author: WETTICK JR., J.,

text:
    Babcock & Wilcox Co. v. American Nuclear Insurers

      C.P. of Allegheny County,
    nos. GD99-11498 and GD99-16227.

      Neal R. Brendel, for Babcock & Wilcox Co.

      Jon Hogue, for American Nuclear Insurers.

      Leonard J. Marsico, for Atlantic Richfield Co.
    April 25, 2001
   WETTICK JR., J.,

There is pending litigation in the Federal District Court for the Western District of Pennsylvania in which more than 300 plaintiffs have raised claims against Babcock & Wilcox Company and Atlantic Richfield Company for harm attributable to exposure to radioactive materials emitted from two nuclear fuel processing facilities that B&W and ARCO owned and operated. In this underlying action (the Hall case), the total recovery may be several hundred million dollars. B&W and ARCO are insured by American Nuclear Insurers. B&W and ARCO contend that ANI policies which cover the underlying claims may provide total coverage of $320 million. ANI contends that most of the underlying claims are covered by ANI policy limits in effect prior to April 1974 when the total coverage never exceeded $40 million.

This consolidated action includes claims raised by the insurer and insureds for declaratory relief as to (1) when the liability of ANI is triggered and (2) whether the insurer must provide separate counsel to each insured to defend what the insurer characterizes as claims channeled to the licensee. Through paragraph 3 of an August 10, 2000 order which the parties submitted to me for my signature, the parties agreed that I would initially address only the following issues:

“(3) ARCO’s prehminary objection in the actions is sustained in part and overruled in part without prejudice. Until further order of court, the actions shall proceed for the limited purpose of resolving the following legal issues (the issues for resolution):
“(a) Whether ANI, having acknowledged a duty to defend ARCO in the Hall action, is obligated to pay for supplemental and/or independent defense counsel to represent and defend ARCO’s separate interests in the Hall action;
“(b) Whether ANI, having acknowledged a duty to defend B&W in the Hall action, is obligated to pay for supplemental and/or independent defense counsel to represent and defend B&W’s separate interests in the Hall action;
“(c) With respect to the ANI facility form policies nos. NF-39, NF-83, MF-83, and MF-84, what is the applicable trigger and scope of coverage in connection with the Hall action.
“At this phase of the proceedings, the court shall not apply any rulings or determinations relating to the issues for resolution to the facts of any individual underlying claim. All other matters in the actions are hereby stayed until further order of court pending the resolution of the Hall action (the stay).”

In paragraphs 7-9 of the August 10, 2000 court order, the parties created a schedule for the filing and briefing of summary judgment motions. Plaintiffs and defendants have each filed motions for partial summary judgment in which they request favorable rulings concerning the issues set forth in paragraph 3 of my August 10, 2000 order. These motions for partial summary judgment are the subject of this opinion and order of court.

These insurance coverage disputes involve insurance coverage for two nuclear fuel processing facilities: the Apollo facility and the Parks facility. In 1957, these facilities were licensed by the Atomic Energy Commission (later known as the Nuclear Regulatory Commission) to possess and use nuclear material. The facilities were owned by Nuclear Materials Equipment Co. (NUMEC) from 1957 to 1967. In 1967, ARCO formed a wholly owned subsidiary which acquired NUMEC. ARCO’s subsidiary (also named NUMEC) operated these facilities until 1971 when it sold the stock in NUMEC to B&W. In connection with the sale, ARCO agreed to indemnify B&W and NUMEC and to assume certain liabilities of NUMEC. In 1974, B&W merged NUMEC into itself, thereby assuming NUMEC’s liabilities.

Since March 1958, ANI (or its predecessor) has provided coverage for nuclear energy hazards at the Apollo facility to the licensee for the facility. The limit of liability for all incidents was initially $3 million. As of February 15, 1979, the limit was $160 million.

The following chart shows the increases in the limit for the Apollo facility:

Effective Date NF-39 MF-83 Total

03/04/58 $3,000,000 — $3,000,000

09/24/60 $5,000,000 — $5,000,000

07/12/68 $10,000,000 — $10,000,000

11/30/71 $20,000,000 — $20,000,000

03/07/75 $96,875,000 $28,125,000 $125,000,000

03/16/77 $108,500,000 $31,500,000 $140,000,000

02/15/79 $124,000,000 $36,000,000 $160,000,000

ANI (or its predecessor) has also provided coverage for nuclear energy hazards for the Parks facility. The initial coverage was $3 million; as of February 15,1979, coverage was increased to $160 million.

The underlying action arose out of a complaint filed in June 1994 against B&W and ARCO in the United States District for the Western District of Pennsylvania on behalf of five individuals and three purported class representatives. Plaintiffs raised claims against B&W and ARCO for bodily injury and property damage that were allegedly attributable to radioactive emissions from the Apollo and Parks facilities. Subsequently, 13 amended complaints have been filed, adding approximately 300 named plaintiffs, but not changing the operative averments of the original complaint. Plaintiffs in the underlying action are seeking hundreds of millions of dollars in compensatory and punitive damages. B&W and ARCO deny that the facilities released any radioactive or toxic materials into the environment that exceeded the levels permitted by federal regulation and deny that any of the plaintiffs’ bodily injuries, diseases, and property damages are attributable to any releases from these facilities.

In 1998, eight “test cases” were tried in a single trial. The jury returned verdicts in favor of plaintiffs that totalled $33.7 million against B&W and ARCO and also $2.8 million against only B&W. The trial court later granted a new trial, based on evidentiary error, which has not occurred.

The two lawsuits that are the subject of this opinion and order of court were filed after the District Court granted B&W’s and ARCO’s post-trial motion to overturn the verdicts in the trial of the eight plaintiffs.

I.

I first consider the applicable triggers with respect to ANI’s policies.

The vast majority of the injuries in the underlying Hall case are various types of cancer. The plaintiffs in this underlying action allege that as a result of repeated releases of hazardous, toxic and/or radioactive substances into the area surrounding the Apollo and Parks facilities, they were repeatedly exposed to such substances. The repeated exposure caused the cancers.

While the parties have framed the issue in terms of whether the only triggering event is the date on which the exposure to the radiation caused the disease or whether exposure, progression, and manifestation are each triggering events, it appears that B&W and ARCO will obtain the coverage which they seek if manifestation is the triggering event. This is so because there is a single insurance policy for each facility and the limits of the insurance policies (which have increased over the years) are not cumulative from year to year. Consequently, if I agree with the position of B&W and ARCO that manifestation is a triggering event, I need not decide whether exposure and progression are also triggering events (and, thus, I need not address ANI’s contention that a multiple-trigger theory applies only when a court must allocate liability among multiple single-year insurance policies issued by different insurance companies).

For purposes of these motions for partial summary judgment, I will accept ANI’s description of the biological process of radiation-induced cancer. See this opinion, infra at 361-64; transcript of February 7, 2001 argument at 20-21, 25-26. According to ANI’s description, exposure to radiation does not necessarily cause cancer. A radiation-induced cancer begins when the nucleus of a cell receives a dose of radiation sufficient to alter its DNA such that it undergoes malignant transformation and becomes a cancer cell. There is a period of latency in which the cancer or tumor is growing undetected (cancer cells are doubling at a constant rate until enough of them have amassed such that they can be detected by modem medical techniques). The length of the latency period depends on the type of cancer. Latency periods may be 25 years or more.

ANI provides liability insurance only for nuclear energy hazards. Each policy that ANI has issued has remained in effect from the date on which it was issued to the present. The policies have been amended to change the name of the named insured and to increase policy limits. The policies do not have a term, and the liability limit is not cumulative from year to year. This means, for example, that if the limits of the policy for the Apollo facility described at pages 356-57 of this opinion had never been increased, the $3 million limit would be the total amount of insurance that would be available for all claims from the March 4, 1958 effective date to the present date.

It is the position of B&W and ARCO that the ANI policies should be read to provide coverage from the date of exposure to the date on which the cancer is diagnosed. If I read the ANI policies in this fashion, the Apollo policy, for example, would provide the following coverage for the following claims:

Assume that plaintiffs A, B, C, D, E, F, and G moved to Apollo in lune 1958. A was diagnosed with cancer in 1959; B was diagnosed with cancer in 1966; C was diagnosed with cancer in 1969; D was diagnosed with cancer in 1970; E was diagnosed with cancer in 1973; F was diagnosed with cancer in 1976; and G was diagnosed with cancer in 1980. Assume that a jury awarded each plaintiff $10 million based on a finding that the cancer was caused by the plaintiff’s exposure to radioactive materials that the Apollo plant had emitted. Assume that the insured sought coverage for A’s claim before B’s claim, B’s claim before C’s claim, etc.

Under B&W’s and ARCO’s reading of the ANI policies, insurance coverage for A’s verdict would be $3 million because throughout the period from 3/4/58 to 9/23/60, there is a $3 million limit; coverage for B’s claim would be $2 million (i.e., the new $5 million limit is not a new $5 million but only a new $2 million on top of the $3 million that has already been paid); the coverage for C’s claim would be $5 million ($5 million of the $10 million limit has already been paid); the coverage for D’s claim would be $0 (the entire $10 million has already been paid); the coverage for E’s claim would be the full $10 million (i.e., as of 11/30/71, there is a new $10 million for the period from 11/30/71 through 3/6/75); the coverage for F’s claim would be $10 million because there is a new $105 million; and the coverage for G’s claim would be $10 million (because of these previous payments totaling $40 million, there was a balance of $120 million for persons who are diagnosed with cancer on or after 2/15/79).

According to B&W and ARCO, the cancer of most of the plaintiffs in the underlying litigation did not become detectable until after 2/15/79. Consequently, the coverage for most of the claims will be $160 million less prior payments.

ANI contends that its policies do not provide the coverage described in examples A-G because the applicable trigger under its policies is not the date on which the cancer can be diagnosed. Instead, it is the date on which exposure to nuclear material caused the cancer (i.e., the date on which a cell’s DNA underwent malignant transformation and cancer began). ANI refers to the use of this date as a causation trigger and to the date on which the cancer can be diagnosed as a diagnosis trigger.

ANI believes that large numbers of the plaintiffs in the underlying Hall lawsuit will be covered by examples A-E because of the lengthy latency period for many cancers caused by radiation.

