Case Name: ROHM AND HAAS COMPANY and Rohm and Haas Delaware Valley Inc., Appellants, v. CONTINENTAL CASUALTY COMPANY, et al., and The Home Insurance Company, Appellees; Rohm nd Haas Company and Rohm and Haas Delaware Valley Inc., Appellants, v. Continental Casualty Company, et al., and Certain Underwriters at Lloyd's, London and Certain London Market Insurance Companies, Appellees
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 2001-10-18
Citations: 566 Pa. 464
Docket Number: Nos. 7 and 8 E.D. Appeal Docket 2000
Parties: ROHM AND HAAS COMPANY and Rohm and Haas Delaware Valley Inc., Appellants, v. CONTINENTAL CASUALTY COMPANY, et al., and The Home Insurance Company, Appellees. Rohm nd Haas Company and Rohm and Haas Delaware Valley Inc., Appellants, v. Continental Casualty Company, et al., and Certain Underwriters at Lloyd’s, London and Certain London Market Insurance Companies, Appellees.
Judges: Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO, NEWMAN and SAYLOR, JJ.
Reporter: Pennsylvania State Reports
Volume: 566
Pages: 464–494

Head Matter:
781 A.2d 1172
ROHM AND HAAS COMPANY and Rohm and Haas Delaware Valley Inc., Appellants, v. CONTINENTAL CASUALTY COMPANY, et al., and The Home Insurance Company, Appellees. Rohm nd Haas Company and Rohm and Haas Delaware Valley Inc., Appellants, v. Continental Casualty Company, et al., and Certain Underwriters at Lloyd’s, London and Certain London Market Insurance Companies, Appellees.
Supreme Court of Pennsylvania.
Argued Oct. 17, 2000.
Decided Oct. 18, 2001.
Steven Andrew Reed, Arlin M. Adams, John G. Harkins, Nancy J. Gellman, William J. O’Brien, Philadelphia, Paul H. Titus, Pittsburgh, for Rohm and Haas Company and Rohm and Haas Delaware Valley, Inc.
Dale G. Larrimore, Philadelphia, for Pennsylvania Trial Lawyers Ass’n.
Marc J. Sonnenfeld, Philadelphia, for Pennsylvania Chamber of Business and Industry.
John J. Walliser, Glenshaw, for Pennsylvania Environmental Council.
John Alexander MacDonald, Philadelphia, for United Policyholders.
William J. Brennan, Philadelphia, for Home Insurance Co.
Frank Elugene Noyes, Judith Nichols Renzulli, Philadelphia, for Insurance Environmental Litigation Ass’n.
Gary Westerberg, Chicago, II., Elit R. Felix, Jerome J. Shestack, Philadelphia, for Certain Underwriters at Lloyd’s, London.
Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO, NEWMAN and SAYLOR, JJ.

Opinion:
OPINION ANNOUNCING THE JUDGMENT OF THE COURT
FLAHERTY, Chief Justice:
This is an appeal by allowance from the judgment of the superior court reversing the trial court's grant of judgment notwithstanding the verdict (JNOV) in favor of appellants, Rohm & Haas. In this case involving comprehensive general liability coverage (CGL) for the cleanup of serious environmental pollution of the soil, groundwater and surface water of a manufacturing site formerly owned and operated by appellants, appellants present three issues for this court's review. The first issue is whether JNOV was properly entered with respect to the appellee insurance companies' defense via the "known loss" doctrine, a matter of first impression before this court. The second is whether JNOV was properly granted with respect to appellees' defense of fraud. The final issue is whether JNOV was properly granted with respect to appellees' defense of late notice.
Appellants are manufacturers of specialty chemicals headquartered in Philadelphia. In June 1964, appellants, through a wholly owned subsidiary, purchased Whitmoyer Laboratories, a small veterinary pharmaceuticals company, and continued operations. Shortly thereafter, appellants discovered that the site was extensively polluted with arsenic waste, a byproduct of Whitmoyer's and appellants' manufacturing processes. Although appellants undertook remedial measures to clean up the site, arsenic waste continued to be produced as a result of appellants' operations. In 1978, appellants sold the site to Smith-Kline Beecham.
