2006 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

4-10-2006

USX Corp v. Liberty Mutl Ins Co

Precedential or Non-Precedential: Precedential

Docket No. 04-1277

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2006

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 2006 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

Recommended Citation

"USX Corp v. Liberty Mutl Ins Co" (2006). 2006 Decisions. Paper 1184.

http://digitalcommons.law.villanova.edu/thirdcircuit_2006/1184
PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

Nos. 04-1277 and 04-1300

 

USX CORPORATION

v.

LIBERTY MUTUAL INSURANCE COMPANY,

Appellant in No. 04-1277

 

USX CORPORATION,

Appellant in No. 04-1300

v.

LIBERTY MUTUAL INSURANCE COMPANY

 

On Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. Civ. No. 01-00889)

Honorable Donald E. Ziegler, Chief Judge,

and Honorable Terrence F. McVerry, District Judge*

 

Argued March 7, 2006

 

*Chief Judge Ziegler entered the June 27, 2002 order, adopting the

magistrate judge’s Report and Recommendation, and Judge McVerry

entered the final judgment on January 9, 2004.
2

BEFORE: ROTH and GREENBERG, Circuit Judges, and

BUCKWALTER, District Judge**

(Filed: April 10, 2006)

 

Mark A. Aronchick (argued)

Daniel Segal

Hangley, Aronchick, Segal & Pudlin

One Logan Square, 27th Floor

Philadelphia, PA 19103

Joseph G. Blute

Mintz, Levin, Cohn, Ferris,

Glovsky & Popeo, P.C.

One Financial Center

Boston, MA 02111

 Attorneys for Appellant/Cross-Appellee

Joseph J. Bosick (argued)

Alfred S. Pelaez (argued)

Pietragallo, Bosick & Gordon

One Oxford Centre, 38th Floor

301 Grant Street

Pittsburgh, PA 15219

 Attorneys for Appellee/Cross-Appellant

Mark F. Horning 

Steptoe & Johnson

1330 Connecticut Ave., NW

Washington, D.C. 20036

 Attorneys for Amici Curiae

 American Insurance Association,

 Property Casualty Insurers Association

 

**Honorable Ronald L. Buckwalter, Senior Judge of the United States

District Court for the Eastern District of Pennsylvania, sitting by

designation.
Although this action implicates multiple policies, inasmuch as

1

the issue before us is the same under all the policies we refer to the

action as though it involves a single policy. In this regard we note that

the magistrate judge in her Report and Recommendation that became the

district court’s opinion sometimes referred to all the policies singularly.

3

 of America, The Insurance Federation of

 Pennsylvania Inc., and the Pennsylvania

 Compensation Rating Bureau

Laura A. Foggan

John C. Yang

1776 K Street NW

Washington, DC 20006

 Attorneys for Amici Curiae

 Complex Insurance Claims

 Litigation Association

 

OPINION OF THE COURT

 

GREENBERG, Circuit Judge.

I. INTRODUCTION

This matter comes on before the court on an appeal by

defendant Liberty Mutual Insurance Company (“Liberty Mutual”)

from an order of the district court entered on June 27, 2002, granting

partial summary judgment in favor of plaintiff USX Corporation

(“USX”) on its contract claims arising out of Liberty Mutual’s refusal

to defend and indemnify USX in various actions brought against it

under a Workmen’s Compensation/Employers’ liability policy

(“WC/EL policy”) that Liberty Mutual had issued to USX. Liberty

1

Mutual also appeals from the final judgment entered in favor of USX

on January 9, 2004. The case is also before us on a cross-appeal that

USX filed from the portion of the district court’s order of June 27,

2002, granting Liberty Mutual partial summary judgment and the

judgment entered on January 9, 2004, in favor of Liberty Mutual on

USX’s claim charging bad faith denial of insurance coverage. For the

reasons we set forth below, we will reverse the order of June 27,

2002, and the judgment of January 9, 2004, to the extent that they are
The facts relevant to our decision are undisputed, and we refer 2

to the Joint Appendix filed by counsel as “J.A.” 

