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. e du/thir dc ir c uit_1996/64UNITED 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 INDEM NITY CO.; THE AMERICAN HOME ASSURANCE COMPANY; COMMERCI AL UNION INSURANCE COMPANY; THE HOME INSURANCE COM PANY;

UNDERWRITER'S AT LLOYD'S OF LONDON

Certain Underwriters at Llo yd's, London; Certain Insurance Companies in the London Market, referred to in this action as "Jackson and Comp anies",* (*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 INDEM NITY CO.; THE AMERICAN HOME ASSURANCE COMPANY; COMMERCI AL UNION INSURANCE COMPANY; THE HOME INSURANCE COM PANY; UNDERWRITER'S AT LLOYD'S OF LONDON; CERTAIN I NSURANCE 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 Pennsylvani a (D.C. Civil Action No. 85-cv-02136)Argued May 2, 1996

BEFORE: STAPLETON, COWEN, AND SEITZ, Circui t Judges

(Opinion Filed October 28, 1996)

J oseph W. Montgomery, III (Argued)

J ones, Day, Reavis &
Pogue

5 00 Grant Street, 31st

Floor

P ittsburgh, PA 15219

A ttorney for Appellee/Cross-Appellant

L arry R. Eaton (Argued)

G regory G. Smith

B latt, Hammesfahr &

Eaton
3 33 West Wacker Drive,

Suite 1900

C hicago, IL 60606

and

W illiam T. Hangley

H angley, Aronchick, Segal & Pudlin

O ne Logan Square, 12th

Floor

P hiladelphia, PA 19103

and

K ent D. Syverud

H utchins Hall

A nn Arbor, MI 48109-1215

A ttorneys for Appellants/Cross-Appellee

OPINION OF THE COURT

STAPLETON, Circuit Judge:

Koppers Company, Inc. ("Koppers"), asserts breach ofcontract and declaratory judgment claims against it s liability

insurers, based on their denial of coverage for var ious environmental property damage claims. Koppers ente red into settlement agreements with several of its insurers prior to trial, leaving only certain excess liability insure rs as litigating defendants. Following the jury's determ inations that the occurrence-based policies had been triggered an d that Koppers had incurred a total of about $70 million in proper ty damage liability, the district court entered judgment for Koppers, holding its excess insurers liable for the full amo unt of the claim without reducing the verdict to account for K oppers'

settlements with the other insurers. On appeal, the excess insurers allege four errors under Pennsylvania law: (1) the court erroneously instruc ted the jury that the occurrence-based policies would be trigger ed 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 ha s the burden of proving that the specific property damage that o ccurred was not fortuitous but was expected or intended by the insured; (3) the court abused its discretion by excluding proffe red evidence of Koppers' failure to mitigate the damage; and (4) the court erroneously failed to reduce the judgment to accoun t for the plaintiff's settlements with other insurers. We be lieve the district court committed reversible error with resp ect 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 conductin g manufacturing operations in locations throughout th e United States since the early part of this century. In th e 1980s, federal and state agencies brought claims against K oppers demanding remediation for environmental contaminati on at some 150 plant sites and disposal sites. This environmental contamination included property damage to third-party soil, subso il and groundwater. Koppers then sought a defense and ind emnification from its various liability insurers, all of whom in itially denied

coverage. Appellants, defendants below, are a grou p of certain underwriters for Lloyd's of London and certain Lond on market insurance companies (hereinafter the "London Insure rs"). Over the years, the London Insurers have issued a number of excess liability insurance policies to Koppers. Koppers commenced this action in 1985 agai nst two of its primary insurers, and has since amended its com plaint several times to add other primary and excess insurers, inc luding 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 co ntracts of insurance, sought damages and a declaratory judgmen t regardingKoppers' right to indemnification under those polic ies.