In December 1964, appellants added the Whitmoyer site to existing CGL insurance coverage it held with appellee insurers. Appellants periodically purchased from appellees additional policies that covered Whitmoyer throughout the time that they operated the site and were aware of the contamination. Although appellants disclosed the problem to their primary coverage insurer and to their insurance broker as well as to the proper commonwealth authorities, there is no evidence that the excess insurers were ever notified of the pollution problem.
In 1980, Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). This act retroactively imposes strict liability for environmental cleanup costs on present and former owners or operators of polluting facilities without regard to fault. Subsequently, the Environmental Protection Agency notified appellants that they were strictly liable for the cleanup costs associated with the Whitmoyer site. In 1988, twenty-four years after becoming aware of the severe pollution at Whitmoyer, appellants notified their excess insurers that they were asserting a claim to cover the Whitmoyer cleanup costs, more than twenty-one million dollars. Appellees denied the claim and appellants brought suit.
The parties agreed to a bifurcated trial, with the liability trial before a jury and any subsequent damages trial to be held before the bench. After a nine-and-one-half week liability trial, the trial court directed a verdict in appellants' favor on the issue of appellees' late notice defense and submitted a verdict form containing seven questions for the jury's consideration. The jury, in response to the special verdict interrog atories, determined that no coverage existed as it found in favor of appellees on, inter alia, the following questions
by answer to Jury Verdict Question No. 7: That Rohm & Haas failed to disclose material facts about the arsenic pollution at Whitmoyer when it purchased the excess policies [the fraud issue]; [and]
by answer to Jury Verdict Question No. 3: That at the time it contracted with the excess liability insurers, Rohm & Haas knew of damage or injury for which there would be legal liability large enough to reach the excess policies [the known loss issue]....
Rohm and Haas Co. v. Continental Casualty Co., 732 A.2d 1236, 1245 (Pa.Super.1999). After post-trial motions were filed, the court entered JNOV on the jury's verdict with respect to questions 3 and 7, among others. Superior Court reversed the trial court with respect to both questions and with respect to the late notice defense, and a timely appeal to this court followed.
Our scope of review with respect to whether JNOV is appropriate is plenary, as with any review of questions of law. Phillips v. A-Best Products Co., 542 Pa. 124, 665 A.2d 1167, 1170 (1995). It is axiomatic that, "[t]here are two bases upon which a judgment n.o.v. can be entered: one, the movant is entitled to judgment as a matter of law, and/or two, the evidence was such that no two reasonable minds could disagree that the outcome should have been rendered in favor of the movant." Moure v. Raeuchle, 529 Pa. 394, 604 A.2d 1003, 1007 (1992) (citations omitted). To uphold JNOV on the first basis, we must review the record and conclude "that even with all the factual inferences decided adverse to the movant the law nonetheless requires a verdict in his favor, whereas with the second [we] review the evidentiary record and [conclude] that the evidence was such that a verdict for the movant was beyond peradventure." Id.
When we review a motion for JNOV, we must consider the evidence in the light most favorable to the verdict winner, who must receive "the benefit of every reasonable inference of fact arising therefrom, and any conflict in the evidence must be resolved in his favor." Id. (citing Broxie v. Household Finance Co., 472 Pa. 373, 372 A.2d 741, 745 (1977)). Any doubts must be resolved in favor of the verdict winner, and JNOV should only be entered in a clear case. Id. Finally, "a judge's appraisement of evidence is not to be based on how he would have voted had he been a member of the jury, but on the facts as they come through the sieve of the jury's deliberations." Id. (citing Brown v. Shirks Motor Express, 393 Pa. 367, 143 A.2d 374, 379 (1958)).
