Civil Action No. 03-CV-3231.
February 16, 2005
AND NOW, this 16TH day of February 2005, it is ORDERED that Plaintiffs' Motion for Partial Reconsideration (Docket # 52) is DENIED. Upon re-examining the relevant cases, I conclude that there are no outstanding issues of material fact for a jury to decide regarding defendants' duty to defend plaintiffs. However, plaintiffs' summary judgment motion was properly denied because this court cannot make a proper determination as to defendants' duty to defend without making legal findings as to the applicability of regulatory estoppel and the usage of the term "sudden and accidental" in the insurance industry.
An "insurance company is obligated to defend an insured whenever the allegations in a complaint filed against the insured potentially fall within the policy's coverage." Lucker Mfg. v. Home Ins. Co., 23 F.3d 808, 813 (3d Cir. 1994). "Before considering whether a complaint is potentially covered by a policy, it is necessary to determine the coverage of the policy in the first instance." Id. In Pennsylvania, "the inquiry into coverage is independent of, and antecedent to, the question of the duty to defend." Id. at 813-814.
The task of interpreting a contract of insurance, and thus its scope of coverage, is generally performed by the court. General Accident Ins. Co. v. Allen, 692 A.2d 1089, 1093 (Pa. 1997). Unambiguous contracts are interpreted by the court as a matter of law. Kripp v. Kripp, 849 A.2d 1159, 1163 (Pa. 2004). Ambiguous contracts are interpreted by the finder of fact. Id. The question of whether a contract is ambiguous is a question of law.Id. at 1164 n. 5. Lower Paxton Twp. v. U.S. Fidelity Guaranty Co., 557 A.2d 393 (Pa.Super. 1989), held that the phrase "sudden and accidental" was unambiguous. In Sunbeam Corp. v. Liberty Mutual Ins. Co., 781 A.2d 1189 (Pa. 2001), the Pennsylvania Supreme Court did not disturb this holding. Therefore, under current Pennsylvania law, there is no ambiguity in the phrase "sudden and accidental" as used in the pollution exclusion clauses in the insurance contracts at issue in this case, and the interpretation of the insurance contracts is a matter of law for the court to determine.
In some instances, it is appropriate for the court to require more information in deciding a pure question of law. TheSunbeam court held that "custom in the industry or usage in the trade is always relevant and admissible in construing commercial contracts and does not depend on any obvious ambiguity in the words of the contract." 781 A.2d at 1193. The Sunbeam court remanded the case to the trial court to determine whether the phrase "sudden and accidental" in the insurance industry had the same meaning as "unexpected and unintended." Id. at 1194-95. The court also remanded the case for a determination of whether regulatory estoppel, "an equitable, judicially-created doctrine," applied. Id. at 1192-93.
Under Sunbeam and under general rules of contract interpretation, there is no ambiguity in the language of the pollution exclusion clauses at issue in the present case, and the scope of coverage under the insurance policies is a matter of law for the court to determine. The question of custom and usage in the industry and the applicability of regulatory estoppel go to the interpretation of the contract and are matters of law for the court. Given that these questions are purely legal questions, there are no outstanding issues of material fact for a jury to decide regarding defendants' duty to defend. However, I cannot make an informed decision as to the legal question of whether defendants have a duty to defend without further arguments and submissions from the parties.
Therefore, it is further ORDERED that:
• The Amended Scheduling Order of February 8, 2005 (Docket # 58) is STAYED until further notice.
• On or before April 1, 2005, all parties shall file briefs on the applicability of regulatory estoppel and on the usage of the term "sudden and accidental" in the insurance industry.
• A hearing on the applicability of regulatory estoppel and the usage of the term "sudden and accidental" in the insurance industry will be held on April 19, 2005 at 9:30am in Courtroom 7-B.