The district court limited the scope of th e trial to twelve specific policies, which provided multiple l ayers of occurrence-based, excess liability coverage for thi rd-party property damage. Five of these policies were in ef fect between late 1953 and January 1957, and the remaining seven policies were in effect between January 1957 and January 1960. T hus, although Koppers had insurance from at least the 1940s throu gh at least the 1970s, the trial was limited to a roughly six-y ear period. The district court further limited the scope of the trial to only 18 of the contaminated sites. Finally, the trial w as limited to determining liability and damages for cleanup and r esponse costs incurred at these sites through the end of 1993, an d to determining whether Koppers was entitled to a decla ratory judgment for the period thereafter. After a three-week trial, the jury found b y special verdict that, during the applicable policy periods, (1) an "occurrence" had triggered coverage under all of th e policies at issue at each site, and (2) Koppers had neither exp ected nor intended to cause damage to third-party property at any site. The jury awarded some $70 million in damages, and t he court entered judgment in May 1995. Pursuant to the cour t's instructions, the jury's damages figure represents the total costs Koppers had incurred because of third-party p roperty damage at the eighteen focus sites through the end of 1993 , without regard to the sums of money Koppers received from t he 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 j udgment under Fed. R. Civ. P. 59(e). The district court, in its July 1995 order, granted Koppers' motion and granted the Lond on Insurers' motion in part but denied it in part. Specifically , as relevant here, the court: (1) granted Koppers' motion to red uce the judgment to about $66 million, but denied the Londo n Insurers' motion to reduce the judgment further to account fo r Koppers' settlements with the other insurers; (2) granted a declaratory judgment (limited to the twelve policies and eighte en focus sites at issue) that Koppers is entitled to indemnificati on under the London Insurers' policies for the period following 1993; and (3) certified the July 1995 order as final under Fe d. R. Civ. P. 54(b). This timely appeal followed.

II. The district court had jurisdiction over t his diversity action pursuant to 28 U.S.C. § 1332. We have appel late jurisdiction over the final order pursuant to 28 U. S.C. § 1291. The parties agree, as do we, that Pennsylv ania law governs this case. We review the district court's interpretation and prediction of state law de novo. Wiley v. Stat e Farm Fire & Cas. Co., 995 F.2d 457, 459 (3d Cir. 1993). In adj udicating 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 e xisting state case law as interpreted by the state's highest cour t in an effortto predict how that court would decide the precise legal issues

before us. Kowalsky v. Long Beach Township, 72 F.3 d 385, 388 (3d Cir. 1995). In the absence of guidance from the st ate's highest court, we must look to decisions of state intermedi ate 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 "analogo us decisions, considered dicta, scholarly works, and any other re liable data tending convincingly to show how the highest court in the state

would decide the issue at hand." McGowan v. Univer sity of Scranton, 759 F.2d 287, 291 (3d Cir. 1985) (quoting McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 663 (3d C ir. 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 underlyin g judgment for review, so that our standard of review varies with the underlying judicial decision. Federal Kemper Ins. Co. v. Raus cher, 807 F.2d 345, 348 (3d Cir. 1986). We exercise plenary review in determining whether a jury instruction misstates a legal standard. Savar ese v. Agriss, 883 F.2d 1194, 1202 (3d Cir. 1989). We consider th e jury instructions as a whole to determine whether they f airly and adequately contain the law applicable to the case. See Douglas v. Owens, 50 F.3d 1226, 1233 (3d Cir. 1995); Savare se, 883 F.2d

at 1202. "We review pre-trial and trial court rulin gs 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 aff ect the outcome of the case." Id. (internal quotation mark s omitted).

III.

A.
We will address first the London Insurers' argument that the district court gave erroneous jury instruc tions regarding the trigger of coverage under their polic ies. The district court instructed the jury that the policie s could be triggered in either of two ways: These policies are triggered if either, on e, the cause of the property damage or, two, the proper ty damage itself took place during the policy period for each site. Thus, if an event or events that ev entually led to property damage took place during the p olicy period, or if . . . the property damage itself too k place during the policy period, the policies hav e been triggered. App. at 2046. The London Insurers argue, however, that their policies could be triggered only by a causative eve nt taking place during the policy period, not by the resultin g property damage alone if the causative event occurred pre-po licy.We need not predict how the Supreme Court of

