J-A17045-16

                          2018 PA Super 68



CONSOLIDATED RAIL CORPORATION                IN THE SUPERIOR COURT
                                                       OF
                                                  PENNSYLVANIA
                      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.,
J-A17045-16


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. (FORMERY 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

                              -2-
J-A17045-16


    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


                 Appeal from the Judgment Entered April 8, 2015
              In the Court of Common Pleas of Philadelphia County
          Civil Division at No(s): 002638 Civil Action Sept. Term, 2004


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

OPINION BY GANTMAN, P.J.:                            FILED MARCH 23, 2018

        Appellant, Consolidated Rail Corporation (“Conrail”), appeals from the

summary judgment entered in the Philadelphia County Court of Common

____________________________________________


*   Retired Senior Judge assigned to the Superior Court.

                                           -3-
J-A17045-16


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

                                      -4-
J-A17045-16


         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

                                     -5-
J-A17045-16


       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

                                    -6-
J-A17045-16


       contamination was the result of Berks Associates’ waste
       storage and disposal methods, including disposing of it in
       lagoons, landfarming it, and depositing filter cakes, as well
       as leaks and spills resulting from Berks’ recycling
       operations.   There were also serious risks [of further
       contamination] arising from Berks’ abandoned processing
       facility.

       Litigation and remediation took place over the next [ten] or
       more years.      In 2001, Conrail and other potentially
       responsible parties entered into agreements regarding
       payment of their respective shares of the remediation costs.
       Conrail claims it paid $5,983,997.95 in such costs and
       incurred $1,313,053.02 in defense costs for both of which it
       seeks [indemnification].     Additional costs may yet be
       incurred by Conrail.

                                *    *    *

       The Conway rail yard is located in western Pennsylvania. A
       creek, Crows Run, flows through a stone and concrete
       culvert under the rail yard. Upon exiting the culvert, Crows
       Run flows approximately 200 feet before joining the Ohio
       River. Thirty-eight storm water outfalls and drains intersect
       the rail yard and discharge into the Ohio River or into Crows
       Run along the culvert wall. Conrail operated Conway from
       1976 until 1999.

       [C]ertain areas at the Conway rail yard were contaminated
       with oil [as a result of releases occurring] both before and
       after April 1, 1976, [when Conrail assumed control of the
       site. The oil] leached and migrated through the soil and was
       able to enter Crows Run by way of the Conway drainage
       system, as well as from groundwater seepage through the
       culvert side wall.

       Two documented oil releases occurred at Conway while
       Conrail was operating there. The first occurred on or around
       September 29, 1977, and resulted from a spill that made its
       way into the Ohio River through a sewer outfall. The release
       of oil appears to have continued unabated until
       approximately October 7, 1977. Although Conrail was never
       able to confirm the source of the spill, it was suspected that
       the discharge was caused when part of the wastewater

                                    -7-
J-A17045-16


       treatment facility was temporarily shut down by a contractor
       hired to clean out sewer lines at the rail yard.

       The second spill occurred in December 1979[,] when an
       underground fueling pipe separated at a joint, causing the
       release of oil directly into the ground (as opposed to directly
       into Crows Run) near a building in the vicinity of Crows Run.
       Approximately 25,000 gallons of oil [were] recovered from
       Crows Run during and immediately after the spill; the
       quantity of oil that was released from the pipeline but stayed
       in the ground and was not [immediately] released to Crows
       Run or the river is unknown. Although the spill was
       originally thought to have occurred because of a ruptured
       pipeline, the actual source of the spill was identified on
       December 31, 1979[,] as a separated pipeline and was
       repaired by January 2, 1980. Booms and other recovery
       efforts were implemented to remove oil from Crows Run.

       There were also two, non-oil, chemical spills at Conway, one
       of styrene monomer in 1984[,] and one of carbon disulfide
       in 1985.

       Conrail admits that it knew about the existing oil
       contamination when it assumed control of Conway, but
       denies that it knew until the 1990s that it would be liable for
       millions of dollars in remediation costs with respect to the
       [s]ite. Conrail seeks coverage relating to the remediation
       of diesel fuel and lubricant oil, as well as styrene and carbon
       disulfide, from the ground and subsurface of the rail yard,
       as well as from the groundwater, Crows Run, and the Ohio
       River.

       Through December 2012, Conrail has incurred over $14
       million in remediation costs, almost $1.2 million in
       government     payments     to the  Commonwealth     of
       Pennsylvania and the Borough of Conway, and more than
       $2 million in defense costs. Conrail continues to incur
       additional remediation costs.

                                *    *    *

       The Beacon Park rail yard is located in Massachusetts and
       was operated by Conrail from 1976 through 1999. The rail
       yard is bisected by the Massachusetts Turnpike, so that it

                                    -8-
J-A17045-16


       comprises two distinct units. Portions of both units are
       contaminated with [light non-aqueous phase liquids
       (“LNAPLs”)], primarily oil and diesel fuel.

       [T]he first area of contamination at the Beacon Park [s]ite
       is known as the “Charles River Chamber” area and is located
       near the diesel servicing facility in the loop track area. The
       Charles River Chamber is a collection point for several storm
       sewers. LNAPL in the surrounding groundwater entered the
       chamber through cracks and fissures in the sewer system,
       often as the result of heavy rains. The sources of this
       contamination are the various historical releases at the
       Beacon Park [s]ite as well as the diesel servicing area and
       the lube oil tank area west of the chamber, all of which
       migrated to the area surrounding the chamber.

       The second area of contamination is located in the
       classification yard section of Beacon Park and is known as
       the “Control Tower” area. Contamination at the Control
       Tower area consists of a layer of LNAPL on the water table
       beneath the Turnpike and the northern portion of the rail
       yard. When precipitation increased the height of the water
       table, the oil would infiltrate a storm drain running through
       this area and flow into the Charles River.

       Conrail knew, at the time that it took over operations of the
       Beacon Park rail yard, that there was contamination [there],
       and that an EPA Administrative Order had been issued
       regarding contamination at Beacon Park on March 1, 1976….
       Conrail [also] knew, in August 1976, that it would be
       responsible for complying with an order issued by the
       Massachusetts Division of Water Pollution Control. Once
       Conrail completed the work required by these two orders,
       however, [Conrail claims] it had no reason to believe that it
       would be responsible for further remediation of the [s]ite.
       Conrail denies that it was aware in 1976, or at any other
       time during the period when [its insurers] issued policies,
       [that subsequent] remediation would approach the level of
       coverage provided by [its insurers’ p]olicies.

       There is evidence that at least two spills occurred [in the
       Charles River Chamber area after Conrail assumed
       operations of the rail yard]: a spill of approximately 2,000
       gallons of fuel reported to Conrail on November 1, 1981,

                                   -9-
J-A17045-16


       and a spill of approximately 800 gallons on or about August
       9, 1982.

       With respect to the 1981 leak, the EPA determined that oil
       discharg[ing] from Conrail’s corroded underground [two
       inch] pipe [entered] into surrounding earth, leached through
       the ground and groundwater into a storm conduit, flowed
       through the conduit to a junction box, and spilled through
       two culverts from the junction box to the Charles River.
       [C]ontamination from the pipe leak reached the Charles
       River Chamber area of Beacon Park. The leak occurred for
       [eight] days until Conrail located its source and capped the
       pipe.

