2006 D e c i sion s O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit

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w . v i l l a no v a . e du/thir dc ir c uit_2006/1184PREC EDENTIAL
U N IT E D S T A T E S C O U R T O F A P P E A LS F O R T H E T H IR D C IR C U IT

Nos. 04-1277 and 04- 1300

USX CORPOR ATI ON

v. L I BERTY MU TUAL

I NSURANCE COMPANY, Appellant in No. 04-1277

USX CORPOR ATI ON,

Appellant in No. 04-1300

v. L I BERTY MU TUAL

I NSURANCE COMPANY

On Appea l from the United States District Court fo r t he Wes te rn

Di str ic t of

Pe nn sylva

nia (D.C. Civ. No. 01-00889) Honora ble Donald E. Z ieg ler, Chief Judge , and Honor able Te rre nce F . McVe rry , District J udg e*

Argued Mar ch 7, 2006

*Chief J udg e Z ieg ler e ntere d the J une 27, 2002 orde r, adoptingthe mag istrate judg e’s Repor t and Recommendation, and J udg e McV err y enter ed the f

inal judgme nt on J anuar

y 9, 2004.2 BEF ORE: ROTH and GREENB ERG, Circuit J udg es, and

BU CKWAL TER, District J udg e** (F iled: April 10, 2006)

Mark A. Aronchic k (ar g ued) Daniel Seg al Ha ng le y , A ro nc hic k, Se g a l & Pud lin One L og an Square , 27th Floor Philadelphia, PA 19103
Jose phG. B lut e Mintz, L e vin , Co hn , F e rr is, Gl ov sk y & Pop e o, P.C. One F inancial Cente r Boston, MA 02111 Attorney s for Appe llant/Cross-Appellee
J oseph J. Bosick (ar g ued) Alfre d S. Pelaez (argued) Pietrag allo, Bosick & Gordon One Oxford Centre , 38th Floor 301 Gra nt Street Pitt sburg h, PA 15219 Attorney s for Appe llee/Cross-Appe llant
M ark F. Ho rn i n g Steptoe & Johnson 1330 Connecticut Ave ., NW Washington, D.C. 20036 Attorney s for Amici Curiae Americ an Insuranc e Association, Property

Casualty Insurer s Association

**Honora ble Ronald L . Buc kwalter , Senior J udg e of the United States District Court for the Ea stern District of Pennsylvania, sitting by desig nation.Although this action impli cate s multi ple policies, inasmuch a s 1 the issue bef

ore us is the same und er al l the policies we ref er to the action as thoug h it involves a single policy . In this reg ard w e note that the mag istrate judg e in her Report and Rec ommendation that beca me the d i s tr i c t c o urt ’ s o p i n i o ns o m e t i m e s r e f e r r e d t o a l l th e p o l i c i e s s i n g u l ar l y. 3 of Amer ica, The Insuranc e F eder ation of Pe nn sy

lva nia Inc ., and the Pe nn sylva

nia Compensation Rating B urea u L aura A. Fog g an J ohn C. Yang 1776 K Street NW Washington, DC 20006 Attorney s for Amici Curiae Com ple x I ns ur anc e Cla ims L itigation Association

OPI NI ONOF TH E CO UR T

GREENB ERG, Circuit J udg e.

I . I NTRODUCTI ON This matter come s on befor e the c ourt on an a ppeal by defe ndant L iberty

Mutual Insuranc e Company (“L iberty Mutual”) from an or der of

the district court e ntere d on J une 27, 2002, g ranting partial summary

judgme nt in favor of

plaintiff USX Corporation (“U SX”) on its contra ct claims ar ising out of L iberty Mutual’s ref

usal to d e fe nd and ind e mni fy

USXin v ari ou s a c tio ns br ou g ht a g a ins t it under a Workmen’s Compensation/Employ ers’ liability policy (“ WC/E Lpo lic y ” ) t

hat L ibe rt y Mutua l ha d is su e d to USX

. L ibe rt y 1 Mutua l a lso a

pp e a ls f ro m th e fi na l ju dg me nt e nte re d in fa vo r o f U SX on J anuar y 9, 2004. The c ase is also be fore us on a cr oss-appe al that USX filed fr om the portion of the district cour t’s order of June 27, 2002, g rantingL iberty

Mutual partial summary

judgme nt and the judgme nt entere d on J anuar y 9, 2004, in favor of

L iberty Mutual on USX’s claim cha

rg ing ba d faith denia l of insuranc e cove rag e. F or the rea sons we set for

th below, we w ill reverse the orde r of June 27, 2002, and the judg ment of January 9, 2004, to the extent that they areThe fa cts rele vant to our decision ar e undisputed, and w e re fer 2 to the J oint Appendix filed by counsel a s “J.A.” Only the per iod betwee n J anuar y 1, 1952 and J anuar

y 1, 1980, 3 i s ati s s u e. T h e p art i es h av e s et t l edth ei r d i s p u t e r ega rd i n g co v er age befor e January

1, 1952. Co v era g e B claims usually , if not alway s, are predic ated on 4 c o m m o nl awp r i n c i p l e s a s s o m e t i m e s m o d i f i e d b y s t a tu t e
. S e e , e
. g
. , N

. J. Stat. Ann. §§ 34:15-1 to 6 (West 2000). 4 in favor of

USX and will aff

irm the order

and judg ment to the extent that they are in favor of

L iberty Mutual. Furthe rmore, w e will rema nd the c a se to t

he dis tr ic t c ourt

to e nte r a fi na l summa

ry jud g me nt i n favor of L iberty

Mutual on the portions of the summary judgme nt that we ar e r ev er s i n g.