Pennsylvania would interpret these particular insur ance contracts, however. Koppers introduced uncontrover ted evidence that the property damage (mostly groundwater contam ination through leaching) was continuous, progressive, and indivisible throughout the relevant policy periods. It also in troduced

uncontroverted evidence that the causes of the cont amination (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 th e court's instruction based solely on the jury's acceptance o f Koppers' uncontradicted evidence regarding the occurrence of property damage, we perceive no basis on which the jury migh t have accepted that evidence yet rejected Koppers' uncont roverted evidence regarding the occurrence of the causes of that damage. Accordingly, we find it more than highly probable t hat the district court's charge on this point did not affec t the outcome of the case. In short, the charge, even if erroneo us, was harmless error.

B.

1. The London Insurers next argue that the co urt erred in instructing the jury that the insurers had the burd en of proving, as an affirmative defense, that the losses were not fortuitous-- i.e., that Koppers expected or intended the third-p arty 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 h arm. The question of which party bears the burd en of proof in a diversity case is a matter of state substantiv e law. Blair v. Manhattan Life Ins. Co., 692 F.2d 296, 299 (3d C ir. 1982). In Pennsylvania, the insured bears the burden of provi ng facts that bring its claim within the policy's affirmative gra nt 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 limi tations on coverage, since disclaiming coverage on the basis o f an exclusion is an affirmative defense. See, e.g., Aetna Life & Cas. Co. v. Barthelemy, 33 F.3d 189, 194 (3d Cir. 1994); Compag nie 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 Suprem e Court would place the burden on the insurer in this case. The terms of the policies do not mention f ortuity. The portions of the policies defining the scope of cove rage state that the London Insurers will "indemnify the Assure d for all sums which the Assured shall be obligated to pay by reas on of the liability imposed upon the Assured . . . for damage s . . . on account of . . . property damage." App. at 141. T here is no requirement in the coverage provisions that the los s befortuitous 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 a cknowledged that the loss claimed was within the scope of cover age as so stated but denied coverage because that loss was no t fortuitous. The policy exclusions contained no reference to the fortuity of the loss. This court there predicted that the Supr eme Court of Pennsylvania would recognize a "judicially created 'fortuity' exclusion from coverage." Id. at 76. Our predicti on was based on the generally accepted principle that "every 'al l risk'

contract of insurance contains an unnamed exclusion -- the loss

must be fortuitous in nature." Id. at 75. We reco gnized that this generally recognized principle had a "public p olicy" basis.

Id. at 77. The rationale supporting the generally acc epted rule against indemnity for non-fortuitous losses is succ inctly explained in Robert E. Keeton & Alan I. Widiss, Ins urance 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 publ ic policy to permit the enforcement of an insurance contract if it would provide

indemnification for losses that are not

fortuitous. . . .

. . . The [rule requiring fortuity] embodi es a fundamental and significant public polic y interest that in some contexts is sufficiently important to preclude coverag e claims even when there are explicit agreements to the contrary, but in any cas e 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 pr edict that it is the public policy of Pennsylvania not to enforce an insurance coverage contract providing coverage for a non-fort uitous loss. As with exclusions stated in an insurance policy it self, when an insurer relies on public policy to deny coverage of a claim, the insurer must bear the burden. See, e.g., Butterfie ld v. Giuntoli, 670 A.2d 646, 654 (Pa. Super. 1995) (find ing no exclusion for punitive damages in insurance policy, burdenshifted to insurer to prove that punitive damages a re excluded as

against public policy in Pennsylvania); Princeton I ns. 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 co nduct, 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 Calif ornia public policy exclusion). In particular, if an insurer ha s issued a policy that on its face covers the loss at issue an d seeks to deny coverage on the basis that enforcing the polic y as written would offend the public policy against indemnificat ion of nonfortuitous losses, we predict that the Pennsylvania Supreme Court would place on the insurer the burden of proving th at the circumstances of the loss were such that coverage w ould 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 a nd intended.

