1995 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

9-21-1995

Gen. Ceramics v Fireman's Fund

Precedential or Non-Precedential:

Docket 94-5371

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Recommended Citation

"Gen. Ceramics v Fireman's Fund" (1995). 1995 Decisions. Paper 259.

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2 

 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

 

N0. 94-5371 

 

 GENERAL CERAMICS INC., National Beryllia Division 

v. 

FIREMEN'S FUND INSURANCE COMPANIES; THE ST. PAUL PROPERTY AND 

LIABILITY INSURANCE COMPANY; HOME INSURANCE COMPANY; 

MARINE INSURANCE COMPANY; HARTFORD INSURANCE COMPANY; 

UNION INDEMNITY, C/O STATE OF NEW YORK INSURANCE DEPARTMENT 

LIQUIDATION BUREAU; GREATER ATLANTIC INSURANCE COMPANY 

 GENERAL CERAMICS, INC., 

 NATIONAL BERYLLIA DIVISION 

 a Corporation of the State 

 of New Jersey, 

 Appellants 

 

On Appeal From the United States District Court 

For the District of New Jersey 

(D.C. Civil Action No. 92-cv-03292) 

 

Argued February 14, 1995 

BEFORE: STAPLETON, GREENBERG and COWEN, Circuit Judges

(Opinion Filed September 21, 1995) 

 

 

David C. Dixon (Argued) 

Scangarella & Feeney 

565 Newark Pompton Turnpike 

P.O. Box 216 

Pompton Plains, N.J. 07444 

 Attorneys for Appellant 

Wendy L. Mager (Argued) 

Jay M. Tuckerman 
2 

Smith, Stratton, Wise, Heher & Brennan 

600 College Road East 

Princeton, N.J. 08540 

 Attorneys for Appellee 

 Home Insurance Co. 

Laura A. Foggan 

Daniel E. Troy 

Stephen D. Goldman 

Tanja E. Hens 

Wiley, Rein & Fielding 

1776 K Street, N.W. 

Washington, D.C. 20006 

 Attorneys for Amicus Curiae 

 Insurance Environmental Litigation 

 Association 

 

OPINION OF THE COURT

 

STAPLETON, Circuit Judge: 

 

 This is an action for a declaratory judgment that a 

standard comprehensive liability insurance policy covers a 

liability incurred under the Comprehensive Environmental 

Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42 

U.S.C. §§ 9601-9675. Central to its resolution is a choice-oflaw issue governed by New Jersey's choice-of-law rules. We must 

decide whether New Jersey or Pennsylvania law controls the 

interpretation of an exception to a pollution-exclusion clause 

when New Jersey has significant contacts with the insurance 

contract and the insured but Pennsylvania is the site of the 

hazardous waste site giving rise to the liability for which 

coverage is sought. Based on the strong public policy that 
3 

underlies New Jersey's broad interpretation of the pollutionexclusion exception, we conclude that the Supreme Court of New 

Jersey would hold the New Jersey law governs this dispute. 

Because the district court applied Pennsylvania law and granted 

summary judgment in favor of the insurer on that basis, we will 

reverse. 

I. 

 The insured, General Ceramics, Inc.,1 is a New Jersey 

company that manufactures high temperature beryllium oxide 

ceramics at its main manufacturing plant in Haskell, New Jersey. 

Until 1991, all of General Ceramics's corporate, manufacturing, 

marketing, and sales operations were located at the Haskell, New 

Jersey facility. Between December 1977 and October 1978, 

approximately five shipments of contaminated waste from the 

Haskell facility were transported by private waste haulers to a 

resource recovery and processing facility in McAdoo, Pennsylvania 

("the McAdoo site"). 

 In 1981, General Ceramics received notice from the 

United States Department of Environmental Protection ("EPA") and 

the Pennsylvania Department of Environmental Resources that these 

agencies were investigating contamination at the McAdoo site. 

This investigation led to a request that General Ceramics remove 

from the site approximately 115 drums allegedly containing toxic 

 

1 General Ceramics was formerly known as National Beryllia 

Corporation and is so identified on the relevant insurance 

policies. 
4 

waste. General Ceramics complied with that request. In 1987, a 

proposed consent decree for clean-up, monitoring, and remediation 

of the McAdoo site was filed with the District Court for the 

Eastern District of Pennsylvania. The EPA then filed a civil 

action in that court, pursuant to CERCLA, against General 

Ceramics and others, seeking damages and injunctive relief, and 

incorporating the provisions of the consent decree. Through 

September 1991, General Ceramics had expended approximately 

$132,000 in clean-up and remediation costs pursuant to the McAdoo 

site consent decree. In October 1992, General Ceramics notified 

its insurers of the environmental claims pending against it. 

 Between December 1972 and December 1978, Home Indemnity 

Company (referred to in the caption as "Home Insurance Company" 

and in this opinion as "Home" or "the insurer") had issued seven 

liability polices to General Ceramics, each covering 

approximately a one year period. Home is incorporated in New 

Hampshire and has its principal place of business in New York. 

The policies were obtained through a New York insurance broker. 

All of the policies listed Haskell, New Jersey as the insured's 

address; all policies were maintained and counter-signed there; 

and all premium notices were sent to and paid from that address. 