       [N]o identifiable release or source of the contamination in
       the Control Tower area of the yard was ever identified.

       Conrail seeks coverage here for $5,388,264.76 in
       remediation costs and $352,101.49 in defense costs.
       Conrail dropped its claim for approximately $2.5 million in
       government penalties that it paid.

                               *     *      *

       The Paoli [s]ite was a rail yard and car shop that Conrail
       operated in Pennsylvania from 1976 through 1982, and
       which was operated by [the Southeastern Pennsylvania
       Transportation Authority (“SEPTA”)] thereafter. [F]rom the
       early 1950s, railcars using transformer oil that contained
       PCBs were repaired and maintained at the Paoli rail yard….
       [F]or most of the period before April 1, 1976, the hazards
       of PCBs were unknown and…from an environmental
       standpoint the PCB-containing transformer fluid was treated
       similarly to other oils. … [R]eleases of PCB-containing fluid
       onto the ground occurred during Conrail’s and SEPTA’s
       occupancy at the site, including some releases during
       maintenance operations.

       [A]fter [Conrail] assumed operations at Paoli, federal and
       state regulations began to require that PCBs be treated as
       hazardous substances and Conrail’s own internal policies
       began to require that PCBs be treated as a hazardous
       substance soon thereafter. [As a result,] there was a
       significant decrease in the incidence of PCB discharges

                                   - 10 -
J-A17045-16


           during the operations conducted by Conrail and…known
           spills were commonly cleaned up promptly.

           However, on at least [twenty] different occasions between
           1979 and 1985, PCBs spilled from railcars at the Paoli [s]ite.
           Conrail admits that the [railcar] transformers were designed
           to release PCB-containing fluid in the event of excessive
           pressure, but Conrail denies that th[is] “burping” of the
           transformers was routine or that it was the exclusive source
           of PCB releases into the ground at Paoli. Conrail [also]
           admits that leaks occurred from time to time from faulty
           gaskets or eroded and fractured sight glass on some cars,
           but denies that such leaks occurred frequently.

           Conrail seeks $12,766,859.05 in indemnity costs and
           $5,215,407.74 in defense costs…. Some of those costs were
           incurred by SEPTA, which Conrail claims is an additional
           insured under the [p]olicies.

(Trial Court Opinion, filed October 28, 2014, at 1-11) (footnotes and

some internal quotation marks omitted). The trial court set forth the

relevant facts regarding the Lloyd principal-agent relationship as

follows:

           [Conrail] claims that [Lloyd] issued a $1,000,000 Umbrella
           Excess Liability [p]olicy to Conrail for the April 1, 1978
           through April 1, 1979 policy period. [Lloyd] denies that it
           issued any such policy to Conrail. Due to the passage of
           time ([thirty-six] years), many relevant records have been
           lost or destroyed, memories have dimmed, and witnesses
           can no longer be found, so the court must determine which
           party must bear the consequences of this lack of evidence.

                                    *     *      *

           In support of its claim that [Lloyd] issued an insurance
           contract to Conrail, Conrail proffers a single page that
           purports to be an “Umbrella Excess Liability Policy Issued By
           [Lloyd]” (the “[Lloyd p]olicy”). It is signed by “Joseph F.
           Ambriano” on behalf of “PLAR GROUP.” There is also a
           second page that purports to be “Endorsement No. 1” to the

                                        - 11 -
J-A17045-16


       [Lloyd p]olicy, which increases the coverage provided by the
       [p]olicy from $500,000 to $1,000,000. That Endorsement
       is signed by “R.A. Browing” on behalf of the “Independence
       Marine Group.” A third page purports to be “Endorsement
       No. 2” to the [p]olicy. It sets forth a computation of the
       earned premium based on Conrail’s revenues during the
       [p]olicy year, which results in an additional premium
       payment due. Endorsement No. 2 was issued in July 1979,
       after the [p]olicy period ended, and is signed “Richard H.
       Byron for Plar.”

       Through discovery, Conrail has established that, at the time
       this transaction allegedly occurred, the following
       relationships existed:

          1.    Conrail’s broker was Marsh & McLennan (“Marsh”)
                in New York, New York.
          2.    Marsh worked with a sub-broker East West
                International (“EWI”) in Geneva, Switzerland.
          3.    EWI negotiated with Mr. Ambriano of Davis,
                Dorland & Co. (“Davis Dorland”) in New York, New
                York.
          4.    Mr. Ambriano and George B. McNeill International
                had some authority to act on behalf of the Pool
                Latino Americano de Reaseguros (“PLAR”) in
                Panama.
          5.    [Lloyd] was a member of PLAR. In [February
                1977], [Lloyd] expressly authorized PLAR’s
                Administrator, Estudio Consultivo De Seguros S.A.
                “to accept shares in Reinsurance transactions” on
                behalf of [Lloyd] up to a limit of $10,000.

                               *     *      *

       Conrail has not been able to discover any document giving
       PLAR or Mr. Ambriano express authority to bind [Lloyd] with
       respect to the issuance of excess policies in the amount of
       [$500,000] such as the one at issue here. Instead, the
       evidence shows only that PLAR’s and thereby Mr.
       Ambriano’s, express authority to act on behalf of [Lloyd]
       was limited to reinsurance policies up to $10,000.

       Conrail [also] obtained an affidavit from Mr. Ambriano, who
       stated as follows with respect to the [Lloyd p]olicy:

                                   - 12 -
J-A17045-16



              I do not recognize the policy number or the form of
              such number. I have no recollection of signing this
              document. However, the signature that appears on
              [it] is a photocopy of my signature.

              Although I have no specific recollection of signing [it]
              or the 1978 transaction to which it refers
              approximately [thirty-six] years ago, I recall that
              [Lloyd] was a member of PLAR and I wrote business
              on behalf of PLAR. I understood I was authorized to
              sign [it] in May 1978. I would not have signed [it] if
              I did not believe I was authorized by PLAR to sign it
              on behalf of [Lloyd].

                                     *     *      *

(Trial Court Opinion, filed December 30, 2014, at 1-4) (footnotes omitted).

      Procedurally, Conrail initiated this action in 2004 against fifty-five

insurers; since then, only Stonewall, Continental, and Lloyd remain in the case

as Appellees in this appeal.        On October 6, 2010, Lloyd filed preliminary

objections to Conrail’s complaint, and on April 29, 2011, Lloyd filed a

memorandum of law in support of its preliminary objections, claiming it did

not authorize the insurance policy to Conrail.          Following briefing and oral

argument, the trial court sustained Lloyd’s preliminary objections and

dismissed Conrail’s complaint against Lloyd on February 21, 2012.                  On

February 6, 2013, the court reconsidered its previous ruling on Lloyd’s

preliminary objections and overruled them. On March 25, 2013, Stonewall

and Continental filed motions for summary judgment, and Conrail filed cross-

motions for summary judgment. The court issued an opinion, on November

13,   2013,    interpreting   the    “Operations      Clause”   of   Stonewall’s   and

                                         - 13 -
J-A17045-16


Continental’s insurance policy. The court determined that the insurance policy

required the insurers to reimburse Conrail only for the damages arising out of

an “occurrence” (i.e., environmental contamination) that was caused by or

grew out of Conrail’s operations at the sites.    In other words, the policies

provided coverage to Conrail only if Conrail could prove it had discharged

some of the pollutants during the policy terms for which it had incurred

liability.   Lloyd filed a motion for summary judgment on June 16, 2014,

arguing it did not authorize the policy Conrail proffered against Lloyd.