2. In addition to challenging the district co urt's fortuity instruction for misallocating the burden o f proof, the London Insurers argue that the instruction improper ly limited this public policy affirmative defense to situation s in which the insured "expected or intended" the specific harms t hat 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 cou rt's instructions were inconsistent with this propositio n. We agree that the district court's instruc tions on this issue did not limit the fortuity defense to those h arms specifically expected or intended by the insured. As the London Insurers point out, the district court instructed t he jury: "If you find that Koppers intentionally or knowingly ca used property damage for which it seeks coverage, then Koppers ma y not recover for that specific damage." App. at 1013. However , the court concluded this instruction by stating: "To lose cov erage, Koppers must have intended the same general type of propert y damage that

occurred." Id. We think that the instructions on this point, when read as a whole, fairly conveyed to the jury w hat the parties agree is the correct legal standard. See D ouglas 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 t he district court abused its discretion by excluding their prof fered evidence of Koppers' failure to mitigate the property damage . The insurers argue that, under Pennsylvania law, an ins ured has an ongoing duty to mitigate its losses, and that Koppe rs' recoverymust be reduced by the amount of loss which could h ave been

prevented if Koppers had undertaken reasonable effo rts to mitigate the property damage. The district court ruled, as a general mat ter, that evidence of Koppers' failure to mitigate damages wo uld be admissible. Although the precise basis for the dis trict court's decision to exclude the London Insurers' proffered evidence is not clear from the record, we find no reversible er ror. As a matter of general contract law, the P ennsylvania Supreme Court has held that a plaintiff's duty to m itigate its damages arises upon the defendant's breach of the c ontract. E.g., Bafile v. Borough of Muncy, 588 A.2d 462, 464 (Pa. 1991). The superior court has applied this rule in the con text 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 Libert y Assocs. v. Genro II, Inc., 652 A.2d 948, 952 (Pa. Super. Ct. 1 995) (holding that insurer, once found to be liable, need not rei mburse insured for unnecessary roof repairs). Here, the d efendant insurers breached by refusing to indemnify Koppers in the 1980s, but all of the proffered "mitigation" evidence conc erned the prior two decades. Even assuming, however, that th e Pennsylvania Supreme Court would require an insured to mitigate its damages prior to the insurer's breach of contract, the dist rict court's exclusion of the proffered evidence was proper beca use the evidence was legally insufficient to make out a cla im of failure to mitigate damages. Mitigation is an affirmative defense, so t he 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 de fendant must show: (1) what reasonable actions the plaintiff oug ht to have taken, (2) that those actions would have reduced th e damages, and (3) the amount by which the damages would have been reduced. See, e.g., Ecksel, 519 A.2d at 1021 (finding defend ant's failure to mitigate defense unproven because defendant did not show how plaintiff could have mitigated damages or how damag es were made worse by alleged inaction); State Pub. Sch. Bldg. A uth. v. W.M. Anderson Co., 410 A.2d 1329 (Pa. Commw. Ct. 1980) ( affirming judgment for contractor where breaching school dist rict failed to

show that contractor's work was unreasonable and av oidable); see also New Castle County v. Hartford Accident & Indem . Co., 685 F. Supp. 1321, 1332 (D. Del. 1988) (holding that, wher e insurance policy contained express mitigation provision, insu rer must specify what further injury occurred as result of t he insured's lack of mitigation).

The London Insurers' evidence would not ha ve satisfied any of these three elements, as it merely purports to show that Koppers was aware of property damage in the 1960s a nd 1970s but failed to correct the problem until the 1980s. The London

Insurers offered no evidence of what reasonable act ions Koppers might or ought to have taken, no evidence tending t o show that any actions would have measurably reduced the harm, and, thus, noevidence 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' evide nce was not
reversible error.

D.
The London Insurers' final claim is that t he district court erroneously saddled them with liability for t he entire loss by improperly failing to reduce the judgment to acc ount for Koppers' settlements with the other defendant insur ers. We

agree.

1.

