indivisible loss is jointly and severally liable, up to the 

limits of its policy, for the full amount of the judgment, lessthe 

settling insurers' apportioned shares. 

 3. 

 Having predicted how the supreme court would modify its 

holding in J.H. France to accommodate the problem of the settling 

insurers, we note that there are two additional rules of 

Pennsylvania insurance law that must guide our resolution of the 

case at hand. These rules are relevant because, unlike J.H. 

France, this case involves excess as well as primary policies. 

 First, a true excess or secondary policy is not 

"triggered" or required to pay until the underlying primary 

coverage has been exhausted. See, e.g., Occidental Fire & Cas. 

Co. v. Brocious, 772 F.2d 47, 53-54 (3d Cir. 1985). This remains 

true even where the primary insurer would have paid to exhaustion 

but for its bankruptcy: in Pennsylvania, an excess insurer is not 

required to "drop down" to provide primary coverage if the 

underlying primary insurer is insolvent. See Donegal Mut. Ins. 

Co. v. Long, 597 A.2d 1124, 1127-28 (Pa. 1991) (deciding to 

"refuse to transform an excess carrier into a primary carrier"); 

J. Kinderman & Sons, Inc. v. United Nat'l Ins. Co., 593 A.2d 857, 

860 (Pa. Super. 1991) (holding that excess policy is responsible 

only for amounts exceeding underlying policy's limits), aff'd, 

619 A.2d 1058 (Pa. 1993). 

 Second, if the underlying primary insurer is solvent 

but the policyholder settles its claim against that primary 

insurer for less than policy limits, we predict the Pennsylvania 

Supreme Court would adopt the widely-followed rule that the 

policyholder may recover on the excess policy for a proven loss 

to the extent it exceeds the primary policy's limits. See Barry 

R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage 

Disputes § 13.04, at 575-77 (7th ed. 1994) (citing, inter alia, 

Stargatt v. Fidelity & Cas. Co., 67 F.R.D. 689, 691 (D. Del. 

1975) (opining that to require insured "actually to collect the 
full amount of the [primary] policies . . . in order to 'exhaust' 

that insurance . . . seems unnecessarily stringent"), aff'd, 578 

F.2d 1375 (3d Cir. 1978)). That is, settlement with the primary 

insurer functionally "exhausts" primary coverage and therefore 

triggers the excess policy -- though by settling the policyholder 

loses any right to coverage of the difference between the 

settlement amount and the primary policy's limits. The excess 

insurer cannot be made liable for any part of this difference 

because the excess insurer never agreed to pay for losses below a 

specified floor (i.e., below the limits of the underlying primary 

policies). Courts have adopted this rule because it encourages 

settlement and allows the insured to obtain the benefit of its 

bargain with the excess insurer, while at the same time 

preventing the insured from obtaining a double recovery. 

 Accordingly, because all of the London Insurers' 

policies provided layers of excess liability coverage over 

certain specified, underlying policy limits, no London Insurer 

policy would be triggered until the underlying coverage has been 

"exhausted," either by settlement or by payment. With respect to 

this exhaustion requirement, the London Insurers argue that allapplicable 

primary coverage must be exhausted before any excess 

insurer will be obligated to pay. This argument is predicated on 

the policies' "other insurance" clauses, which state essentially 

that all other available insurance must be exhausted first. 

Under J.H. France, however, a policy which promises to pay "all 

sums" must provide for full coverage once triggered, without 

regard for such "other insurance" clauses. 626 A.2d at 507. The 

court held that it was irrelevant whether other policies were 

also triggered, concluding that, "The insurer in question must 

bear potential liability for the entire claim." Id. at 508. 

Here, the London Insurers agreed to pay "all sums" in excess of 

the specified limits of the directly underlying policies. Once 

the directly underlying coverage has been exhausted, then, each 

excess policy must indemnify the insured for the full excess loss 

up to policy limits. Under J.H. France, the insured gets 

indemnified first (pursuant to the insuring agreements) and thenthe 

insurers may seek to redistribute the burden among 

themselves. It is only at this latter stage that the "other 

insurance" clauses become relevant, so the London Insurers' 

exhaustion argument based on the "other insurance" clauses must 

be rejected. 

 In sum, taking all of the above rules together, we 

predict that the Pennsylvania Supreme Court would hold that the 

non-settling excess insurers are jointly and severally liable for 

the full amount of the loss in excess of: the sum of (1) the 

policy limits of the directly underlying, "exhausted" primary 

policies, and (2) the combined pro rata shares of other settling 

(primary and excess) insurers. The beneficent consequences of 

this formula are that the insured bears the risk of settling too 

low while the non-settling insurers bear the risk of being unable 

to redistribute equitably among themselves the burden of paying 

the balance (if, for example, some of their number are 

insolvent). 
 4. 