ANI contends that the date of causation is required by its insurance policies and can be established by medical science. In its brief, ANI refers to the research of Dr. Ann Kennedy, an expert witness who will testify on its behalf as follows:

“(B) The causation trigger required by the facility form policies is also one which is recognized by medical science
“Not only is causation the operative fact for the coverage analysis, it is also a fact which can be established by medical science. The vast majority of the injuries alleged by the Hall plaintiffs are cancers. While radiation-induced cancer is characterized by its ‘potentially unlimited and uncontrolled growth,’ Kennedy aff. at^3, there is nevertheless a definitive point in the biological process when the cancer is ‘caused.’ Dr. Ann Kennedy, who has spent over 30 years studying cancer and particularly cancers caused by radiation, explains that ‘a radiation induced cancer begins when the nucleus of a cell receives a dose of radiation sufficient to alter its DNA such that it undergoes malignant transformation and becomes a cancer cell.’ Id. at ¶17. While there are several steps in the development of the malignancy, ‘[o]ne of these steps is the initial step, or the initiation step, directly produced by the radiation exposure.’ Id. at ¶19. After the initiated cell undergoes further changes to become fully malignant, the cell must reproduce itself until it results in a ‘mass of cells . . . large enough to be detected and diagnosed as a cancer.’ Id. at ¶17.
“The distinction between causation and diagnosis is particularly important for purposes of construing the trigger of the facility form policies because ‘ [n]ormally, between the initial abnormal cell produced by radiation and the time of diagnosis of a cancer, years of time pass.’ Id at ¶19. During those years, the cancer cells are doubling at a constant rate until enough of them have amassed such that they can be detected by modem medical techniques. Id at ¶17. This ‘latency period’ when the cancer is growing undetected in the body can span many years; in fact, ‘latency periods of 25 years or more have been observed for many types of radiation-induced cancer.’ Id. at^ZO. The ‘cause’ language in the facility form policies mandates that coverage is triggered at the beginning of the latency period and not at the end; the ultimately diagnosed cancer was ‘caused’ when the radiation exposure produced the initiated cell. As Dr. Kennedy explains:
“ ‘While it may take a decade or more in some cases for the abnormal/cancer cells to replicate enough times so that a cancer becomes detectable or the person suffers the effects of injury or disease, the ultimately diagnosed mass of cancer cells is the direct result of the replication of the original cell that was made abnormal by a sufficient dose of radiation.’ Id at ¶19.
“Another example from the list of Hall plaintiffs highlights the distinction between a ‘causation trigger’ and a ‘diagnosis trigger.’ The estate of Anthony F. Venis alleges that his kidney cancer diagnosed in 1973 was caused by emissions from the Apollo facility. See Keely aff. exhibit 32 (injury chart) at 31. If the latency period for Mr. Venis’ cancer was very short, for example less than a year, the $20,000,000 limit that became effective November 30, 1971 would apply to his claim. If it were slightly longer, for example three years so that his injury was caused in 1970, the $10,000,000 limit effective on July 12,1968 would apply to his claim. If the latency period were six years such that his injury was caused in 1967, the $5,000,000 limit effective on September 24, 1960 would apply. Thus, even for this one plaintiff, the latency period for his injury will determine whether the applicable limit triggered is $5 million, $10 million or $20 million.15
“14. Dr. Kennedy is an expert in the area of radiation biology, having taken a doctorate degree in that field from Harvard University. She has taught in the Department of Cancer Biology at the Harvard School of Public Health and is currently professor of radiation biology at the University of Pennsylvania School of Medicine. She has authored scores of peer-reviewed articles on radiation-induced cancer. Kennedy aff. at ¶1.
“15. Medical science can determine the latency period for numerous types of cancer to a reasonable degree of certainty. Following a declaration of the proper construction of the policy language in this phase of the coverage action, the Pools intend in a future phase to offer evidence with respect to such latency periods so that the applicable limits can be determined with respect to individual Hall plaintiffs.”

The ANI policies contain the following language: [ANI agrees]

“I. Coverage A — Bodily Injury And Property Damage Liability to pay on behalf of the insured: (1) all sums which the insured shall become legally obligated to pay as damages because of bodily injury . . . caused by the nuclear energy hazard....
“III. Definitions — Wherever used in this policy:
“'bodily injury’ means bodily injury, sickness or disease, including death resulting therefrom, sustained by any person....
“‘nuclear energy hazard’ means the radioactive, toxic, explosive or other hazardous properties of nuclear material, but only if (1) the nuclear material is at the facility or has been discharged or dispersed therefrom without intent to relinquish possession or custody thereof to any person or organization ....
“IV. Application Of Policy — This policy applies only to bodily injury or property damage (1) which is caused during the policy period by the nuclear energy hazard and (2) which is discovered and for which written claim is made against the insured, not later than two years after the end of the policy period.” (Keely aff. exhibit 1 at 1.)

The endorsements which increase the policies’ limits contain similar language:

“This amended limit applies with respect to obligations assumed or expenses incurred because of bodily injury or property damage caused, during the period from the effective date of this endorsement to the date of termination of the policy, by the nuclear energy hazard.” (Keely aff. exhibit 4 at 1.)

B&W and ARCO contend that they are protected by the policy limits in effect on the date on which the cancer could be diagnosed. They rely on J.H. France Re fractories Company v. Allstate, 534 Pa. 29, 626 A.2d 502 (1993).

Between 1956 and 1972, J.H. France and its wholly owned subsidiary manufactured and marketed a product containing asbestos. In the period beginning April 1979 and continuing beyond 1984, numerous individuals who allegedly suffered from asbestos-related diseases contracted through exposure to J.H. France’s products, filed lawsuits against J.H. France. The initial lawsuit involved a decedent who allegedly suffered from asbestos-related diseases contracted through exposure to J.H. France’s products from 1948 through 1978.

J.H. France was insured by six insurance companies for the period from 1967 into the 1980s. The insurance companies and J.H. France instituted declaratory judgment actions which addressed the insurer’s duty to defend and to indemnify.

The six insurers provided comprehensive insurance coverage to J.H. France from July 1, 1967 through October 30, 1984. The policies (standard comprehensive general liability “CGL” policies) contained the following language:

“[The insurer] will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury ... to which this insurance applies, caused by an occurrence, and [the insurer] shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury....
“ ‘Bodily injury’ means bodily injury, sickness or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom ....
“ ‘Occurrence’ means an accident, including continuous or repeated exposure to conditions, which result in bodily injury . . . neither expected nor intended from the standpoint of the insured.” Id. at 35, 626 A.2d at 505.

The parties stipulated that the evidence in the underlying action included medical evidence that the nature of asbestos-related diseases is progressive. Discrete cellular injuries occur upon exposure to asbestos; the disease may then progress and culminate in the manifestation of recognizable incapacitation.

The Supreme Court ruled that under the language of the policies, coverage is provided if any of the three events — exposure, progression, or manifestation — occurred during the term of the policy. The court relied on the definitions of “occurrence” and “bodily injury.” The policy provided coverage for damages incurred because of bodily injury caused by an occurrence. Bodily injury includes any injury which occurs during the policy period. The court ruled that any stage of the development of a claimant’s disease constitutes a bodily injury occurring during the policy period:

“Rather than selecting one or another of the phases as the exclusive trigger of liability, it seems more accurate to regard all stages of the disease process as bodily injury sufficient to trigger the insurers’ obligation to indemnify, as all phrases independently meet the policy definition of bodily injury.” Id. at 38, 626 A.2d at 507.

The court also ruled that every insurer which was on the risk at any time during the development of the claimant’s asbestos-related disease had an obligation to indemnify J.H. France. The opinion stated that the definition of an “occurrence” supported the court’s position that the liability of each insurer was triggered if exposure, progression or manifestation occurred during the term of the policy.

“The definition suggests that any insurance policy triggered under the ‘multiple-trigger’ concept with respect to any specific claim is potentially liable for the entire amount of any judgment or settlement of that claim. An ‘occurrence’ includes ‘continuous or repeated exposure to conditions which result in bodily injury.’ The insurers which drafted the definition obviously contemplated the possibility of injury resulting from continuous or repeated exposure to conditions, and specified that the process of exposure was to constitute one occurrence. If prolonged exposure, constituting one occurrence, resulted in injury, and if the injury occurred during the time a given policy was in effect, then the injury is an insurable risk under the terms of that policy.” Id. at 40-41, 626 A.2d at 508.

ANI contends that J.H. France does not apply because the ANI policies are not “occurrence” policies; they are “causation” policies uniquely designed for the nuclear industry.

According to ANI’s expert witness (see supra at 362) a radiation-induced cancer begins when the nucleus of a cell receives a dose of radiation sufficient to alter its DNA such that it undergoes malignant transformation and becomes a cancer cell. Thereafter, the initiated cell undergoes further changes to become fully malignant; the cell reproduces itself until it results in a mass of cells large enough to be detected and diagnosed as cancer. It is ANI’s position that its “causation” policy mandates that coverage is triggered at the beginning of the latency (i.e., when the radiation exposure results in the initial abnormal cell).

ANI supports its position that this is a “causation” policy on the basis of provisions within the policy which state that it applies only to bodily injury or property damage which “is caused during the policy period by the nuclear energy hazard” and the language in endorsements increasing the policy limits which states that the amended limits apply only to obligations or expenses incurred “because of bodily injury or property damage caused, during the period from the effective date of this endorsement to the date of termination of the policy, by the nuclear energy hazard.” According to ANI, CGL occurrence policies focus on the date of an injury while its “causation” policies focus on the date when the emission causes the injury.

B&W and ARCO contend that the language of the ANI policies is almost identical to the language of the J.H. France CGL policies, so J.H. France’s interpretation of the CGL policies governs the ANI policies. I agree.

Both the ANI and CGL policies cover only bodily injury and property damage. Under a CGL policy, bodily injury “means bodily injury, sickness or disease sustained by any person;” under an ANI policy — bodily injury is defined as “bodily injury, sickness or disease including death resulting therefrom, sustained by any person.” Obviously, the ANI policy definition of bodily injury contains no language that would support an interpretation that differs from J.H. France’s interpretation of a CGL policy.