Only the period between January 1, 1952 and January 1, 1980, 3

is at issue. The parties have settled their dispute regarding coverage

before January 1, 1952. 

Coverage B claims usually, if not always, are predicated on 4

common law principles assometimes modified by statute. See, e.g., N.J.

Stat. Ann. §§ 34:15-1 to 6 (West 2000). 

4

in favor of USX and will affirm the order and judgment to the extent

that they are in favor of Liberty Mutual. Furthermore, we will remand

the case to the district court to enter a final summary judgment in

favor of Liberty Mutual on the portions of the summary judgment that

we are reversing.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. The Parties and the Relevant Insurance Contract

USX is a Delaware corporation with its principal place of

business in Pennsylvania, and Liberty Mutual is a mutual insurance

company founded by an act of the Massachusetts Legislature with its

principal place of business in that state. In 1912, Liberty Mutual 2

issued to USX a standard form WC/EL policy, which the parties

annually renewed until January 1, 1980. Although issued in 3

Pennsylvania, the WC/EL policy provided coverage to USX for

specified operations in identified states, including some USX

operations in Texas. 

The WC/EL policy had two parts: “Coverage A– Workmen’s

Compensation” (“Coverage A”) provided coverage for USX’s

statutory liability for workmen’s compensation claims; and “Coverage

B– Employers’ Liability” (“Coverage B”) provided coverage for

liability that the exclusivity provisions of the applicable workmen’s

compensation statute did not bar. Thus, ordinarily, at least, Coverage

B covered workmen’s claims that were not based on no fault

workmen’s compensation statutory provisions. The portion of the 4

WC/EL policy most germane to this appeal is Coverage B, which

covered “all sums which [USX] shall become legally obligated to pay
At oral argument, counsel for USX suggested that the quoted

5

definition did not apply to both Coverage A and Coverage B. We

disagree and note that the WC/ELpolicy uses the limiting phrase “Under

coverage A” when limiting application of a provision to Coverage A or

the phrase “Under coverage B” when limiting application of a provision

to Coverage B. The definition for “Bodily Injury by Accident; Bodily

Injury by Disease” does not contain any such limiting phrase. 

The employees’ claims against their employer USX are not 6

barred in Texas which permits the additional recovery of exemplary

5

as damages because of bodily injury by accident or disease[.]” J.A. at

662. The WC/EL policy contained a single “Definitions” section,

applicable to both Coverage A and Coverage B, containing the

following definition:

Bodily Injury by Accident; Bodily Injury by Disease

The contraction of disease is not an accident within the

meaning of the word ‘accident’ in the term ‘bodily

injury by accident’ and only such disease as results

directly from a bodily injury by accident is included

within the term ‘bodily injury by accident.’ The term

‘bodily injury by disease’ includes only such disease as

is not within the term ‘bodily injury by accident.’ 

J.A. at 662. The policy did not define “accident” or “disease.” 5

While Coverage B insured USX for damages resulting from

either “bodily injury by accident” or “bodily injury by disease,” there

was a notable limitation on the latter coverage in that the policy did

not cover a claim for “bodily injury by disease” “unless prior to thirtysix months after the end of the policy period written claim is made or

suit is brought against the insured for damages[.]” J.A. at 662. This

thirty-six-month claim limitation period, by its terms, applies only to

claims for “bodily injury by disease.” J.A. at 662. 

B. The Underlying Complaints and the Claim for Coverage

Beginning in 1990, certain of USX’s former employees and

their survivors filed hundreds of non-workmen’s compensation

actions against USX in Texas, seeking damages for injuries sustained

by the former employees while allegedly being exposed to asbestos

products and/or asbestos-contaminated premises. On June 27, 1997, 6
damages against an employer in wrongful death cases, where gross

negligence or intentional misconduct is shown. Tex. Lab. Code Ann. §

408.001(b) (Vernon 2005). The plaintiffs named additional defendants

in the actions, but we need not list them.

