Consol. Rail Corp. v. Ace Prop. & Cas. Ins. Co.

182 A.3d 1011

CONSOLIDATED RAIL CORPORATION, Appellant

v.ACE PROPERTY & CASUALTY INSURANCE CO. (Formerly Aetna Ins. Co. ), Allianz Global Risks U.S. Insurance Co. (Formerly Allianz Ins. Co.), Allianz Underwriters Insurance Co., Allstate Insurance Co. (As Successor in Interest to Northbrook Excess & Surplus Ins. Co. a/k/a Northbrook Ins. Co.), American Home Assurance Co. (American International Group), American Motorists Insurance Co. (Kemper), Aviva Insurance Co. of Canada (U.S. Branch), (Formerly GAN General Ins. Co. (Formerly Simcoe & Erie General Ins. Co.) ), Birmingham Fire Insurance Co. of PA. (American International Group), Britamco Underwriters, Inc. c/o Devonshire Group, Century Indemnity Co. (Successor in Interest To Cigna Specialty Ins. Co. (Formerly California Union Insurance Co.) and as Successor to CCI Insurance Co., Successor To Insurance Co. of North America), Continental Insurance Co. (In Its Own Right and as Successor in Interest to Harbor Insurance Co.) (CNA Insurance Cos.), Employers Mutual Casualty Co. (EMC Insurance Cos.), Employers Insurance of Wausau (Formerly Employers Mutual of Wausau), Evanston Insurance Co., Everest Reinsurance Co. (Formerly Prudential Reinsurance Co.), Federal Insurance Co. (Chubb Group of Ins. Cos.), Fireman's Fund Insurance Co., First State Insurance Co. (Hartford Insurance Group), Granite State Insurance Co. (American International Group), Hartford Accident & Indemnity Co. (Hartford Insurance Group), Hudson Insurance Co., INSCO c/o Devonshire Group, Insurance Company of the State of Pennsylvania (American International Group), Landmark Insurance Co. (American International Group), Lexington Insurance Co. (American International Group), Liberty Mutual Insurance Co., Midstates Reinsurance Corp. (Formerly Mead Reinsurance Corp. ), National Casualty Co., National Union Fire Insurance Co. of Pittsburgh, PA (American International Group), Northwestern National Insurance Co. (Formerly Bellefonte Underwriters Insurance Co.), Old Republic Insurance Co., Pacific Insurance Co. (CNA Insurance Cos.), Republic Insurance Co., Royal Insurance Co. of America (Formerly Royal Globe Ins. Co.) (Royal & Sun Alliance Insurance Group ), Sentry Insurance Group (as Assumptive reInsurer of Great Southwest Fire Ins. Co. and Great Southwest Surplus Lines Ins. Co.), St. Paul Fire & Marine Insurance Co. (St. Paul Travelers Companies), St Paul Surplus Lines Insurance Co. (St. Paul Travelers Companies), Stonewall Insurance Co., TIG Insurance Co. (As Successor To International Ins. Co. (Formerly International Surplus Lines Ins. Co.) ) (Fairfax Financial (USA) Group), TIG Premier Insurance Co. (Formerly Transamerica Ins. Co. ) (Fairfax Financial (USA) Group), Travelers Casualty and Surety Co. (Formerly Atena Casualty and Surety Co.) (St. Paul Travelers Companies), Travelers Indemnity Co.(St. Paul Travelers Companies), Twin City Fire Insurance Co. (Hartford Insurance Group), Unione Italiana Reinsurance Co. of America, Inc., Utica Mutual Insurance Co., Zurich American Insurance Co. (Formerly Zurich Insurance Co.) and Certain London Market Insurance Companies and Pennsylvania Property & Casualty Insurance Guaranty Association (Formerly Pennsylvania Insurance Guaranty Association), Appellees

No. 1376 EDA 2015

Superior Court of Pennsylvania.

Argued June 30, 2017

Filed March 23, 2018

Mark W. Mosier, Washington, DC, for appellant.

Ronald P. Schiller, Philadelphia, for Continental, appellee.

David Smith, Philadelphia, for Italico and L'Ancora, appellees.

Marie S. Barbich, Philadelphia, for Stonewall, appellee.

BEFORE: GANTMAN, P.J., LAZARUS, J., and PLATT, J.^*

OPINION BY GANTMAN, P.J.:

Appellant, Consolidated Rail Corporation ("Conrail"), appeals from the summary judgment entered in the Philadelphia County Court of Common Pleas, in favor of Stonewall Insurance Company ("Stonewall"), Continental Insurance Company ("Continental"), and Lloyd Italico & L'Ancora ("Lloyd"). For the following reasons, we affirm in part, reverse in part, and remand for further proceedings.