 During the period litigated at trial in this case, 

1953-1960, there were two primary policies directly underlying 

the twelve excess policies issued by the London Insurers. There 

were no other policies involved in that period. Prior to trial, 

Koppers settled with the insurer that had issued both primary 

policies. Accordingly, coverage under these two primary policies 

has been "exhausted" -- regardless of the amount Koppers received 

in settlement -- and the London Insurers' excess policies are 

obligated to pay. 

 If Koppers had not settled with any other insurers 

(insurers which had issued policies outside of the 1953-1960 

litigation period), that would be the end of the matter: the 

judgment would be reduced simply by the combined limits of the 

two underlying primary policies, and the London Insurers would be 

jointly and severally liable for the balance (although they would 

be free subsequently to seek contribution from the other 

insurers, all of whom would be non-settlers). But our case is 

not so simple: Koppers settled with several other primary and 

excess insurers that had issued policies in effect both before 

and after the litigation period. On remand, the district court 

must therefore apply the apportioned share set-off rule for these 

settled policies as well. 

 Determining the apportioned share of a settling insurer 

requires consideration of the "other insurance" clauses of the 

policies found to cover the loss and the applicable state law 

governing the interpretation of those clauses and the resolution 

of any conflicts among them. See Gould, 585 A.2d at 19; see 

also Ostrager & Newman, supra, §§ 11.01-11.04 (discussing 

allocation of coverage responsibility and resolution of conflicts 

involving "other insurance" clauses). The record before us does 

not contain the "other insurance" clauses from all potentially 

applicable policies. Moreover, because of the district court's 

limitation of the period covered by the trial, all policies that 

may be found to cover the indivisible loss have not yet been 

identified. In these circumstances, we cannot determine what the 

apportioned shares of the settling insurers will be. While we 

leave that determination for the district court in the first 

instance, we offer two observations to assist the district court 

in its task. 

 Our first observation relates to the primary policies 

that do not directly underlie the London Insurers' excess 

policies (i.e., those that cover a period outside of 1953- 

1960). We have today held that the London Insurers' liability 

under their excess policies was triggered as soon as the two 

directly underlying primary policies were settled, and that the 

existence of other primary policies applicable to the indivisible 

loss was irrelevant for the purpose of resolving the threshold 

issue of whether the London Insurers' policies were triggered. 

This does not necessarily mean, however, that the existence of 

other primary policies applicable to the indivisible loss is 

irrelevant for the purpose of determining the extent of the 

London Insurers' liability under their excess policies. The 

"other insurance" clauses of the relevant policies and the 
Pennsylvania law applicable thereto may require that, as between 

a primary policy and an excess policy triggered to cover the same 

loss, the primary policy must pay first and, accordingly, that 

the apportioned share of a settled primary policy covering the 

same indivisible loss is its full policy limits. See, e.g., 

Ostrager & Newman, supra, § 11.03[e][1]. Thus, the district 

court may be required to deduct from the total loss the combined 

limits of all settled primary policies. 

 Our second observation relates to the settled excess 

policies. Koppers settled with some, but not all, of the excess 

insurers that issued policies in effect outside of the litigation 

period. Therefore, there are some non-settled, excess policies 

for which the threshold triggering question has not been 

answered. 

 It may be that, under the applicable law, the 

apportioned share of a settling excess insurer -- and, 

accordingly, the extent of the London Insurers' liability -- 

cannot be determined without identifying all policies that are 

triggered and cover the indivisible loss, whether they were in 

force during or outside the litigation period. This will be 

true, for example, if the applicable rule of allocation among 

excess policies here is found to be a pro rata allocation based 

on the limits of each policy and the total limits of all 

triggered policies. See Gould, 585 A.2d at 19; Ostrager & 

Newman, supra, § 11.04. Under this rule of allocation and the 

peculiar circumstances of our case, however, the district court 

would not need to determine whether the non-settling pre-1971 

policies were triggered because the London Insurers concede -- 

against their interests -- that all of Koppers' policies up to 

1971 (the date from which pollution exclusion clauses have 

appeared in all the policies) were triggered. Reply Br. at 31 

(noting that Koppers "admits" this fact). With respect to the 

post-1970 policies, however, the district court may have to 

decide whether those policies were triggered before it can 

properly determine the settling insurers' apportioned shares. 

 IV. 

 For the foregoing reasons, we will reverse and remand 

for the sole purpose of allowing the district court to mold the 

verdict to take account of the settling insurers' apportioned 

shares of liability.