 The Home policies provided coverage for "bodily injury 

[or] property damage . . . caused by an occurrence." (See, e.g., 

app. at 84.) "Occurrence" was defined in the policies as "an 

accident, including continuous or repeated exposure to 

conditions, which results in bodily injury or property damage 

neither expected nor intended from the standpoint of the 
5 

insured." (See, e.g., app. at 78.) The policies also contained 

the following standard exclusion clause applicable to bodily 

injury and property damage resulting from pollution: 

This insurance does not apply: 

 . . . 

(f) to bodily injury or property damage 

arising out of the discharge, dispersal, 

release or escape of smoke, vapors, soot, 

fames, acids, alkalis, toxic chemicals, 

liquids or gases, waste materials or other 

irritants, contaminants or pollutants into or 

upon land, the atmosphere or any water course 

or body of water; but this exclusion does not 

apply if such discharge, dispersal, release 

or escape is sudden and accidental. 

(See, e.g., app. at 84 (emphasis added).) 

 After giving Home notice of the EPA claims against it, 

General Ceramics filed an action in the Superior Court of New 

Jersey against Home and a number of other insurers seeking a 

declaration that any liability in connection with the McAdoo site 

environmental claims was covered by General Ceramics's insurance 

policies. After removal to the United States District Court for 

the District of New Jersey, summary judgment was granted in favor 

of Home, and General Ceramics's cross-motion for summary judgment 

was denied. The district court determined that Pennsylvania law 

applied, that the discharge of the pollution in this case had 

been gradual and not abrupt, and that under Pennsylvania law the 

gradual discharge of pollutants was not covered under the "sudden 

and accidental" exception to the pollution-exclusion clause. 

Accordingly, the damage at the McAdoo site resulting from General 
6 

Ceramics's delivery of waste over a one year period was not 

covered. General Ceramics promptly filed a notice of appeal. 

 Both before and shortly after the district court 

granted summary judgment to Home, the other defendant insurance 

companies were voluntarily dismissed from the action with 

prejudice. 

 The district court had jurisdiction over this diversity 

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

the appeal pursuant to 28 U.S.C. § 1291. Although at the time 

General Ceramics filed its notice of appeal on June 21, 1994, 

claims remained pending against other defendant insurers, General 

Ceramics's premature notice of appeal ripened when the remaining 

defendants were dismissed from the action on July 25 and July 26, 

1994. Because this court had not yet taken any action on the 

appeal at that time, we may assert appellate jurisdiction over 

the prematurely filed appeal. See New Castle County v. Hartford 

Accident & Indem. Co., 933 F.2d 1162, 1178 (3d Cir. 1991) (citing 

Cape May Greene, Inc. v. Warren, 698 F.2d 179 (3d Cir. 1983)). 

 General Ceramics raises three issues on appeal: (1) 

whether the district court erred when it determined under New 

Jersey's choice-of-law rules that Pennsylvania law applies to the 

interpretation of the insurance contract provisions, (2) whether 

under Pennsylvania law the pollution-exclusion clause bars 

recovery, and (3) whether there existed substantial issues of 

material fact precluding summary judgment. Because we conclude 

that application of New Jersey's choice-of-law rules require 

application of New Jersey law, we do not reach the second issue. 
7 

Because the district court granted summary judgment on the basis 

of Pennsylvania substantive law and because genuine issues of 

material fact preclude summary judgment under New Jersey law at 

this juncture, we will reverse and remand for application of New 

Jersey law in further proceedings. 

 In reviewing a grant of summary judgment, we apply the 

same test that the district court should have used initially. 

Public Interest Research Group of New Jersey, Inc. v. Powell 

Duffryn Terminals, Inc., 913 F.2d 64, 76 (3d Cir. 1990), cert. 

denied, 498 U.S. 1109 (1991). Summary judgment is appropriate 

where "there is no genuine issue as to any material fact and . . 

. the moving party is entitled to judgment as a matter of law." 

Fed. R. Civ. P. 56. The allegations of the party opposing the 

motion are taken as true and inferences are drawn in a light most 

favorable to the non-movant. Goodman v. Mead Johnson & Co., 534 

F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038 (1977). 

In responding to a motion for summary judgment, however, the 

nonmoving party must "go beyond the pleadings and by her own 

affidavits, or by the 'depositions, answers to interrogatories, 

and admissions on file,' designate 'specific facts showing that 

there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 

477 U.S. 317, 324 (1986) (quoting Fed. R. Civ. P. 56(e)). The 

district court's application of New Jersey's choice-of-law rules 

involves the application of legal principles and therefore is 

subject to plenary review. 
8 

II. 

 A choice-of-law issue arises in this case because 

Pennsylvania and New Jersey law differ regarding the 

interpretation to be given the "sudden and accidental" discharge 

exception found in the pollution-exclusion clause of standard 

comprehensive liability policies like those issued by Home to 

General Ceramics.2 Pennsylvania's intermediate appellate courts 

have consistently held that the "sudden and accidental" exception 

does not extend coverage for gradual discharges of pollution. 

See, e.g., O'Brien Energy Sys., Inc. v. American Employers Ins. 

Co., 629 A.2d 957, 962 (Pa. Super. Ct. 1993), appeal denied, 642 

A.2d 487 (Pa. 1994); Lower Pe Goodman v. Mead Johnson & Co., 534 

F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038 

(1977).__ 

 

 

2 The parties do not contend that the law of Home's state of 

incorporation, New Hampshire, or its principal place of business, 

New York, should apply. We accordingly do not consider the law 

of those states.