USX does not assert that any of the plaintiffs made a written 7

claim or brought a suit against USX prior to thirty-six months after the

end of the policy period. 

6

seven years after the former employees and their survivors filed the

initial asbestos-related lawsuits against USX, USX sought coverage

for defenses and indemnification from Liberty Mutual in the

underlying actions. By letter dated February 28, 1998, from its inhouse coverage counsel, Liberty Mutual denied USX’s claim for

coverage, explaining that there was no potential coverage and citing,

inter alia, the thirty-six-month claim limitation provision. 

C. The Proceedings in the District Court

In response to the Liberty Mutual disclaimer, USX filed this

diversity of citizenship action on May 18, 2001, against Liberty

Mutual in the district court asserting a claim for breach of insurance

contract (Count I), seeking a declaratory judgment that there was

coverage (Count II), claiming insurance bad faith under 42 Pa. Const.

Stat. Ann. § 8371 (West 1998) (Count III), seeking indemnity (Count

IV), and asking for contract reformation (Count V). In sum, USX

alleged that the policy covers asbestos-related claims because they are

for “bodily injury by accident,” to which the thirty-six-month claim

limitation provision does not apply, or, in the alternative, that the

contract should be reformed as it “defeated the reasonable

expectations of [USX] and is thus contrary to public policy.” See J.A.

52. The district court referred the case to a magistrate judge under 28

U.S.C. §§ 636(b)(1)(A) and (B). 

On October 1, 2001, Liberty Mutual filed a motion for

summary judgment. As with its initial denial of coverage, Liberty

Mutual asserted that the policy did not cover the underlying claims

because they were for “bodily injury by disease” and thus the thirtysix-month claim limitation provision precluded coverage for them

inasmuch as the plaintiffs did not file their actions within thirty-six

months following the end of the policy period. On February 21, 7

2002, USX filed a cross-motion for summary judgment as to Counts IIV. 
Because the district court adopted the magistrate judge’s Report

8

and Recommendation, we will refer to the adopted opinion as that of the

district court. 

7

The magistrate judge to whom the court referred the case

issued a Report and Recommendation on May 15, 2002,

recommending that the court grant summary judgment in favor of

USX on its claims for breach of contract, declaratory relief and

indemnity (Counts I, II, and IV, respectively), but that the court grant

summary judgment in favor of Liberty Mutual on the insurance bad

faith claim (Count III). The magistrate judge concluded with regard to

Counts I, II and IV that the definition of “bodily injury by accident”

was ambiguous and consequently recommended that the court

construe it in favor of USX as the insured. 

The magistrate judge in reaching her conclusion relied on the

Pennsylvania Supreme Court opinion in J.H. France Refractories Co.

v. Allstate Insurance Co., 626 A.2d 502 (Pa. 1993), for the proposition

that “exposure to asbestos causes immediate ‘bodily injury’ under the

terms of an insurance policy that offers coverage for ‘bodily injury.’”

J.A. at 8. In light of this immediate bodily injury, the magistrate judge

reasoned that because “no one intends to inhale asbestos fibers and

develop asbestosis,” “the injury [therefore] occurs by an accident that

later results in a disease.” J.A. at 13. According to the Report and

Recommendation, this circumstance raises at least a “reasonable

interpretation” that the underlying claims were for “bodily injury by

accident” and thus the Liberty Mutual policy covered USX against

them. J.A. at 11, 13. In view of the magistrate judge’s

recommendation with respect to the meaning of the policy, she

recommended that the court dismiss Count V seeking reformation as

moot. The magistrate judge, however, recommended that the court

grant summary judgment in favor of Liberty Mutual on Count III

because she believed that Liberty Mutual “demonstrated a reasonable

basis for its refusal to defend and indemnify USX,” specifically its

reliance on authority from another jurisdiction in the absence of

applicable precedent from the courts of Pennsylvania. J.A. 17.