I I . FACTUA LAND PROCEDURAL BA CKGROUND A. The Par

ties and the Releva

nt I nsuranc e Contrac t USX is a Dela

war e cor poration with its principal place of business in Pennsy lvania, and L iberty Mutual is a mutual insurance c omp any fo un de d b y

an a c t of the Ma ssa c hu se tts L e g isl a tur e wi th i ts principal plac e of business in that state. In 1912, L iberty Mutual 2 issued to USX a standar d form WC/ELpolicy , which the pa rties annua lly re ne we d unti l Jan

ua ry 1, 19 80

. Al tho ug h is su e d in

3 Pennsylvania, the WC/ELpolicy provided c overa g e to USX for sp e c if ie d o pe ratio ns in i de nti fi e d s tate s, inc lud ingso me USX operations in Tex as. The WC/ELpolicy

had two par

ts: “Coverag e A– Workmen’s Compensation” (“ Coverag e A” ) provided c overa g e for USX’s s t atu t o ry l i ab i l i ty fo r w o rk m en ’s co m

p en s at i o ncl ai m s ; an d

“C o v er age B– Employ ers’ L iability ” (“ Coverag e B ”) pr ovided cove rag e for liability that the exclusivit y

provisions of the applica ble workme n’s co mp en s at i o ns t atu t e d i d

n o tb ar
. T hu s , o rd i n ar i l y , atl ea s t , C o v er age B c ov e re d w or

kme n’ s c la ims that w e re no t ba se d o n n o f a ult workmen’ s compensation statutory provisions. The portion of the

4 WC /ELpolicy

most ge rmane to this appeal is Coverag e B , which cover ed “a ll sums which [ USX] shall become leg ally obligated to payAt oral a rgument, counsel for

USX s u gg ested that the quote d 5 d e f in it io nd id

n o t a p p ly to b o th Co v e r a g e A an d

Co v e r a g e B

. We disag ree and note that the WC /EL policy uses the limiting phra se “Under cover ag e A” when limiting application of a provision to Coverag e A or the phra se “Under covera g e B” when limit ing a pplication of a pr ovision to C ov e ra g e B . T he de fi nit io n for “ B od ily Inju ry by Ac c ide nt; B od ily Injury by Disease ” does not c ontain any such limiti ng phrase

. The e mp lo y e e s ’ c la im s a g a in s t t h e ir e mp lo y e r

U SXar e not 6 barr ed in Texas which per mits t he ad d itional recove ry of exemplary 5 as dama g es bec ause of

bodily injury by acc ident or disease [.] ” J.A. at 662. The WC/ELpolicy

contained a

single “De finitions” section, applicable to both Coverag e A a nd Coverag e B , containingthe following definition: Bodily Injury by Acc ident; Bodily

Injury by Disease The c ontrac tion of disease is not an a ccide nt within the me anin g of

the wo rd ‘a c c ide nt’ in t

he te rm ‘b od ily inj ur y by a c c ide nt’ and

on ly su c h d ise a se a s r e su lts direc tly from a bodily

injury by acc ident is included within the term ‘bodily

injury by acc ident.’ The te rm ‘bodily injury by disease’ includes only

such disease as is not withi n the term ‘bodily injury by acc ident.’
J .A. at 662. The policy

did not define “ acc ident” or “ disease.” 5
Whil e Covera g e B insured USX for damag es re sulting fr om either “ bodily

injury by acc ident” or “ bodily

injury by disease,” there wa s a no ta ble lim itatio n o n th e latte r c ov e ra g e in t hat th e po lic y

did n o t c o v e r a c l a i mf o r “ b o d i l y i n

j ur y b y d i s e a s e ” “ un l e s s p r i o r t o th i rtysix months after the end of the policy period wr itten claim is made or su it i s b ro ug ht a g a ins t th e ins ur e d f or dama g e s[.]” J.A. a t 66 2. Th is thi rt y -s ix-m on th c la im l imi tatio n p e ri od , b y its te rm s, a

pp lie s o nly

to claims for “ bodily

injury by disease.” J .A. at 662.
B. T h e U n d er l yi n g C o mp l ai n t s an d th e C l ai mfo r C o v er age Be g inning in 1990, ce rtain of USX’ s former employ ees a

nd their survivors filed hundr eds of non- workmen’ s compensation actions ag ainst USX in Texas, seeking damag es for injuries sustained by the forme r employ ees while alleg edly beingexposed to asbestos products and/or

asbestos-c ontaminated pre mises. On J une 27, 1997, 6dama g e s a g ain st an e mpl oy e r i n wro ng fu l de a th c a se s, wh e re g ro ss neg lige nce or

intentional misconduct is shown. Tex. L ab. Code Ann. § 40 8. 00 1( b) (V e rn on