       On October 28, 2014, the court applied its ruling of the “Operations

Clause” to the sites and granted Continental’s motion for summary judgment

in part and denied it in part. The court determined facts for some of the sites

indicated that pollutants had been discharged before Conrail took over

operations. On that same day, the court granted summary judgment in favor

of Stonewall because the court found pollutants had been discharged before

Conrail began to operate at the site Stonewall insured.      On December 30,

2014, the court granted summary judgment in favor of Lloyd, finding Lloyd

did not authorize Conrail’s policy.     The court dismissed as moot Lloyd’s

remaining motions for summary judgment and Conrail’s cross motion for

summary judgment. Conrail and Continental filed a stipulation for entry of

final judgment on April 6, 2015. On April 8, 2015, the court entered an order

discontinuing without prejudice Conrail’s claims regarding the twenty-seven

non-focus sites listed in Conrail’s complaint and entering final judgment in


                                      - 14 -
J-A17045-16


favor of the Insurers and against Conrail as to all remaining claims and parties.

Conrail timely filed a notice of appeal on April 23, 2015. The court, on April

28, 2015, ordered Conrail to file a concise statement of errors complained of

on appeal pursuant to Pa.R.A.P. 1925(b), and Conrail timely complied on May

22, 2015.

      Conrail raises three issues for our review:

         WHETHER      LIABILITY     INSURANCE    POLICIES
         UNAMBIGUOUSLY PRECLUDE COVERAGE FOR CONRAIL’S
         POLLUTION-RELATED LIABILITIES UNLESS CONRAIL CAN
         PROVE ITSELF GUILTY OF DISCHARGING SOME OF THE
         POLLUTANTS…[?]

         WHETHER (I) CONRAIL HAD THE BURDEN TO PROVE THAT
         IT POLLUTED THIRD-PARTY PROPERTY TO ESCAPE
         APPLICATION OF THE INSURANCE POLICIES’ OWN
         PROPERTY EXCLUSION TO ITS ENVIRONMENTAL LIABILITY
         AT THE HOLLIDAYSBURG SITE, AND (II) CONRAIL FAILED
         TO SATISFY THIS BURDEN DESPITE EVIDENCE THAT IT
         HAD CONTAMINATED GROUNDWATER UNDER THE SITE
         AND WAS LIABLE FOR ON-SITE REMEDIATION DESIGNED
         TO PREVENT THREATENED OFF-SITE DAMAGE[?]

         WHETHER CONRAIL FAILED AS A MATTER OF LAW TO
         PROVE THE EXISTENCE OF AN INSURANCE POLICY
         ALLEGEDLY ISSUED BY THE ITALIAN INSURER [LLOYD],
         DESPITE EVIDENCE FROM WHICH A JURY COULD FIND (I)
         THAT THE AGENT WHO SIGNED THE POLICY HAD ACTUAL
         OR APPARENT AUTHORITY TO ACT FOR [LLOYD], OR (II)
         THAT [LLOYD] SHOULD BE ESTOPPED FROM DENYING THE
         AGENT’S AUTHORITY[?]

(Conrail’s Brief at 3-4) (footnote omitted).

      Conrail argues the insurance policy language is ambiguous and can be

reasonably read to provide coverage for Conrail’s liability for preexisting

contamination, regardless of whether Conrail actively contributed to that

                                     - 15 -
J-A17045-16


contamination. As a result, Conrail contends the policy language should be

construed against the drafter to effect the dominant purpose of the policy,

which is to provide indemnity to Conrail.     Specifically, Conrail offers three

interpretations of the policy language to provide liability coverage.      First,

Conrail disagrees with the court’s definition of an “occurrence” because it

ignores the phrase “all operations incidental thereto,” which is not specifically

defined in the policy but is ordinarily defined by standard dictionaries as

“related to.”   Had the trial court given effect to the phrase “all operations

incidental thereto,” Conrail suggests the court could have reasonably

interpreted the policy to cover “occurrences” as related to Conrail’s operations,

because Conrail is engaged in the same operations as the previous site

operators, conducted operations on the same properties, and used many of

the same equipment and personnel in those operations.

      Second, Conrail maintains the trial court should have considered the

term “occurrence” under the more expansive policy language of “continuous

or repeated exposure to conditions which cause injury or damage during the

term of the policy.” If the trial court had considered the term “occurrence” as

a continuous and repeated exposure caused by the initial discharge event,

Conrail posits the court could have concluded that the migration of previously

discharged contaminants into and through the groundwater and off the site

was covered by the policy.      Conrail submits the policy should cover the

continuous and repeated exposure occurring as a result of the initial event;


                                     - 16 -
J-A17045-16


otherwise, the language “caused by or grew out of” is superfluous. Relying

on a Kansas federal court case, Conrail claims the phrase “grew out of” should

mean “associated with.” Based on Conrail’s interpretations of these applicable

terms and phrases, Conrail reasons the preexisting contamination that

evolved and expanded by migration on and off the site are “occurrences”

which continued to happen during Conrail’s operations; and the policy

language lends itself to this construction to provide coverage for Conrail’s

liability.

       Third, Conrail avers the language, “caused by or growing out of the

insured’s operations,” when read in the context of the policy as a whole, could

reasonably be interpreted to permit broader coverage than just for a single

event because the phrase “caused by or grew out of” modifies both

“occurrence” and the larger promise of the policy to provide indemnification

for the insured’s liability. Under this broader interpretation, Conrail suggests

liability can arise not only out of a triggering event but also the triggering

event can stretch into a continued or repeated exposure to migrating

contaminants. Because Conrail is liable for the preexisting contamination at

the sites, under this broader policy interpretation, Conrail insists it should be

covered by the relevant policies.

       For its second issue, Conrail argues Continental should indemnify Conrail

for the Hollidaysburg site remediation because the contaminated groundwater

found at the site constitutes damage to third-party property. Conrail reasons


                                     - 17 -
J-A17045-16


groundwater belongs to the Commonwealth under Pennsylvania law, not just

to Conrail, so the contaminated groundwater is not Conrail’s “owned property”

within the meaning of the “Own Property Exclusion,” thus liability coverage

under the policy is available.    Conrail alternatively posits the trial court

incorrectly placed the burden of proving the “Own Property Exclusion” on

Conrail where Pennsylvania law requires the insurer to prove policy exclusions.

Conrail further complains the trial court improperly required Conrail to show

that actual damage to third-party property occurred, where Pennsylvania

courts have held “own property” exclusions do not bar coverage for

remediation efforts to prevent threatened damage to third-party property.