Both parties filed timely objections to the magistrate judge’s

Report and Recommendation, following which the district court, after

a de novo review, issued an order on June 27, 2002, which adopted

the Report and Recommendation as the opinion of the court and

dismissed Count V as moot. Subsequently, the parties agreed that 8

Liberty Mutual as a result of the June 27, 2002 order, owed USX
In its final judgment of January 9, 2004, the district court stated 9

that “[t]he parties have settled and finally resolved all other claims and

issues between them, except that each has reserved the right to appeal

their respective adverse decision of the Court.” J.A. at 35. 

We note that USX in its brief asserts that the materials 10

submitted to Liberty Mutual’s in-house coverage counsel were not

adequate for counsel to know “that the coverage issue was governed by

Pennsylvania law; nor indeed any knowledge as to what law governed

the insured’s demand for indemnity and a defense.” Cross-Appellant’s

br. at 8. We are perplexed by this implicit criticism inasmuch as USX

agrees that Pennsylvania law is applicable here. 

8

$2,200,000, subject to Liberty Mutual’s right to appeal, for attorneys’

fees, defense costs, and pre-judgment interest. The court then entered

a final judgment on January 9, 2004, in favor of USX on Counts I, II,

and IV and in favor of Liberty Mutual on Count III. The January 9, 9

2004 judgment included an award of $2,200,000. Thereafter both

parties timely filed notices of appeal. 

III. JURISDICTION AND STANDARD OF REVIEW 

The district court exercised diversity jurisdiction over this

matter pursuant to 28 U.S.C. § 1332, and we have jurisdiction over

the appeal and cross-appeal under 28 U.S.C. § 1291. We exercise

plenary review of the order granting summary judgment. See

Dilworth v. Metro. Life Ins. Co., 418 F.3d 345, 348 (3d Cir. 2005);

Haugh v. Allstate Ins. Co., 322 F.3d 227, 230 (3d Cir. 2003). We will

affirm an order granting summary judgment if our review reveals that

“there is no genuine issue of material fact and that the moving party is

entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). We

view the facts in the light most favorable to the party against whom

summary judgment was entered. See Dilworth, 418 F.3d at 349;

Haugh, 322 F.3d at 230. The parties agree that Pennsylvania law

governs this action.10

 

IV. DISCUSSION

A. Appeal by Liberty Mutual
9

In asserting that the district court should have entered

summary judgment in its favor on Counts I, II and IV, rather than in

favor of USX, Liberty Mutual argues that the court erred in

concluding that the policy language at issue was ambiguous. Liberty

Mutual submits that, when viewed in the context in which the parties

made the contract, the only reasonable interpretation of the policy is

that the underlying asbestos-related claims are not claims for “bodily

injury by accident” but instead are claims for “bodily injury by

disease,” to which the thirty-six-month claim limitation period

applies. In particular, Liberty Mutual asserts that the district court’s

analysis ignored a substantial body of Pennsylvania workmen’s

compensation law defining the term “accident” which necessarily

informs the employers’ liability coverage at issue inasmuch as it was

written in a single policy also providing workmen’s compensation

coverage. Of course, in light of the circumstance that the Texas

plaintiffs brought the underlying actions well beyond the expiration of

the thirty-six-month claim limitation period and did not make written

claims within that period, if Liberty Mutual is correct it owes no

duties to USX on the WC/EL policy involved here. 

USX counters that the meaning of the disputed policy

language should be ascertained by reference to J.H. France

Refractories and that “the workers’ compensation precedents upon

which Liberty Mutual almost exclusively relies have no relevance.”

Appellee’s br. at 26 (emphases in original). Thus, in USX’s view,

this case involves underlying claims for “bodily injury by accident” to

which the thirty-six-month claim limitation period does not apply. 

Our review of the materials submitted and the relevant authorities

leads us to agree with Liberty Mutual. 

The district court was, of course, correct to the extent that it

observed that in Pennsylvania a court construes ambiguities in an

insurance policy strictly against the insurer. See, e.g., Selko v. Home

Ins. Co., 139 F.3d 146, 152 n.3 (3d Cir. 1998) (citing Standard

Venetian Blind Co. v. Am. Empire Ins. Co., 469 A.2d 563, 566 (Pa.