In J.H. France Refractories Co. v. Allstat e Insurance Co., 626 A.2d 502 (Pa. 1993), the Pennsylvania Supr eme Court was called upon to allocate coverage responsibility amo ng six primary insurers, each of which was obligated to cover an i ndivisible loss. J.H. France had brought a declaratory judgme nt action to determine its insurers' duty to defend and indemnif y against lawsuits involving asbestos-related bodily injury c laims. The insurance policies at issue were all pre-1986 compr ehensive general liability ("CGL") policies which would be t riggered by the occurrence during the policy period of "bodily injury." Affirming the lower court's application of the "mul tiple-trigger" or "continuous-trigger" theory of determining liabi lity of the insurers, under which all phases of the disease--ex posure, progression, and manifestation--independently const itute "bodily injury" triggering coverage, the supreme court held that "every insurer which was on the risk at any time during th e development

of a claimant's asbestos-related disease has an obl igation 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 ano ther 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, apport ioned upon the amount of time each policy was in effect. Id. Dec lining to adopt that approach, the supreme court held instead that the insurers whose coverage had been triggered were joi ntly and severally liable for the full amount of the claim u p 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 developme nt of the disease [i.e., the remaining triggered pol icies]. Any policy in effect during the period from ex posure through manifestation must indemnify the i nsured 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 pr ovisions of'other insurance' clauses in the applicable policie s," so that an

insurer who is saddled with more than its fair shar e of liability may seek to obtain "a share of indemnification or d efense costs

from other insurers." Id. In the instant case, the district court pr edicted that the Pennsylvania Supreme Court would extend its hol ding on the allocation issue in J.H. France to cases involving environmental property damage claims, such that all insurers whos e policies were triggered to cover an indivisible loss would b e jointly and severally liable, up to policy limits, for the full amount of that loss. Although we conclude that J.H. France d oes not completely control the disposition of this case, we agree as a general matter with this prediction. The Pennsylvania Supreme Court's reasons f or adopting the joint and several approach in J.H. France are f ully applicable to the case before us. "First, and most compelling, is the language of the policies themselves." Id. a t 507. In J.H. France, "[e]ach insurer obligated itself to 'p ay on behalf

of the Insured all sums which the Insured shall bec ome legally obligated to pay as damages because of bodily injur y to which this insurance applies.'" Id. (emphasis in origina l). Thus, as the supreme court explained, "each insurer contract ed to pay all sums which the insured becomes legally obligated to pay, not merely some pro rata portion thereof." Id. (emphas is in original). Similarly, the policy at issue here obliga ted the London Insurers "to indemnify the Assured for all s ums 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 in sured's] entire liability once they are triggered." 626 A.2 d at 508 (quoting Keene Corp. v. Insurance Co. of N. Am., 66 7 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) (predi cting Pennsylvania Supreme Court would interpret "the phr ase 'all sums' to provide for full coverage once coverage under a policy was triggered"). The second reason the supreme court gave f or adopting the joint and several approach in J.H. France is th e indivisibility of asbestos-related bodily injury. No medical evidence was presented to substantiate the assumpti on, implicit in the superior court's allocation method of pro ra ta by time on the risk, "that the progression of asbestos-related disease is linear in character." 626 A.2d at 508. The suprem e court elaborated: "To apportion liability among the insur ers on a strictly temporal basis in direct proportion to the length of time each insurer was on the risk, . . . notwithsta nding its surface attractiveness, assumes a linearity of dise ase progression which this record does not support." I d. As with asbestos-related bodily injury, en vironmentalproperty damage is a progressive harm that, as a pr actical