Conrail emphasizes that it engaged in remediation efforts by removing the

buried drums at the Hollidaysburg site to prevent further contamination of any

groundwater and surface waters, which Conrail maintains is property of the

Commonwealth as a third party.

      For Conrail’s third and final issue, it argues a genuine issue of material

fact exists in this case to preclude summary judgment. Specifically, Conrail

claims Mr. Joseph Ambriano (“Mr. Ambriano”) had authority to bind Lloyd to

the terms of the Lloyd policy because Mr. Ambriano underwrote the policy

through an implied principal-agent relationship based on the following facts:

(a) Mr. Ambriano signed a statement indicating that he understood he was

authorized to sign the Lloyd policy in May 1978 and that he would not have

signed it if he did not believe he was so authorized; (b) an employee of EWI


                                    - 18 -
J-A17045-16


documented a conversation he had with Mr. Ambriano, wherein Mr. Ambriano

notified EWI that a recent change in government regulations restricted Lloyd’s

ability to issue a letter of credit for another Italian insurer and Mr. Ambriano

suggested deferring the transfer; (c) PLAR, an international reinsurance

syndicate, entered into an agreement with Mr. Ambriano through which he

was deemed the sole and exclusive agent for all of PLAR’s United States

business; Lloyd was a PLAR member; and the majority of the policies issued

by PLAR that are still of-record were direct policies rather than reinsurance

policies; (d) PLAR negotiated policies for individual members, two of which

were issued by another PLAR member to Conrail; and (e) Mr. Ambriano was

highly regarded in the international insurance market. Based on these facts,

Conrail also argues Mr. Ambriano bound Lloyd to the policy because he

possessed apparent authority through a “limited delegation” from Lloyd to

underwrite it. Conrail emphasizes Lloyd was a member of PLAR, and by nature

of that membership, Lloyd delegated authority to PLAR to issue insurance

policies on its behalf; and Mr. Ambriano frequently acted for PLAR. Conrail

further contends that from the perspective of a third party engaging with Mr.

Ambriano, it was reasonable for a broker to believe Mr. Ambriano possessed

the authority to act on behalf of Lloyd because of his prominence in the

market. Alternatively, Conrail avers Lloyd is estopped from arguing that a

principal-agent relationship does not exist because once Lloyd was made

aware of the policy, Lloyd failed to take reasonable steps to notify Conrail that


                                     - 19 -
J-A17045-16


Mr. Ambriano was unauthorized to underwrite it. Conrail concludes the trial

court erred as a matter of law in misinterpreting the policy clauses and

exclusions at issue and misapplying Pennsylvania agency law, and this Court

must reverse summary judgment and remand for further proceedings. For

the following reasons, we disagree in part and agree in part.

     Our standard of review of an order granting summary judgment requires

us to determine whether the trial court abused its discretion or committed an

error of law.   Mee v. Safeco Ins. Co. of America, 908 A.2d 344, 347

(Pa.Super. 2006).

        Judicial discretion requires action in conformity with law on
        facts and circumstances before the trial court after hearing
        and consideration. Consequently, the court abuses its
        discretion if, in resolving the issue for decision, it misapplies
        the law or exercises its discretion in a manner lacking
        reason. Similarly, the trial court abuses its discretion if it
        does not follow legal procedure.

Miller v. Sacred Heart Hospital, 753 A.2d 829, 832 (Pa.Super. 2000)

(internal citations and quotation marks omitted).       Our scope of review is

plenary. Pappas v. Asbel, 564 Pa. 407, 418, 768 A.2d 1089, 1095 (2001),

cert. denied, 536 U.S. 938, 122 S.Ct. 2618, 153 L.Ed.2d 802 (2002).         In

reviewing a trial court’s grant of summary judgment,

        [W]e apply the same standard as the trial court, reviewing
        all the evidence of record to determine whether there exists
        a genuine issue of material fact. We view the record in the
        light most favorable to the non-moving party, and all doubts
        as to the existence of a genuine issue of material fact must
        be resolved against the moving party. Only where there is
        no genuine issue as to any material fact and it is clear that
        the moving party is entitled to a judgment as a matter of

                                     - 20 -
J-A17045-16


        law will summary judgment be entered. All doubts as to the
        existence of a genuine issue of a material fact must be
        resolved against the moving party.

        Motions for summary judgment necessarily and directly
        implicate the plaintiff’s proof of the elements of [a] cause of
        action.    Summary judgment is proper if, after the
        completion of discovery relevant to the motion, including
        the production of expert reports, an adverse party who will
        bear the burden of proof at trial has failed to produce
        evidence of facts essential to the cause of action or
        defense which in a jury trial would require the issues to be
        submitted to a jury. In other words, whenever there is no
        genuine issue of any material fact as to a necessary element
        of the cause of action or defense, which could be established
        by additional discovery or expert report and the moving
        party is entitled to judgment as a matter of law, summary
        judgment is appropriate. Thus, a record that supports
        summary judgment either (1) shows the material facts are
        undisputed or (2) contains insufficient evidence of facts to
        make out a prima facie cause of action or defense.

        Upon appellate review, we are not bound by the trial court’s
        conclusions of law, but may reach our own conclusions.

Chenot v. A.P. Green Services, Inc., 895 A.2d 55, 61 (Pa.Super. 2006)

(internal citations and quotation marks omitted) (emphasis added).

     “The interpretation of an insurance contract is a matter of law and is

generally performed by a court.” Kropa v. Gateway Ford, 974 A.2d 502,

505 (Pa.Super. 2009), appeal denied, 605 Pa. 701, 990 A.2d 730 (2010). The

goal of insurance contract interpretation is “to ascertain the intent of the

parties as manifested by the language of the written instrument.” Madison

Const. Co. v. Harleysville Mut. Ins. Co., 557 Pa. 595, 606, 735 A.2d 100,

106 (1999).    “[A] court is required to give effect to such language, if




                                    - 21 -
J-A17045-16


unambiguous, but to interpret it in favor of the insured, if otherwise.” Lititz

Mut. Ins. Co. v. Steely, 567 Pa. 98, 104, 785 A.2d 975, 978 (2001).

      Ambiguity in a contract exists “if the language at issue could reasonably

be construed in more than one way.” Id. Nevertheless, “[w]hether ambiguity

exists cannot be resolved in a vacuum, …but must instead be considered in

reference to a specific set of facts.” Id. In other words, the ambiguity cannot

be measured in the abstract; rather, the policy language must be tested

against the facts of the case. See Wagner v. Erie Ins. Co., 801 A.2d 1226

(Pa.Super. 2002), aff’d, 577 Pa. 563, 847 A.2d 1274 (2004). No ambiguity

exists if after close review, it appears that only a lawyer’s ingenuity has made

the language uncertain. Lower Paxton Twp. v. U.S. Fidelity & Guar. Co.,

557 A.2d 393, 402 (Pa.Super. 1989), appeal denied, 523 Pa. 649, 567 A.2d

653 (1989).