A CGL policy provides coverage “because of bodily injury ... to which this insurance applies, caused by an occurrence.” (emphasis added) An ANI policy provides coverage “only to bodily injury . . . which is caused during the policy period by the nuclear energy hazard.” (emphasis added) There are no differences in the language of an ANI policy that would support a different interpretation from J.H. France’s interpretation of the CGL policy unless there is language in the definitions of “nuclear energy hazard” and “occurrence” that support a different interpretation. However, the only differences relate to the scope of coverage. The CGL policy covers bodily injury from any accident; the ANI policy covers bodily injury only from nuclear material.

I recognize that the CGL policy states that it covers only bodily injury which occurs during the policy period by using the clause “which occurs during the policy period” in the definition of bodily injury, and that the ANI policy states that it covers only bodily injury which occurs during the policy period in the application of coverage by saying that the policy covers only bodily injury “which is caused during the policy period.”

ANI’s emphasis on the language in the CGL policy’s definition of bodily injury ignores other language in the CGL policy that uses the same causation language on which ANI relies. As I stated, the CGL policy provides coverage “because of bodily injury ... to which this insurance applies, caused by an occurrence.” An occurrence is defined as bodily injury resulting from any accident. A bodily injury is defined as an injury which occurs during the policy period. Thus, the CGL policy provides coverage “because of [an injury which occurs during the policy period] to which this insurance applies, caused by occurrence [any accident].” This coverage is no different from the coverage furnished by the ANI policy which applies “only to bodily injury [defined as bodily injury, sickness or disease sustained by any person] which is caused during the policy period by the nuclear energy hazard.”

In summary, both the CGL policies and the ANI policies use the same “causation” language. The present case involves the development of diseases that, for purposes of coverage issues, is similar to the development of asbestos-related diseases. Consequently, J.H. France’s interpretation of the CGL policies governs this litigation.

Also, see Consulting Engineers Inc. v. Insurance Company of North America, 710 A.2d 82 (Pa. Super. 1998), where the court ruled that any insurance policy that specifically focuses on the act causing injury as the coverage trigger and specifically requires this injury to occur during the applicable policy period is an “occurrence” policy governed by Pennsylvania case law construing occurrence policies.

Since Pennsylvania case law will characterize the ANI policies as occurrence policies, manifestation is a triggering event. Under Pennsylvania case law an occurrence, for purpose of determining insurance coverage, happens when the injurious effects of the negligence first manifest themselves in such a way that would put a reasonable person on notice of the injury. Consulting Engineers Inc. v. Insurance Company of North America, 710 A.2d 82, 85 (Pa. Super. 1998); D’Auria v. Zurich Insurance Co., 352 Pa. Super. 231, 239, 507 A.2d 857, 861 (1986). Also, ANI does not cite any Pennsylvania appellate court case law that has ever used as the sole triggering event an injury-in-fact theory under which the triggering event is the time in which some injury, which cannot be detected, occurred within the human body.

Words of an insurance policy should be given their every day meaning; they must be construed in a natural, plain, and ordinary manner. Consulting Engineers Inc. v. Insurance Company of North America, supra, 710 A.2d at 85. Riccio v. American Republic Insurance Co., 550 Pa. 254, 263-64, 705 A.2d 422, 426 (1997). Under the plain meaning, a bodily injury which is caused during the policy period refers to a diagnosable injury or disease arising during the policy period. When the ANI policies were issued for the Apollo and Parks facilities (Apollo — 1958; Parks — 1960), the insurers and insureds would have intended to provide coverage based on the date that the injury/disease was capable of being detected.

Also, if there is any ambiguity, the policy must be construed in favor of the insured and against the insurer. Id. When the insureds obtained higher policy limits, in the absence of clear language in the policy to the contrary, they would have reasonably expected that the increased coverage applied to claims of any person who was initially diagnosed with a disease after the date on which the limits were increased. They would not have construed the policy to exclude from the increased coverage the claims of every person who, as of the date of the increased coverage, had an undetectable injury to even a single cell of his or her body. Also, they would not have anticipated that the scope of their insurance protection would depend on future theories of medical science regarding the development of diseases caused by exposure to radiation.

It is possible that a CGL policy need not describe with specificity every circumstance in which coverage is not provided because every circumstance cannot be anticipated. However, the ANI policies covered only injuries/diseases caused by nuclear material. Consequently, ANI was in a position to describe with specificity any exclusions. Thus, if ANI intended to exclude persons who did not have any detectable diseases caused by exposure to radiation as of the date of the increase of the policy limits, it was required to include specific language advising the insured that coverage was not based on the date on which a person previously exposed to radiation developed a detectable injury or disease but, instead, excluded any person who already had even a single cell that was cancerous because of exposure to radiation.

If this is what ANI intended, it would have been easy for ANI to state that the new limits did not apply after the beginning of the latency period and to define this term. For example, ANI’s endorsements (Keely aff. exhibit 4) clearly describe the manner in which the amended limit of liability operates (the insurance is not cumulative, and each payment shall reduce limits of liability previously stated as well as the current amended limit).

For these reasons I rule that manifestation is an applicable trigger.

n.

I next consider whether ANI’s duty to provide a defense is met by selecting a single law firm to defend the claims that the plaintiffs have raised against B&W and ARCO in the underlying action.

B&W and ARCO contend that they require separate counsel because they disagree over which defendant is ultimately responsible for claims that are not covered by insurance. It is the position of B&W that ARCO is legally responsible to the plaintiffs in the underlying litigation and to B&W (through indemnification) for any recoveries based on discharges that occurred when ARCO was the licensee. In support of its position that ARCO is legally responsible to the plaintiffs in the underlying litigation and to B&W for these discharges, B&W relies on the following: an interpretation of the Price Anderson Act with which ARCO disagrees; an indemnification agreement under which ARCO allegedly agreed to hold B&W harmless for all liability it incurs because of the actions of the prior licensee; and common-law indemnification under which a defendant against whom a judgment is entered may seek indemnification from any other entity whose negligence, solely or jointly, caused the injuries to the plaintiffs in the underlying action.

ANI contends that there is not and cannot be a material conflict between B&W and ARCO because any traditional tort and indemnity doctrines that would create conflicts between B&W and ARCO do not apply to the underlying federal litigation. Its argument is set forth in its brief in support of motion for partial summary judgment at 2-3:

“With respect to the first issue for resolution, B&W and ARCO are neither entitled to nor do they require independent counsel to represent them separately. The Hall action was brought as a ‘public liability action’ pursuant to the federal Price Anderson Act, 42 U.S.C. §2210 et seq. The Act provides that, regardless of who may be named as defendants, all financial responsibility for liability in a public liability action shall be channeled to the party that holds the license for the nuclear facility from the Nuclear Regulatory Commission. In accordance with this ‘economic’ channeling provision of the Price Anderson Act, the facility form policies contain an omnibus insured provision that defines the ‘insured’ as both the named insured and ‘any other person or organization with respect to his legal responsibility for damages because of bodily injury or property damage caused by the nuclear energy hazard.’
“Regardless of how many entities are named as defendants in a public liability action, the Price Anderson Act channels responsibility for payment of all defendants’ liability to the licensee of the facility. By design, material conflicts of interest, therefore, cannot arise among defendants in a public liability action because the law pursuant to which the action is brought settles the question of allocation. For this reason, a single law firm represents all defendants in a public liability action. And for the same reason, cross-claims in public liability actions are not permitted; litigating cross-claims would waste resources and frustrate the intent of the Price Anderson Act to streamline the litigation process in order to promptly and efficiently compensate victims of nuclear accidents.”

It is the position of B&W that ANI’s interpretation of the Price Anderson Act is incorrect. Thus, an attorney representing B&W in the federal court action must be prepared to argue that: (1) only ARCO is liable for cancers that were diagnosed before B&W acquired the facilities; (2) ARCO is jointly liable where a jury finds that both B&W and ARCO contributed to a cancer; and (3) B&W may raise its indemnity claims in the federal court lawsuit.

These are not arguments that an attorney representing ARCO may raise because ARCO agrees with ANI’s position that Price Anderson channels any liability to B&W. ARCO also contends that if this is the correct interpretation of the Price Anderson Act, ARCO should not be in the underlying case at all. Consequently, an attorney representing ARCO must be prepared to raise the arguments that may result in ARCO’s dismissal from the federal court action.

In the Hall case, the jury awarded verdicts in the amount of $33.7 million against B&W and ARCO. B&W characterizes the verdicts as findings of joint and several liability. ANI disagrees. According to ANI, pursuant to the provisions of the Price Anderson Act, the trial judge (if the verdicts had not been set aside) should have molded the verdicts by entering judgments in the plaintiffs’ favor against only B&W.

Assuming that the verdicts had not been set aside, a law firm representing both B&W and ARCO could not have argued that the verdicts should be molded by entering judgments only against B&W because B&W disagrees with this interpretation of the Price Anderson Act. Neither could the law firm have argued that judgments should be entered against both defendants because ARCO supports ANI’s interpretation of the Price Anderson Act.

In the complaints filed in the underlying federal lawsuit, plaintiffs seek judgments against each B&W and ARCO, jointly and severally. I assume that counsel for the plaintiffs (particularly because of ANI’s interpretation of the coverage provisions of its insurance policies and B&W’s bankruptcy) will contend in the federal court proceedings that any verdict against B&W and ARCO should be reduced to a judgment in which each is jointly and severally liable. If B&W and ARCO are represented by the same law firm, this law firm will be receiving conflicting directions from its two clients as to how to respond to this argument of the underlying plaintiffs.

The first three questions on the verdict slip in the underlying test case asked the jury to consider separately the plaintiffs’ claims against each defendant:

“VERDICT

(1) Do you find that the defendants listed below were negligent by violating 10 C.F.R. §20.105?

YES NO

Atlantic Richfield Company _

Babcock & Wilcox Company / _

(2) Do you find that the defendants listed below were negligent by violating 10 C.F.R. §20.106?

YES NO

Atlantic Richfield Company _

Babcock & Wilcox Company _

[If your answer to either question for either defendant was ‘Yes,’ proceed to question 3 as to that defendant or defendants. If your answer was ‘No’ to both questions as to both defendants, do not answer any other questions, sign the verdict slip and return to the courtroom.]

