# Supplemental Brief — Triangle Industries, Inc. v. Liberty Mutual Insurance > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0764%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Supplemental Brief - **Published:** January 1, 1992 - **Citation:** 506 U.S. 824 ## Text FILED JUL 7 1992 = / 3 No. 91-1945 | § &irivel Cr THE CLERK } Setaigesssteceeiene a IN THE SUPREME COURT OF THE UNITED STATES October Term, 1991 TRIANGLE INDUSTRIES, INC.., a/k/a ANC HOLDINGS, INC.; TRIANGLE PWC, INC., Petitioners, Uv. LIBERTY MUTUAL INSURANCE Co., NEW JERSEY PROPERTY/LIABILITY INSURANCE GUARANTY ASSOCIATION, on behalf of IDEAL MUTUAL INSURANCE COMPANY, in liquidation, Respondents. SUPPLEMENTAL BRIEF AND APPENDIX TO PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT STEPHEN M. ORLOFSKY New Jersey Resident Partner Woodland Falls Corporate Park 210 Lake Drive East, Suite 200 Cherry Hill, New Jersey 08002 (609) 779-3600 Counsel for Petitioners PACKARD PRESS / LEGAL DIVISION, 1617 JFK BOULEVARD, PHILA, PA. 19103 (215) 563-9000 Py = poh: se er ee 5 Si TABLE OF CONTENTS Page SARMR COICO nck vest cccwicsaccdaccecs i pe OR Be ys tf) Sr il ee REPRE So Wy ae os RR ui ca each ee knees 1 SE 5 hash 44s 4k bee eek een oaks 2 1. LIBERTY MUTUAL IS COLLATERALLY ESTOPPED BY THIS COURT’S DECI- SION IN PARKLANE HOSIERY, CO. INC. v. SHORE FROM RELITIGATING AN IS- SUE WHICH WAS RESOLVED AGAINST IT BY THE DECISION OF THE SU- PREME COURT OF APPEALS OF WEST VIRGINIA IN THE RECENT CASE OF JOY TECHNOLOGIES, INC. v. LIBERTY MUTUAL INSURANCE COMPANY ....... 2 2. LIBERTY MUTUAL IS ESTOPPED FROM CONTRADICTING ITS OWN INTERPRE- TATION OF THE SUDDEN AND ACCI- DENTAL EXCEPTION TO THE POLLU- TION EXCLUSION CLAUSE WHICH IT SUBMITTED TO THE COMMISSIONER OF INSURANCE OF THE STATE OF WEST VIRGINIA AND WHICH WAS THEN RELIED UPON BY THE COMMIS- SIONER IN APPROVING THE LAN- GUAGE AT ISSUE IN THIS CASE FOR INCLUSION IN INSURANCE POLICIES. 5 (NCTE wa ek weal wukh sions caeenwh awk 11 APPENDIX: Joy Technologies, Inc. v. Liberty Mutual Insurance Company, Docket No. 88-C-96-F (June 11, Ma UN Soe cue als ee ada Mies ka vs 1-b TABLE OF AUTHORITIES Cases: Page Broadwell Realty Services Inc. v. Fidelity & Casu- alty Co., 218 N.J. Super. 516, 528 A.2d 76 (App. Div. EGBT) oso cccneee ene tee 6, 7,8 County of Cook v. MidCon Corp., 773 F.2d 892 (7th Cit. 1965) ... Brotherton, Justice: This is an appeal by Joy Technologies, Inc.,! from an order entered by the Circuit Court of Mercer County on June 26, 1990. That order granted Liberty Mutual Insurance Company? partial summary judgment in an action brought by Joy Technologies for indemnification for certain pollution claims which had been paid by Joy Technologies. Liberty Mutual had issued commercial general liability policies to Joy Technologies which had obligated it to defend and indemnify Joy for liability claims for personal injury and property damage. It, however, refused to indemnify Joy on the pollution claims involved in the present case on the ground that an exclusion clause contained in certain of its policies excluded coverage for such claims. The circuit court, in 1. Hereinafter variously also referred to as “Joy Technologies” or “Joy”. 2. Also referred to as “Liberty Mutual”. 3-b granting Liberty Mutual summary judgment, in es- sence, found that the exclusion clause precluded cover- age for pollution damage unless the pollution was “sudden and accidental.” In reaching that conclusion, it appears that the circuit court, relying upon the holding of this Court in Liberty Mutual Insurance Company v. Triangle Industries, Inc., W. Va. , 390 S.E.2d 562 (1990), applied the law of Pennsylvania, which indicates that the exclusion clause in question relieves an insurer of liability unless the pollution was “sudden and accidental.” On appeal, Joy Technologies claims that West Vir- ginia had a more significant relationship with the parties in this case than Pennsylvania and that, under the circumstances, and under the holding in Liberty Mutual Insurance Company v. Triangle Industries, Inc., Id., the law of West Virginia rather than the law of Pennsylvania should have been applied in resolving the issues raised. It also claims that under West Virginia law the exclusion clause should be construed to preclude liability of the insurer only when pollution damage was expected or intended by the insured. After reviewing the questions presented and the record, this Court agrees with Joy Technologies’ asser- tions. Accordingly, the judgment of the Circuit Court of Mercer County is reversed. The facts in this case show that Joy Technologies, Inc., is a successor of Joy Manufacturing Company. Joy Manufacturing Company was a Pennsylvania corpora- tion with executive offices in Pennsylvania and with a facility in West Virginia. In 1968, Joy Technologies, Inc., purchased a man- ufacturing plant in Bluefield, West Virginia. Joy utilized the facility for cleaning and rebuilding mining machin- ery. Joy sold the plant in 1980 and moved its operations to Bluefield, Virginia. Joy continues to employ a number of West Virginia residents in its Bluefield, Virginia, operations. 