      “When analyzing a policy, words of common usage are to be construed

in their natural, plain, and ordinary sense.” Continental Cas. Co. v. Pro

Machine, 916 A.2d 1111, 1118 (Pa.Super. 2007). “[W]hen ‘the language of

the [insurance] contract is clear and unambiguous, a court is required to give

effect to that language.’” Mitsock v. Erie Ins. Exchange, 909 A.2d 828,

831 (Pa.Super. 2006) (quoting Madison Const. Co., supra at 606, 735 A.2d

at 106). A court must not distort the meaning of the language or resort to a

strained contrivance to find an ambiguity. Mitsock, supra.

         [T]he proper focus regarding issues of coverage under
         insurance contracts is the reasonable expectation[s] of the

                                     - 22 -
J-A17045-16


         insured. In determining the reasonable expectations of the
         insured, courts must examine the totality of the insurance
         transaction involved.        However, while reasonable
         expectations of the insured are focal points in interpreting
         the contract language of insurance policies, an insured may
         not complain that [its]…reasonable expectations were
         frustrated by policy limitations which are clear and
         unambiguous.      Like every other contract, the goal of
         interpreting an insurance contract is to ascertain the intent
         of the parties as manifested by the language of the policy.

St. Paul Mercury Ins. Co. v. Corbett, 630 A.2d 28, 30 (Pa.Super. 1993)

(en banc) (internal citations omitted).

      Additionally, the insured has the burden to prove a valid policy claim.

Antrim Mining, Inc. v. Pennsylvania Ins. Guar. Ass’n, 648 A.2d 532, 534

(Pa.Super. 1994), appeal denied, 540 Pa. 616, 657 A.2d 487 (1995) (citing

Riehl v. Travelers Insurance Co., 772 F.2d 19, 23 (3d Cir. 1985)). On the

other hand, where “an insurer relies on a policy exclusion as the basis for its

denial of coverage…, the insurer has asserted an affirmative defense, and

accordingly, bears the burden of proving such defense.” McEwing v. Lititz

Mut. Ins. Co., 77 A.3d 639, 646 (Pa.Super. 2013) (quoting Madison Const.

Co., supra at 605; 735 A.2d at 106).         Further, if the policy contains an

exception to an exclusion, the burden to prove whether the exception applies

falls again on the insured. Northern Ins. Co. of New York v. Aardvark

Assocs., Inc., 942 F.2d 189, 194-95 (3d Cir. 1991).

      Regarding the existence of a principal-agent relationship, that question

is ordinarily one of fact for the jury to determine. Joyner v. Harleysville

Ins. Co., 574 A.2d 664, 668 (Pa.Super. 1990), appeal denied, 527 Pa. 587,

                                    - 23 -
J-A17045-16


588 A.2d 510 (1991). Where the facts giving rise to the relationship are not

in dispute, however, the question is one which is properly decided by the

court. Breslin by Breslin v. Ridarelli, 454 A.2d 80, 82 (Pa.Super. 1982).

     An agency relationship may be created by any of the following ways:

        (1) express authority, (2) implied authority, (3) apparent
        authority, and/or (4) authority by estoppel.          Express
        authority exists where the principal deliberately and
        specifically grants authority to the agent as to certain
        matters. Implied authority exists in situations where the
        agent’s actions are “proper, usual and necessary” to carry
        out express agency. Apparent agency exists where the
        principal, by word or conduct, causes people with whom the
        alleged agent deals to believe that the principal has granted
        the agent authority to act. Authority by estoppel occurs
        when the principal fails to take reasonable steps to disavow
        the third party of their belief that the purported agent was
        authorized to act on behalf of the principal.

                                 *     *      *

        The basic elements of agency are the manifestation by the
        principal that the agent shall act for him, the agent’s
        acceptance of the undertaking and the understanding of the
        parties that the principal is to be in control of the
        undertaking.     The creation of an agency relationship
        requires no special formalities. The existence of an agency
        relationship is a question of fact. The party asserting the
        existence of an agency relationship bears the burden of
        proving it by a fair preponderance of the evidence. In
        establishing agency, one need not furnish direct proof of
        specific authority, provided it can be inferred from the facts
        that at least an implied intention to create the relationship
        of principal and agent existed.

V-Tech Services, Inc. v. Street, 72 A.3d 270, 278–79 (Pa.Super. 2013)

(citing Walton v. Johnson, 66 A.3d 782, 786–88 (Pa.Super. 2013)

(citations and quotation marks omitted)).


                                     - 24 -
J-A17045-16


      Instantly, Stonewall’s policy provides the following language:

         TO INDEMNIFY THE INSURED ANY AND ALL SUMS THE
         INSURED SHALL BECOME LEGALLY LIABLE TO PAY AS
         DAMAGES, INCLUDING LIABILITY ASSUMED BY THE
         INSURED UNDER ANY AGREEMENT OR CONTRACT, TO ANY
         PERSON OR PERSONS AS COMPENSATION FOR:

         (1)   PERSONAL INJURY

         (2)   PROPERTY DAMAGE

         (3)   EVACUATION EXPENSES

         TO REIMBURSE THE INSURED FOR COSTS PAID OR
         INCURRED BY THE INSURED IN CONNECTION WITH
         PERSONAL INJURY, PROPERTY DAMAGE OR EVACUATION
         EXPENSES ARISING OUT OF AN OCCURRENCE TO WHICH
         THIS POLICY APPLIES. SUCH COSTS ARE PAYABLE IN
         ADDITION TO ANY LIMIT OF INSURER’S LIABILITY FOR
         ULTIMATE NET LOSS, BUT THE [INSURER] SHALL NOT BE
         OBLIGATED TO PAY ANY GREATER PROPORTION OF SUCH
         COSTS THAN THE AMOUNTS OF ULTIMATE NET LOSS
         PAYABLE UNDER THIS POLICY BEARS TO THE TOTAL OF ALL
         ULTIMATE   NET   LOSS    RESULTING    FROM    SUCH
         OCCURRENCE.

         ARISING OUT OF ANY OCCURRENCE OR OCCURRENCES
         CAUSED BY OR GROWING OUT OF THE INSURED’S
         OPERATIONS   ANYWHERE    IN  THE WORLD,  AND
         OPERATIONS INCIDENTAL THERETO.

(CRL 1985 Policy at 2; R.R. at 001417a). The policy defines “occurrence” as

“an event, or continuous repeated exposure to conditions which cause

personal injury, property damage or evacuation expenses.” (Id. at 3; R.R. at

001418a). The policy defines “property damage” as “(1) physical injury to or

destruction of tangible property (other than property owned by the named

insured) which occurs during the policy period, including loss of use thereof at


                                     - 25 -
J-A17045-16


any time resulting therefrom, or (2) loss of use of tangible property which has

not been physically injured or destroyed provided such loss of use is caused

by an occurrence during the policy period, but (2) above shall not include

evacuation expenses.” (Id. at 4; R.R. at 001419a).

      In preparation for analyzing the application of Stonewall’s policy to the

Elkhart site, the trial court relied on its interpretation of the substantially

similar “Operations Clause” in Continental’s policy, as follows:

         The acquired assets at issue here are parcels of real
         property located in several states that suffer from
         environmental contamination for which Conrail has been
         found liable under the Comprehensive Environmental
         Response Compensation and Liability Act (“CERCLA”).
         Under CERCLA, a current owner or operator of a
         contaminated site may be held strictly and wholly liable for
         the environmental clean-up of the site, even if the causes of
         that contamination predate its ownership or operation of the
         site.