(3) Was the negligence of either or both defendants a cause in fact and a substantial factor in bringing about the harm to

ARCO B&W

Yes No Yes No

Tina Hall / /

Kevin Barr / /

Jennifer Marks Kettering X /

Anna Mae Chrusick / /

Edmond Kolakowski / /

Grace Cimprich / /

Helen Mitcheson / /

Susan Visely / /

[If your answer was ‘Yes’ as to either defendant for any individual plaintiff, please proceed and answer the following questions as to those plaintiffs.]”

I agree with ARCO that it cannot assume that the sole issue the trial court judge was considering was whether the plaintiffs may obtain a judgment against B&W. If only B&W is liable for the negligence of either B&W or ARCO, the verdict slip would not have broken out the plaintiffs’ claims against ARCO and the plaintiffs’ claims against B&W (thereby creating a potential conflict between B&W and ARCO). The jury, instead, would only have been asked whether ARCO and/or B&W were negligent by violating the applicable regulations, and whether this negligence was a substantial factor in bringing about the harm to the plaintiffs.

Even assuming that ANI’s contention that cross-claims cannot be raised in the underlying federal action is correct, the law may permit B&W to seek common-law contribution from ARCO where its negligence solely or partially contributed to the injuries of the plaintiffs in the underlying case. Furthermore, under the written indemnification agreement between B&W and ARCO, ARCO’s duty to indemnify may depend on whether its negligence solely or partially contributed to the plaintiffs’ injuries. The verdict slips used in the federal action contain findings as to whether ARCO’s negligence was a substantial factor in bringing about harm to the plaintiff. In all likelihood, findings that only ARCO’s negligence was a substantial factor in bringing about this harm, and findings that the negligence of both defendants was a substantial factor in bringing about this harm, will apply to subsequent B&W-ARCO indemnity litigation. Consequently, in the pending federal litigation, a law firm representing ARCO’s interests might attempt to convince a jury that as to each plaintiff ARCO was not negligent or that its negligence was not a substantial factor, while an attorney representing B&W might attempt to convince a jury that if discharges from the facility caused a plaintiff’s injuries, ARCO is solely or jointly responsible for the injuries. The plaintiffs’ lawyers in the underlying litigation will, in all likelihood, be seeking to convince the jury that the negligence of both defendants caused the injuries whenever the exposure occurred during periods before and after B&W became the licensee. A lawyer representing both B&W and ARCO can only ask the jury to find that neither defendant caused the injuries. He or she cannot suggest that responsibility rests with only one defendant (or alternatively, that it rests with both defendants) in the event the jury finds that discharges from the facility caused a plaintiff’s injuries.

ARCO asks the following question: “If the plaintiffs can’t recover against me and if this litigation can’t, in any way, affect any indemnification claims that B&W seeks to raise against me, why am I still in the case?” ANI does not have a convincing response. ANI simply states: “While a plaintiff in a public liability action may name defendants other than the licensee for any number of reasons — for example, to obtain party discovery from the non-licensee — the channeling provision will nonetheless ‘shift [ ] the obligation to pay damages to [the licensee].’ Smith v. General Electric Co., 938 F. Supp. 70, 77 (D. Mass. 1996).” ANI’s reply memorandum at 6. (footnote omitted)

If ARCO is simply a nominal defendant, ARCO’s interests would differ from the interests of a defendant against whom a judgment can be entered. Consequently, it is unclear why ANI would not have appointed separate counsel to represent ARCO in its capacity as a nominal defendant.

It is ANI’s position that the defense of the plaintiffs’ claims in the underlying lawsuit is time consuming and expensive; consequently, it should not be paying a second law firm to prepare for and to present a defense to the plaintiffs’ claims. However, if (as ANI contends) it is clear that the outcome of the underlying lawsuit cannot include the entry of a judgment against ARCO or any findings detrimental to ARCO that could be introduced in subsequent litigation between B&W and ARCO, the second law firm representing ARCO’s nominal interests would not be preparing and presenting a defense to the underlying claims.

I did not begin my discussion of ANI’s duty to provide separate counsel by reviewing the case law on which ANI relies to support its “channeling” interpretation of Price Anderson because I agree with B&W and ARCO that it does not matter whether I agree or disagree with ANI’s interpretation of this federal legislation. Obviously, the trial court and appellate courts deciding the underlying federal action are not required to give any weight to my interpretation of the Price Anderson Act.

Plaintiffs in the underlying action are seeking judgments against both B&W and ARCO; there is no ruling stating that they may obtain judgments only against B&W. B&W wishes to raise cross-claims in the underlying action; there is no final ruling precluding them from doing so. Case law holds that the scope of the duty to provide a defense is defined by the claims raised in the pleadings in the absence of a court ruling limiting these claims. Scopel v. Donegal Mutual Insurance Co., 698 A.2d 602 (Pa. Super. 1997). Consequently, in deciding whether ANI has a duty to provide separate counsel, I must assume that the claims which plaintiffs raise against ARCO in the underlying action can result in judgments in favor of plaintiffs against ARCO and that jury findings can be used in subsequent litigation between B&W and ARC0. Thus, at this stage of the proceedings, one law firm may not represent both defendants because of the conflicts that I have described.

After considering the case law which ANI cites in support of its channeling theory, I continue to agree with B&W and ARCO that the law is not settled and there is a reasonable likelihood that, at least where both defendants were licensees, the courts may reject ANI’s channeling theory and ANI’s argument that cross-claims cannot be raised.

ANI cites the following statement in an opinion of the United States Court of Appeals for the Third Circuit: “A claim growing out of any nuclear incident is compensable under the terms of the [Act] or it is not compensable at all." In re TMI Litigation Cases Consolidated II, 940 F.2d 832, 854 (3d Cir. 1991). However, this statement does not answer the question of whether under the terms of the Price Anderson Act, ARCO may be liable for incidents occurring when it was a licensee, whether cross-claims may be asserted, and whether a trial in a public liability action may result in findings of fact that may be relevant to subsequent indemnification claims (assuming that these claims can be raised).

ANI cites four other cases in support of its interpretation of Price Anderson: Smith v. General Electric Co., 938 F. Supp. 70 (D. Mass. 1996); Corcoran v. New York Power Authority, 935 F. Supp. 376 (S.D.N.Y. 1996), aff’d, 202 F.3d 530 (2d Cir. 1999); Grimes v. Baltimore Gas and Electric Co., 1995 WL 901885 (D. Md. 1995); and O’Conner v. Commonwealth Edison Co., 807 F. Supp. 1376 (C.D. Ill. 1992), aff’d, 13 F.3d 1090 (7th Cir. 1994).

In O’Conner v. Commonwealth Edison Co., supra, the district court considered motions by the defendants to exclude part of the testimony of plaintiff’s causation expert and for summary judgment based on the evidence then remaining in the case. The court granted both motions and dismissed the action.

The defendants in O’Conner included both the licensee and a contractor at the plant. In dicta, the court said that Congress had channeled all public liability to licensees and away from nonlicensees such as contractors who might have otherwise born liability under ordinary tort law. The court stated that only one law firm has represented both defendants since the contractor cannot be separately liable to the plaintiff in any manner in this case:

“One law firm has represented both defendants, without conflict, throughout the pendency of this action, since there can be only one liability pursuant to Price Anderson and that liability is channeled solely through the licensee and through the financial protection provided by Price Anderson. Any disagreements between defendants as to who might have done what wrong are irrelevant to O’Conner’s claim for compensation under Price Anderson. The only relevant issues are whether the duty owed was breached (O’Conner’s exposure), and whether that exposure caused his claimed injury (causation).” 807 F Supp. at 1378.

Grimes v. Baltimore Gas and Electric Co., supra, is a one-page memorandum opinion in which the court was considering “an unopposed motion to dismiss filed by several of the defendants.” In this memorandum opinion, the court said that claims against the nonlicensee defendants should be dismissed because Congress sought to eliminate complicated legal proceedings that might arise in multiple defendant suits, so it channeled all public liability to licensees and away from non-licensees such as contractors.

In Corcoran v. New York Power Authority, supra, the estate of a person who died allegedly because of exposure to radiation sued both the licensee and Westinghouse which provided maintenance services. Westinghouse argued that the Price Anderson Act channeled all public liability to the licensee so Westinghouse was not a proper party. Westinghouse relied on the Grimes case which cites the O’Conner case. The court found Westinghouse’s argument to be “unpersuasive.” 935 F. Supp. at 390. It stated that in O’Conner the contractor was not dismissed from the case and that “it is incongruous to argue that contractors cannot be subject to suit simply because they may be indemnified.” Id. (emphasis added)

In Smith v. General Electric Co., supra, the estate of an electrician who worked at a nuclear power plant and contracted leukemia sued the owner of the plant and General Electric, the supplier of fuel rods. General Electric sought dismissal on the ground that it was a redundant party. General Electric argued that the channeling provisions of the Price Anderson Act affirmatively barred the plaintiff from even naming General Electric as a party. While the court denied the motion, in its opinion it stated that “[t]he purpose of the channeling provision of the Price Anderson Act is to make third-party vendors like GE indemnitees of nuclear plant operators like Boston Edison. The Act does not exonerate GE of its legal liability, it merely shifts the obligation to pay damages to Boston Edison.” 938 F. Supp. at 77.

The plaintiffs’ claims against General Electric included claims for punitive damages based on allegations that General Electric knowingly and recklessly sold defective fuel rods to Boston Edison. The opinion cited, with approval, a ruling of the Third Circuit that a claim for punitive damages may be asserted directly against a defendant who supplied the materials or services to a nuclear plant, so long as such award is authorized by the law of the forum state. The Smith opinion contained the following language:

“The basis of plaintiff’s punitive damages claim is the allegation that GE knowingly and recklessly sold defective fuel rods to Boston Edison. While it is true that Price Anderson will eventually require Boston Edison to indemnify GE for any damages, to dismiss GE at this stage as a party would hinder plaintiff from developing proof of knowing and reckless conduct on GE’s part. The purpose of the Price Anderson Act is to ‘provide persons seeking compensation for injuries as a result of a nuclear incident with significant advantages over procedures and standards for recovery that might otherwise be applicable under state tort law.’ A limitation on provable damages is not an advantage to a plaintiff, nor does it serve to advance the public confidence-building objective of the Price Anderson Act.” 938 F. Supp. at 78. (citation omitted)

The case law is in its infancy. Thus, B&W may, in good faith, argue that ANI’s interpretation of Price Anderson is not correct.