4-b In cleaning and repairing mining machinery at its West Virginia facility, Joy utilized oil containing poly- chlorinated biphenyls or “PCBs.” The same type of oil had been utilized at the facility before Joy purchased it. In the 1970’s, concerns arose over the potential environmental hazards of PCBs, and in the mid-1970’s the United States Environmental Protection Agency advised Joy Technologies, Inc., of the concerns. Subse- quently, Joy adopted measures to prevent pollution from the PCBs. In spite of its efforts, in 1985 Joy discovered PCB contamination at the Bluefield, West Virginia, site and on neighboring property. Joy notified the Environmental Protection Agency and negotiated an order with the Agency to remediate the contamination. Pursuant to the order, Joy eliminated the pollution at a cost of over $6,000,000. Additionally, after the pollution was discovered, owners of property adjoining the Bluefield site filed suit against Joy for property damage, and the individual who had purchased the Bluefield site from Joy, Elwin Aliff, brought an action claiming that the PCB contamination had diminished the value of the property. Personal injury claims were also asserted by employees, former employees, and their spouses who alleged that they had suffered bodily injuries as a result of exposure to PCBs and other substances. From 1944 until January 1, 1978, Liberty Mutual Insurance Company, a Massachusetts corporation with its principal place of business in Massachusetts, issued commercial general liability policies to Joy. The policies obligated Liberty Mutual to defend and indemnify Joy for liability claims based on personal injury or property damage arising out of an “occurrence.” The policies defined “occurrence” as “an accident, including contin- uous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.” 5-b The policies which Liberty Mutual issued to Joy Technologies beginning in 1972 contained an exclusion clause. The exclusion clause provided that coverage did not extend: [T]o bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental. After the various claims mentioned above arose against Joy Technologies as a result of the pollution of the Bluefield, West Virginia, facility, Liberty Mutual Insurance Company, taking the position that the exclu- sion clause contained in the policies issued after 1971 relieved it of liability, refused to indemnify and defend Joy as was generally required on the policies which it had issued to Joy. Joy, therefore, instituted this action for 3. In the record of the present appeal a copy of only one policy has been submitted to this Court. That policy bore an expiration dated of October 1, 1974. In addition to the language quoted in the body of the opinion, the 1974 policy submitted to the Court contains another “Contamination or Pollution Exclusion” which has some- what different language. The page containing that additional clause does not state an effective date or an expiration date, and it is not clear to the Court whether it was actually a part of the policy issued to Joy Technologies. Both Joy Technologies and Liberty Mutual, in their briefs, identify the language quoted in the opinion as constituting the exclusion in issue in this case. The same language was also submitted to the West Virginia Insurance Commissioner in 1970 for his consideration and approved as hereinafter discussed. Given the nature of the record and the representations of the parties in their briefs, this Court has based its conclusions on the clause quoted in the body of the opinion rather than on the additional “Contamination or Poilution Exclusion” submitted in the record. 