2001 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

8-22-2001

Acceptance Ins Co v. Sloan

Precedential or Non-Precedential:

Docket 00-2423

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Recommended Citation

"Acceptance Ins Co v. Sloan" (2001). 2001 Decisions. Paper 188.

http://digitalcommons.law.villanova.edu/thirdcircuit_2001/188
Filed August 22, 2001 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 00-2423 

ACCEPTANCE INSURANCE COMPANY 

 Appellant 

v. 

ROBERT H. SLOAN, BANKRUPTCY TRUSTEE FOR MON 

VALLEY STEEL COMPANY, INC.; LARRY M. BOWERS; 

GLADYS D. BOWERS, INDIVIDUALLY 

AND 

AS CO-ADMINISTRATORS OF THE ESTATE OF JOELENE 

BOWERS, DECEASED; UTICA MUTUAL INSURANCE 

COMPANY; NOBLE WINE; COMMONWEALTH 

OF PENNSYLVANIA 

ON APPEAL FROM THE 

UNITED STATES DISTRICT COURT 

FOR THE WESTERN DISTRICT OF PENNSYLVANIA 

(Dist. Court No. 98-cv-01647) 

District Court Judge: William L. Standish 

Argued: April 17, 2001 

Before: ALITO, RENDELL, and FUENTES, Circuit Judges. 

(Opinion Filed: August 22, 2001) 

 Russell J. Ober, Jr. (Argued) 

 Kelly A. Reynolds 

 Meyer, Unkovic & Scott LLP 

 1300 Oliver Building 

 Pittsburgh, Pennsylvania 15222 

 Counsel for Appellant 
 Jan C. Swensen (Argued) 

 Alan H. Perer 

 Swensen Perer & Kontos 

 2710 Two PNC Plaza 

 Pittsburgh, Pennsylvania 15222 

 Counsel for Appellees Larry M. 

 Bowers and Gladys D. Bowers 

 Ashley W. Ward 

 Sites & Harbison 

 250 West Main Street, 

 Suite 2300 

 Lexington, Kentucky 40507 

 Counsel for Appellee Utica Mutual 

 Insurance Company 

OPINION OF THE COURT 

ALITO, Circuit Judge: 

Acceptance Insurance Co. ("Acceptance") brought this 

action seeking a declaratory judgment to resolve its rights 

and duties under an insurance policy issued to Mon Valley 

Steel Co. ("Mon Valley"). The policy in question was a 

general liability policy for the Clyde Mine, located in 

western Pennsylvania. Acceptance's potential liability arose 

as a result of an action against Mon Valley brought by the 

parents of Joelene Bowers, who was pushed to her death 

through an open shaft in the Clyde Mine. Acceptance

sought to establish that the Clyde Mine insurance policy 

was effectively terminated prior to Joelene Bowers's death 

and, thus, that Acceptance is not obligated to provide a 

defense for Mon Valley or to pay for any recovery. 

The District Court entered summary judgment against

Acceptance, holding that under regulations of the 

Pennsylvania Department of Environmental Protection

("DEP"), the Clyde Mine policy could not effectively be 

canceled until the DEP was notified. The District Court 

further held that no reasonable jury could find from the 

undisputed facts that Acceptance had notified the DEP of 

its cancellation of the Clyde Mine policy and that therefore 

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the policy was still in effect at the time of Joelene Bowers's 

death. We hold that, under the applicable DEP regulations, 

notification was not a necessary precondition of 

cancellation. We therefore reverse. 

I. 

In 1994, Mon Valley contacted independent insurance

broker Phillip Harvey of Phillip J. Harvey & Co., Inc. ("PJH 

& Co.") to obtain general liability insurance for mining 

operations at the Clyde Mine. Harvey contacted Tri-City 

Brokers ("Tri-City") to locate a policy. Through Tri-City's 

brokerage agreement with Acceptance Risk Managers, 

Acceptance's underwriters, Acceptance issued a policy to 

Mon Valley. 