Furthermore, each of the cases which ANI cited addresses only claims occurring during the time in which the licensee held the license. The present case involves claims made against a prior licensee and a current licensee. In addition, in the cases which ANI cited, the courts never addressed any contribution issues between licensees or contribution issues based on indemnity agreements.

For some plaintiffs in the underlying Hall action, as of the date on which cancer was diagnosed, B&W had never been a licensee, had never been an operator and had no responsibility for the facility. If Price Anderson channels liability to the licensee, it is unclear why liability would not be channeled to the entity that held the license during the relevant time rather than to a current licensee that had nothing to do with the operation of the facility at the time the plaintiff was diagnosed with cancer.

Plaintiffs’ claims against B&W and ARCO include claims for punitive damages. If the outrageous conduct of ARCO caused cancer that was diagnosed before B&W became the licensee, it is not clear why liability would not be channeled to ARCO rather than to the entity that held the license at the time the lawsuit was filed.

Also, even assuming that Price Anderson channels liability to licensees, if discharges occurred over a period of time in which two or more entities were the licensees, it is not clear why an interpretation of Price Anderson permitting a jury to find that more than one licensee was responsible for the plaintiffs’ injuries, would not best serve the purposes of Price Anderson of making money available to victims of nuclear discharges.

The final issue is whether B&W and ARCO waived their right to be represented by different counsel because of their willingness to be represented by the same law firm during the initial litigation. There can be no waiver because of the developments that occurred beginning with the jury verdict in the underlying Hall litigation. The jury verdict established that the claims are substantial, that the court was using a verdict slip that required separate findings as to the plaintiffs’ claims against B&W and ARCO, that the activities of both defendants may have caused many of the plaintiffs’ injuries, and that B&W and ARCO have conflicting interests unless there is sufficient insurance that will cover all of the claims. Shortly thereafter, ANI raised arguments concerning the application of its insurance policies which suggested that insurance coverage may be inadequate.

Furthermore, as long as the plaintiffs are raising claims against both B&W and ARCO and the trial court may be using verdict forms which require the jury to make separate findings as to the responsibilities of B&W and ARCO for the plaintiffs’ injuries, it is not possible for a single law firm to represent B&W and ARCO. Rule 1.7 of the Rules of Professional Conduct does not permit a lawyer to represent a client if the representation of that client will be directly adverse to another client unless the lawyer reasonably believes that the representation will not adversely affect the relationship with the other client. In the present posture of the underlying litigation, a lawyer cannot reasonably believe that he or she can represent both clients.

POSTSCRIPT

In parts I and II of this opinion, I have assumed that judgments may be entered against one or more of the defendants in the underlying Hall litigation and that payment of these judgments may be sought from these defendants. See footnote 12 of this opinion, supra at 376, where I state that ANI does not contend that Price Anderson limits the plaintiffs’ recovery against a licensee to that amount of insurance coverage plus other financial protections provided for under the Price Anderson Act, and in which I state that ANI does not contend that B&W could not in separate proceedings seek to recover from ARCO payments made to the plaintiffs.

However, elsewhere in its brief in support of motion for summary judgment at 7, ANI describes the Price Anderson Act as follows:

“The 1975 amendment put in place three levels of financial protection to respond in the event of a nuclear incident. The first layer, called primary financial protection, consists of private insurance, which the NRC requires licensees to purchase in the maximum amount available from insurers. The second layer, called secondary financial protection, was added by the 1975 amendment and consists of a retrospective premium program. In the event of a nuclear incident resulting in public liability exceeding the layer of primary financial protection, the secondary financial protection program requires each NRC licensee to contribute a certain amount (originally between $2 million and $5 million) to meet the cost of the remaining public liability. If the public liability for a nuclear incident exceeded both the primary and secondary layers of financial protection, the federal government would pay to compensate victims for the difference between the two layers and the cap on aggregate public liability.
“Today, following a further amendment of the Price Anderson Act in 1988 in which Congress eliminated the third layer of federally-funded financial protection, the Act provides that the public liability of a licensee for a nuclear incident shall be capped at the amount of financial protection available under the primary and secondary layers. See 42 U.S.C. §2210(e)(l). In the event that public liability for any nuclear incident exceeds those amounts, Congress will review the incident and take any further action it deems necessary to compensate victims. Id. at §2210(e)(2).”

If Price Anderson should be construed to cap the liability of a licensee at the amount of financial protection available under the primary and secondary layers of financial protection, the ANI insurance policies for the mandated insurance should not be narrowly construed in the manner which ANI proposes. In this ANI brief at 8, ANI recognizes that one of the goals of the Price Anderson Act is to provide adequate compensation to persons injured by exposure to nuclear material. Since the ANI policies were designed to furnish coverage in the context of the Price Anderson Act, they must be construed to provide adequate compensation for victims of nuclear incidents.

Also, if the liability of a licensee is capped at the amount of the financial protection afforded under the primary and secondary layers, ANI would be treating both B&W and ARCO as nominal defendants. However, ANI is not treating these defendants in this fashion because, if it was ANI’s position that the liability of B&W and ARCO is capped at whatever insurance is available, ANI would not be raising insurance coverage issues against B&W and ARCO. In this situation, B&W and ARCO would not be proper parties to sue because they would not be concerned with the amount of insurance that is available to the plaintiffs in the underlying Hall case.

If it was ANI’s position that B&W and ARCO are only nominal defendants (and, thus, ANI is the only party that has a financial interest in the outcome of the underlying Hall litigation), ANI should have retained one law firm acting under ANI’s direction whose sole mission is to minimize recovery in the underlying Hall litigation, and a separate law firm (or law firms) which raises the legal position on behalf of B&W and ARCO that they are only nominal defendants.

ORDER

On April 25, 2001, upon consideration of the motions for partial summary judgment filed by Babcock & Wilcox Company, Atlantic Richfield Company, and American Nuclear Insurers, it is hereby ordered, adjudged, and decreed that:

(1) with respect to the ANI facility form policy nos. NF-39, NF-83, MF-83 and MF-84, the date of manifestation is an applicable trigger;

(2) ANI has a duty to pay for independent defense counsel to represent and defend the separate interests of B&W and ARCO in the Hall action; and

(3) a status conference will be held on May 21, 2001 at 11 a.m. o’clock.

      . I have jurisdiction to hear the parties’ requests for declaratory relief addressing insurance coverage because in each lawsuit each plaintiff in the underlying action has been named as an interested party and properly served. (It appears that counsel for the plaintiffs in the underlying action favor the resolution of the coverage issues in these proceedings.)

      . These facts are set forth in the parties’ briefs. See ARCO’s brief in support of motion for partial summary judgment at 4; ANI’s brief in support of motion for partial summary judgment at 12-13; B&W’s motion for partial summary judgment regarding ANI’s obligation to pay independent defense counsel fees at 5-6.

      . For this litigation, the break-out between NF-39 and MF-83 is irrelevant because the Hall litigation does not involve a single occurrence.

      . It is possible that this issue will need to be addressed subsequently if ANI’s argument is correct that any payment made for a later period of coverage is deducted from the coverage available for earlier periods. However, this issue may not arise if the insureds initially submit claims covered only by the earliest periods.

      . Plaintiffs in the underlying litigation appear to offer slightly different expert testimony: every exposure increases the likelihood of a cell becoming cancerous; each exposure is a substantial factor in the development of the disease; subsequent exposures are also substantial factors.

      . B&W and ARCO agree that this is the only coverage that would be provided. While ANI’s brief states that B&W and ARCO assert that the highest limits ($160 million for each facility) apply for each claim, this is not the position that either insured asserted at the February 7, 2001 argument.

      . These examples do not take into consideration any money that would be deducted from the limits for costs of defense.

      . ANI is not seeking an emission trigger because an emission does not necessarily cause cancer. ANI’s reply memorandum at 2-3,18-19.

      . There is no merit to ANI’s argument that the following clause in the definition of nuclear energy hazard creates a difference in the coverage language between ANI and CGL policies: coverage only if the nuclear material “has been discharged or dispersed therefrom without the intent to relinquish possession or custody thereof....” (emphasis added) The purpose of this clause is to exclude from coverage discharges and disbursements where there was an intent to relinquish possession or custody of nuclear material.

      . In its reply memorandum of law in support of motion for partial summary judgment at 4, ANI states that unlike comprehensive general liability policies, ANI policies were written specifically to cover legal liability for damages caused solely by nuclear energy hazards at nuclear facilities.

      . In the underlying Hall litigation, the trial court has ruled that ARCO is liable for claims that could be raised against the ARCO subsidiary (NUMEC) that held the license.

      . ANI does not contend that Price Anderson limits the plaintiffs’ recovery against a licensee to that amount of mandated insurance coverage plus other financial protections provided for under the Price Anderson Act. See e.g., ANI’s reply memorandum at 6 n.3 (Price Anderson “says that the licensee has the responsibility to satisfy any judgment to the plaintiffs (initially out of the financial protection).”).
      Also, while ANI contends that the licensee “bears the responsibility for bearing all liability to the plaintiff in the first instance” (id. at 6), ANI does not contend that B&W cannot in separate proceedings seek to recover payments made to the plaintiffs. See ANI reply memorandum of law in support of motion for partial summary judgment at 2 (“Issues of allocating liability among co-defendants are deferred to a later contribution action among those parties only when it is determined that there is legal liability resulting from a nuclear incident that cannot be satisfied by financial protection available to the licensee”) id. at 1 l(emphasis added); (“B&W would like to claim in the Hall action that ARCO is responsible for paying some or all of any damages in the action as a result of the assumption agreement entered into by ARCO at the time B&W purchased the stock of NUMEC____While these facts would support the assertion of contribution claims by B&W and ARCO against each other in some forum, they do not establish that such claims may be asserted by B&W and ARCO in the Hall action.”). Also, see ANI reply memorandum at 7 n.4 (ANI’s “position is actually that Price Anderson eliminates contractual risk shifting among co-defendants during the public liability action. ... As they have previously stated, any contractual risk shifting must take place after resolution of the public liability action in a separate contribution proceeding.”), (emphasis in original)

      . See B&W’s brief in opposition to ANI’s motion for partial summary judgment at 2: “For all of ANI’s emphasis that Price Anderson supposedly ‘channels’ all liability to B&W, the Act never states any such thing. It certainly does not state that B&W must bear responsibility for injuries properly attributable to ARCO’s conduct or that B&W’s contractual rights to indemnification and/or contribution have been vaporized by the Act.”

