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Lumbermens Mutual Casualty Co. v. Commonwealth of Pennsylvania

Other Lower Courts

January 24, 2008

Lumbermens Mutual Casualty Company and American Motorist Insurance Company, Plaintiffs,
v.
The Commonwealth of Pennsylvania and The Pennsylvania Department of Transportation, Defendants.

Editorial Note:

This case is not published in a printed volume and its disposition appears in a table in the reporter.

COUNSEL

For Plaintiffs: Melito & Adolfsen, P.C. By: David M. Pollack, Esq. and David DePasquale, Esq., Donovan Hatem, LLP By: David M. Pollack, Esq.

For Defendants: Kaufman, Polowich, Scheider, Bianco & Voluck, LLP By: Ivan J. Dolowich, Esq. and Anne P. Edelman, Esq.

OPINION

Michael D. Stallman, J.

In this action, plaintiffs seek a judgment declaring the rights and obligations of the parties under an insurance policy issued to defendants, for a claim arising from environmental damage that arose during a construction project on an interstate highway. Defendants Commonwealth of Pennsylvania and Pennsylvania Department of Transportation (PennDOT) move to dismiss the amended complaint of plaintiff Lumbermens Mutual Casualty Company (Lumbermens), on the grounds of (a) sovereign immunity; (b) forum non conveniens, pursuant to CPLR 327; (c) comity; and (d) lack of standing. Defendants also contend that this declaratory action is unnecessary, in that plaintiffs may assert all of their claims as affirmative defenses in the Pennsylvania action brought by defendants.

Pursuant to CPLR 6301, Lumbermens cross-moves for a preliminary injunction enjoining defendants from pursuing their breach of contract action in Pennsylvania ( Commonwealth of Pennsylvania, Department of Transportation v Kemper Indemnity Insurance Company, Docket No. January Term 2007-004490 (Court of Common Pleas, Philadelphia County, Pennsylvania) until the conclusion of this declaratory judgment action. By decision dated September 25, 2007, American Motorists Insurance Company (AMICO) was added as a plaintiff to this action.

BACKGROUND

PennDOT is an agency of the Commonwealth of Pennsylvania. In March 2000, Pennsylvania commenced construction of an eighteen-mile stretch of interstate highway to be known as Interstate 99 (the project). Kemper Indemnity Insurance Company (Kemper), an Illinois corporation duly authorized to transact the business of insurance in the State of New York, provided defendants with a General Contractor's Pollution Liability Policy (Kemper policy) for the project.

The Kemper policy provided coverage from February 10, 2000 to February 10, 2004. Defendants are named insureds under the Kemper policy. The Kemper policy affords coverage in the amount of $10 million per loss, and, in the aggregate, subject to a Self-Insured Retention, coverage in the amount of $1 million per loss. It should be noted that the Insured's Broker Representative, Willis Corroon Corporation of Pennsylvania (Willis), is located in Radnor, Pennsylvania. The Kemper policy was executed in Pennsylvania.

The project required a significant cut-and-fill operation, wherein soil was to be excavated from one area of the highway and then used to fill in other areas of the highway. During preliminary engineering on the project in late 1998, the presence of pyritic material was detected. Pyrite is a metal and sulfur-bearing material that, when exposed to air and water, oxidizes, turning the sulfurous material to sulfuric acid. This sulfuric acid dissolves the metals in the rock, which can lead to potential contamination of streams and groundwater if left untreated.

In February 2003, the construction activities of defendants further exposed pyritic rock, and defendants attempted to treat the pyritic material and the acid run-off. However, defendants were unable to neutralize and contain the sulfuric acid discharges emanating from the pyritic material, though they continued to excavate and expose additional pyritic material. As a result, serious environmental damage occurred. Defendants now seek coverage for costs associated with the removal of the pyritic material from the environment, which they estimate could be in excess of $60 million.

While Kemper was in the process of reviewing and analyzing the various documents and materials that defendants provided to Kemper regarding their claim, and while Kemper was having discussions with defendants regarding relevant information, Kemper issued defendants various coverage letters, dated January 7, 2005, October 24, 2005, March 16, 2006 and May 15, 2006. On November 30, 2006, defendants' counsel, located in Pennsylvania, sent Kemper's claim adjuster a detailed coverage letter. Following receipt of this letter, ...


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