6-b breach of contract and for a declaratory judgment that it is entitled to defense and idemnity for personal injury and property liability arising out of the pollution at the Bluefield facility. After the filing of Joy’s complaint, Liberty Mutual moved for summary judgment on the claims arising after 1971 at the Bluefield, West Virginia, facility on the basis of the exclusion clause contained in the policies issued to Joy after 1971. Liberty Mutual took the position that since the pollution was not “sudden and acciden- tal,” the exclusion clause barred it of liability for the years that its policies contained the clause. In support of the motion, Liberty Mutual introduced depositions taken in an underlying personal injury and property damage case brought against Joy Technologies, Inc. The evi- dence from that case showed that Joy rebuilt motors used in mining equipment at the Bluefield, West Vir- ginia, facility. The rebuilding of the motors required the emptying of PCB contaminated oil. In emptying the motors, the oil was drained into five-gallon buckets. From 1968 until 1972 or 1973, Joy’s employees regularly disposed of the oil by dumping it down a storm drain outside the AC motor room at the facility, by dumping it into a gravel parking lot, or by dumping it on a hill or bank at the site. There was also evidence that PCB- contaminated oil was routinely spattered inside the building where the motors were rebuilt, that the oil was everywhere, and that there were puddles of it on the floor. At times, buckets of the oil were knocked over by forklifts and spilled. The testimony also indicated that spills occurred on a regular basis. Liberty Mutual essen- tially argued that this evidence showed that the pollution was not “sudden and accidental” and that coverage for it was excluded by the exclusion clause. At the submission of briefs and oral arguments, the Circuit Court of Mercer County granted Liberty Mut- ual’s motion for summary judgment. In so doing, the Court apparently concluded that under Liberty Mutual Insurance Company v. Triangle Industries, Inc., Id., 7-b Pennsylvania law governed the interpretation of the exclusion clause in the policies issued by Liberty Mutual in 1972 and the following years. Further, under Penn- - sylvania law the exclusion clause precluded coverage for claims arising out of pollution at the Bluefield facility for the period Liberty Mutual’s policies contained the clause. On June 26, 1990, the circuit court issued a written order formally embodying its conclusions. It is from that order that Joy Technologies, Inc., now appeals. On appeal, Joy Technologies first asserts that West Virginia had a more significant relationship with the parties in the case than Pennsylvania and that, under the circumstances, the circuit court should have applied the law of West Virginia rather than the law of Pennsyl- vania in resolving the issues presented. The question of whether West Virginia law of Penn- sylvania law applies in this case is somewhat critical since Pennsylvania has carefully examined the exclu- sion clause in issue in the present case and has con- cluded that it is unambiguous and that its clear and plain meaning is to exclude coverage for intentional pollution and for unintentional pollution resulting from a release or dispersal that occurs gradually over time. Lower Paxton Township v. United States Fidelity & Guaranty Company, 383 Pa.Super. 558, 557 A.2d 393 (1989). See also, United States Fidelity & Guaranty Company v. The Korman Corp., 693 F.Supp. 253 (E.D.Pa. 1988), Fisher & Porter Company v. Liberty Mutual Insurance Company, 656 F.Supp. 132, (E.D.Pa. 1986); Techalloy Company, Inc. v. Reliance Insurance Company, 338 Pa. Super. 1, 487 A.2d 820 (1984). In Liberty Mutual Insurance Company v. Triangle Industries, Inc., Supra, this Court addressed the ques- tion of what law should be applied in interpreting an insurance policy. In the sole syllabus in that case, the Court ruled that: In a case involving the interpretation of an insur- ance policy, made in one state to be performed in —————___aeeeeeeeEe 8-b another, the law of the state of the formation of the contract shall govern, unless another state has a more significant relationship to the transaction and the parties, or the law of the other state is contrary to the public policy of this state. In adopting the rule in the Triangle Industries case which favors_the application of the law of the forum in which formation of the contract occurs, the Court rec- ognized that “certainly, predictability and uniformity of result” were desirable in contract negotiations and ap- plication. The Court did not, however, preclude the application of the law of another state where the other state has a more significant-retationship to the transac- tion and the parties, or where the law of the state of formation is contrary to the public policy of the other State. The action 4n-the-present case arises out of the expenditures