      . Also, even if ANI’s interpretation of the Price Anderson Act is correct, there is the additional issue of whether the verdicts should be molded in order to address jury findings against ARCO that may be relevant in a separate indemnity action.

      . The verdict slip would have read as follows: (1) Do you find that either or both of the defendants were negligent by violating 10 C.F.R. §20.10? Yes_No_; (2) Do you find that either or both of the defendants were negligent by violating 10C.F.R. §20.1067? Yes _No_; and (3) If your answer to either question was yes, was the negligence a cause in fact and a substantial factor in bringing about harm to plaintiff? Yes_No_..

      . ANI is obligated to pay only for counsel fees that are reasonably incurred. Consequently, if the law is clear that ARCO is only a nominal defendant, ANI would not be required to pay any counsel fees ARCO incurred in defending the claim that ARCO was negligent and that its negligence contributed to a plaintiff’s injuries.

      . [sic] Also, B&W may be permitted to pursue its cross-claims in the underlying action because these claims were dismissed only on procedural grounds.

      . In re TMI[IV], 67 F.3d 1103 (3d Cir. 1995).

      . The Smith opinion suggests that the plaintiffs might obtain judgments against any entity that was responsible for the injury, and that the Price Anderson Act makes the licensee an indemnitor. If this is a correct reading of Price Anderson, the Hall plaintiffs in the underlying federal action may obtain judgments against ARCO.

      . No party has based its motion for partial summary judgment on this construction of Price Anderson.


source: Caselaw Access Project

author: DOBSON, J.,

license: Public Domain

text:
    United Airlines v. Tevan Management Group Inc.
    C.P. of Mercer County,
    no. 2000-2463.

      Herman L. Feldman, for the plaintiff.

      Jack W. Cline, for the defendant.
    January 29, 2001
   DOBSON, J.,

The matter before this court for disposition is defendant Tevan Management Group Inc.’s preliminary objections to plaintiff United Airlines’ complaint, along with United’s preliminary objections to Tevan’s preliminary objections. For the reasons hereinafter set forth, the court will overrule Tevan’s preliminary objections to United’s complaint. As a result, United’s preliminary objections to Tevan’s preliminary objections are moot.

Tevan operates a travel agency at 117 1/2 South Broad Street, Grove City, Pennsylvania. On November 17, 1997, Tevan entered into an agent reporting agreement with Airlines Reporting Corp., which was acting individually and on behalf of United. ARC is an independent entity that reports the sales, prices, and details of tickets sold by travel agencies to United.

Pursuant to the agent reporting agreement, Tevan was permitted to sell airline tickets for travel on United’s flights and was permitted to accept payment from purchasers of such tickets. Once Tevan received full payment for a ticket, it was permitted to release such ticket to the purchaser. Tevan was required to report the sale of each ticket to ARC.

United alleges that in August 1998, Tevan did not report the sale of 33 tickets on United’s flights nor did Tevan submit money to either ARC or United for the sale of those tickets. On July 28, 2000 United filed its complaint seeking $65,751.60 plus interest for the payment of the 33 tickets and charges for prepaid ticket advice. On August 29, 2000, Tevan filed preliminary objections to United’s complaint.

Tevan has asserted three objections to United’s complaint. First, Tevan objects that the Mercer County Court of Common Pleas is the correct forum for the adjudication of this dispute. Tevan alleges that the agent reporting agreement has a clear and definite provision requiring any and all disputes under the agreement to be resolved through arbitration and, therefore, the Mercer County Court of Common Pleas is the incorrect forum pursuant to Pa.R.C.P. 1028(a)(6).

Tevan’s next objection is that United’s complaint failed to conform to the law or a rule of court. Tevan alleges that United’s complaint is legally insufficient pursuant to Pa.R.C.P. 1019(h) because it fails to specifically state that United’s claim is based upon a writing and even if the complaint does make a claim based upon a writing, no writing signed by both parties is attached to the complaint.

Tevan’s final objection is in the nature of a demurrer alleging United failed to allege any written or oral contract between it and Tevan as a basis for this action. Tevan further alleges that it is legally essential in a breach of contract action to allege and attach an agreement between the parties that is signed by both parties and United failed to attach any such document.

The court will discuss Tevan’s second and third objections prior to addressing its first objection. Pa.R.C.P. 1019(h) provides that:

“A pleading shall state specifically whether any claim or defense set forth therein is based upon a writing. If so, the pleader shall attach a copy of the writing, or the material part thereof, but if the writing or copy is not accessible to the pleader, it is sufficient so to state, together with the reason, and to set forth the substance in writing.” Pa.R.C.P. 1019(h).

Tevan asserts that United’s complaint is both legally and procedurally insufficient for failing to conform to Rule 1019(h). Tevan admits that it entered into an agent reporting agreement with ARC, but it contends that United is not a party to the agreement and that United has not signed the agreement. Tevan contends that United’s complaint is insufficient because it fails to specifically state that United’s claim is based upon a writing, and even if the complaint does make a claim based upon a writing, United has failed to attach a writing between the two parties that would provide United the legal authority to bring suit against Tevan.

Paragraph 4 of United’s complaint provides that:

“Plaintiff and defendant are bound by an agent reporting agreement which is a standard agreement between plaintiff and all travel agencies authorized to do business in behalf of plaintiff. The agreement was signed by an authorized officer of defendant corporation, and defendant is bound by its terms. Sections of the 48-page agreement are not relevant and there were pages intentionally left blank. Attached hereto are the pages of the agreement which are relevant.”

Furthermore, paragraphs 5,6,7,11 and 45 of United’s complaint also refer to the agent reporting agreement as a basis for this action. Therefore, United’s complaint, pursuant to Rule 1019(h), has asserted with sufficient specificity that its claim against Tevan is based on a writing.

Ordinarily, a complaint should be stricken for failure to attach an essential document. Adamo v. Cini, 656 A.2d 576, 579 (Pa. Commw. 1995). Where the cause of action set forth in a complaint is based upon a writing, only the material part of the writing shall be attached, but if less than the whole is attached, it is incumbent upon plaintiff to aver that the part attached is the material part of the contract. Maurer v. Township of Coal, 65 D.&C.2d 112, 114 (1974). In this case, United has attached to its complaint portions of the agent reporting agreement. In its complaint United has asserted that sections of the 48-page agreement are not relevant, therefore it attached only the relevant pages of the agreement.

Tevan asserts that United did not sign the agent reporting agreement, it is not a party to the agreement and United has failed to attach a writing between it and Tevan that would give United the legal authority to bring this suit. The caption to the agent reporting agreement asserts that the agreement is by and between ARC on its own behalf and on the behalf of the carriers and Tevan. United is one of the carriers for which ARC entered into this agreement on its behalf.

“Under the law of agency a contract made by an agent acting within the scope of its delegated authority is considered a contract of the principal.” Pennsylvania Federation of Teachers v. School District of Philadelphia, 506 Pa. 196, 200, 484 A.2d 751, 753 (1984). Here, ARC is the agent, United is the principal, and United is bound by the agent reporting agreement entered into by ARC on behalf of United. Furthermore, United has stated with sufficient specificity that its claims are based upon the agent reporting agreement, and it has attached the material provisions of the agreement to its complaint pursuant to Rule 1019(h). Therefore, Tevan’s preliminary objection that United’s complaint failed to conform to the law or a rule of court will be overruled.

Tevan also objects, in the nature of a demurrer, that it is legally essential in a breach of contract action to allege and attach a copy of an agreement between the parties, which is signed by both parties. The only issue to be resolved in considering a demurrer is “whether the facts in the complaint itself are sufficient to entitle the plaintiff to relief.” International Union of Operating Engineers v. Linesville Construction Co., 457 Pa. 220, 223, 322 A.2d 353, 356 (1974). “A demurrer admits every well-pleaded material fact set forth in the pleadings to which it is addressed as well as all inferences reasonably deducible therefrom, but not conclusions of law.” Gekas v. Shapp, 469 Pa. 1, 5, 364 A.2d 691, 693 (1976). The complaint must indicate on its face that the plaintiff’s claim “cannot be sustained, and the law will not permit recovery.... If there is any doubt, this should be resolved in favor of overruling the demurrer.” Id. at 5-6, 364 A.2d at 693. (citations omitted)

The same facts discussed in overruling Tevan’s preliminary objection that United’s complaint failed to conform to Rule 1019(h) are relevant here in discussing Tevan’s preliminary objection in the nature of a demurrer. United has alleged a contract between it and Tevan. In fact, in paragraph 4 of its complaint United states that “plaintiff and defendant are bound by an agent reporting agreement.” United also refers to and relies on the provisions of the agent reporting agreement throughout its complaint.

United has also attached the relevant pages of the agent reporting agreement to its complaint. Although United did not sign the agreement, ARC, United’s agent, entered into such agreement individually and on behalf of United. Therefore, United is bound by the agent reporting agreement and has standing to sue for the enforcement of such agreement. Since United has alleged a contract between it and Tevan, and United attached the relevant portions of such agreement, United’s complaint does not indicate on its face that United’s claim cannot be sustained. Furthermore, a demurrer is not the proper basis to challenge a failure to attach documents as required by Rule 1019(h). Commonwealth ex rel. Zimmerman v. Nickel, 26 D.&C.3d 115, 138 (1983). The appropriate procedure is a motion to strike for lack of conformity to law. Id. Therefore, Tevan’s preliminary objection in the nature of a demurrer will be overruled.

