Pharmacia & Upjohn Co. v. American Ins. Co.

• Citation: 719 A.2d 1265,316 N.J. Super. 161
• Parties: PHARMACIA & UPJOHN COMPANY, Plaintiff-Appellant, v. AMERICAN INSURANCE COMPANY, Associated Indemnity Corp., and Fireman's Fund Indemnity Corp., Defendants-Respondents.
• Decision Date: 08 October 1998
• Court: New Jersey Superior Court

719 A.2d 1265

316 N.J. Super. 161

PHARMACIA & UPJOHN COMPANY, Plaintiff-Appellant, v. AMERICAN INSURANCE COMPANY, Associated Indemnity Corp., and Fireman's Fund Indemnity Corp., Defendants-Respondents.

Superior Court of New Jersey, Appellate Division.

Argued September 15, 1998.

Decided October 8, 1998.

Kevin H. Michels, Stirling, for plaintiff-appellant (Michels & Hockenjos, attorneys; Mr. Michels, on the brief).

Marybeth Witecki, Rutherford, for defendants-respondents (Caron, McCormick, Constants & Goldberg, attorneys; Ms. Witecki, on the brief).

Before Judges PRESSLER, BROCHIN and KLEINER.

PER CURIAM.

This is an environmental-coverage case involving the single issue of choice of law. Plaintiff Pharmacia & Upjohn Company (Pharmacia), successor in interest to the insured, Electro-Nucleonics, Inc. (ENI), brought this declaratory judgment action seeking an adjudication that its liability for environmental contamination at a Pennsylvania site is covered by the insurance policies issued to ENI by defendants, American Insurance Company, Associated Indemnity Corp., and Fireman's Fund Indemnity Corp. (collectively, the insurer). It appeals, on leave granted, from a partial summary judgment entered by the Law Division declaring that Pennsylvania law rather than New Jersey law governs the interpretation of the pollution-exclusion clause of the policies. The New Jersey Supreme Court, in the Pfizer trilogy,¹ has recently clarified the principles governing choice of law in insurance-contract interpretation and, more particularly, insurance contracts providing coverage for environmental damage caused by the insured. We are satisfied that those principles mandate the application of New Jersey law to the policies here. Accordingly, we reverse and remand.

The material facts are simple and undisputed. ENI, a research and development corporation, was incorporated in New Jersey in 1960, and its principal place of business was then and for many years after in Fairfield, New Jersey. While most of its manufacturing facilities were initially located in this state, by the mid-1980's, in addition to its twelve manufacturing sites in New Jersey, it operated five in Maryland and several in other states. Its policies of insurance for the years 1984 through 1989 were negotiated on its behalf by Richard Abajian, an ENI officer based in Fairfield, with the Purpose Agency in Fair Lawn, New Jersey. All negotiations were conducted in New Jersey, the policies were delivered to ENI in New Jersey, and the premiums were billed by and paid to Purpose in New Jersey. The policies themselves were silent as to the specific locations of the risks.

In 1989, ENI merged with another New Jersey corporation, Pharmacia Acquisition Corporation, which was a subsidiary of Pharmacia, Inc. Pharmacia Acquisition Corporation's name was then changed to Pharmacia ENI Diagnostics. The principal place of business remained in Fairfield. By the end of 1989, the corporate name was changed to Pharmacia Diagnostics, Inc. and again in 1992 to 350 Passaic Associates, Inc. All pertinent aspects of its doing business remained essentially the same. In 1996, Pharmacia Diagnostics, Inc. lost its New Jersey identity by merger into Pharmacia & Upjohn Company, a Delaware corporation with its principal place of business in Michigan.

The gravamen of Pharmacia's coverage claims against the defendants arises out of a clean-up action taken by the Pennsylvania Department of Environmental Protection (PDEP) in respect of a Pennsylvania company, Industrial Solvents and Chemical Company (ISCC), which reprocessed commercial solvents at its Pennsylvania location. In 1990 the PDEP notified ENI that it was one of the parties potentially responsible for the contamination at the ISCC site by reason of its having shipped to it waste acetone for reprocessing from one of its Maryland manufacturing sites. More specifically, the PDEP claimed that ENI had shipped approximately 13,720 gallons of waste acetone to ISCC between January 1985 and May 1989. The three defendants had, collectively, issued general casualty and liability policies to ENI and its New Jersey corporate successors for the period in question, and ENI looked to its insurers for coverage of the PDEP claim. The insurers disclaimed, primarily, as we understand it, on the basis of Pennsylvania's narrow interpretation of the "sudden and accidental" language of the then standard pollution exclusion of general casualty and liability coverage. In any event, plaintiff ultimately settled the claim against it by the PDEP by paying about $50,000 to the ISCC Site Buy-Out Settlement Trust Fund. It then commenced this declaratory judgment action, alleging that the more liberal New Jersey interpretation of the pollution-exclusion provision applied.² Defendants moved for partial summary judgment declaring the applicability of Pennsylvania law. The trial judge, apparently of the view that the site of the contamination was the dispositive choice-of-law factor, granted that relief. The Supreme Court in Pfizer v. Emp. Ins. of Wausau, 154 N.J. 187, 197, 712 A.2d 634 (1998), has made clear its rejection of a bright-line rule mandating application of the law of the place where the contamination has occurred. It opted instead for a case-by-case analysis of the factors informing choice of law decisions prescribed by Restatement (Second) of Conflict of Laws § 6 (1969) in order to identify, consistently with the principles of § 193 of the Restatement, the state with the dominant interest in the matter. It is unnecessary for us to retread the ground so recently and carefully covered by the Supreme Court. Suffice it to say that the methodology laid out by the Court in Pfizer requires consideration of the competing interests of the states involved, the national interests of commerce among the states, the interests of the parties and the interests underlying contract law, and the interests of judicial administration. Pfizer, supra, 154 N.J. at 198,712 A.2d 634. We consider this record not only in the light of these factors but also in the light of Pfizer's express approval of General Ceramics Inc. v. Firemen's Fund Ins., 66 F.3d 647 (3d Cir.1995), and of this court's adoption of the General Ceramics rationale in J. Josephson v. Crum & Forster, 293 N.J.Super. 170, 679 A.2d 1206 (App.Div.1996).

To begin with, we point out that § 193 of the Restatement requires application of the law of "the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties...." Irrespective of what the parties' understanding here may have been in respect of the principal location of the risk in view of ENI's out-of-state operations, we think it plain that in any event New Jersey's interest, as defined by General Ceramics and J. Josephson, is of paramount significance. As expressed by J. Josephson, supra, 293 N.J.Super. at 188, 679 A.2d 1206, New Jersey's liberal interpretation of the pollution-exclusion clause

was born of a concern for insureds who purchased coverage based on the state's regulatory approval of the standard CGL policies. The underlying policies prompting this interpretation by our

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