1983)). Nevertheless, in Pennsylvania, and no doubt elsewhere,

“[c]lear policy language . . . is to be given effect, and courts should

not torture the language to create ambiguities but should read the

policy provisions to avoid it.” Selko, 139 F.3d at 152 n.3 (internal

citations and quotation marks omitted). In construing policy

language, courts should consider any special usage “[w]here terms are

used in a contract which are known and understood by a particular

class of persons in a certain special or peculiar sense[.]” Sunbeam
The Pennsylvania Supreme Court explained in Sunbeam that 11

“[t]he parol evidence rule does not apply in its ordinary strictness where

the existence of a custom or usage to explain the meaning of words in a

writing is concerned,” and that an ambiguity need not be shown before

looking to usage. 781 A.2d at 1193 (citing Restatement (Second) of

Contracts §§ 202(5), 220 cmt. d (1979)). Instead, absent an express

provision to the contrary, “custom or usage, once established, is

considered a part of a contract and binding on the parties though not

mentioned therein, the presumption being that they knew of and

contracted with reference to it.” 781 A.2d at 1193.

Even though we refer to “workplace” injuries we are well aware 12

that some employee injuries are within the scope of workmen’s

compensation laws though they occur away from the workplace.

10

Corp. v. Liberty Mut. Ins. Co., 781 A.2d 1189, 1193 (Pa. 2001). 

11

While the terms “disease” and “accident” do not appear

alongside the definitions of “bodily injury by disease” and “bodily

injury by accident,” Liberty Mutual correctly argues that the meaning

of those terms with respect to employers’ liability under Coverage B

in the policy at issue is informed by their usage in the closely related

context of workmen’s compensation claims. Carriers write insurance

for both types of claims to cover claims arising out of employee

workplace injuries. Accordingly, as one leading treatise explains, 12

workers’ compensation is routinely written in

combination with an employer’s liability policy to

provide protection for those situations where worker’s

compensation may not apply and thus avoid a gap in

protection because employee claims subject to

workers’ compensation law are generally excluded in

other types of liability policies. 

7B John Allan Applebaum, Insurance Law and Practice § 4571, at 2

(Berdal ed. 1979). Courts of last resort in several states have

observed, consistently with this explanation, that “employers’ liability

insurance is traditionally written in conjunction with workers’

compensation policies.” Producers Dairy Delivery Co. v. Sentry Ins.

Co., 718 P.2d 920, 927 (Cal. 1986); see also Travelers Indem. Co. v.

PCR, Inc., 889 So.2d 779, 784 n.7 (Fla. 2004); Schmidt v. Smith, 713

A.2d 1014, 1017 (N.J. 1998). Such is the case here where the

employers’ liability coverage at issue is part of a WC/EL policy
None of the parties or the amici curiae has cited a Pennsylvania 13

Supreme Court or Superior Court case dealing with the precise issue

before us, and in our research we have not found one. But we are

obliged to predict how the Supreme Court of Pennsylvania would rule

on the issue. See Monaco v. Am. Gen. Assurance Co., 359 F.3d 296,

303 (3d Cir. 2004); Rush v. Scott Specialty Gases, Inc., 113 F.3d 476,

486 (3d Cir. 1997).

11

containing a single “Definitions” section applicable to both Coverage

A and Coverage B. Accordingly, although to the best of our

knowledge the Supreme Court of Pennsylvania has not considered the

precise issue before us, we predict that it would look to the substantial

body of workmen’s compensation precedent to inform its construction

of the terms “disease” and “accident” in a related employers’ liability

policy, such as the one involved here. After all, it is logical that the 13

contracting parties would not use the term “accident” in a WC/EL

policy intending the term to have one meaning under Coverage A and

another under Coverage B, when the coverages are written in

conjunction and are set forth in a single document with one set of

definitions. 