20 05 ). Th e pla int if

fs name d a dd iti on a l de fe nd ants in t he a c tio ns , b ut w e ne e d n ot l ist the m. USX does not asser

t that any o f t h e plainti ffs made a wr itten 7 claim or broug ht a suit ag ainst USX prior to thirty -six months after the end of the policy

period. 6 seven year s after

the forme r employ ees a

nd their survivors filed the i n i t i al as b es t o s -r el at edl aw s u i t s aga i n s tUS X, US X s o u gh tco v er age for de fense s and indemnification from L iberty Mutual in the underlying a ctions. By

letter dated Fe bruar

y28, 1998, from its inhouse cove rag e counse l, L iberty Mutual denied USX’s c laim for co v er age , ex p l ai n i n g th atth er e w as n o p o t en t i al co v er age an d ci t i n g, inter alia, the thirty -six -month claim limit ation provision. C. The Proce eding s in the District Court
In r e sp on se to t

he L ibe rt y Mutua l di sc la ime r, USXfi le d th is div e rs ity of c iti zen sh ip a c tio n o n M ay 18 , 2 00 1, a g a ins t L ibe rt

y Mutual in the district court asser ting a claim for br eac h of insuranc e contra ct (Count I ), see king a decla ratory judgme nt that there w as c ov e ra g e (C ount I I ), c la imi ngins ur anc e ba d f a ithun de r 4 2 Pa . Co ns t. Stat. Ann. § 8371 (West 1998) (Count I I I ), see king inde mnity (Count I V) , a nd a sk ingfo r c on tr a c t r e fo rm a tio n ( Count V ). In s um, USX alleg ed that the policy

cover s asbestos-re lated cla ims because they are fo r “ bo dil y

inj ur y by a c c ide nt, ” to whic h th e thi rt y -s ix-m on th c la im limit ation provision does not apply , or, in the alter native, that the c on tr a c t sh ou ld b e re fo rm e d a s it “ de fe a te d th e re a so na

ble expectations of [USX] and is thus contrar y to public policy .” See J.A. 52. The district cour

t refe rre d the ca se to a mag istrate judg e under 28 U.S.C. §§ 636(b)(1)( A) a nd (B ). On Octobe r 1, 2001, L iberty Mutual filed a motion for summa ry jud g me nt. As wi th i ts i nit ia l de nia l of c ov e ra g e , L ibe rt

y Mutua l a sse rt e d th at th e po lic y did no t c ov e r t

he un de rl yingc la ims b e c a u s e th e y w e r e f

o r “ b o d i l y i n

j ur y b y d i s e a s e ” an d

thu s th e th i rtysix -month claim limit ation provision prec luded cove rag e for them ina smu c h a s th e pla int if

fs did no t f ile the ir a c tio ns wi thi n th ir

ty -s ix months following the e nd of the policy period. On Fe bruar

y 21, 7 2 0 0 2 , U S X f

i l e d a c r o s s - m o t i o nf

o r s u m m ar y j u d g m e n ta s t o C o un t s II V.Be cause the di strict court adopted the m ag istrate judg e’s Repor t 8 and Recommendation, we will refe r to the adopte d opinion as that of the district court. 7 Th e ma g istrate jud g e to who m th e c ourt re fe rr e d th e c a se issued a Report a

nd Recommendation on May 15, 2002, rec ommending that the court g rant summary judgme nt in favor of USX on its claims for bre ach of contra ct, dec laratory

relief and indemnity

(Counts I , I I , and IV, re spectively ), but that the cour

t gr ant summary judgme nt in favor of

L iberty Mutual on the insuranc e bad fa ithc la im ( Count I I I ). Th e ma g istra te jud g e c on c lud e d w ithre g ard to Counts I , I Iand

I V that th e de fi nit ion

of “ bo dil y inj ur y by a c c ide nt” was ambiguous a

nd conseque ntly

rec ommended that the c ourt construe it in favor of USX a s the insured. The mag istrate judg e in re achingher c onclusion relied on the Pennsylvania Supreme Court opinion in J .H. Fr ance Refra ctories Co. v. Allstate Insuranc e Co., 626 A.2d 502 (Pa. 1993) , for the pr oposition that “exposure to asbe stos causes immediate ‘ bodily injury ’ under

the terms of a n insurance policy

that offe rs cove rag e for

‘bodily injury .’” J

. A. at8

. Inl i gh to f t h i s i m m ed i at e b o d i l y i n j ury , th e m agi s tra t e j u d ge rea soned that bec ause “ no one intends to inhale a sbestos fibers a nd develop a sbestosis,” “the injury [t here fore ] occurs by

an ac cident that later r esults in a disease.” J .A. at 13. Ac cordingto the Report and Re c omm e nd atio n, thi s c ir c ums tanc e ra ise s at le a st a “ re a so na ble interpre tation” that the under lying c laims were for “ bodily injury by a c c ide nt” and

thu s th e L ibe rt

y Mutua l po lic y

c ov e re d U SX a g a ins t them. J .A. at 11, 13. In view of the mag istrate judg e’s rec ommendation with respec t to the meaningof the policy , she rec ommended that the c ourt dismiss C ount V seekingref ormation as moot. The mag istrate judg e, howe ver, r ecommende d that the cour t g r an ts u m m ar

y j u d g m e n ti nf

av o r o f Li b e rty M u tu a l o nC o un tIII be c a us e sh e be lie ve d th at L ibe rt y Mutua l “ de mon str a te d a

re a so na ble ba sis fo r i ts r e fu sa l to de fe nd and ind e mni fy

USX ,” sp e c if

ic a lly its relianc e on author ity

from anothe r jurisdiction in the absenc e of applicable prec edent f

rom the cour

ts of Pennsylvania. J.A. 17. Both pa rties filed timely

objections to the mag istrate judg e’s Report and Rec ommendation, following which the district cour t, after a de novo r eview, issued a n order on J une 27, 2002, which a dopted the Report and Re commendation as the opinion of the court a nd dismiss ed Count V as moot. Subsequently , the par ties ag ree d that 8 L ibe rt y Mutua l a s a

re su lt o f t

he June 27 , 2 00 2 o rd e r, ow e d U SXIn its final judgment of J anuar y 9, 2004, the district court stated 9 that “[t] he par

ties have se ttled and finally resolved all other c laims and issues betwee n them, except that eac h has re s er v ed the right to appe al their re spective a dverse decision of the Court.” J .A. at 35. We no te that USX in its br ie f a sse rt s that th e mate ri a ls 10 submitt ed to L iberty