On February 13, 1995, Acceptance issued a certificate of 

insurance to Mon Valley for a general liability policy 

covering the Clyde Mine. The policy's coverage was to be 

effective from December 7, 1994, through December 7, 

1995, and was subsequently extended through January 24, 

1996. The insurance policy contained no provision 

requiring Acceptance to notify the DEP before canceling the 

policy. 

Mon Valley's last valid permit to operate the Clyde Mine 

had expired on October 31, 1994, and Mon Valley had

ceased all mining operations on approximately that date. 

Harvey, acting on Mon Valley's behalf, submitted the 

certificate of insurance to the DEP as proof of the requisite 

insurance coverage in support of Mon Valley's application 

for a renewal of its expired mining permit. On March 21, 

1995, and again on May 3, 1995, the DEP notified Mon 

Valley that its application for a mining license could not be 

processed because of several deficiencies in the application 

and the accompanying proof of insurance. Because Mon 

Valley did not make the necessary corrections or request an 

informal hearing, the DEP denied the license application on 

November 9, 1995. 

Mon Valley, which financed the policy through First

Premium Services, Inc. ("First Premium"), never actually 

made a premium payment on the policy. On March 7, 

1995, First Premium used its power of attorney pursuant to 

 3 
an agreement with Mon Valley to notify Acceptance to 

cancel the policy for nonpayment of premiums. Although it 

is not clear on what date Acceptance actually canceled the 

policy, it is undisputed that Acceptance took actions which, 

absent a statutory or regulatory bar, would have terminated 

the policy by July 15, 1995, at the latest. 

PJH & Co. had a general business practice of sending 

notices of cancellation to both certificate holders and state 

administrative agencies. Harvey testified that a notice of 

cancellation addressed to the DEP was present in PJH & 

Co.'s files. However, Harvey could not testify from personal 

knowledge concerning the actual preparation or mailing of 

the notice. Moreover, the DEP file on Mon Valley did not 

contain a copy of the notice. 

In March 1998, the Bowers commenced an action in the 

Court of Common Pleas of Greene County, Pennsylvania, 

captioned Bowers v. Mon Valley Steel Co., Inc., et al., Case 

No. AD-24 (1998) (the "Greene County suit"), to recover 

damages relating to the murder of Joelene Bowers at the 

Clyde Mine on January 19 or 20, 1996. Acceptance then 

brought the instant action, seeking a declaratory judgment 

that the Clyde Mine policy was effectively canceled prior to 

Joelene Bowers's death and that Acceptance therefore had 

no duty to defend or indemnify Mon Valley in connection 

with the Greene County suit. 

Following discovery, Acceptance moved for summary 

judgment, arguing that the undisputed facts showed that 

the Clyde Mine policy had been effectively terminated prior 

to Joelene Bowers's death. Acceptance argued that it had 

no duty to notify the DEP prior to cancellation because no 

contractual provision, statute, or regulation specifically so 

required. In the alternative, Acceptance argued that, by 

application of the Pennsylvania "mailbox rule," the

undisputed facts gave rise to a presumption that a notice of 

cancellation had been received by the DEP and that there 

was insufficient evidence in the record to rebut that 

presumption. 

The Bowerses and Utica also moved for summary 

judgment, arguing that the applicable DEP regulations 

mandated that Acceptance notify the DEP before its 

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attempted cancellation became effective. The Bowerses and 

Utica also argued that Acceptance had not provided 

sufficient evidence to trigger the mailbox rule. 

The Magistrate Judge issued a Report and 

Recommendation, concluding that "the DEP's coal mining 

regulations establish a strict administrative scheme which 

unequivocally prohibits an insurer from cancelling a policy 

without first providing notification to the agency." R. & R. 

at 12, App. at 18. In reaching this conclusion, the

Magistrate Judge relied on 25 Pa. Code S 86.168(d), which 

outlines the requirements for insurance policies submitted 

with a permit application. The Magistrate Judge also 

concluded that Acceptance had not adduced sufficient 

evidence to show that notice had been given to the DEP. 