At the time the parties entered into the policy at issue, the term

“accident” had a special meaning based on its usage in the context of

workmen’s compensation. Inasmuch as the Pennsylvania Workmen’s

Compensation Act (“WCA”), as the legislature originally enacted it in

1915, provided benefits only for injury or death resulting from an

“accident” in the course of employment but did not define “accident,”

the courts fashioned a definition of that term. See Pawlosky v.

Workmen’s Comp. Appeal Bd. (Latrobe Brewing Co.), 525 A.2d

1204, 1208 (Pa. 1987). The courts defined the term “accident” as a

“sudden and unexpected event,” with “[a] sudden event impl[ying] a

distinct happening or occurrence at a particular time.” Loudon v.

H.W. Shaull & Sons, 13 A.2d 129, 130 (Pa. Super. Ct. 1940) (internal

citation and quotation marks omitted). Loudon is instructive because

it involved a claimant who sought compensation after contracting

typhoid from contaminated drinking water. In differentiating between

an “accident” and a “disease,” the court in Loudon adopted the

following language from Matter of Connelly v. Hunt Furniture Co.,

147 N.E. 366, 367 (N.Y. 1925):

Germs may indeed be inhaled through the nose or

mouth or absorbed into the system through the normal

channels of entry. In such cases their inroads will
We are mindful that the Pennsylvania legislature has made 14

revisions to the WCA, including, inter alia, replacement of the term

“accident” with the term “injury.” See Pawlosky, 525 A.2d at 1208-09.

We have considered the revisions and have concluded that they do not

affect our analysis. We also are aware that the legislature has adopted the

Occupational Disease Act, see 77 Pa. Stat. Ann. § 1201 et seq. (West

2002), which includes asbestos-related diseases among its list of

enumerated “occupational diseases,” id. at § 1208. This law, like the

revisions to the WCA, does not affect our analysis.

12

seldom, if ever, be assignable to a determinate or single

act, identified in space or time. . . . For this reason as

well as for the reason that absorption is incidental to a

bodily process both natural and normal, their action

presents itself to the mind as a disease and not an

accident. 

Id. at 132 (internal citation omitted); see also Ciabattoni v. Birdsboro

Steel Foundry & Mach. Co., 125 A.2d 365, 368 (Pa. 1956) (defining

accident as “a definite happening or occurrence or event of which the

employee is almost invariably aware,” as distinguished from an

occupational disease, which “is latent and insidious and the resultant

disability is often difficult to determine”). Employing this

contemporaneous industry usage of the terms “accident” and

“disease,” we conclude that the only reasonable interpretation of the

term “bodily injury by accident” excludes the underlying claims for

asbestos-related diseases. 

14

Accordingly, we reject the district court’s contrary conclusion

that the type of injuries involved in the underlying actions “occur[ ] by

an accident that later results in a disease” because “no one intends to

inhale asbestos fibers and develop asbestosis.” J.A. at 13. To us, at

least, it is clear that the district court’s conclusion under the policy at

issue contravenes the usage of the term “accident,” and renders certain

policy provisions essentially meaningless. Most notably, under the

district court’s conclusion the term “bodily injury by disease” would

be practically meaningless inasmuch as nearly every microscopic

injury resulting from indeterminate, generalized exposure to an agent

would be considered a “bodily injury by accident” because no one

intends to be injured. See Riverwood Int’l Corp. v. Employers Ins. of

Wausau, 420 F.3d 378, 383 (5th Cir. 2005); Hubbs v. Anco

Insulations, Inc., 747 So.2d 804, 807-08 (La. Ct. App. 1999). 
Indeed, notwithstanding the district court’s grant of partial 15

summary judgment in favor of USX, it recognized that J.H. France

Refractories was not controlling as it “[did] not hold that the inhalation

of asbestos fibers is an immediate accidental injury, but only that such

exposure constitutes an immediate bodily injury.” J.A. at 16 (internal

quotation marks omitted). 