Mutual’s in-hous e cove rag e counse l were not adequa te for c ounsel to know “that the cove rag e issue wa s g overne d by Pennsylvani a law; nor indeed a ny knowledg e as to what law g overne d the i nsured’ s demand f

or indemnity

and a de fense .” Cross-Appe llant’s br . at 8. We a

re pe rp le xed

by thi s im pli c it c ri tic ism

ina smuch as USX ag ree s that Pennsylvania law is a pplicable he re. 8 $2 ,2 00 ,0 00 , s ub

je c t to L ibe rt

y Mutua l’ s r ig ht t o a

pp e a l, f or a tto rn e y s’ fee s, defe nse costs, and pr e-judg ment interest. The court then e ntere d a f i n a l j u d g m e n to nJ anu ar

y 9 , 2 0 0 4 , i nf

av o r o f U S X o nC o un t s I, II, and IV and in fa

vor of L iberty

Mutual on Count I I I

. The January 9, 9 20 04 jud g me nt i nc lud e d a n a wa rd of $2 ,2 00 ,0 00 . T he re a ft e r b oth parties timely

filed notices of

appea l.

I I I

. JU RI SD I CT I O N A

N D ST A N D A RD O F RE V I E W
Th e dis tr ic t c ourt

e xer c ise d d ive rs ity

jur isd ic tio n o ve r t

his matter pursua

nt to 28 U.S.C . § 1332, and we have jur isdiction over the a pp e a l and c ro ss- a pp e a l un de r 2 8 U .S. C. § 12 91 . We e xer c ise plenar y revie w of the or der grantingsummary judgme nt. See Dilworth v. Metro. L ife Ins. Co., 418 F.3d 345, 348 (3d Cir. 2005); Ha ug h v . A lls tate Ins . Co ., 32 2 F .3 d 2 27 , 2 30 (3 d Ci r. 20 03 ). We w ill aff irm an orde r g rantingsummary judgme nt if our re view re veals that

“ the re is n o g e nu ine iss ue of mate ri a l f

a c t and tha t th e mov ingpa

rt y is e n ti tl e d to ju d g me n t a s a

matt e r o f la w . ” F e d

. R. Ci v . P. 5 6 ( c )

. We view the f

acts in the lig ht most favorable to the party ag ainst whom summary judgme nt was ente red. See Dilworth, 418 F.3d at 349; Haug h, 322 F.3d at 230. The par ties ag ree that Pennsylvania law g overns this ac tion. 10

I V. DI SCUS SI ON A. Appea l by

L iberty Mutual9 In asser ting that the district c ourt should have e ntere d summa ry jud g me nt i n it s f

avo r o n Co un ts I , I Iand

I V, ra the r t ha n in fa vo r o f U SX, L ibe rt

y Mutua l arg

ue s th a t th e c ourt

e rr e d in c on c lud ingthat th e po lic y langua g e a t is su e wa s ambi g uo us . L ibe rt y Mutual submits that, when view ed in the conte x t in which the par ties ma de the c on tr a c t, t

he on ly re a so na ble int e rp re tatio n o f t

he po lic y is that th e un de rl yinga sb e sto s- re late d c la ims are no t c la ims fo r “ bo dil y injury by acc ident” but instead a

re c laims for “bodily

injury by disease,” to which the thirty -six -month claim limit ation period applies. In particula

r, L iberty Mutual asserts that the district c ourt’s analy sis ignore d a substantial body of Pennsylvania wor

kmen’s c omp e ns atio n la

w d e fi nin g the te rm

“ a c c ide nt” wh ic h n e c e ssa ri ly informs the employ ers’ liability cover ag e at issue inasmuc h as it was written in a sing le policy

also providing workmen’ s compensation cover ag e. Of

course , in light of the c ircumstance that the Texas plaintiffs broug ht the underlying a ctions well beyond the expiration of the thirty -six -month claim limit ation period a nd did not make written claims within that period, if L iberty Mutual is corre ct it owes no duties to USX on the WC /ELpolicy involved here

. USX counter s that the meaningof the disputed policy languag e should be a scer

tained by ref ere nce to J.H. Fra

nce Refra ctories a

nd that “the wor

kers’ compensation prece dents upon which L iberty

Mutual almost ex clusively relies have no re levanc e.” Appellee ’s br. at 26 (emphase s in origina l). Thus, in USX’s view, thi s c a se inv olv e s und e rl yingc la ims fo r “ bo dil y inj ur y by a c c ide nt” to which the thirty -six -month claim limit ation period doe s not apply