matter, is indivisible. See, e.g., New Castle Coun ty 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 neig hboring property, or at what rate the contamination spread" ), aff'd and rev'd in part on other grounds, 933 F.2d 1162 (3d C ir. 1991); Abraham, supra, at 120 ("Given the progressive natu re of the environmental harms in question, finding the facts necessary [to hold each policy liable only for those harms that o ccurred during the policy period] usually would be administrativel y difficult, scientifically impossible, or both."); John H. Math ias, Jr. et al., Allocation: J.H. France and the Insureds' Righ t 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 contami nants over years or decades may result not from a predictable, linear process, but rather from sporadic or periodic event s or conditions that vary in magnitude and frequency ove r the years."). Accordingly, it is appropriate to hold t he triggered policies jointly and severally liable here, given t hat "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 o f the several policies triggered to cover a specific claim was po tentially liable for the entire claim. The policies provided insurance against "occurrences" and, as defined in the polici es, an "occurrence" included "'continuous or repeated expo sure to conditions which result in bodily injury.'" 626 A. 2d at 508. Thus, the entire "process of exposure [would] const itute one occurrence." Id. The supreme court explained: Being defined as one "occurrence," the ent ire injury, and all damages resulting therefrom, fall within the indemnification obligation of the insurer. In other words, once the liability of a given insur er is triggered, it is irrelevant that additiona l exposure or injury occurred at times other than when t he 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 in sured period, it is irrelevant to [the insured's] legal obligatio ns and, therefore, to the insurer's liability that they wer e also caused, in part, during another period"). Like the CGL policies in J.H. France, the London Insurers' policies provided occurrence-based covera ge and

defined an "occurrence" to mean either "a series of occurrences arising out of one event," App. at 158, or "one hap pening 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 resulti ng from a single causative event are considered a single occu rrence. As inJ.H. France, because the entire injury is defined a s 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 ap ply the J.H. France allocation approach, holding jointly and sev erally liable all policies triggered to cover a single, indivisib le loss. We note that other courts have similarly taken the joi nt and several approach where multiple policies cover an indivisib le 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. 10 07 (1982); Dayton Indep. Sch. Dist. v. National Gypsum Co., 68 2 F. Supp. 1403, 1410-11 (E.D. Tex. 1988), rev'd on other grou nds sub nom.W.R. Grace & Co. v. Continental Cas. Co., 896 F.2d 865 (5th Ci r. 1990).

2. Given this prediction, if this case, like J.H. France, involved several triggered primary policies where n one 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, th e insured's settlements with some primary and some excess insur ers, and the

district court's decision to limit the trial to a c ertain period of years at certain sites. We believe that, if pre sented with the complicating factors in our case, the Pennsylva nia Supreme Court would not simply apply J.H. France and hold t hat the appellant excess insurers are jointly and severally liable, up to policy limits, for the entire property damage liabi lity at the focus sites. Instead, as explained below, we predi ct that the supreme court would modify the J.H. France rule to hold the London Insurers jointly and severally liable for th e amount of the loss in excess of the settling insurers' pro ra ta shares of liability. We begin with the principle of indemnity, a fundamental principle of insurance law which prohibits insuranc e 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 mor e than it owes in damages") (quoting Keene, 667 F.2d at 1050); Kee ton & Widiss, supra § 3.1(a), at 135. We must apply this princip le of indemnity -- barring recoveries greater than losses -- in conjunction with the J.H. France rule -- holding th at 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 ano ther. 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-settlinginsurers to seek contribution from the settling ins urers and, in

turn, permit the settling insurers to seek reimburs ement from Koppers. We predict that the Pennsylvania Supreme Court would choose the former rule: reducing the judgment to a ccount for the settling insurers' apportioned shares of liability. That is, we predict that the supreme court would adopt the "app ortioned share

set-off rule." Although the Pennsylvania Supreme Court ha s not had occasion to decide how to allocate coverage respons ibility where some of the defendant insurers have settled, the Pe nnsylvania Superior Court has reached this issue and has resol ved it by applying the apportioned share set-off rule. In Go uld, Inc. v. Continental Cas. Co., 585 A.2d 16 (Pa. Super. Ct. 1 991), Gould, the insured, sued several insurers seeking indemnif ication for sums paid in settlement of its employees' claims of injury from exposure to toxic metals and chemicals in Gould's l ead smelting facility. One of the insurers, National Union, joi ned an additional insurer, Travelers, claiming entitlement for contribution. Because Travelers had previously pai d money to