This case involves Conrail's efforts to obtain indemnification for contamination remediation, clean-up costs, and other expenses related to toxic spills and releases at various geographic sites. The trial court set forth the relevant facts regarding the Elkhart site as follows:

From 1976 through 1999, Conrail owned a large classification yard for freight cars in Indiana. Beginning in 1986, the [United States Environmental Protection Agency ("EPA") ] found significant amounts of [trichloroethene ("TCE") ] and [carbon tetrachloride ("CCl₄") ] in portions of Conrail's property and in the groundwater under a large number of neighboring properties.

Conrail admits that [t]here is only one incident that resulted in carbon tetrachloride contamination at Elkhart—a release of [CCl₄] in the vicinity of track number 69...in May 1968[,] while Penn Central was operating Elkhart...eight years before Conrail began its own operations at Elkhart.

Conrail also claims that [t]he principal source of the TCE contamination at Elkhart was a release of TCE in the Track 65–66 area of the rail yard. The TCE emanating from the rail yard has reached the drag strip and the St. Joseph River on the northern border of the site. The EPA's expert, Gary Chirlin, opined that [s]ubstantial TCE contamination exists over the entire aquifer thickness...within this source area; this is consistent with a local release of sufficient magnitude that separate phase TCE [a dense non-aqueous phase liquid ("DNAPL") ] penetrated nearly to bedrock. Conrail's lead environmental consultant at the Elkhart [s]ite, Miranda Menzies, testified that the nature of the contamination at Tracks 65–66—i.e. , a large release of contaminants in undissolved form that sank through the soil into the aquifer—is consistent with a large spill from a tank car, as opposed to multiple small spills [which] would remain close to the soil surface. While the exact date of this release [of TCE] is unknown, it likely took place before 1976.

In addition, Conrail notes that its employees told the EPA that solvents were used as degreasers at the car shop, then poured onto concrete pads and hosed down; they did not specify the year(s) in which this occurred or the types of solvent(s) used.

Through September 2012, Conrail incurred over $15 million in remediation costs, approximately $3.8 million in government payments, and more than $2 million in defense costs in connection with the Elkhart [s]ite. Remediation is ongoing and Conrail continues to incur additional costs with respect to the Elkhart [s]ite.

(Trial Court Opinion, filed October 28, 2014, at 1–2) (internal quotation marks and footnotes omitted). The trial court set forth the relevant facts regarding the Hollidaysburg, Douglasville, Conway, Beacon, and Paoli sites as follows:

The Hollidaysburg, Pennsylvania, [s]ite was owned by Conrail from 1976 until 1999. It was a car shop, which was used to build, rebuild, and repair railway cars, and a reclamation plant, which was used to repair railcars and components, to recover parts and equipment from railcars, and to recycle rail equipment and materials that could no longer be used.

In 1997, the [Pennsylvania Department of Environmental Protection ("PaDEP") ] and Conrail discovered over 3,500 drums of waste material buried on the [s]ite. It appears that Conrail's predecessors buried the drums. In addition, there was apparently spilling and/or leaking of hazardous waste from [Conrail's] drum crusher and its catch basin onto the adjacent ground.

[Polychlorinated biphenyl ("PCB") ] and lead contamination was found in the soil at the Hollidaysburg [s]ite, but not at any neighboring sites. Arsenic contamination was also a problem at the site. In addition, [n]aphthalene and various metals were present at levels exceeding established maximum allowable levels in the groundwater at the [s]ite, but Conrail's environmental consultants concluded that the contaminated groundwater was not migrating off-site.

The PaDEP ordered Conrail to excavate and remove the drums. Conrail was also ordered to install a control system to prevent off-site migration of surface water, submit a plan to control wind dispersion of contamination, and submit a groundwater monitoring plan to determine whether any contaminated groundwater was migrating off-site. Conrail promptly undertook the remediation required by [the PaDEP's] Administrative Order, which included the performance of groundwater flow and usage studies; the testing and monitoring of groundwater; the performance of an ecological assessment of the Beaverdam and Frankstown branches of the Juniata River; and the investigation of potential contamination at other locations at the [s]ite.

In connection with the Hollidaysburg [s]ite, Conrail paid $4,999,806.60 in remediation costs and $2,828,740.45 in defense costs which it seeks to recover [through indemnification]. It also paid $4.1 million in governmental fines and penalties for which it seeks coverage.

* * *

The Douglasville Disposal [s]ite is located in Pennsylvania. It was never owned or operated by Conrail. It was operated by Berks Associates as a waste oil recycling plant. Between 1976 when Conrail came into being and 1985 when waste oil processing ceased at the Douglassville [s]ite, Conrail sent its waste oil to be processed there, as did many other entities. At least one Conrail agent testified to the effect that Conrail contracted with Berks Associates to safely process and recycle its waste oil, and to do so in compliance with all applicable environmental regulations.

In the 1980s, the EPA investigated the [s]ite and discovered a panoply of contaminants, including [volatile organic compounds ("VOCs") ], PCBs, [polycyclic aromatic hydrocarbons ("PAHs") ], and lead in the soil, ground and surface water, which had emanated from [ten] different source areas of contamination at the [s]ite. The contamination was the result of Berks Associates' waste storage and disposal

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