. Our re view of the materia ls submit ted and the r eleva nt authorities leads us to ag ree with L iberty Mutual.
Th e dis tr ic t c ourt

wa s, of c ours e , c or

re c t to the e xtent th a t it observe d that in Pennsy lvania a c ourt construe s ambig uities in an ins ur anc e po lic y

str ic tly a g a ins t th e ins ur e r. Se e , e .g ., Se lko v. Ho me Ins. Co., 139 F.3d 146, 152 n.3 (3d Cir. 1998) ( citing Standa rd Vene tian Blind Co. v. Am. Empire Ins. Co., 469 A.2d 563, 566 (Pa. 1983)). Ne verthe less, in Pennsy lvania, and no doubt e lsewher e,
“ [c]le ar p oli c y

langua g e
. . . is to b e g ive n e ff e c t, a nd c ourt s sh ou ld not torture the languag e to cr eate ambig uities but should read the policy provisions to avoid it.” Selko, 139 F.3d at 152 n.3 (inter nal citations and quotation marks omitted). In construingpolicy languag e, cour

ts should consider any

specia l usag e “[w]here te rms are used in a c ontrac t which ar e known a nd understood by

a par ticular class of pe rsons in a ce rtain spec ial or pec uliar sense [.] ” SunbeamThe Pennsylvania Supreme Court expl ained in S unbeam that 11 “[t] he parol e vidence rule doe s not apply in its ordinary

strictness wher e the exist ence of a c ustom or usag e to e x plain the meaning of words in a writing is conce rned,” and that an ambig uity need not be shown bef ore looking to usag e. 781 A.2d at 1 193 (citingRestatement (Sec ond) of Contr a c ts § § 2 02 (5 ), 22 0 c mt. d ( 19 79 )) . Ins te a d, a bs e nt an e xpre ss pr ov isi on to t he c on tr ary , “ c us tom

or us a g e , once e sta

bli sh e d, is con s id e r e d

a p art o f a c o n tr a c t a

n d b in d in g o nth e p arti e s th o u g hn ot ment i o n ed ther ein, the pre sumption being that they knew of

and contra cted with re fer ence to it.” 781 A.2d at 1193. Even t h o u gh w e ref er to “ workplac e” injurie s we a re w ell awa

re 12 that some em ploy ee injurie s are within the scope of w orkmen’s compensation laws though the y occur awa y from the wor

kplace

. 10 Corp. v. L iberty

Mut. I ns. Co., 781 A.2d 1189, 1193 (Pa. 2001). 11
Whil e the ter

ms “disease ” and “ acc ident” do not appe ar a lon g sid e the de fi nit ion s o f “ bo dil y inj ur y by dis e a se ” and

“ bo dil y injury by acc ident,” L iberty

Mutual corr ectly

argues that the mea

ning of those ter

ms with respec t to employ ers’ liability under Cover ag e B in the policy

at issue is informed by

their usag e in the close ly related context of workmen’s c ompensation claims. Carr iers wr ite insurance for both ty

pes of c laims to cover c laims arisingout of employ ee workplac e injuries. Acc ording ly , as one le adingtreatise expl ains, 12

wo rk e rs ’ c omp e ns a tio n is ro uti ne ly wr itt e n in c omb inatio n w ithan e mpl oy e r’ s li a bil ity po lic y to provide prote ction for those situations wher e wor ker’ s c omp e ns atio n ma

y no t a pp ly and thu s avo id a

g a p in pr ote c tio n b e c a

us e e mpl oy e e c la ims su

bje c t to wo rk e rs ’ c omp e ns a tio n la w a re g e ne ra lly

e xclu de d in other ty pes of liability

policies.
7B JohnAl lan App le ba

um, Ins ur anc e L aw a

nd Pr a c tic e § 4 57 1, a t 2 (B erda l ed. 1979). Courts of last re sort in severa l states have ob se rv e d, c on sis te ntl y

wi th t his e xplanatio n, tha

t “ e mpl oy e rs ’ l ia

bil ity ins ur anc e is tra dit ion a lly

wr itt e n in

c on jun c tio n w ithwo rk e rs ’ c omp e ns atio n p oli c ie s. ” Pr od uc e rs Da ir

y De liv e ry Co. v. Se ntr

y Ins
. Co., 718 P.2d 920, 927 (Cal. 1986); see also Tra veler s Indem. Co. v. PCR , Inc., 889 So.2d 779, 784 n.7 (F la. 2004); Schmidt v. Sm ith, 713 A.2d 1014, 1017 (N.J. 1998). Such is the case here wher e the employ ers’ liability

cover ag e at issue is par

t of a WC/ELpolicyNo ne of the pa rt ie s o r t he amic i c ur ia e ha s c ite d a Pe nn sylva

nia 13 Supreme Cour t o r S uperior Court c ase de aling with the prec ise issue befor e us, and in our r esea rch w e have not found one. B u t we are ob lig e d to pr e dic t ho w the Sup re me Court of Penn sylva

nia wo uld ru le on the is s u e
. Se e M o n a c o v . A m. G e n
. A s s ur an c e Co

. , 3 5 9 F

. 3 d 296, 303 (3d Cir. 2004); Rush v. Scott S pecia lty Gase s, I nc., 113 F .3d 476, 486 (3d Cir. 1997). 11 co n t ai n i n g a s i n gl e “ De fi n i t i o n s ” s ec t i o nap p l i cab l e t o b o thC o v er age A and Cover ag e B . Acc ording ly , althoug h to the best of our knowledg e the Supre me Court of Pennsylvania has not c onsidered the prec ise issue befor e us, we predic t that it would look t o the substantial body of workme n’s compensation prece dent to inform its construction of the te rm s “ dis e a se ” and

