Rohm & Haas Co. v. Continental Casualty Co., 781 A.2d 1172

Pennsylvania Supreme Court

2001

Chapter

21

Title

Misrepresentation

Page

830

Topic

The Misrepresentation

Quick Notes

The majority held that the jury reasonably concluded that Rohm & Haas deliberately withheld information it knew would be material to the insurers' decision to provide coverage.  The Dissent believes R&H did not withhold evidence and the insurance company simply failed to ask.

Book Name

Torts Cases, Problems, And Exercises.  Weaver, Third Edition.  ISBN:  978-1-4224-7220-0.

Issue

o         Whether R&H withheld information that  was material in the insurance determination to insure or not?  Yes, but read DISSENT.

Procedure

Trial

o         Trial Jury determined that no coverage existed as it found in favor of the insurance company.

o         Trial Court Reversed the Jury JNOV

Supreme

o         Reversed JNOV, We conclude that there is sufficient support for the jury's [verdict].

Facts

Reasoning

Rules

Pl Rohm & Haas Co

Df Continental Casualty Co

What happened?

o         Rohm & Haas are manufacturers of specialty chemicals headquartered in Philadelphia.

o         In June 1964, R&H purchased from Whitmoyer Laboratories, a small veterinary pharmaceuticals company, and continued operations.

Discovered Arsenic

o         Shortly thereafter, R&H discovered that the site was extensively polluted with arsenic waste; a byproduct of Whitmoyers manufacturing processes.

Remedial Clean Up

o         Although appellants undertook remedial measures to clean up the site, arsenic waste continued to be produced as a result of appellants' operations.

Sold to Smith-Kline Beecham

o         In 1978, appellants sold the site to Smith-Kline Beecham.

Add Whitmoyer to Insurance

o         In Dec 1964 (6 months later), R&H add Whitmoyer to the existing comprehensive general liability (CGL) insurance.

Pollution Awareness & Purchases

o         R&H periodically purchased additional policies that covered Whitmoyer throughout the time that they operated.

o         R&H was aware of the contamination.

o         R&H said they notified the primary insurance carrier.

o         However, there is no evidence that the excess insurers were ever notified of the pollution problem.

CERCLA in 1980

o         Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

o         This act retroactively imposes strict liability for environmental cleanup costs on present and former owners or operators of polluting facilities without regard to fault.

EPA Contracted R&H

o         Notified R&H that they were strictly liable for the cleanup costs associated with the Whitmoyer site.

R&H Notified Insurer (21 Million)

o         Notified their excess insurers that they were asserting a claim to cover the Whitmoyer cleanup costs, more than twenty-one million dollars.

Denied Claim

o         Appellees denied the claim and appellants brought suit.

Trial Jury

o         Determined that no coverage existed as it found in favor of the insurance company on the following question:

Question

o         That Rohm & Haas failed to disclose material facts about the arsenic pollution at Whitmoyer when it purchased the excess policies [the fraud issue]; [and]

Trial Court Reversed the Jury JNOV

o         The trial court entered JNOV with respect to the three policies already in existence at the time Rohm & Haas acquired Whitmoyer on the basis that Rohm &Haas could not have been aware of the problem prior to acquiring Whitmoyer when it contracted for those policies.

o         Thus, could not have had an intent to deceive or conceal material information from the insurers.

o         That court further granted JNOV with respect to the remaining policies on the basis that the evidence presented at trial was insufficient for the jury to find a "deliberate, fraudulent intent to deceive.".

Insurance secured by fraudulent Misrepresentation

o         When an insured secures an insurance policy by means of fraudulent misrepresentations, the insurer may avoid that policy.

Burden Clear and Convincing Evidence

o         The burden of proving fraud must be established by clear and convincing evidence and rests with the party alleging it.

o         The clear and convincing standard requires evidence that is so clear, direct, weighty, and convincing as to enable the jury to come to a clear conviction, without hesitancy, of the truth of the precise facts of the issue.

Fraud Is Never Proclaimed From the Roof Tops

o         Fraud is never proclaimed from the housetops nor is it done otherwise than surreptitiously with every effort usually made to conceal the truth of what is being done.

o         So fraud can rarely if ever be shown by direct proof.

o         It must necessarily be largely inferred from the surrounding circumstances.