Gould in settlement of Gould's claims for indemnifi cation, however, the trial court granted an order dismissin g the crosscomplaint against Travelers. National Union appeal ed from that

order. The superior court affirmed. The court he ld that, where two insurers are obligated to cover the same loss and one insurer settles but one does not, the litigating in surer cannot seek contribution from the settling insurer. Id. a t 19 ("Travelers is not 'contributorily' liable to Natio nal Union in this action."). Rather, the litigating insurer "wi ll be entitled to prorate the amount of coverage" based on the set tling insurer's proportionate share of coverage responsib ility as determined by the terms of the two policies, especi ally the "other insurance" provisions. Id. The court state d 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 i f they are no longer parties to the action." Id. (internal quota tion 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 resu lt, the superior court's holding is entitled to great defer ence in our endeavor to predict state law. See, e.g., Rolick v . Collins Pine Co., 925 F.2d 661, 664 (3d Cir. 1991) (predicting P ennsylvania law, and stating that we cannot disregard decision of intermediate appellate court unless we are convince d that state's highest court would establish different rul e). The superior court's decision in Gould, in sofar as it requires the amount for which the litigating insure rs are liable to be reduced by the settling insurers' apportioned shares, is in no way inconsistent with J.H. France, which involve d no settling insurers. Moreover, the Pennsylvania Supreme Court has hadoccasion to decide the effect of a plaintiff's sett lement with

fewer than all jointly and severally liable defenda nts 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 settlin g 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 severa l tort liability, verdict amount against litigating defend ants shall be reduced by amount of settling defendants' apportion ed share of liability, regardless of amount received by plainti ff in settlement). The decisions in Charles and Gould ar e readily applicable in a case in all respects like J.H. Fran ce except for the existence of some settling insurers; there must be a set-off, rather than a subsequent contribution action, to av oid a double

recovery. We accordingly predict that, if presented with our case, the Pennsylvania Supreme Court would hold tha t each nonsettling insurer whose policy was triggered to cove r an indivisible loss is jointly and severally liable, u p to the limits of its policy, for the full amount of the ju dgment, lessthe settling insurers' apportioned shares.

3. Having predicted how the supreme court wou ld modify its holding in J.H. France to accommodate the problem o f the settling insurers, we note that there are two additional rul es of Pennsylvania insurance law that must guide our reso lution of the case at hand. These rules are relevant because, un like J.H. France, this case involves excess as well as primar y policies. First, a true excess or secondary policy i s 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 Doneg al Mut. Ins. Co. v. Long, 597 A.2d 1124, 1127-28 (Pa. 1991) (dec iding to "refuse to transform an excess carrier into a prima ry carrier"); J. Kinderman & Sons, Inc. v. United Nat'l Ins. Co., 593 A.2d 857, 860 (Pa. Super. 1991) (holding that excess policy i s responsible only for amounts exceeding underlying policy's limi ts), 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 limit s. See Barry R. Ostrager & Thomas R. Newman, Handbook on Insuran ce 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 thefull amount of the [primary] policies . . . in orde r to 'exhaust'

that insurance . . . seems unnecessarily stringent" ), aff'd, 578 F.2d 1375 (3d Cir. 1978)). That is, settlement wit h the primary insurer functionally "exhausts" primary coverage an d therefore triggers the excess policy -- though by settling th e policyholder loses any right to coverage of the difference betwe en 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 unde rlying primary policies). Courts have adopted this rule because i t encourages
settlement and allows the insured to obtain the ben efit of its bargain with the excess insurer, while at the same time preventing the insured from obtaining a double reco very. Accordingly, because all of the London Ins urers' policies provided layers of excess liability covera ge over certain specified, underlying policy limits, no Lon don Insurer policy would be triggered until the underlying cove rage has been "exhausted," either by settlement or by payment. W ith respect to this exhaustion requirement, the London Insurers ar gue that allapplicable primary coverage must be exhausted before any exces s insurer will be obligated to pay. This argument is predicated on the policies' "other insurance" clauses, which stat e essentially