“ a c c ide nt” in a

re late d e mpl oy e rs ’ l ia

bil ity policy , such as the one involved here

. After all, it is l og ical that the 13 contra cting parties would not use the term “a ccide nt” in a WC/EL policy intending the term to have one mea ning unde r Covera g e A a nd ano the r u nd e r C ov e ra g e B , w he n th e c ov e ra g e s a re wr itt e n in conjunction and a

re se t forth in a sing le document with one se t of definitions. At the time the par

ties entere d into the policy at issue, the ter

m “ac cident” ha d a spec ial meaningbased on its usag e in the conte x t of workmen’ s compensation. Inasmuch a s the Pennsylvania Workmen’s Com pe ns atio n A c t ( “ WCA” ), a s th e le g isl a tur e or ig ina lly e na c te d it

in 1915, provided be nefits only for injury

or death resulting f

rom an “ac cident” in the c ourse of employ ment but did not define “a ccide nt,” the cour ts fashioned a

definition of that term. See Pawlosky v. Workmen’s Comp. Appeal B d. (L atrobe Br ewingCo.), 525 A.2d 12 04 , 1 20 8 ( Pa . 1 98 7) . T he c ourt s d e fi ne d th e te rm “ a c c ide nt” a s a
“ s u d d e nan d

un e xp e c te d

e v e n t, ” w it

h“ [a ] s u d d e ne v e n t i mp l[ yin g ] a distinct happeningor occ urre nce at a par ticular time.” L oudon v. H.W. Shaull & Sons, 13 A.2d 129, 130 (Pa. Super. Ct. 1940) (interna l c itatio n a nd qu otatio n ma

rk s o mitte d) . L ou do n is ins tr uc tiv e be c a

us e it involved a claimant who soug ht compensation af ter c ontrac ting ty phoid from contaminate d drinking water . In differ entiating betwee n an “a ccide nt” and a

“disea se,” the court in L oudon adopted the following languag e fr om Matter of Connelly v. Hunt Fur

niture Co., 147 N.E. 366, 367 (N.Y . 1925):
Ger ms may indeed be inhaled throug h the nose or mouth or absorbe d into the sy stem throug h the normal c ha nn e ls o f e ntr

y . In s uc h c a se s th e ir

inr oa ds wi llWe ar e mi n d f u l th a t th e Pe n n s ylv an ia le g is latu r e h a s made 14 revisions to the WCA, including, inter alia, re place ment of the ter m “ac cident” w ith the term “injury .” See P awlosky , 525 A.2d at 1208-09. We have c onsidered the revisions and have conc luded t h at t hey do not aff ect our analy sis. W e also a

re a war e that the leg islature has a dopted the Oc c up atio na l D ise a se Ac t, s e e 77 Pa . St a t. Ann . § 12 01 e t se q. (We st 2002), which inc ludes asbestos-r elated diseases among its list of enumer ated “ occupational diseases,” id. at § 1208. This law, l i k e the re vis ion s to the WCA, do e s n ot a ff e c t ou r a na ly sis

. 12 se ldo m, i f e ve r, be a ssi g na ble to a de te rm inate or

sin g le act, identifie d in space or time. . . . For this reason a s well as for

the re ason that absor

ption is i ncidental to a bodily proce ss both natural and nor mal, their ac tion prese nts itself to the mind as a disease a nd not an acc ident.
I d. at 132 (interna l citation omitt ed); see also Ciabattoni v. Birdsboro Steel Foundr

y & Ma ch. Co., 125 A.2d 365, 368 (Pa. 1956) (def ining acc ident as “a

definite ha

ppeningor occ urre nce or

event of which the employ ee is a lmost i nvaria bly awa re,” as distinguished f

rom an occupa tional disease, whic h “is latent and insidious and the re sultant dis a bil ity is o ft e n d if

fi c ult to d e te rm ine ” ). Em

plo yingthi s contempora

neous industry

usag e of the terms “a ccide nt” and “disea se,” w e conc lude that the only rea sonable interpr etation of the term “bodily

injury by acc ident” excludes the unde rlying c laims for a sb e sto s- re late d d ise a se s. 14
Acc ording ly , we r ejec t the district court’s c ontrary conclusion that the ty pe of injuries involved in the unde rlying a ctions “occ ur[ ] by an a c c ide nt t

hat late r r e su lts in a

dis e a se ” be c a

us e “ no on e int e nd s to inhale asbe stos fibers and de velop asbe stosis.” J .A. at 13. To us, at least, it is clear

that the district court’s c onclusion under the policy at iss ue c on tr ave ne s th e us a g e of the te rm “ a c c ide nt, ” and

re nd e rs c e rt a in policy provisions essentially

meaning less. Most notably , under the dis tr ic t c ourt ’s c on c lus ion the te rm “ bo dil y inj ur y by dis e a se ” wo uld be pr a c tic a lly

me anin g le ss i na smu c h a s n e arl y e ve ry mic ro sc op ic injury resulting from indeter

minate, g ener alized expos ure to a n ag ent would be conside red a

“bodily injury by acc ident” bec ause no one intends to be injured. See River wood Int’l Corp. v. Employ ers Ins. of Wausau, 420 F.3d 378, 383 ( 5th Cir. 2005); Hubbs v. Anco Insulations, I nc., 747 So.2d 804, 807-08 (L a. Ct. App. 1999).Indeed, n otwithstanding the district c ourt’s g rant of pa rtial 15 summary judgme nt in favor of USX, it recognized that J .H. Fr ance Refra ctories wa s not controlling a s it “[di d] not hold that the inhalation of asbe stos fibers is an immediate a ccid en t al injury , but only that such exposure constitutes a

n immediate bodily injury .” J .A. at 16 (i n t ernal quotation marks omitted). 13 We also are of the viewthat the district court’s c onstruction e ff e c tiv e ly wo uld re a d o ut o f t