As it raises a matter of first impression before this court, we will first turn our attention to the entry of JNOV with respect to question no. 3. As Superior Court observed, "[t]he 'known loss' doctrine has not been tested in the state courts of Pennsylvania, [but] has been recognized by the courts of other states." Rohm and Haas, supra, at 1256 (quoting UTI Corp. v. Fireman's Fund Ins. Co., 896 F.Supp. 362, 375 (D.N.J. 1995) (a case in which the federal district court predicted Pennsylvania law)). Superior Court described the known loss doctrine as follows:
The known loss doctrine is a common law concept that derives from the fundamental requirement of fortuity in insurance law. Essentially, the doctrine provides that one may not obtain insurance for a loss that either has already taken place or is in progress. As we have recognized, the rule is based on the realization that the purpose of insurance is to protect insureds against unknown risks. State courts are divided as to the scope of the known loss doctrine. Some have construed it quite narrowly, barring coverage only when the insured knew of certainty of damages and liability. Others have refused to find coverage when the insured was substantially aware of a risk of loss.
Rohm and Haas, supra at 1256 (quoting Pittston Co. Ultramar America Ltd. v. Allianz Ins. Co., 124 F.3d 508, 517 3d Cir.1997) (citations and quotations omitted). The questions presented here are whether this doctrine is recognized in Pennsylvania, and if so, how broadly or narrowly should it be construed.
Appellants argue that if it exists at all, courts should employ a narrow construction of the doctrine. They urge that its application requires the existence of certain knowledge of a particular legal liability large enough to reach the excess layers of insurance at the time of contracting; for example, an entry of judgment on a claim by a third party against the insured that exceeds the CGL threshold. Appellees, on the other hand, argue that courts should employ a broad construction of the doctrine. That is, an insured's mere awareness of a substantial probability of liability large enough to reach the excess layers of insurance at the time of contracting is sufficient to satisfy the requirements of the doctrine.
While the known loss doctrine has not been formally adopted in Pennsylvania, this court has long required insurance applicants to make full and fair disclosure of all things material to the insurable risk. Smith v. Northwestern Mut. Ins. Co., 196 Pa. 314, 46 A. 426 (1900), See also American Union Life Ins. Co. v. Judge, 191 Pa. 484, 43 A. 374 (1899). On their faces these cases seemingly support the proposition that when an insured knows of an insurable harm incurred prior to the purchase of an insurance policy, the insured has suffered a "known loss" and the damage is no longer a mere risk and is deemed uninsurable. However, these cases are distinguishable from the matter sub judice given that in both Smith and Judge the courts were confronted with insureds who had given less than candid answers to explicit and specific questions on their insurance applications. In the present case, appellants were never explicitly asked whether a pollution problem existed and never volunteered such information. Nonetheless, this distinction is one of little moment, particularly where, as here, we are presented with a sophisticated insured, possessed of its own experienced legal and insurance departments, "faced with mounting evidence that it will likely incur responsibilities to the extent of the insurance which is sought." Rohm and Haas, supra at 1258. We agree, therefore, with Superior Court's conclusion that the standard for the known loss defense in this case should be "whether the evidence shows that the insured was charged with knowledge which reasonably shows that it was, or should [have been], aware of a likely exposure to losses which would reach the level of coverage." Id.
Furthermore, even if we were to employ the standard urged by appellants it appears that they would not prevail on this issue. No matter which standard is applied, the question of whether JNOV was properly entered with respect to question no. 3 lies at the heart of this issue. That question reads as follows:
Have the insurers proven that, at the time of contracting any of the following CGL excess policies, Rohm and Haas had certain knowledge of damage or injury for which there would be legal liability that was large enough to exceed the underlying insurance layers and would reach the excess layer of any of the following CGL excess policies?