                                  *     *      *

         [T]he opening provisions of the [p]olicies [provide]:

            TO INDEMNIFY THE INSURED FOR ANY AND ALL
            SUMS THE INSURED SHALL BECOME LEGALLY LIABLE
            TO PAY AS DAMAGES, INCLUDING LIABILITY
            ASSUMED BY THE INSURED UNDER ANY AGREEMENT
            OR CONTRACT, TO ANY PERSON OR PERSONS AS
            COMPENSATION FOR:

                                  *     *      *

            (b) DAMAGE TO OR DESTRUCTION OF PROPERTY,
            INCLUDING LOSS OF USE THEREOF, EXCLUDING
            INSURED’S OWN PROPERTY BUT INCLUDING
            PROPERTY OF OTHERS IN INSURED’S CARE,
            CUSTODY OR CONTROL;


                                      - 26 -
J-A17045-16


                                *     *      *

          ARISING  OUT   OF   ANY  OCCURRENCE   OR
          OCCURRENCES CAUSED BY OR GROWING OUT OF
          THE INSURED’S OPERATIONS ANYWHERE IN THE
          WORLD, AND ALL OPERATIONS INCIDENTAL
          THERETO.

       The [p]olicies further provide that the “Named Insured” is
       Conrail, and “[o]ccurrence means an event, or continuous
       or repeated exposure to conditions which cause injury or
       damage during the term of the policy.”

                                *     *      *

       In 1976, when the first [p]olicies were executed, CERCLA
       did not yet exist, so such far[-]reaching environmental
       liability was not contemplated by Conrail and its insurers.
       Conrail had expressly disclaimed assumption of its
       predecessor’s liabilities in its acquisition agreements, and
       the [p]olicies did not include such predecessors in their
       definition of the “Insured.”

       In enacting the Rail Act, Conrail’s enabling legislation,
       Congress intended for Conrail to get a “fresh start” with a
       “clean slate.” Then, in 1980, Congress enacted CERCLA and
       radically changed the legal landscape in which Conrail and
       its insurers had been operating.

       CERCLA was enacted to ensure that hazardous pollutants
       which had accumulated in the nation’s land and water
       through decades of industrial activity were removed,
       contained, or otherwise remediated. Under CERCLA, the
       government may opt to pursue only one potentially
       responsible party for the entire cost of the clean-up, and
       that party must then seek contribution from other
       responsible parties. In this case, Conrail has apparently
       settled or entered into tolling agreements with respect to its
       contribution claims against the reorganized Penn Central, so
       it does not have to shoulder the entire burden of the clean-
       up costs alone. However, there may be other potentially
       responsible parties who are defunct, insolvent, or otherwise
       unable to contribute their fair share to the clean-up costs,
       so Conrail may have to cover their portion too.

                                    - 27 -
J-A17045-16



       As noted by Judge Wisdom of the Special Regional Rail
       Reorganization Court, there is a potential conflict between
       the Rail Act’s fresh start policy and CERCLA’s broad liability
       provisions. However, he found that

          CERCLA takes precedence over this general fresh start
          policy because Congress specifically stated that
          CERCLA liability arises “[n]otwithstanding any other
          provision or rule of law.” In a conflict, CERCLA
          prevails. [As a result,] the fresh start policy may work
          to limit [Conrail’s] liability to post-conveyance
          contamination; it does not, however, affect our
          decision to leave for the district courts the decision
          whether to impose joint and several liability [on
          Conrail under CERCLA].

       In reaching this conclusion, Judge Wisdom recognized that
       where the environmental harm caused by several potentially
       responsible parties is not clearly divisible, joint and several
       liability may be imposed, and, as a result, Conrail may end
       up paying for contamination that was caused by others,
       prior to 1976. However, just because Conrail may be found
       liable to pay for the clean-up of pollution that was not
       caused by its own operations, that does not necessarily
       mean its general liability insurers must reimburse it for such
       costs under the [p]olicies.

                                *     *      *

       The language of the [p]olicies makes clear that the insurers
       will reimburse Conrail only for the damages (clean-up costs)
       arising out of an occurrence (environmental contamination)
       that was caused by or grew out of Conrail’s operations.
       Where Conrail’s CERCLA liability is premised solely upon its
       status as a current, passive owner of the contaminated site,
       and not as a polluting operator, then the pre-existing
       environmental condition giving rise to the damages for
       which indemnification is sought by Conrail was not caused
       by, nor did it grow out of, Conrail’s railroad operations.
       However, where Conrail contributed to that condition, i.e.,
       the contamination, by discharging some of the pollutants
       itself, then the occurrence giving rise to the damages for


                                    - 28 -
J-A17045-16


         which Conrail seeks indemnification was caused by and grew
         out of Conrail’s operations.

         The [p]olicies do not require that the damages incurred by
         Conrail arise out of an occurrence caused solely or wholly
         by Conrail. Nor do they expressly provide coverage for
         damages caused in part by Conrail’s operation. However,
         the phrase “growing out of” Conrail’s operations can
         reasonably be interpreted to include contamination caused
         only partially by Conrail. Therefore, where Conrail is liable
         because it caused some of the pollution itself, the insurers
         must provide coverage for the entire amount of damages
         that Conrail must pay, even if some of the damages arose
         out of pollution that was caused by other entities.

         This result is somewhat unusual—where Conrail did nothing
         wrong, it is not covered, but where it is at least partially at
         fault, it is entirely covered. However, that is the result
         dictated by a plain reading of the language of the Operations
         Clause at issue.

(Trial Court Opinion, filed November 13, 2013, at 1-7) (footnotes omitted).

      Regarding the specific issue of coverage under Stonewall’s policy, the

trial court applied its analysis of Continental’s similar policy language to the

facts of the Elkhart site contamination and Stonewall’s policy as follows:

         In this case, Conrail has the burden of proof with respect to
         the general coverage language of the [p]olicies. In other
         words, Conrail must show that it had to pay money damages
         to third parties for physical injury to or destruction of their
         tangible property, which injury or destruction occurred
         during the policy period 1985-1986 and was caused by an
         event, or continuous or repeated exposure to conditions,
         which event or conditions were caused by or grew out of
         Conrail’s operations.

         Conrail has failed to meet its burden with respect to the
         Elkhart [s]ite because the one documented spill of [CCl4]
         occurred before Conrail came into existence and there were
         no specific spills of TCE identified for the [p]olicy year at
         issue here. The evidence regarding the alleged dumping of

                                     - 29 -
J-A17045-16


           solvents by Conrail employees at the car shop at Elkhart
           does not identify what solvent/degreaser was purportedly
           spilled, although Conrail speculates that it was something
           “like TCE.” Conrail therefore cannot prove that its dumping
           activities caused the specific contamination that it was
           forced to pay to remediate at Elkhart. Furthermore, no year
           was identified in connection with those vaguely remembered
           occurrence(s). As a result, Conrail cannot show an event,
           or continuous or repeated exposure to conditions, which
           caused injury or destruction to a third party’s property
           during the term of the [p]olicies at issue here.