Tevan’s first, and most compelling, preliminary objection is that United improperly filed this action in Mercer County pursuant to an agreement for alternative dispute resolution. United has alleged in its complaint that both it and Tevan are bound by the agent reporting agreement. Tevan asserts that such agreement has a clear and definite provision requiring any and all disputes under the agreement to be resolved through arbitration. Accordingly, because an agreement for alternative dispute resolution exists which governs this dispute, Tevan contends that Mercer County is the incorrect forum pursuant to Rule 1028(a)(6).

The court must determine whether United and Tevan are bound by an arbitration agreement. “When one party to an agreement seeks to prevent another from proceeding to arbitration, judicial inquiry is limited to determining (1) whether a valid agreement to arbitrate exists between the parties and, if so, (2) whether the dispute involved is within the scope of the arbitration provision.” Midomo Co. Inc. v. Presbyterian Housing Development Co., 739 A.2d 180, 186 (Pa. Super. 1999).

In the usual case, the court would address the issue whether an agreement to arbitrate exists before it addresses the scope of the agreement. In this case, the court chooses to address the second issue first because it is dispositive.

“[I]n order to determine the intent of the parties to a contract, a court should look to the four comers of the document and its express language.” Id. at 190. “[T]he law favors settlement of disputes by arbitration and seeks to promote swift and orderly disposition of claims.” Id. “At the same time, ... a court must be careful not to extend an arbitration agreement by implication beyond the clear, express and unequivocal intent of the parties as manifested by the writing itself.” Id.

The Midomo court asserted that:

“[A] court must apply two basic and seemingly contradictory propositions when deciding whether the parties have agreed to arbitrate a particular dispute:
“(1) arbitration agreements are to be strictly construed and not extended by implication; and (2) when parties have agreed to arbitrate in a clear and unmistakable manner, every reasonable effort should be made to favor the agreement unless it may be said with positive assurance that the arbitration clause involved is not susceptible to an interpretation that covers the asserted dispute.” Id.

To resolve this tension, courts should apply the rales of contractual construction, adopting an interpretation that gives paramount importance to the intent of the parties and ascribes the most reasonable, probable and natural conduct to the parties. Id. at 190-91. All parts of the contract should be interpreted together, with the goal of giving effect to each of its provisions. Id. at 191.

Tevan alleges that section XXIII of the agent reporting agreement provides that any and all disputes under the agreement are to be resolved through arbitration, and United improperly filed this action in Mercer County. Section XXIII of the agent reporting agreement states:

“Disputes between the agent [Tevan] and ARC shall be resolved by the arbiter in accordance with the rules and procedures promulgated and published by the arbiter and the decision of the arbiter shall be final and binding; provided, however, that neither the agent nor ARC is precluded from seeking judicial relief to enforce a decision of the arbiter, or to compel compliance with a requirement or prohibition of this agreement prior to the filing of an answer in a proceeding concerning such requirement or prohibition before the arbiter.”

There is a second provision regarding arbitration under the agent reporting agreement at section XV(B) of the agreement. Section XV(B) states “If there is reason to believe that the agent has breached a provision of this agreement, ARC may file a complaint against the agent with the arbiter.”

There is a great discrepancy between the two clauses in the agent reporting agreement dealing with arbitration. The arbitration clause at section XV(B) is dealing with the breach of the agent reporting agreement, while the arbitration clause at section XXIII concerns disputes in the agreement. This is a clear distinction between the two arbitration clauses.

“[A] court must be careful not to extend an arbitration agreement by implication beyond the clear, express and unequivocal intent of the parties as manifested by the writing itself.” Midomo, 739 A.2d at 190. The wording of the agent reporting agreement itself is clear in that it makes a distinction between a dispute and a breach of the agreement. As the agreement indicates, the arbiter shall resolve disputes, while a breach may be filed with the arbiter. If it had not been the clear, express and unequivocal intent of the parties to have these two separate and distinct provisions, the parties could have chosen to include only one of the provisions. Such was not the case.

Since the court is to apply the rules of contractual construction, and all parts of the contract should be interpreted together with the goal of giving effect to each of its provisions, the court finds that there are two separate and distinct arbitration clauses under the agreement. United has clearly asserted a claim against Tevan for breach of the agent reporting agreement. United’s complaint asserts that Tevan had a duty to report the sale of each ticket to ARC and that Tevan breached this duty by failing to report the sale of 33 tickets for flights on United. United’s claims against Tevan arise for a breach of the agent reporting agreement, not a dispute as to the agreement. Since the clause at section XV(B) asserts that if there is a breach of the agreement a complaint may be filed with the arbiter, this implicitly indicates that complaint may also be filed in an otherwise appropriate forum. Therefore, this court holds with positive assurance that neither of the arbitration clauses included in the agreement are susceptible to an interpretation that would mandate any and all claims by United against Tevan to be subject to arbitration.

Pa.R.C.R 2179(a) provides that a personal action against a corporation or similar entity may be brought in and only in:

“(1) the county where its registered office or principal place of business is located;
“(2) a county where it regularly conducts business;
“(3) the county where the cause of action arose; or
“(4) a county where a transaction or occurrence took place out of which the cause of action arose.” Pa.R.C.R 2179.

Tevan’s principal office for business is located at 117 1/2 South Broad Street, Grove City, Mercer County, Pennsylvania. Since Tevan’s principal place of business is located within Mercer County, the venue in Mercer County is appropriate.

United’s preliminary objections to Tevan’s preliminary objections are merely responses to Tevan’s preliminary objections. In light of the court’s ruling on Tevan’s preliminary objections, it is not necessary to rule upon United’s preliminary objections. Therefore Tevan’s preliminary objections will be overruled and United’s preliminary objections are moot.

Hence, this order:

ORDER

And now, January 29, 2001, it is hereby ordered that defendant Tevan Management Group Inc.’s preliminary objections to plaintiff United Airlines’ complaint are overruled, and plaintiff’s preliminary objections to defendant’s preliminary objections are moot.

It is further ordered that defendant shall file its answer to plaintiff’s complaint within 20 days of this date.


author: HERRON, J.,

text:
    Bowdren v. Prudential Insurance Co.

      Bernard M. Gross, for plaintiff.

      David M. McCormick, for defendant.
    January 24, 2001
   HERRON, J.,

INTRODUCTION

The issue presented in this motion to compel appointment of arbitrators is whether arbitration should be compelled where the relevant arbitration provision sets forth limitations to arbitration that are contradictory and thus, ambiguous. For the reasons set forth below, this court concludes that the ambiguities in the policy must be interpreted against the insurer/drafter of the policy.

FACTUAL BACKGROUND

Petitioner William Bowdren, a Philadelphia police officer, was injured on March 23, 2000, while a passenger in an unmarked police car that was struck by an uninsured motorist. At the time of the accident, Mr. Bowdren was performing surveillance operations in plainclothes. The vehicle Mr. Bowdren occupied was from a fleet of 4 or 5 unmarked vehicles that were supplied to officers on surveillance duty.

Mr. Bowdren subsequently sought to recover under-insurance motorist benefits pursuant to a policy that was issued to his mother by Prudential Property and Casualty Insurance Company (PRUPAC). In fact, he is listed on the declarations page of the policy under the heading “Licensed operator(s) in your household.” Petitioner’s exhibit A; PRUPAC’s exhibit B. When PRUPAC refused coverage, Mr. Bowdren requested arbitration pursuant to the policy. When this request was denied, he filed a motion to compel arbitration.

PRUPAC objects to this motion arguing, inter alia, that Mr. Bowdren is not an insured because of an exclusion within the policy that would not cover him “while occupying a vehicle regularly supplied for his use and which he was, in fact, using in the course and scope of his employment at the time of the alleged accident.” Response, ¶5. PRUPAC therefore argues that Mr. Bowdren’s claim should not be submitted to arbitration. Mr. Bowdren counters that the critical language concerning the non-owned vehicle is ambiguous and must therefore be construed against the insurer. Petitioner’s response memorandum at 1-2. This court notes, in addition, that the policy language as to the scope of arbitration is ambiguous and contradictory. It is this language that determines the narrow, procedural issue before this court: whether arbitration should be compelled. It is this language that must be construed against the insurer for the reasons set forth below.

Legal Analysis

The standards for review of a motion to compel arbitration are well established. When presented with a contested petition to compel arbitration, a court’s role is limited to determining “(1) whether an agreement to arbitrate was entered into and (2) whether the dispute involved comes within the ambit of the arbitration provision.” Messa v. State Farm Insurance Co., 433 Pa. Super. 594, 597, 641 A.2d 1167, 1168 (1994). See also, Santiago v. State Farm Insurance Co., 453 Pa. Super. 343, 346, 683 A.2d 1216, 1217-18 (1996). A motion to compel arbitration should not be denied “on the ground that the controversy lacks merit or bona fides or on the ground that no fault or basis for the controversy sought to be arbitrated has been shown.” Borgia v. Prudential Insurance Co., 561 Pa. 434, 750 A.2d 843, 846 (2000) (quoting 42 Pa.C.S. §7304(e)). The frame of reference of any analysis, therefore, must be the actual language of the relevant arbitration provision.

The PRUPAC policy in the present case contains the following provision for arbitration:

“Arbitration
“If we and an insured do not agree:
“(1) Whether that person is entitled to recover damages resulting from the negligence of the owner or operator of an uninsured motor vehicle, or
“(2) As to the amount of compensatory damages; “Either party may make a written demand for arbitration. In this event, each party will select an arbitrator from the county where the insured lives. The two arbitrators will select a third arbitrator from the same county. If they cannot agree within 30 days, either party may request selection from a judge of a common pleas court having jurisdiction where the insured claiming coverage lives; or by a judge in the federal district court whose jurisdiction includes the county where the insured claiming coverage lives.
“Each party will:
“(1) Pay the expenses it incurs; and
“(2) Bear the expenses of the third party equally.
“Arbitration will be conducted in the county where the insured lives. Local rules of procedure and evidence will apply to the entire arbitration process.” PRUPAC policy, part 4 at 5-6.

In addition to the above description of the scope of arbitration, the PRUPAC policy also sets forth a limitation on arbitrable issues:

“We will not arbitrate questions of coverage of law as to whether a person making a claim is covered under the policy, or is excluded under the policy. All disputes affecting the scope of coverage, the amount of coverage, a person’s right or eligibility to make a claim, or the insureds selection of coverage, will be determined by the court in the county where the insured lives at the time the demand for arbitration is made; or a federal district court whose jurisdiction includes the county where the insured lives.” PRUPAC policy, part 4 at 6.