The Magistrate Judge wrote that Acceptance "c[ould] not 

overcome this significant and undisputed fact: the DEP's 

license file for Mon Valley does not contain a cancellation 

notice." R. & R. at 13, App. at 19. Accordingly, the 

Magistrate Judge recommended that summary judgment be 

granted to Utica and the Bowerses. 

The District Court adopted the Magistrate Judge's 

recommendation, and Acceptance then took this appeal. 

Our standard of review with respect to the grant of

summary judgment is plenary. Waldorf v. Shuta , 896 F.2d 

723, 728 (3d Cir. 1990). The Appellees in this appeal are 

Utica Mutual Insurance Co. ("Utica"), the surety on

reclamation and subsidence bonds posted on behalf of Mon 

Valley, and the Bowerses. 

II. 

Acceptance raises two issues on appeal. The first is 

whether the District Court erred in concluding that the 

DEP regulations require that a surface and underground 

coal mining general liability insurance carrier notify the 

DEP prior to canceling an insurance policy. The second 

issue is whether the District Court erred in concluding that 

the undisputed facts did not allow Acceptance to benefit 

from the presumption of receipt accorded to items placed in 

the mail under the Pennsylvania mailbox rule. We hold that 

Acceptance had no duty to notify the DEP before canceling 

 5 
the policy, and we therefore need not reach the question 

whether Acceptance adduced sufficient evidence to take 

advantage of the Pennsylvania mailbox rule. 

A. 

Pursuant to the authority granted by the Pennsylvania 

Surface Mining Conservation and Reclamation Act of May 

31, 1945, P.L. 1198, as amended, 52 Pa. Cons. Stat. Ann. 

SS 1396.1-1396.31, the DEP has issued regulations 

governing surface and underground coal mining and 

reclamation activities. See 25 Pa. CodeSS 86.1 et seq. 

Under these regulations, it is illegal to operate a coal mine 

in Pennsylvania without a permit from the DEP. See 25 Pa. 

Code S 86.11. Furthermore, 25 Pa. Code S 86.144 provides 

that an applicant for a coal mining permit must provide 

proof of adequate insurance: 

 86.144 Requirement to file a certification of liability 

 insurance. 

 Each applicant for a [mining] permit shall submit proof 

 to the Department [of Environmental Protection] of 

 liability insurance coverage for its mining and 

 reclamation operations issued by an insurance 

 company authorized to do business in this 

 Commonwealth. The amount, duration, form, 

 conditions, terms and method of proof of this 

 insurance coverage shall conform to [25 Pa. Code] 

 S 86.168 (relating to terms and conditions for liability 

 insurance). 

25 Pa. Code S 86.144. The regulations also outline the 

requirements of an applicant's insurance policy if a permit 

is to be granted: 

 86.168. Terms and conditions for liability insurance. 

 (a) A permittee shall submit proof of liability insurance 

 coverage before a permit or license is issued. The proof 

 may consist of either a certificate filed at the time of 

 license application and renewal thereof, or, otherwise 

 annually filed with the Department certifying that the 

 permittee has a public liability insurance policy in force 

 6 
 covering all of the permittee's mining and reclamation 

 operations in this Commonwealth. 

 . . . . 

 (d) The insurance shall include a rider requiring that the 

 insurer notify the Department 30 days prior to 

 substantive changes being made in the policy, or prior 

 to termination or failure to renew. 

25 Pa. Code SS 86.168(a), (d) (emphasis added). 

B. 