he po lic y the “ De fi nit ion s” c la

us e which re cites that “[t] he contr action of disea se is not an ac cident within the meaningof the wor d ‘ac cident’ in the te rm ‘bodily injury by acc ident.’” See J .A. at 662. Pennsylvania cour ts long have admonished that “c ontrac t terms will not be construed in such a manner so as to rende r them mea ningle ss,” Gira

rd Trust B ank v. L ife Ins. Co. of N. Am., 364 A.2d 495, 498 (Pa. Super . Ct. 1976), and we de c lin e to d o s o h e re . L a stl y , th e dis tr ic t c ourt ’s c on str uc tio n w ou ld produce an anoma lous result in which the term “ bodily injury by acc ident,” as use d by

the par ties in the WC /ELpolicy , means one thi ngun de r C ov e ra g e A b ut s ome thi nge lse un de r C ov e ra g e B , d e sp ite its inclusion i n a sing le def inition s ection applica

ble to both. The de cision in J .H. Fr ance Refra ctories, 626 A.2d 502, on which USX primar ily

relies, is not g erma

ne to the issue bef

ore us. USXa sse rt s th at in

J.H. F ra nc e Re fr a c tor ie s, “ the Pe nn sylva nia Supreme Court ac cepte d as a sc ientific fa ct that exposure to asbestos cause s an immediate bodily injury and that it is that injury

that leads to and ca uses the subseque nt asbestos-re lated disea se.” A ppellee’ s br. at 25 (e mphases in orig inal). The issue he re, how ever , is not whether a sbestos exposure cause s an injury , a proposition that L iberty Mutual does not dispute, but is inst ead whether

the under lying c laims for asbe stos-relate d injuries are claims for “ bodily injury by acc ident” or “ bodily

injury by dis e a se .” J.H. F ra

nc e Re fr a c tor ie s d oe s n ot p ro vid e g uid anc e on thi s question beca

use in that ca se the Pennsylvania Supreme Court addre ssed cove rag e under commerc ial g ener al liability insurance policies, construingthe terms “bodily injury ” and “ occur

renc e” r ather than the ter

ms at issue here

. Unlike workme n’s compensation 15 po lic ie s, g e ne ra l li a

bil ity ins ur anc e po lic ie s a

re no t w ri tte n in c on jun c tio n w ithe mpl oy e rs ’ l ia bil ity po lic ie s. Ind e e d, wh ile workmen’ s compensation policies a nd employ ers’ liability

policies bo th a dd re ss c la ims ari sin g out of

e mpl oy e e wo rk

pla c e inj ur ie s, c omm e rc ia l g e ne ra l li a

bil ity po lic ie s g e ne ra lly

e xclu de inj ur ie s toWe not e fu rt he r that the Court of Ap pe a ls fo r the F if th C ir c uit 16 in Riverwood s imilarly

looked to the applica

ble body of state wor

kmen’s compensation case la

w to discern the ind u s try usag e of the term “ac cident.” See 420 F.3d at 383. 14 so me , if no t a ll, e mpl oye e s f

ro m c ov e ra g e . Se e 9AL e e R. R us s & Thomas F. Seg alla, Couch on Insuranc e § 129:10 (3d e d. 2005). There fore , inasmuch as J.H. Fra nce Re fra ctories involved a c omm e rc ia l g e ne ra l li a

bil ity po lic y and c on str ue d te rm s mate ri a lly differ ent than those at issue here , the district court’s a nd USX’s relianc e on that ca se is misplaced. Finally , on the policy

construction issue we observe that our conclusion is consistent with that rea ched by other c ourts. See Riverwood, 420 F .3d at 378; Hubbs, 747 So.2d at 804. I n Riverwood and Hu bb s th e c ourt s c on c lud e d th a t te rm s id e nti c a l to tho se he re in standard e mploy er’ s liabilit y policies wer e subjec t to only one re a so na ble int e rp re tatio n–

tha t an a sb e sto s- re late d in

jur y is n ot a “bodily injury by acc ident” under

the policies. 420 F .3d at 382; 747 So.2d at 807-08. The c ourts ag ree d that to find otherwise “ would be to subsume the definition of bodily injury by disease into the definition of bodily

injury by acc ident.” Hubbs, 747 So.2d at 807-08; Riverwood, 420 F .3d at 383. We rea liz e that those c ases a re not 16 binding on the Pennsy

lvania cour

ts nor on this court when a pplying Pennsylvania law. N ever theless we f

ind their construc tion of identical te rm s in sta nd ard e mpl oy e rs ’ l ia

bil ity po lic ie s to be pe rs ua siv e and to comport with our under standing of the plain mea ning of the policy

at issue here

. B. Cross-a

ppeal by USX
As a pr e lim ina

ry matte r o n th e c ro ss- a

pp e a l, w e a dd

re ss L ibe rt y Mutua l’ s p e nd ingmot ion to s tr ike po rt ion s o f what U SX sty le s a s it s “ Re ply