of monies for remediating damage caused by pollution to property in West Virginia, and it is rather clear that the pollution arose from operations which were conducted in West Virginia and involved a facility located in West Virginia. Thus, the injury occurred in West Virginia, the instrumentality of injury was located in West Virginia, and the forum selected to try the issues was West Virginia. These factors suggest that West Virginia has had a very significant relationship to the transaction and the parties. In fact, the relationship would appear to be more substantial than that of Penn- sylvania, where the contract was formed. In a very recent case, similar to the one now before the Court, the New Jersey Superior Court, Appellate Division, concluded that contacts similar to those in the present case were alone sufficient to justify the applica- tion of the law of the forum rather than the law of the jurisdiction where the contract was entered into. In that case, Gilbert Spruance Co. v. Pennsylvania Manufactur- ers’ Assn Ins. Co., No. A-1975-90TS (N.J.Super. App.Div. Feb. 14, 1992), the New Jersey Court stated: 9-b We hold that New Jersey courts should interpret according to New Jersey law a pollution exclusion clause contained in a comprehensive general liabil- ity insurance policy, wherever written, which was purchased to cover an operation or activity, wher- ever its principal location, which generates toxic wastes that predictably come to rest in New Jersey and impose legal liabilities there on the insured. In such a case, New Jersey has the dominant and significant relationship with the parties, the trans- action, and the outcome of the controversy. slip op. at 10. However, as indicated in Liberty Mutual Insurance Company v. Triangle Industries, supra, a further sub- stantial factor which might militate against the applica- tion of the law of the state of contract formation is the public policy of the state of litigation. Certainly, in this Court’s view, an essential part of the public policy of the State of West Virginia is that the law of the State should be administered in such a way as to insure that foreign corporations which seek to do business in West Virginia act in a manner consistent with their studied, unambiguous, official, affirmative representations to the State, its subdivisions, or its regulatory bodies. As will hereinafter be discussed, this Court believes that Liberty Mutual Insurance Company, in studied,- affirmative and official communications with a regula- tory authority of the State of West Virginia, prior to the institution of this action, took the position that the exclusion in question in the present case would have a meaning and effect different from that attributed to it by the State of Pennsylvania. In view of this, if this Court held that Pennsylvania law applied to the questions in issue, it would allow Liberty Mutual Insurance Com- pany to take a position, and act in a manner, inconsistent with Liberty Mutual’s studied, unambiguous, official and affirmative representations. Such, in this Court’s 10-b view, would be inconsistent with, and contrary to, the public policy of this State. Under the circumstances, the Court believes that in spite of the general policy of the law favoring the application of the law of a state where a contract is formed, the Court, in line with the overall holding in the syllabus of Liberty Mutual Insurance Company v. Tri- angle Industries, Inc., supra, believes that the law of West Virginia, rather than the law of Pennsylvania, should govern the resolution of the questions involved in the present case. The question which the Court must now address is what is the legal effect in West Virginia of the exclusion in question in the policies issued by Liberty Mutual Insurance Company. Before this question is addressed, however, certain observations should be made regarding the basic coverage language of the general commercial liability policy. The basic language of the policy states: The company will pay on behalf of the insured all sums which the insured shall become legally obli- gated to pay as damages because of Coverage A. bodily injury or Coverage B. property damage to which this policy applies, caused by an occur- Fence ... An occurrence is defined as: “occurrence” means an accident, including contin- uous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured; Thus, under the basic policy issued by Liberty Mutual Insurance Company, Liberty Mutual obligated itself to defend and indemnify Joy Technologies for liability claims based on personal