Verdict Form for Whitmoyer Laboratories Site, Question No. 3 (emphasis added). Relying upon the evidence introduced at trial by both sides, the jury answered affirmatively with regard to each policy at issue.
That evidence included, inter alia: undisputed testimony that Rohm & Haas first became aware of catastrophic levels of arsenic pollution at the Whitmoyer site in 1964; testimony that Rohm & Haas faced liability under the 1937 Clean Streams Law; evidence that Rohm & Haas' legal department was concerned with the potential legal liability arising out of the situation at Whitmoyer; testimony that Rohm & Haas supplied water and paid the medical bills of its neighbors to avert potential liability; and testimony that Rohm & Haas considered the situation at Whitmoyer to be a grave emergency. Viewing this evidence in the light most favorable to the insurers (the verdict winner), resolving conflicts in the evidence in their favor, and allowing them the benefit of all reasonable inferences of fact, the evidence easily supports the jury's conclusion that Rohm & Haas certainly knew of damage or injury for which there would be legal liability large enough to reach the excess layers of insurance. Consequently, we cannot conclude either that the law requires a verdict in Rohm & Haas' favor or that no two reasonable minds could disagree that Rohm & Haas should have prevailed. This is not a sufficiently clear case to mandate the entry of JNOV; thus Superior Court correctly resolved this issue.
The next issue deals with fraud and is closely related to the known loss issue. We must decide whether JNOV was properly granted with respect to question no. 7, which reads:
Do you find that, as to [the policies at issue], the insurer issuing the policy has proven the following facts by clear and convincing evidence:
A. That in connection with buying the specific insurance policy, Rohm and Haas' employees or agents of Rohm and Haas who were in contact with the issuing insurer intentionally failed to disclose material information about Whitmoyer, and, if so,
B. That Rohm and Haas employees or agents deliberately concealed material information with the intent to deceive the CGL excess insurer; or, that other persons at Rohm and Haas, as part of an intentional plan to conceal and deceive, kept material information from the employees or agents in contact with the insurer so that the information would not be disclosed?
The jury answered affirmatively with respect to each policy. The trial court entered JNOV with respect to the three policies already in existence at the time Rohm & Haas acquired Whitmoyer on the basis that Rohm & Haas could not have been aware of the problem prior to acquiring Whitmoyer when it contracted for those policies, and thus, could not have had an intent to deceive or conceal material information from the insurers. That court further granted JNOY with respect to the remaining policies on the basis that the evidence presented at trial was insufficient for the jury to find a "deliberate, fraudulent intent to deceive." Rohm and Haas, supra at 1251.
When an insured secures an insurance policy by means of fraudulent misrepresentations, the insurer may avoid that policy. New York Life Ins. Co. v. Brandwene et ux., 316 Pa. 218, 172 A. 669 (1934). See also Smith and Judge, supra. The burden of proving fraud must be established by clear and convincing evidence and rests with the party alleging it. Id. The clear and convincing standard requires evidence that is "so clear, direct, weighty, and convincing as to enable the jury to come to a clear conviction, without hesitancy, of the truth of the precise facts of the issue." Lessner v. Rubinson, 527 Pa. 393, 592 A.2d 678, 681 (1991). This court has previously observed that fraud "is never proclaimed from the housetops nor is it done otherwise than surreptitiously with every effort usually made to conceal the truth of what is being done. So fraud can rarely if ever be shown by direct proof. It must necessarily be largely inferred from the surrounding circumstances." Shechter v. Shechter, 366 Pa. 30, 76 A.2d 753, 755 (1950).