Since the Pennsylvania Supreme Court has yet to 

interpret the regulation in question in this appeal,"we 

must predict how the state court would resolve these issues 

should it be called upon to do so." Wiley v. State Farm Fire 

& Cas. Co., 995 F.2d 457, 459 (3d Cir. 1993). We predict 

that the Pennsylvania Supreme Court would interpret this 

regulatory scheme, and specifically S 86.168(d), to mean 

that Acceptance had no duty to inform the DEP of the 

cancellation unless the insurance policy itself created a 

duty to do so. Although the DEP presumably could have 

issued a regulation directly requiring an insurer to notify 

the DEP of cancellation of a mining insurance policy, the 

DEP has not done so. 

Unless a statute or regulation imposes some additional 

requirement, "[w]here the right to cancel an insurance 

policy is expressly reserved in the contract itself, then the 

extent of the right and the conditions upon which it may be 

exercised must be determined by reference to the contract." 

Clairton City Sch. Dist. v. Mary, 541 A.2d 849, 851 (Pa. 

Commw. Ct. 1988) (citing Hanna v. Reliance Ins. Co., 166 

A.2d 877, 879 (Pa. 1961)). Neither Utica nor the Bowerses 

argue that Acceptance failed to cancel the policy in 

accordance with the policy's cancellation clause. Nor do 

they contend that the policy contained the requisite rider or 

any language equivalent to what was contained therein. 

Rather, they argue that S 86.168(d) is ambiguous and that 

we should interpret it to require notice to the DEP. 

Pennsylvania has adopted the canon of statutory 

construction that courts of the Commonwealth must 

 7 
interpret unambiguous statutes according to their terms. 

See 1 Pa. Cons. Stat. Ann. S 1921(b) (Purdon's 1995); 

Anthony v. Koppers Co., 436 A.2d 181, 183 (Pa. 1991). 

When interpreting a Pennsylvania statute, we are to give 

the words of a statute their plain and ordinary meaning. 

Commonwealth v. Neckerauer, 617 A.2d 1281 (Pa. Super. 

Ct. 1992); Commonwealth v. Johnson, 612 A.2d 1382 (Pa. 

Super. Ct. 1992). The words are to be considered in their 

grammatical context. 1 Pa. Cons. Stat. Ann. S 1930 

(Purdon's 1995). Moreover, 

 sections of statutes are not to be isolated from the 

 context in which they arise such that an individual 

 interpretation is accorded one section which does not 

 take into account the related sections of the same 

 statute. Statutes do not exist sentence by sentence. 

 Their sections and sentences comprise a composite of 

 their stated purpose. 

Commonwealth v. Lurie, 569 A.2d 329, 331 (Pa. 1990)

(quoting Commonwealth v. Revtai, 532 A.2d 1, 5 (Pa. 1987)). 

These same principles of statutory construction apply to 

DEP regulations as well. See 1 Pa. CodeS 1.7; Bush v. Pa. 

Horse Racing Comm'n, 466 A.2d 254, 255-56 (Pa. Commw. 

Ct. 1983). 

Instead of directly requiring that insurers notify the DEP 

upon cancellation of a policy, the text of S 86.168(d) 

provides that a permit applicant must secure a policy 

having a rider mandating notice to the DEP in the event of 

cancellation. The pertinent parts of S 86.168, read in 

conjunction, require the following: "A permittee shall 

submit proof of liability coverage . . . . The insurance shall 

include a rider requiring that the insurer notify the 

Department 30 days prior to substantive changes being 

made in the policy, or prior to termination or failure to 

renew." SS 86.168(a)-(d). The plain meaning of SS 86.168(a) 

and (d) is that the permittee must obtain suitable insurance 

in order to obtain a permit and that the insurance, in order 

to be suitable, must contain a rider requiring notice to the 

DEP. Section 86.168(d) places no direct obligation on the 

insurer. Indeed, when viewed in light of S 86.168(a), all of 

the provisions of S 86.168 speak to the obligations of 

 8 
permittees and permit applicants -- not to the obligations 

of insurers. 