(Trial Court Opinion, filed October 28, 2014, at 4) (footnotes omitted).

      Regarding the specific issue of coverage under Continental’s policy, the

trial court applied its analysis of Continental’s policy language to the facts of

the Hollidaysburg, Elkhart, Douglasville, Conway, Beacon, and Paoli sites as

follows:

           In this case, Conrail has the burden of proof with respect to
           the Operations Clause and the other general coverage
           language of the [p]olicies. In other words, Conrail must
           show that it had to pay money damages as compensation
           for physical damage to a third party’s property arising out
           of an event, or continuous or repeated exposure to
           conditions, which caused injury or damage during the term
           of the policy, which event or conditions were caused by or
           grew out of Conrail’s operations.

                                   *     *      *

           Conrail has…failed to meet its burden with respect to the
           Elkhart [s]ite because the one documented spill of [CCl4]
           occurred before Conrail came into existence and there were
           no specific spills of TCE identified for any of the [p]olicy
           years at issue here. The alleged dumping of solvents by
           Conrail employees at the car shop at Elkhart is not covered
           because no year was identified in connection with those
           vaguely remembered occurrence(s). As a result, Conrail
           cannot show “an event, or continuous or repeated exposure
           to conditions which cause injury or damage during the tern

                                       - 30 -
J-A17045-16


       of” any of the [p]olicies at issue here. Furthermore, the
       evidence cited by Conrail does not identify what
       solvent/degreaser was purportedly dumped at the car shop,
       although Conrail speculates that it was something “like
       TCE.”

       Conrail failed to meet its burden with respect to the Control
       Tower [a]rea at the Beacon [s]ite because Conrail has not
       shown that any spill occurred at that [s]ite during its tenure
       there.

       Conrail has also failed to show an occurrence caused by its
       operations and causing damage within the term of any
       [p]olicy prior to the 1981 oil spill at the Charles River
       Chamber [a]rea at Beacon [s]ite, prior to the 1977 oil spill
       at the Conway site, and prior to a 1979 PCB spill at the Paoli
       [s]ite, so the [p]olicies for the years prior to those
       occurrences are not implicated at those [s]ites. Douglasville
       is the only [s]ite for which Conrail appears to have met its
       burden of proof regarding relevant occurrences implicating
       all Continental [p]olicies because there is no dispute
       between the parties that Conrail sent its waste oil there
       between 1976 and 1985.

       [Continental] argue[s] with respect to the Douglasville oil
       recycling [s]ite that there is no coverage because Conrail
       did not contribute to the pollution by discharging some of
       the waste there itself. However, the Operations Clause in
       the [p]olicies provides coverage not only for occurrences
       directly “caused by” Conrail’s operations, but also
       occurrences “growing out of the insured’s operations
       anywhere in the world, and all operations incidental
       thereto.” The mistreatment of Conrail’s waste, which it sent
       to a third party for recycling or disposal, necessarily grows
       out of Conrail’s operations and is incidental thereto.

       If Conrail fails to meet its burden of proof as to coverage
       with respect to a specific site, then [Continental’s] summary
       judgment motions must be granted. Summary judgment
       will therefore be granted in favor of [Continental] with
       respect to the Hollidaysburg and Elkhart [s]ites, the Control
       Tower [a]rea at the Beacon [s]ite, the pre-1981 [p]olicies
       at the Charles River Chamber [a]rea of the Beacon [s]ite,


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       the pre-1977 [p]olicies at the Conway site, and the pre-
       1979 [p]olicies at the Paoli [s]ite.

       With respect to the 1981 occurrence at the Charles
       River/Beacon [s]ite, the 1977 and 1979 occurrences at the
       Conway [s]ite, and the multiple occurrences at Paoli
       beginning in 1979, [Continental] contend[s] that Conrail has
       failed to show that the costs it paid for more general site-
       wide clean-up long after each specific spill occurred arose
       out of those occurrences. [Continental] argue[s] that each
       such occurrence was promptly remediated by Conrail at the
       time it happened, or shortly thereafter. In [Continental’s]
       view, those specific, immediately remediated, spills did not
       contribute to the general pollution of the [s]ite which Conrail
       eventually had to pay to remediate.

       [Continental’s] argument raises disputed issues of fact as to
       whether each of the specifically identified occurrences was
       a contributing cause of the larger [s]ite pollution that
       ultimately had to be remediated at great cost to Conrail and
       others. This is a battle for the experts to fight at trial, not
       for the court to resolve now as a matter of law.

       [Continental] also argue[s] that the documented spills at
       the Paoli [s]ite were de minimus compared to the decades
       of PCB burps and drips that preceded Conrail’s take-over of
       the Paoli [s]ite.     Similarly, [Continental] argue[s] that
       Conrail’s oil spills at Conway and Beacon Park [were] de
       minimus compared to the overall pollution at the [s]ites.
       The [p]olicies do not speak to de minimus occurrences.
       Instead, they provide coverage for property damage arising
       out of “any occurrence” arising out of Conrail’s operations.
       Therefore, if the spills that occurred on Conrail’s watch were
       a contributing cause to the environmental damage later
       remediated at the Conway, Beacon Park and Paoli [s]ites,
       then they are covered occurrences under the [p]olicies.

       For now, the court can rule only that Conrail has shown
       occurrence(s) potentially covered by the [p]olicies
       beginning in 1981 at the Charles River/Beacon [s]ite, in
       1977 at the Conway [s]ite, in 1979 at the Paoli [s]ite, and
       in 1976 at Douglasville.




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J-A17045-16


          With respect to the [s]ites and [p]olicies for which Conrail
          has shown a potentially covered occurrence, the burden
          then shifts to [Continental] to show that each occurrence at
          each [s]ite falls within the “Pollution Exclusion.” Since all
          such occurrences involve the discharge, dispersal, release
          or escape of pollutants, [Continental has] met [its] initial
          burden. With respect to the [p]olicies in effect from 1985-
          1986 and onward, which contain no Exception to the
          Pollution Exclusion, the inquiry ends, and summary
          judgment must be granted in favor of [Continental] with
          respect to all remaining [s]ites and those post-1985
          [p]olicies.

          However, the [p]olicies in effect from 1976-1985 contain a
          “sudden and accidental” or “accidental” Exception to the
          Pollution Exclusion, which this court has previously ruled are
          both synonymous with the term “unexpected and
          unintended.” While the burden of proving an exception to
          an exclusion may fall on the insured, in this case that initial
          burden is easily met with a description of the nature of the
          occurrence and Conrail’s assertion that it did not expect or
          intend the occurrence. Such assertions of innocence are
          subject to the Nanty-Glo rule[1] and preclude a grant of
          summary judgment.