In an insurance fraud case, the insurer must prove that the fraudulent misrepresentations were material to the risk assumed by the insurer. Evans v. Penn Mutual Life Ins. Co. of Philadelphia, 322 Pa. 547, 186 A. 133 (1936). When knowledge or ignorance of certain information would influence the decision of an insurer in the issuance of a policy, assessing the nature of the risk, or setting premium rates, that information is deemed material to the risk assumed by the insurer. A.G. Allebach, Inc. v. Hurley, 373 Pa.Super. 41, 540 A.2d 289 (1988). Furthermore, "fraud consists of anything calculated to deceive, whether by single act or combination, or by suppression of truth, or suggestion of what is false, whether it be by direct falsehood or by innuendo, by speech or silence, word of mouth or look or gesture." Moser v. DeSetta, 527 Pa. 157, 589 A.2d 679, 682 (1991). That is, there must be a deliberate intent to deceive. Evans, supra. Finally, "the concealment of a material fact can amount to a culpable misrepresentation no less than does an intentional false statement." Moser, supra at 682
In the present case, evidence was adduced at trial regarding the calamitous nature of the pollution at Whitmoyer. It is undisputed that Rohm & Haas learned of this problem shortly after purchasing the site. Rohm & Haas did not disclose the problem to the insurers either when adding Whitmoyer to the policies in existence or when purchasing subsequent coverage. Indeed, the insurers were not made aware of the problem until some twenty-four years later when Rohm & Haas filed a claim for coverage. Furthermore, evidence was introduced at trial which showed that the pollution at Whitmoyer was material to the insurers' decision to provide coverage.
The insurers presented a chronology of events showing that as Rohm & Haas increasingly became aware of the pervasiveness of the problem, with its concomitant risk of liability, the company purchased increasing amounts of excess coverage. Evidence was also adduced of the company's awareness of the potential liability to its neighbors. Furthermore, while Rohm & Haas cooperated fully and openly with the appropriate commonwealth agencies to address the problems at Whitmoyer, the company also deliberately undertook to keep the situation from becoming public knowledge.
Examining this evidence under the standard required in a review of JNOV, we conclude that there is sufficient support for the jury's answer to question no. 7. Rohm & Haas argues that their evidence shows that the failure to disclose was unintentional and that the purchases of excess insurance were unrelated to the situation at Whitmoyer. Essentially they are asking this court to reexamine the evidence and substitute our findings for those of the jury. However, factual determinations are the sole province of the jury and it was for the jury to decide how the evidence should be interpreted. Here, the jury weighed the evidence and, drawing permissible inferences, concluded that the failure to disclose was not merely inadvertent and unrelated to Whitmoyer, but knowing and deliberate. The jury determined that at the times that Whitmoyer was added to existing policies or included in newly purchased policies Rohm & Haas deliberately withheld information it knew would be material to the insurers' decision to provide coverage. We therefore conclude that Superior Court appropriately reversed the entry of JNOV on this issue.
The final issue is whether JNOV was properly entered with respect to the insurers' "late notice" defense. We have stated in the past that when an insurance policy contains provisions requiring timely written notice of claims under that policy, the breach of that provision releases the insurer from the obligations imposed by the policy. Brakeman v. Potomac Ins. Co., 472 Pa. 66, 371 A.2d 193 (1977). The timeliness of such notice depends on the facts and circumstances of each case. Id, The purpose of these provisions is to
prevent the insurer from being prejudiced, not to provide a technical escape-hatch by which to deny coverage in the absence of prejudice nor to evade the fundamental protective purpose of the insurance contract to assure the insured and the general public that liability claims will be paid up to the policy limits for which the premiums were collected. Therefore, unless the insurer is actually prejudiced by the insured's failure to give notice immediately, the insurer cannot defeat its liability under the policy because of the non-prejudicial failure of its insured to give immediate notice of an accident or claim as stipulated by a policy provision.
Id. at 197.
In the present case the trial court properly observed that dissipation and disappearance of evidence occurs over the passage of time and that witnesses become unavailable and memories fade. These are some of the prejudicial effects sought to be mitigated by notice provisions. Nonetheless, the trial court directed the verdict in Rohm & Haas' favor on this issue claiming that the insurers failed to present sufficient evidence demonstrating how they had been prejudiced by a twenty-four year delay in notification of the problems at Whitmoyer.