Moreover, if, as Utica and the Bowerses argue, the 

regulation did directly require that the insurer provide 

notice, the requirement that a rider be included in the 

policy would be superfluous. "Such an interpretation would 

defy the axiom of statutory construction that `whenever 

possible each word in a statutory provision is to be given 

meaning and not to be treated as surplusage.' " 

Commonwealth v. Lassiter, 722 A.2d 657, 661 (Pa. 1998) 

(quoting In re Employees of Student Servs., 432 A.2d 189, 

195 (Pa. 1981)). The more logical explanation is that the 

DEP chose to place the burden on the insured to have the 

rider included in the policy and to have the policy form the 

basis of the insurer's duty. Thus, S 86.144 states that if the 

applicant wishes to have its application for a mining permit 

approved, "the amount, duration, form, conditions, terms, 

and method of proof of this insurance shall conform to 

S 86.168." This shows that the burden is on the permit 

applicant to have the rider placed in the insurance

contract. Similarly, the requirement that proof of suitable 

insurance be submitted with a permit application suggests 

that DEP's means of ensuring that it receives notice of 

cancellation is to deny any permit application that is not 

accompanied by an insurance policy imposing such a duty 

on the insurer. If the interpretation of S 86.168(d) advanced 

by Utica and Bowers were correct, the DEP would have no 

need to deny a permit application that was not 

accompanied by such a policy. 

In concluding that the regulation itself imposed a notice 

requirement, the Magistrate Judge relied in part on 2 Couch 

on Insurance S 31:19 (3d ed. 1996), which states that 

"[w]here statutory provisions require notice to a government 

agency in order to effect a cancellation of policy, such 

notice must be given to effect a cancellation, and conversely 

there is no cancellation where notice is given merely in 

accordance with the provisions of the policy." This

statement is inapplicable to Acceptance's situation. Section 

31:19 concerns the effect of the failure to notify a 

government agency "[w]here statutory provisions require 

notice to a government agency in order to effect a 

 9 
cancellation of a policy." As discussed above, the relevant 

regulations here do not require notice to the DEP to effect 

a cancellation of the policy. Rather, the regulations require 

that policies contain notification riders. It is noteworthy 

that none of the cases cited in Couch involved a situation 

analogous to the one here, i.e., a situation in which the 

law, rather than directly requiring the insurer to provide 

notice, required a notification rider to be included in the 

policy. 

For similar reasons, Metro Transportation Co. v. North 

Star Reinsurance Co., 912 F.2d 672 (3d Cir. 1990), on 

which Utica and the Bowers rely, is not apposite. In Metro 

Transportation, we noted that "whenever a statute or 

insurance policy provides for notice of cancellation , 

Pennsylvania law has mandated that an insurer's failure to 

comply with the provisions of the notice of cancellation 

results in the continuation of coverage regardless of any 

prescribed date of expiration." Id. at 682 (citations omitted) 

(emphasis added). We do not question that, if S 86.168(d) 

directly required Acceptance to provide notice of 

cancellation, then a failure to provide notice would have 

made an attempted cancellation ineffective. However, the 

principle of Pennsylvania law stated in Metro Transportation 

does not apply where, as in this case, there is no statute or 

regulation requiring notification.1 And, as we have stated, 

the policy contains no such requirement. We will not 

convert a statutory requirement of a rider into a mandate 

that the requisite language be deemed to be implicated in 

the policy if the rider is not in fact attached. 

Our analysis of the text of S 86.168(d) is confirmed by a 

survey of analogous Pennsylvania regulations. In other 

similar areas, the DEP has explicitly placed the burden of 

giving notice directly on insurers. For example, the DEP has 

a permit system for the handling and disposing of residual 

_________________________________________________________________ 

1. The regulation in question in Metro Transportation required a taxi 

company to file a Uniform Carrier Bodily Injury and Property Damage 

Certificate of Insurance, known as a "Form E." "Form E . . . [itself] 

states 

that the insurance policy -- and hence the coverage provided by the 

policy -- cannot be canceled without first giving[the Pennsylvania Public 

Utility Commission] thirty days [sic] notice." Id. at 678. 