13

We also are of the view that the district court’s construction

effectively would read out of the policy the “Definitions” clause

which recites that “[t]he contraction of disease is not an accident

within the meaning of the word ‘accident’ in the term ‘bodily injury

by accident.’” See J.A. at 662. Pennsylvania courts long have

admonished that “contract terms will not be construed in such a

manner so as to render them meaningless,” Girard Trust Bank v. Life

Ins. Co. of N. Am., 364 A.2d 495, 498 (Pa. Super. Ct. 1976), and we

decline to do so here. Lastly, the district court’s construction would

produce an anomalous result in which the term “bodily injury by

accident,” as used by the parties in the WC/EL policy, means one

thing under Coverage A but something else under Coverage B, despite

its inclusion in a single definition section applicable to both. 

The decision in J.H. France Refractories, 626 A.2d 502, on

which USX primarily relies, is not germane to the issue before us. 

USX asserts that in J.H. France Refractories, “the Pennsylvania

Supreme Court accepted as a scientific fact that exposure to asbestos

causes an immediate bodily injury and that it is that injury that leads

to and causes the subsequent asbestos-related disease.” Appellee’s br.

at 25 (emphases in original). 

The issue here, however, is not whether asbestos exposure

causes an injury, a proposition that Liberty Mutual does not dispute,

but is instead whether the underlying claims for asbestos-related

injuries are claims for “bodily injury by accident” or “bodily injury by

disease.” J.H. France Refractories does not provide guidance on this

question because in that case the Pennsylvania Supreme Court

addressed coverage under commercial general liability insurance

policies, construing the terms “bodily injury” and “occurrence” rather

than the terms at issue here. Unlike workmen’s compensation 15

policies, general liability insurance policies are not written in

conjunction with employers’ liability policies. Indeed, while

workmen’s compensation policies and employers’ liability policies

both address claims arising out of employee workplace injuries,

commercial general liability policies generally exclude injuries to
We note further that the Court of Appeals for the Fifth Circuit 16

in Riverwood similarly looked to the applicable body of state workmen’s

compensation case law to discern the industry usage of the term

“accident.” See 420 F.3d at 383. 

14

some, if not all, employees from coverage. See 9A Lee R. Russ &

Thomas F. Segalla, Couch on Insurance § 129:10 (3d ed. 2005). 

Therefore, inasmuch as J.H. France Refractories involved a

commercial general liability policy and construed terms materially

different than those at issue here, the district court’s and USX’s

reliance on that case is misplaced. 

Finally, on the policy construction issue we observe that our

conclusion is consistent with that reached by other courts. See

Riverwood, 420 F.3d at 378; Hubbs, 747 So.2d at 804. In Riverwood

and Hubbs the courts concluded that terms identical to those here in

standard employer’s liability policies were subject to only one

reasonable interpretation– that an asbestos-related injury is not a

“bodily injury by accident” under the policies. 420 F.3d at 382; 747

So.2d at 807-08. The courts agreed that to find otherwise “would be

to subsume the definition of bodily injury by disease into the

definition of bodily injury by accident.” Hubbs, 747 So.2d at 807-08;

Riverwood, 420 F.3d at 383. We realize that those cases are not 16

binding on the Pennsylvania courts nor on this court when applying

Pennsylvania law. Nevertheless we find their construction of identical

terms in standard employers’ liability policies to be persuasive and to

comport with our understanding of the plain meaning of the policy at

issue here. 

B. Cross-appeal by USX 

As a preliminary matter on the cross-appeal, we address

Liberty Mutual’s pending motion to strike portions of what USX

styles as its “Reply Brief on Behalf of Appellee/Cross-Appellant,

USX Corporation.” Specifically, Liberty Mutual moved to strike

those portions of the brief that address issues related to Liberty

Mutual’s appeal but are outside of the scope of USX’s cross-appeal. 