Insurer Must Prove Fraudulent Misrepresentation

o         The insurer must prove that the fraudulent misrepresentations were material to the risk assumed by the insurer.

Determining What Is Material

o         When knowledge or ignorance of certain information would influence the decision of an insurer in the issuance of a policy, assessing the nature of the risk, or setting premium rates, that information is deemed material to the risk assumed by the insurer.

Fraud Consists of

o         Anything calculated to deceive, whether by single act or combination, or by suppression of truth, or suggestion of what is false, whether it be by direct falsehood or by innuendo, by speech or silence, word of mouth or look or gesture.

o         There must be a deliberate intent to deceive.

o         The concealment of a material fact can amount to a culpable misrepresentation no less than does an intentional false statement.

In the present case

o         Evidence was adduced at trial regarding the calamitous nature of the pollution at Whitmoyer.

o         It is undisputed that Rohm & Haas learned of this problem shortly after purchasing the site.

o         Rohm & Haas did not disclose the problem to the insurers either when adding Whitmoyer to the policies in existence or when purchasing subsequent coverage.

o         The insurers were not made aware of the problem until some twenty-four years later when Rohm & Haas filed a claim for coverage.

o         Evidence was introduced at trial which showed that the pollution at Whitmoyer was material to the insurers' decision to provide coverage.

Courts Conclusion

o         We conclude that there is sufficient support for the jury's answer to question no. 7.

o         The jury weighed the evidence and, drawing permissible inferences, concluded that the failure to disclose was not merely inadvertent and unrelated to Whitmoyer, but knowing and deliberate.

o         The jury determined that at the times that Whitmoyer was added to existing policies or included in newly purchased policies Rohm & Haas deliberately withheld information it knew would be material to the insurers' decision to provide coverage.

o         We therefore conclude that Superior Court appropriately reversed the entry of JNOV on this issue.

DISSENT

Never Requested by insurer

o         It is inequitable to retroactively impose a duty upon appellants to disclose information concerning the contamination at Whitmoyer when such information of pollution or contamination was never requested by the insurer.

R&H was in not position to know what was material

o         The prospective insured is in no position to know with any kind of certainty what unidentified information an insurer might later deem relevant to its decision to insure.

Trial Court Said there was not evidence

o         The Trial court noted there was no direct evidence that R&H planned to deceive their insurers.

o         There was not one exhibit introduced into evidence which demonstrated that any Rohm and Haas supervisory or executive employee was involved in a plan to deceive the . . . insurers."

Commonwealth Authorities knew

o         Rohm and Haas immediately disclosed the existence of the Whitmoyer contamination to Commonwealth authorities (who promptly made it public),

Insurers Did not Reject Coverage After Disclosure

o         The fact that their primary insurer did not reject coverage after the disclosure is objective proof that appellants had no reason to believe that the fact of pollution was material to issuance of the excess coverage.

Insurer simply failed to ask!!!

o         The appellant never failed to answer accurately any question actually posed by their insurers respecting the facility

o         This objective evidence hardly constitutes conduct warranting a jury finding of clear and convincing evidence of an intent to deceive.

Rules

Burden Clear and Convincing Evidence

o         The burden of proving fraud must be established by clear and convincing evidence and rests with the party alleging it.

o         The clear and convincing standard requires evidence that is so clear, direct, weighty, and convincing as to enable the jury to come to a clear conviction, without hesitancy, of the truth of the precise facts of the issue.

Insurer Must Prove Fraudulent Misrepresentation

o         The insurer must prove that the fraudulent misrepresentations were material to the risk assumed by the insurer.

Determining What Is Material

o         When knowledge or ignorance of certain information would influence the decision of an insurer in the issuance of a policy, assessing the nature of the risk, or setting premium rates, that information is deemed material to the risk assumed by the insurer.

Fraud Consists of

o         Anything calculated to deceive, whether by single act or combination, or by suppression of truth, or suggestion of what is false, whether it be by direct falsehood or by innuendo, by speech or silence, word of mouth or look or gesture.

o         There must be a deliberate intent to deceive.

o         The concealment of a material fact can amount to a culpable misrepresentation no less than does an intentional false statement.

Class Notes