B ri e f o n B e ha lf

of Ap pe lle e /Cr os s- Ap pe lla

nt, USX Corporation.” Spec ifically , L iberty Mutual moved to strike tho se po rt ion s o f t

he br ie f t hat a dd re ss i ssu e s r e late d to L ibe rt y Mutual’s appe al but are outside of the scope of USX’s c ross-appe al. L ibe rt y Mutua l’ s mo tio n is me ri tor iou s a s th e inc lus ion of the se portions in the brief c ontrave nes F ed. R. App. P. 28(c) , which pr ov ide s th at “ [a]n

a pp e lle e wh o c ro ss- a

pp e a le d ma

y fi le a br ie f i n re ply to t he a pp e lla nt’ s r e sp on se to t

he iss ue s p re se nte d b y

the c ro ssa pp e a l.” Mo re ov e r, Rul e 28 (c ) d oe s n ot a llo w the c ro ss- a pp e lla nt t o use its reply

brief a s a sur-r eply

to the appellant’ s openingbrief. SeeWe ha v e w r itte n a t le n g th o n th is b r ie f in g matt e r to g ive 17 g uid anc e to t

he ba r. Whil e the re is no do ub t but that U SX l e g iti mate ly fi le d it s c ro ss- a

pp e a l, w e po int

out th a t th e sit

uatio n here is simi lar t o that when a

n appellee fi les an unne cessa ry cross-a ppeal whe n it seeks only an af firmanc e of the district court orde r, see , e.g ., Kontakis v. Be y er, 19 F .3d 110, 112 (3d Cir. 1994) , and ther eby sets up a situation in which it inappropriate ly can f ile an additional brief. In that situation we may dismiss the cr oss-appe al. See, e.g ., Rite Aid of Pa. v. Houstoun, 171 F.3d 842, 849 ( 3d Cir. 1999).
USXa sse rt s th at it wa s nec e ssa ry fo r i t to inc lud e the mate ri a ls c on stitut inga

sur- re ply in i ts r e ply

br ie f o n it s c ro ss- a

pp e a l be c a

us e it fa c e d th e sit

uatio n o f h avin g to r e sp on d to L ibe rt y Mutua l and

its “ca ptive Amici” by

whom USX claims to have be en “tr iple teamed.” Cr os s- Ap pe lle e ’s Op p’ n at 3- 4. Th is e xcu se do e s not impr e ss us f or if USXwa nte d to su bmi t a br ie f n ot i n a c c or da

nc e wi th Fed. R. A

pp . P. 28 (c ), its a

pp ro pr iate c ours e wo uld

have be e n to se e k le ave of thi s c ourt , as i t did with it s previous unsucc essful re quests to exceed pa ge limit ations in respondingto L iberty Mutual’s appe al. 15 Casas v. Am. Airlines, Inc., 304 F .3d 517, 526 (5th Cir. 2002); Echo Acc eptanc e Corp. v. House hold Retail Servs., Inc., 267 F .3d 1068, 10 92 (1 0th

Cir . 2 00 1) (“ I f t

he latte r p or

tio n o f [c ro ss- a

pp e lla nt’ s] ‘Reply Br ief’ ha d been submitted to the Clerk of Court unde r the corr ect title, ‘Appe llee’s Sur-Re ply Br ief,’ it would not have been a c c e pte d f

or fi lin g .” ). B e c a

us e USX ’s op po sit ion

to t he mot ion

to str ike la c ks me ri t, w e g ra nt L ibe rt y Mutua l’ s mo tio n to str ike tho se po rt ion s o f t

he re ply br ie f r e late d to iss ue s th a t U SX d id n ot a pp e a l. 17 Turningto the merits of the c ross-appe al, we a re c oncer ned only with the district court’s grant of summar y judgme nt in favor of L i b erty M u tu al o nUS X’ s cl ai mfo r b adfa i thd en i al o f c o v er age (Count I I I ). As the f

oreg oing disc ussion of L iberty Mutual’s appe al portends, we will affirm the grant of summar y judgme nt in favor of L ibe rt y Mutua l on

thi s c la im b e c a

us e USX ’s ba d f

a ithc la im nece ssarily

fails in light of our

deter mination that L iberty

Mutual corr ectly conclude d that there was no potential c overa g e under the policy . See The Fr og , Switch & Mfg . Co. v. Trave lers Ins. Co., 193 F .3 d 7 42 , 7 51 n. 9 ( 3d

Cir . 1 99 9) (a ff

ir min g dis tr ic t c ourt

wh ic h h e ld that, under Pennsylvania law, “ bad fa ith claims cannot survive a deter mination that there wa s no duty to defe nd, beca

use the c ourt’s deter mination that there wa s no potential cover ag e mea ns that theUS X ci tes Brit amc o Un derw ri ter s , Inc ., v. C. J .H. Inc. , 8 45 F. 18 S up p
. 1 0 90, 1093-94 (E.D . Pa.), af f’d, 37 F .3d 1485 (3d Cir. 1994) (tab l e) , fo r t he proposition that an insurer ’s duty to defe nd may

be broade r t h an i ts duty

to indemnify . We do not doubt thi s proposition, but, as Br itamco notes, the duty to defe nd ends if “the insurercan confine the claim to re cover y that is not wit h i n t h e s cope of the cover ag e.” I d. In this case L iberty Mutual has done e x actly that, and there fore it has nei ther the duty to defe nd nor the duty

to indemnify USX. 16 insurer ha d g ood cause to refuse to defe nd”). 18

V. CONCLUSI ON
For the fore g oing r easons, we will rever se the orde r g ranting partial summary

judgme nt in favor of

USX enter ed on June 27, 2002, and will reve rse the f

inal judgme nt in its favor enter ed on January

9, 2004, including the $2,200,000 monetary awa rd, and w ill affirm the order g rantingpartial summary judgme nt and final judg ment in favor of L iberty Mutual. In addition, inasmuch as L iberty Mutual was entitled to a complete summar y judgme nt on its m otion in the dist rict court, we will remand the c ase to the district c ourt for e ntry of a summary judgme nt in its favor

on Counts I , I I , and IV of the complaint. See Coar v. K azimar, 990 F.2d 1413, 1416 ( 3d Cir. 1993).