injury or property 11-b damage arising out of a “occurrence,” and an “occur- rence” was defined as “an accident, including continu- ous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.” The record shows at the time Liberty Mutual adopted this standard form for the commercial general liability policy, a memorandum entitled “Summary of Broadened Coverage Under New GL Policies With Nec- essary Limitations to Make This Broadening Possible,” was circulated internally within the company. That memorandum indicated that the policies covered liabil- ities including: Coverage for gradual BI [bodily injury] or gradual PD [property damage] resulting over a period of time from exposure to the insured’s waste disposal. Ex- amples would be gradual adverse effect of smoke, fumes, air or stream pollution, contamination of water supply or vegetation. We are all aware of cases such as contamination of oyster beds, lint in the water intake of down stream industrial sites, the Donora Pa. atmospheric contamination, and the like. In interpreting the basic policy, courts have uni- formly indicated that the language generally covers claims arising from pollution. However, because of the “expected” and “intended” language, intentional pollu- tion claims are not covered. The fact that pollution has occurred over a period of time, in the absence of an element of intention or expectation, has not been held to preclude coverage under the basic language. See Liberty Mutual Insurance Company v. SCA Service, Inc., No. 88-6575 (Mass.Super., October 12, 1989); Kipin Indus- tries, Inc. v. American Universal Insurance Company, 41 Ohio App.3d 228, 535 N.E.2d 334 (1987). In the present case there were no facts elicited which demonstrate that Joy Technologies at any level intended at any time to harm property, persons, or 12-b environment in conducting its business. In fact, certain depositions indicate that the disposal practices used by Joy, and which were ultimately found to have caused pollution, were commonly accepted in the industry at the time. When Joy acquired knowledge of possible harm from the practices, it changes those practices. In this Court’s view, the evidence adduced does not support the conclusion that Joy Technologies expected or intended to do harm when it dumped and negligently allowed the spilling of oils contains PCBs at the Bluefield site. Given all these circumstances, the question in the present case is ultimately whether the exclusion clause contained in the policies issued by Liberty Mutual to Joy Technologies in 1972, and on later dates, effectively excluded indemnification for the damage which resulted at the Bluefield facility. Before the exclusion clause could be legally incor- porated into the commercial general liability policy in West Virginia, it was necessary that Liberty Mutual obtain the approval of the West Virginia Insurance Commissioner. Before incorporating the exclusion clause, in accordance with West Virginia law, Liberty Mutual submitted the exclusion language to the West Virginia Insurance Commissioner for his approval. The West Virginia Insurance Commissioner held hearings to consider the proposed exclusionary lan- guage. The record shows that, in conjunction with the submissions, the Insurance Rating Board and appar- ently also the Mutual Insurance Rating Board, acting on behalf of their members and subscribers, including Liberty Mutual, included with their submission of the proposed exclusion language an explanation which stated: Coverage for pollution or contamination is not pro- vided in most cases under present policies because the damages can be said to be expected or intended eV 13-b and thus are excluded by the definition of occur- rence. The above exclusion [the exclusion which is in issue in the present case] clarifies this situation so as to avoid any question of intent. Coverage is continued for pollution or contamination caused injuries when the pollution or contamination results from an accident... In this Court’s view, the insurance industry thus represented to the State of West Virginia, acting through the West Virginia Commissioner of Insurance, that the exclusion which is in issue in the present case merely clarified the pre-existing “occurrence” clause. This conclusion is further supported by an affidavit submitted by the former West Virginia Insurance Com- missioner, who officially authorized the inclusion of the exclusion in West Virginia policies. That affidavit stated that “in preliminary submissions on the matter, the insurers represented that the proposed forms did not