Liberty Mutual’s motion is meritorious as the inclusion of these

portions in the brief contravenes Fed. R. App. P. 28(c), which

provides that “[a]n appellee who cross-appealed may file a brief in

reply to the appellant’s response to the issues presented by the crossappeal.” Moreover, Rule 28(c) does not allow the cross-appellant to

use its reply brief as a sur-reply to the appellant’s opening brief. See
We have written at length on this briefing matter to give 17

guidance to the bar. While there is no doubt but that USX legitimately

filed its cross-appeal, we point out that the situation here is similar to

that when an appellee files an unnecessary cross-appeal when it seeks

only an affirmance of the district court order, see, e.g., Kontakis v.

Beyer, 19 F.3d 110, 112 (3d Cir. 1994), and thereby sets up a situation

in which it inappropriately can file an additional brief. In that situation

we may dismiss the cross-appeal. See, e.g., Rite Aid of Pa. v. Houstoun,

171 F.3d 842, 849 (3d Cir. 1999).

USX asserts that it was necessary for it to include the materials

constituting a sur-reply in its reply brief on its cross-appeal because it

faced the situation of having to respond to Liberty Mutual and its

“captive Amici” by whom USX claims to have been “triple teamed.”

Cross-Appellee’s Opp’n at 3-4. This excuse does not impress us for if

USX wanted to submit a brief not in accordance with Fed. R. App. P.

28(c), its appropriate course would have been to seek leave of this court,

as it did with its previous unsuccessful requests to exceed page

limitations in responding to Liberty Mutual’s appeal. 

15

Casas v. Am. Airlines, Inc., 304 F.3d 517, 526 (5th Cir. 2002); Echo

Acceptance Corp. v. Household Retail Servs., Inc., 267 F.3d 1068,

1092 (10th Cir. 2001) (“If the latter portion of [cross-appellant’s]

‘Reply Brief’ had been submitted to the Clerk of Court under the

correct title, ‘Appellee’s Sur-Reply Brief,’ it would not have been

accepted for filing.”). Because USX’s opposition to the motion to

strike lacks merit, we grant Liberty Mutual’s motion to strike those

portions of the reply brief related to issues that USX did not appeal. 

17

Turning to the merits of the cross-appeal, we are concerned

only with the district court’s grant of summary judgment in favor of

Liberty Mutual on USX’s claim for bad faith denial of coverage

(Count III). As the foregoing discussion of Liberty Mutual’s appeal

portends, we will affirm the grant of summary judgment in favor of

Liberty Mutual on this claim because USX’s bad faith claim

necessarily fails in light of our determination that Liberty Mutual

correctly concluded that there was no potential coverage under the

policy. See The Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193

F.3d 742, 751 n.9 (3d Cir. 1999) (affirming district court which held

that, under Pennsylvania law, “bad faith claims cannot survive a

determination that there was no duty to defend, because the court’s

determination that there was no potential coverage means that the
USX cites Britamco Underwriters, Inc., v. C.J.H. Inc., 845 F. 18

Supp. 1090, 1093-94 (E.D. Pa.), aff’d, 37 F.3d 1485 (3d Cir. 1994)

(table), for the proposition that an insurer’s duty to defend may be

broader than its duty to indemnify. We do not doubt this proposition,

but, as Britamco notes, the duty to defend ends if “the insurer can

confine the claim to recovery that is not within the scope of the

coverage.” Id. In this case Liberty Mutual has done exactly that, and

therefore it has neither the duty to defend nor the duty to indemnify

USX.

16

insurer had good cause to refuse to defend”).18

V. CONCLUSION

For the foregoing reasons, we will reverse the order granting

partial summary judgment in favor of USX entered on June 27, 2002,

and will reverse the final judgment in its favor entered on January 9,

2004, including the $2,200,000 monetary award, and will affirm the

order granting partial summary judgment and final judgment in favor

of Liberty Mutual. In addition, inasmuch as Liberty Mutual was

entitled to a complete summary judgment on its motion in the district

court, we will remand the case to the district court for entry of a

summary judgment in its favor on Counts I, II, and IV of the

complaint. See Coar v. Kazimar, 990 F.2d 1413, 1416 (3d Cir. 1993).