that all other available insurance must be exhauste d 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.2 d at 507. The court held that it was irrelevant whether other pol icies were also triggered, concluding that, "The insurer in qu estion 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 pol icies. Once the directly underlying coverage has been exhausted , then, each excess policy must indemnify the insured for the fu ll excess loss up to policy limits. Under J.H. France, the insure d gets indemnified first (pursuant to the insuring agreeme nts) and thenthe insurers may seek to redistribute the burden among themselves. It is only at this latter stage that t he "other insurance" clauses become relevant, so the London I nsurers' exhaustion argument based on the "other insurance" clauses must be rejected. In sum, taking all of the above rules toge ther, we predict that the Pennsylvania Supreme Court would h old that the non-settling excess insurers are jointly and severa lly liable for

the full amount of the loss in excess of: the sum of (1) the policy limits of the directly underlying, "exhauste d" primary policies, and (2) the combined pro rata shares of o ther settling (primary and excess) insurers. The beneficent cons equences of

this formula are that the insured bears the risk of settling too low while the non-settling insurers bear the risk o f being unable to redistribute equitably among themselves the burd en of paying the balance (if, for example, some of their number are insolvent).4.

During the period litigated at trial in th is case, 1953-1960, there were two primary policies directly underlying the twelve excess policies issued by the London Ins urers. There were no other policies involved in that period. Pr ior to trial, Koppers settled with the insurer that had issued bo th primary policies. Accordingly, coverage under these two pr imary policies has been "exhausted" -- regardless of the amount Ko ppers received in settlement -- and the London Insurers' excess po licies 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 ma tter: the judgment would be reduced simply by the combined li mits of the two underlying primary policies, and the London Ins urers would be jointly and severally liable for the balance (altho ugh 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 p rimary and excess insurers that had issued policies in effect both before and after the litigation period. On remand, the di strict court must therefore apply the apportioned share set-off rule for these settled policies as well. Determining the apportioned share of a set tling insurer requires consideration of the "other insurance" cla uses of the policies found to cover the loss and the applicable state law governing the interpretation of those clauses and t he resolution of any conflicts among them. See Gould, 585 A.2d a t 19; see also Ostrager & Newman, supra, §§ 11.01-11.04 (disc ussing allocation of coverage responsibility and resolutio n of conflicts involving "other insurance" clauses). The record b efore us does

not contain the "other insurance" clauses from all potentially applicable policies. Moreover, because of the dist rict 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 dete rmine 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 d istrict court

in its task. Our first observation relates to the prima ry policies that do not directly underlie the London Insurers' excess policies (i.e., those that cover a period outside o f 1953- 1960). We have today held that the London Insurers ' liability under their excess policies was triggered as soon a s the two directly underlying primary policies were settled, and that the existence of other primary policies applicable to t he indivisible loss was irrelevant for the purpose of resolving th e threshold issue of whether the London Insurers' policies were triggered. This does not necessarily mean, however, that the e xistence of other primary policies applicable to the indivisibl e loss is irrelevant for the purpose of determining the exten t of the London Insurers' liability under their excess polic ies. The "other insurance" clauses of the relevant policies and thePennsylvania law applicable thereto may require tha t, as between

a primary policy and an excess policy triggered to cover the same loss, the primary policy must pay first and, accord ingly, that the apportioned share of a settled primary policy c overing the same indivisible loss is its full policy limits. S ee, 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 sett led 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, exc ess 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 -- a nd, accordingly, the extent of the London Insurers' lia bility -- cannot be determined without identifying all polici es that are triggered and cover the indivisible loss, whether t hey were in force during or outside the litigation period. Thi s will be true, for example, if the applicable rule of alloca tion among excess policies here is found to be a pro rata allo cation based on the limits of each policy and the total limits o f all triggered policies. See Gould, 585 A.2d at 19; Ost rager & Newman, supra, § 11.04. Under this rule of allocat ion and the peculiar circumstances of our case, however, the di strict court

would not need to determine whether the non-settlin g pre-1971 policies were triggered because the London Insurers concede -- against their interests -- that all of Koppers' pol icies up to 1971 (the date from which pollution exclusion claus es have appeared in all the policies) were triggered. Repl y Br. at 31 (noting that Koppers "admits" this fact). With res pect 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' apportion ed 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' a pportioned shares of liability.