limit and were not intended to limit the coverage.” The Commissioner also said in the affidavit that: The insurers stated in pre-hearing submissions, at the hearing, and in post-hearing submissions that the proposed endorsement forms did not limit or narrow coverage and were not ‘intended to do so. Based upon those representations. I concluded that the pollution endorsement forms did not narrow or limit coverage and, instead, were mere clarifications of existing coverage as defined and limited by the definition of the term “occurrence.” Accordingly, I approved the endorsement forms IRB 335 and MIRB MB GO008 submitted respectively by the In- surance Rating Board and the Mutual Insurance Rating Bureau. In the written order approving the pollution exclu- sion, the West Virginia Insurance Commissioner stated: 14-b (1) The said companies and rating organiza- tions have represented to the Insurance Commis- sioner, orally and in writing, that the proposed exclusions ... are merely clarifications of existing coverage as defined and limited in the definitions of the term “occurrence”, contained in the respective policies to which said exclusions would be attached: (2) To the extent that said exclusions are mere clarifications of existing coverages, the Insurance Commissioner finds that there is no objection to the approval of such exclusicns; In this Court’s view, it appears clear from the foregoing discussion that the 1966 commercial general liability insurance policies, as originally issued, covered gradual bodily injury and gradual property damage resulting over a period of time from exposure to the insured’s waste disposal, as was suggested by Mr. Bean in the memorandum issued’in conjunction with the drafting of the policies. They, however, as originally issued, excluded damage resulting from expected and intended pollution, as indicated by the Insurance Rating Board and the Mutual Insurance Rating Board in their 1970 filings with the West Virginia State Insurance Commissioner. Further, from the filings it is clear that in seeking approval of the exclusion provision, the insur- ance companies did not represent that they intended to exclude any risk which was not excluded in the original policies, but that they merely intended to clarify what had been excluded in the original policies. In approving the new policy language, the West Virginia Insurance Commissioner specifically stated that the companies and rating organizations had represented that the pro- posed exclusions were mere clarifications of existing coverage, and in approving the language the Insurance Commissioner approved it only “to the extent that said exclusions are mere clarifieations of existing coverages.” This Court has recognized that where a definite meaning has been ascribed to language used in an ee 15-b insurance policy, that meaning should be given to the language by the courts. Christopher v. United States - Life Insurance Company in City of New York, 145 W.Va. 707, 116 S.E.2d 864 (1960). In view of this, and in view of the fact that in the present case the insurance group representing Liberty Mutual unambiguously and officially represented to the West Virginia Insurance Commission that the exclusion in question did not alter coverage under the policies involved, coverage which included the injuries in the present case, this Court must conclude that the policies issued by Liberty Mu- tual covered pollution damage, even if it resulted over a period of time and was gradual, so long as it was not expected or intended.* The evidence in the present case shows that Joy Technologies neither expected nor intended the pollu- tion damage which occurred in the present case. The judgment of the Circuit Court of Mercer County is, therefore, reversed, and this case is remanded for determination of the amount of damages to which Joy Technologies, Inc., is entitled. Reversed and remanded with directions. 4. The Court notes that a number of other courts have con- cluded that the so-called “exclusion policy” involved in the present case merely clarified the coverage provided under the definition of insurance in the 1966 commercial general liability policy. See Claussen v. Aetna Casualty & Surety Co., 259 Ga. 333, 380 S.E.2d 686 (1989); United States Fidelity & Guaraity Co. v. Specialty Coatings Co., 188 Ill.App.3d 378, 129 Ill.Dec. 306, 535 N.E.2d 1071 (1989); Broadwell Realty Services, Inc. v. Fidelity &-Casualty Co., 218 N.J.Super. 516, 528 A.2d 76 (1987). erie --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0764%3A3. Public record. Not legal advice.