ELR Citation: ELR 21350
No(s). 90-3687 (3d Cir. Aug 8, 1991)

The court rules that under Pennsylvania law the sudden and accidental exception to the pollution exclusion clause in a Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) defendant's comprehensive general liability insurance policy does not apply to systematic discharges that occur over extended periods. The court first notes that it is bound to apply state substantive law in this diversity action, even though the Supreme Court of Pennsylvania has not addressed this issue. However, the Pennsylvania Superior Court has twice ruled that the sudden and accidental exception requires that the discharge be both abrupt and unexpected. The court further notes that although it is not bound in a diversity action to follow decisions of a state intermediate appellate court, the Superior Court's decisions on this issue are grounded on established principles of Pennsylvania law regarding the interpretation of insurance contracts. Moreover, the court cannot say that the Supreme Court of Pennsylvania would reach a different conclusion from that of the Superior Court, especially in light of the fact that the Supreme Court denied review of both cases in which the Superior Court denied coverage. Thus, the court rules that based on the decisions by the Pennsylvania Superior Court, the exception for sudden and accidental discharges applies only to discharges that are abrupt and last a short time, not discharges that are merely unintended and unexpected. The court next rules that application of the pollution exclusion clause is not dependent on whether the polluter actually released the pollutants or was a passive polluter, but on whether injury or damage arose out of the discharge, dispersal, release, or escape of pollutants. The exclusion clause makes no reference to who did the polluting.

The court next holds that the district court properly granted summary judgment for the insurers with respect to their duty to provide the insured with coverage and a defense. Although conflicting authority exists as to whether the insured or the insurer has the burden of proving an exception to an exclusion, the court predicts that the Supreme Court of Pennsylvania would again follow the Superior Court's decisions, which have held that the insured bears the burden of persuasion under Pennsylvania law. Thus, summary judgment as to coverage was properly granted since the insured failed to present evidence on the record that the discharges were sudden and accidental. On the contrary, the evidence showed that the discharges occurred over extended periods. Finally, the court holds that although the duty to defend is a distinct obligation that is separate from the insurer's duty to provide coverage, the Environmental Protection Agency's (EPA's) complaints against the insured regarding two disposal sites do not aver facts that would support a finding that discharges of pollutants at those sites were sudden and accidental. Since EPA's claims relate only to a recovery that the insured's policy does not cover, the insurers did not have a duty to defend.

Counsel for Appellant
Stephen G. Weil, Joseph D. Tydings
Anderson, Kill, Olick & Oshinsky
2000 Pennsylvania Ave. NW, Ste. 7500, Washington DC 20006
(202) 728-3100

E. Max Weiss
Culbertson, Weiss, Schetroma & Schug
911 Diamond Park, Meadville PA 16355
(814) 336-6500

Counsel for Appellee
Thomas W. Brunner
Wiley, Rein & Fielding
1776 K St. NW, Washington DC 20006
(202) 429-7000

Richard M. Shusterman
White & Williams
1 Liberty Pl., Ste. 1800, 1650 Market St., Philadelphia PA 19103
(215) 854-7000

Before: NYGAARD and ALITO, Circuit Judges; FULLAM, District Court.^*