 10 
waste. See 25 Pa. Code S 287.1 et seq.. Section 287.101 

outlines the requirements for receiving a permit. One of the 

requirements is that an applicant must "comply with the 

. . . insurance requirements of Subchapter E." Section 

287.375, part of Subchapter E, states: 

 (b) The operator shall submit proof of insurance under 

 S 287.373 (relating to proof of insurance coverage) . . . . 

 (c) The insurer may cancel or otherwise terminate an 

 insurance policy by sending 60 days or other period 

 prior written notice as may be authorized by the 

 Insurance Department, to the Department and the 

 operator, of the insurer's intention to cancel or otherwise 

 terminate the insurance policy. The notice shall be sent 

 to the Department and the insured by certified mail, 

 return receipt requested. Prior to the cancellation or 

 termination becoming effective, the operator shall 

 provide the Department with proof of a replacement 

 insurance policy sufficient to meet the requirements of 

 this subchapter. 

25 Pa. Code S 287.375(b)-(c) (emphasis added). This

provision contrasts sharply with the regulation at issue in 

the present case. Whereas 25 Pa. Code S 287.375(c) places 

an obligation directly on the insurer to provide notice 

regardless of the provisions of the policy, 25 Pa. Code 

S 86.168 places an obligation on an applicant to have a 

rider requiring notice placed in the insurance contract. See 

also 25 Pa. Code S 271.383(f)(2) (regulating municipal waste 

management); 25 Pa. Code S 271.392 (g)(2) (same). 

Finally, we note that our interpretation of the regulation 

is consistent with what we perceive to be the Legislature's 

objective, viz., ensuring that mining operations are not 

conducted without the type of insurance deemed by the 

Legislature to be necessary.2 That goal is fulfilled by 

_________________________________________________________________ 

2. Consideration of legislative intent is not necessary in this case since 

the Pennsylvania legislature has provided that "[w]hen the words of a 

statute are clear and free from all ambiguity, the letter of it is not to 

be 

disregarded under the pretext of pursuing its spirit." 1 Pa. Code 

S 1922(b). However, we merely reconcile our interpretation with the 

general intent of the regulatory scheme in order to ensure that we 

 11 
requiring that the party applying for the mining permit 

obtain liability insurance. See SS 86.67, 86.144. If the 

applicant has not obtained an insurance policy with a rider 

requiring notice of cancellation, the application should be 

rejected, and the applicant may not legally conduct a 

mining operation. See id. Thus, assuming that the DEP 

ensures that mining operations are not conducted without 

a permit, notification to the DEP of the cancellation of a 

policy is not necessary to prevent uninsured parties from 

conducting mining operations. Cf. Metro Transp. , 912 F.2d 

at 681 (goal of notice requirement for cancellation of 

automobile insurance policy for taxis is so that the State 

may revoke the taxi license if the insurance is canceled). 

III. 

In sum, we hold that, under Pennsylvania law, a surface 

and underground coal mining general liability insurance 

carrier has a no duty to notify the DEP before effectively 

canceling an insurance policy unless a notification

provision is included in the insurance policy. We therefore 

reverse the District Court's July 17, 2000, order granting 

summary judgment against Acceptance and remand this

case to the District Court for entry of an order granting 

summary judgment in favor of Acceptance. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

_________________________________________________________________ 

effectuate the Pennsylvania Legislature's other mandates that (1) "[t]he 

object of all interpretation and construction of statutes is to ascertain 

and effectuate the intention of the General Assembly," 1 Pa. Code 

S 1921(a); and (2) "the General Assembly does not intend a result that is 

absurd," 1 Pa. Code S 1922(1). 

 12