Twenty-four years had elapsed between the acquisition of the site and the claim for coverage; thirty-three years had elapsed by the time the case went to trial. At trial, evidence was adduced that many of the Rohm & Haas employees involved in the purchase and operation and cleanup of Whitmoyer were deceased. In all likelihood, those who had survived to trial had experienced some diminution of their recollection of the events thirty-three years earlier. Finally, by the time Rohm & Haas gave notice of the claim to its insurers, relevant documents had been lost or destroyed. Therefore, we agree with Superior Court that disputed issues of fact existed as to whether the insurers were prejudiced by the delay. This presented a triable issue of fact that should have been presented to the jury.
For the foregoing reasons the judgment of Superior Court is affirmed in all respects.
Mr. Justice NIGRO files a concurring opinion.
Mr. Justice CASTILLE files a dissenting opinion in which Mr. Justice CAPPY and Mr. Justice SAYLOR join.
. CGL policies provide coverage above a certain threshold and are meant to supplement coverage provided by primary liability policies.
. The pervasiveness of the problem caused appellants to supply drinking water to several neighbors and to pay the hospitalization costs of one farmer who fell ill. No legal claims were ever filed against appellants.
. 42 U.S.C. § 9601 et seq. (1995).
. Among these post-trial motions were motions by the appellees seeking the trial judge's recusal from both ruling on the post-trial motions and from presiding over the damages trial. The recusal motions were based upon a post-trial meeting that the judge held with the jury where it is alleged that, among other things, he informed the jurors that they had made the wrong decision; that appellees had lost a similar trial in Pittsburgh; that. Rohm & Haas is a very good company; and that he had seen evidence that they had not, which would have changed their verdict. The motions were denied. Superior Court, while admitting that the recusal nrotions might have been handled differently, concluded that the trial judge's disavowal of any bias was sufficient and that he objectively determined the post-trial motions; this matter has not been appealed.
. 35 P.S. § 691.1 et seq.; section 3 of which provided:
The discharge of sewage or industrial waste or any noxious and deleterious substances into the waters of this Commonwealth, which is or may become inimical and injurious to the public health, or to animal or aquatic life, or to the uses of such waters for domestic or industrial consumption, or for recreation, is hereby declared not to be a reasonable or natural use of such water, to be against public policy and to be a public nuisance.
Section 3 was amended in 1970 as follows:
The discharge of sewage or industrial waste or any substance into the waters of this Commonwealth which causes or contributes to pollution as herein defined or creates a danger of such pollution is hereby declared not to be a reasonable or natural use of such waters, to be against public policy and to be a public nuisance.
While there was no private right of action at the time, the act did and still does provide for abatement of the nuisance; in 1964 the act gave the Chief Environmental Administrator the power to compel companies to clean up pollution and remedy environmental damage caused by their operations. See e.g., 35 P.S. § 691.5, 691.316, 691.501, 691.503, 691.601, 691.602, 691.604, 691.605, and 691.610. Notwithstanding any liability that might arise as a result of state or federal statutory enactments, Rohm & Haas certainly should have realized that the gross contamination of the Whitmoyer site would likely have constituted a public nuisance, a long recognized source of common law liability.
. One of the reasons the trial judge entered JNOV was that he believed the jury had improperly utilized post hoc ergo propter hoc reasoning (after this and therefore in consequence of this; the fallacy of false cause) when it inferred fraudulent intent from the chronology of events presented showing that Rohm & Haas coincidentally purchased increasing amounts of CGL coverage as its awareness of the magnitude of the problem grew. While a single isolated incident of some event followed by a second event may render tenuous an inference that the first event caused the second, a series of such incidents accompanied by other circumstantial evidence may result in a much more compelling conclusion. Here, the jury's review of all the evidence led them to the permissible inference that Rohm & Haas intentionally undertook to withhold the material information.