          As a practical matter, the burden then, necessarily, shifts to
          [Continental] to proffer evidence that the polluting
          discharge was expected or intended.          For instance,
          [Continental] contend[s] that the PCB railcar burps that
          occurred at the Paoli site were expected and intended
          because the railcars were designed by General Electric to
          release PCB laden oil in the event of overheating or other
          equipment malfunction, and they regularly did so. The
          question of whether such designer-induced burps were
          expected or intended by Conrail is an issue of fact for trial.
          Furthermore, not all of the spills documented at the Paoli
          site during Conrail’s tenure were burps, so some of these


____________________________________________


1See Borough of Nanty-Glo v. American Surety Co. of New York, 309
Pa. 236, 163 A. 523 (1932) (holding oral testimony of moving party, even if
uncontradicted, will not afford sufficient basis for entry of summary judgment
because credibility of testimony is for jury to decide).

                                          - 33 -
J-A17045-16


       spills may well prove to have been unexpected and
       unintended.

       [Continental] also argue[s] that the improper disposal of
       waste materials at Douglasville was expected and intended
       because Berks Associates did it deliberately. However, the
       proper test is whether the insured, Conrail, expected or
       intended the release of waste oil at the [s]ite, not whether
       a third party, who is a stranger to the [p]olicies, did. Since
       Conrail’s employees claim they did not know of, expect, or
       intend Berks’ apparently purposeful polluting activities,
       Conrail’s knowledge, expectation, and intent become issues
       of fact for trial.

       [Continental] further argue[s] that coverage is barred at the
       Beacon, Conway and Paoli [s]ites, by the “Known Loss
       Doctrine,” i.e., that Conrail knew the [s]ites were polluted
       when it acquired them and therefore knew that they were
       polluted when it applied for the [p]olicies at issue here.
       Under the Known Loss Doctrine, the question for trial is
       “whether the evidence shows that the insured was charged
       with knowledge which reasonably shows that it was, or
       should have been, aware of a likely exposure to losses which
       would reach the level of coverage” provided by the [p]olicies
       at issue.

       Conrail asserts that it did not know, during the 1976 through
       1985 period when it applied for the [p]olicies here, the
       extent of the loss or damages it would later be required to
       pay for remediation of the contamination, much of which
       was caused by others before Conrail even came into being.
       Whether that is a true statement is for the finder of fact to
       determine.

       [Continental’s] final argument is that any fines and penalties
       Conrail paid in connection with any of the [s]ites are not
       recoverable under the [p]olicies because they do not
       constitute “damages” paid by Conrail as “compensation
       for…damage or destruction of property” and coverage for
       them is barred as a matter of public policy.

       With respect to the [Charles River/Beacon, Conway, Paoli,
       and Douglasville s]ites, Conrail paid approximately $1.2
       million to governmental entities in connection with the

                                   - 34 -
J-A17045-16


         clean-up at the Conway [s]ite only.        Of this amount,
         [Continental] contest[s] coverage with respect to $616,000
         in civil penalties Conrail paid to the PaDEP and $91,200 it
         paid to the Borough of Conway.

         Both the state and local fines Conrail paid were assessed as
         “penalties” and were in addition to the costs Conrail was
         required to incur for corrective or remedial action, i.e.,
         clean-up and prevention of further violations. Since the
         state legislature and the municipality termed them
         “penalties,” the intent was to punish Conrail rather than
         compensate other property owners for damage.               The
         [p]olicies allow for the recovery only of amounts paid as
         “compensation.” Furthermore, Pennsylvania law prohibits
         the recovery of punitive or penal damages under insurance
         policies like the ones at issue here. Therefore, Conrail is not
         entitled to recover from [Continental] the civil penalties it
         paid to the PaDEP and the Borough of Conway.

(Trial Court Opinion, filed October 28, 2014, at 12-19) (footnotes omitted).

We see no reason to disrupt the court’s sound analysis regarding the

interpretation of the insurance policy language and the application of the

language to the sites in question. See Chenot, supra; Wagner, supra; St.

Paul Mercury Ins., supra.          See also Antrim Mining, Inc., supra;

McEwing, supra; Northern Ins. Co. of New York, supra. Consequently,

Conrail’s first issue on appeal merits no relief.

      Regarding Conrail’s second issue, that the trial court incorrectly found

Conrail did not damage third-party property, even if Conrail did damage third-

party property by polluting groundwater at the Hollidaysburg site, Conrail is

still not entitled to relief. As the insured, Conrail bears the burden to prove a

valid policy claim. See Antrim Mining, Inc., supra. We observe nothing in

the record to indicate the groundwater pollution occurred during any of the

                                      - 35 -
J-A17045-16


policy years at issue in this case. Therefore, assuming without deciding the

polluted groundwater constituted damage to third-party property, Continental

would not be responsible for indemnification. See id. Accordingly, Conrail’s

second issue merits no relief.

      With respect to Conrail’s third claim on appeal, we observe an issue of

fact arguably exists regarding the existence of a principal-agent relationship

between Mr. Ambriano and Lloyd: Mr. Ambriano stated that he understood he

was authorized to sign the Lloyd policy; EWI, Conrail’s broker, dealt with Mr.

Ambriano; Mr. Ambriano was the sole and exclusive agent for all of PLAR’s

business in the United States; Lloyd was a PLAR member; the majority of the

of-record policies issued by PLAR were direct policies; PLAR negotiated policies

for individual members; and Mr. Ambriano was highly regarded in the

international insurance industry.     See Chenot, supra; Joyner, supra;

Breslin, supra.    Despite the issue of fact, we note the finding of such a

relationship is irrelevant regarding the Elkhart, Hollidaysburg, Beacon, and

Conway (prior to the 1977 oil spill) sites. Lloyd’s purported policy only covered

“occurrences” on all of Conrail’s sites from April 1, 1978, to April 1, 1979, and

the contamination that occurred at the Elkhart, Hollidaysburg, Beacon, and

Conway (prior to the 1977 oil spill) sites falls outside of the policy coverage

based on the court’s foregoing application of its interpretation of Continental’s

similar policy language to the sites at issue on appeal. Therefore, Conrail’s

argument regarding the existence of a principal-agent relationship as it


                                     - 36 -
J-A17045-16


pertains to the Elkhart, Hollidaysburg, Beacon, and Conway (prior to the 1977

oil spill) sites merits no relief.

      With respect to the Douglasville, Paoli, and Conway (after the 1977 oil

spill) sites, however, Lloyd’s purported policy may be implicated if the

“occurrences” happened within the policy period.      In order to determine

whether Lloyd is required to indemnify Conrail for any “occurrences” under a

binding insurance contract, a finder-of-fact must first decide if a principal-

agent relationship existed between Mr. Ambriano and Lloyd. Based on this

record, we observe an issue of fact exists with regard to Mr. Ambriano and

Lloyd’s alleged principal-agent relationship. See Chenot, supra. Because

the facts regarding the existence of a principal-agent relationship are in

dispute, this issue is for the fact-finder. Joyner, supra; Breslin, supra.

      Based on the foregoing, we conclude Conrail produced sufficient facts to

defeat summary judgment on the question of whether there was a principal-

agent relationship between Mr. Ambriano and Lloyd. Accordingly, we reverse

summary judgment on this claim and remand for further proceedings.

      Judgment affirmed in part, reversed in part, and case remanded for

further proceedings. Jurisdiction is relinquished.




                                     - 37 -
J-A17045-16


Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 3/23/18




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