In interpreting an insurance policy, the objective is to discern the intent of the parties as expressed in the written language. Hamilton Bank v. INA, 384 Pa. Super. 11, 15, 557 A.2d 747, 750 (1989). The first paragraph of this arbitration provision outlines a broad scope for arbitration that is quite similar to the language the Pennsylvania Supreme Court analyzed in Brennan v. General Accident Fire & Assurance Corp., 524 Pa. 542, 574 A.2d 580 (1990). The PRUPAC policy provides that arbitration may be requested:

“If we and an insured do not agree:
“(1) Whether that person is entitled to recover damages resulting from the negligence of the owner or operator of an uninsured motor vehicle, or
“(2) As to the amount of compensatory damages.” PRUPAC policy, part 4 at 5.

The policy the Pennsylvania Supreme Court analyzed in Brennan provided:

“If we and the covered person disagree whether that person is legally entitled to recover damages from the owners or operator of an underinsured motor vehicle, or do not agree as to the amount of damages, either party may make a written demand for arbitration.” Brennan, 524 Pa. at 548, 574 A.2d at 582.

The two prong test in both policies is cast in terms of (1) a covered person or insured’s “entitlement” to damages and (2) a dispute over the amount of damages. The Brennan court interpreted this language as creating a broad scope of arbitration:

“A review of the language of the arbitration clause reveals that arbitration is mandated whenever the insured and insurer disagree as to when a party is legally entitled to recover damages. There is no limit to the jurisdiction of the arbitrators over what issues may be submitted and in fact the policy declares that all disputes between the insurance company and the insured will be arbitrated.” Brennan, 524 Pa. at 549, 574 A.2d at 583. (emphasis added)

The PRUPAC policy, in contrast, does purport to set limitations on the scope of arbitration. Pennsylvania courts have repeatedly recognized the general principle, that the scope of arbitration may be limited. See e.g., National Grange Mutual Insurance Co. v. Kuhn, 428 Pa. 179, 185, 236 A.2d 758, 761 (1968) (“the policy language is the company’s and it may, if it so desires, alter that language to limit arbitration to only those issues it desires to be arbitrable”). As the Pennsylvania Superior Court has observed, “if the agreement or contract clearly includes or excludes particular issues or remedies from arbitration, a court may so hold without submitting these matters to arbitration.” PBS Coal Inc. v. Hardhat Mining Inc., 429 Pa. Super. 372, 377, 632 A.2d 903, 905 (1993). (emphasis added)

The problem, however, is that the stated limitations in the PRUPAC policy are not clear. Instead, the limitations are mechanically juxtaposed after language similar to that which the Brennan court interpreted as providing that all disputes as to an insured’s legal entitlement to recover damages should be submitted to arbitration. On one hand, the- arbitration provision provides that all issues of whether a person is entitled to recover damages is arbitrable, while on the other, in equally broad terms the policy states that “We will not arbitrate questions of coverage or law as to whether a person making a claim is covered under the policy, or is excluded under the policy.” Compare PRUPAC policy, part 4 at 5 with PRUPAC policy, part 4 at 6. PRUPAC ostensibly relies on the “limiting” provisions to support its argument that under its policy “issues of coverage or eligibility or exclusion of an individual from coverage are not for the arbitrators and are exclusively for the courts.” PRUPAC’s response memorandum at 12. This argument, however, is unconvincing because the purported limitations must be reviewed within the context of the entire arbitration provision. Madison Construction Co. v. The Harleysville Mutual Insurance Co., 451 Pa. Super. 136, 142, 678 A.2d 802, 805 (1996) (“to determine whether a term or language in a policy provision is ambiguous, the term or language must be considered in the context of the entire policy”).

Reading the purported limitations in the context of the entire arbitration provision leads to the conclusion that it is ambiguous and contradictory so that a court attempting to apply it is faced with an almost Alice-in-Wonderland dichotomy. Because these provisions are subject to at least two interpretations, they are ambiguous. Courts have found a contract ambiguous “when a policy provision is reasonably susceptible of more than one meaning.” Weisman v. The Green Tree Insurance Co., 441 Pa. Super. 549, 552, 670 A.2d 160, 161 (1996); Lebanon Coach Co. v. Carolina Casualty Insurance Co., 450 Pa. Super. 1, 9, 675 A.2d 279, 283 (1996), appeal denied, 546 Pa. 695, 687 A.2d 378 (1997).

In the instant case, the PRUPAC arbitration provision is subject to more than one meaning: it can be read as simultaneously stating that issues of entitlement to recovery are arbitrable but issues of coverage are not arbitrable. These conflicting provisions must be construed against the insurer. Under controlling precedent, ambiguous provisions in an insurance policy must be construed against the insurer. Borgia v. Continental Insurance Co. v. Prudential Insurance Co., 561 Pa. 433, 447, 750 A.2d 843, 850 (2000); Brennan, 524 Pa. at 549, 574 A.2d at 583. As the Borgia court recently observed when concluding that an arbitration provision was ambiguous:

“Pursuant to Kuhn and Brennan, such ambiguity is not to be resolved by inserting into the arbitration agreement a requirement for court proceedings to resolve the purported threshold issue, but by applying the settled principle that ambiguous language is to be interpreted against the drafter — in this case Prudential.” Borgia, 561 Pa. at 447, 750 A.2d at 850.

CONCLUSION

For these reasons, petitioner’s motion to compel arbitration is granted.

ORDER

And now, January 24, 2001, upon consideration of the petition to compel arbitration, and the response thereto of Prudential Property and Casualty Insurance Company, it is hereby ordered that this petition is granted.

Respondent shall appoint an arbitrator on its own behalf within 30 days of this order. If respondent fails to appoint a defense arbitrator, this court will do so upon application by either party. The arbitrators shall select a neutral arbitrator and upon failing to do so on or before April 2, 2001, this court upon letter request will designate a neutral arbitrator.

      . Petition, ¶5 and petitioner’s response memorandum. Petitioner suggests that he is presently seeking underinsurance benefits, rather than uninsured benefits, because he received a payment of $15,000 from his uninsured motorist carrier. Petition, ¶¶6-7. Prudential Property and Casualty Insurance Company, however, properly notes that if Mr. Bowdren was struck by an uninsured motorist, he is seeking uninsured benefits. PRUPAC’s response, ¶9. The policy at issue, for instance, characterizes the benefits strictly in terms of the status of the motor vehicle causing the injury (i.eunderinsured or uninsured). See e.g., PRUPAC policy, part 4 at 2. PRUPAC concedes that the language relating to arbitration is the same whether for uninsured or underinsured benefits. PRUPAC’S response, ¶10. This opinion, therefore, will analyze petitioner’s claims for uninsurance benefits.

      . Petitioner’s response memorandum at 1.

      . Petition, ¶¶1-3. Respondent notes that it was mistakenly identified as Prudential Insurance Company while its proper name is Prudential Property and Casualty Company or “PRUPAC.” PRUPAC’s response, ¶1.

      . The PRUPAC policy provides that arbitration shall be conducted according to the provisions of the Pennsylvania Uniform Arbitration Act and the Pennsylvania Arbitration Act of 1927. PRUPAC policy, part 4 at 6. The provisions of 42 Pa.C.S. §7304 for compelling arbitration apply equally to statutory or common-law arbitration. Messa, 433 Pa. Super. at 597, 641 A.2d at 1168.

      . The policy at issue in Brennan was governed by common-law arbitration in contrast to the provision for statutory arbitration in the PRUPAC policy. As previously discussed, the same principles apply for compelling either common-law or statutory arbitration. See n.4 supra. A critical distinction is the standards for reviewing an award under these two rules for conducting arbitration. Brennan, 524 Pa. at 549, 574 A.2d at 583.


author: FIELD, J.,

text:
    Weinstein v. Witmer

      Leonard A. Cohen, for plaintiff.

      Calvin Taylor Jr. and Kevin S. Riechelson, for defendants.
    February 27, 2001
   FIELD, J.,

Defendant, Paul Witmer, appeals from this court’s order entered on December 8, 2000, granting a new trial. For the reasons which follow, the order was proper and should be affirmed.

This case arises from a motor vehicle accident which occurred on August 27, 1998. On November 1, 2000, a jury trial commenced. After three days of testimony, on November 3, 2000, the jury returned a verdict for the defense. No motions were filed in the following 10 days as required by Rule 227.1 of the Pennsylvania Rules of Civil Procedure. However, within a few days of the expiration of the 10-day period, counsel for the plaintiff and both defendants jointly requested a conference with the court. Said conference was held in chambers on November 16, 2000.

At the conference, counsel relayed to the court that a court officer assisting in jury selection had apparently made some remarks which could have influenced the outcome in this matter. Specifically, it was brought to the court’s attention that some members of the jury venire had expressed disdain for the judicial system and the existence of “frivolous lawsuits.” In response, the court officer reportedly replied that the proposed jurors should want to serve so that they could rid the courts of such suits. While the court is of the belief that the court officer was not referring to the instant lawsuit, counsel raised the point that such a comment could have been misinterpreted in that manner. It should be noted that none of the above exchanges were on the record, but the mere possibility that such an exchange may have taken place raised concern.

The decision whether to grant a new trial is a matter committed to the sound discretion of the trial court. Absent an abuse of that discretion or a clear error of law, the decision should not be disturbed. Gunn v. Grossman, 748 A.2d 1235 (Pa. Super. 2000). Where, as here, the court finds, that new trial is appropriate in the interest of justice, a new trial is warranted. Commonwealth v. Powell, 527 Pa. 288, 590 A.2d 1240 (1991). Additionally, it need not be upon motion of a party, but may be ordered sua sponte by the trial court. Id. Cf. Armbruster v. Horowitz, 744 A.2d 285, 287 n.2 (Pa. Super. 1999). Because judgment had not yet been entered when the order for a new trial was entered on December 5, 2000, said order was timely.

For the foregoing reasons, this court’s order dated December 5, 2000, granting a new trial, should be affirmed.