American Employers' Ins. Co. v. Elf Atochem North America, Inc.

• Decision Date: 11 April 1995
• Citation: 280 N.J.Super. 601,656 A.2d 58
• Parties: AMERICAN EMPLOYERS' INSURANCE COMPANY and Commercial Union Insurance Company (as successor to certain obligations of Employers' Surplus Lines Insurance Company and Employers' Liability Assurance Corporation, Ltd.), Plaintiffs-Appellants, v. ELF ATOCHEM NORTH AMERICA, INC., Pennwalt Corporation and its successors and assigns, Defendants-Respondents, and The Travelers Indemnity Company, International Insurance Company, North River Insurance Company, Certain Underwriters at Lloyd's London and Certain Companies in the London Insurance Market, Defendants-Appellants, 1 and The Aetna Casualty and Surety Company, Allianz Underwriters Insurance Company, Allstate Insurance Company, as successor to Northbrook Excess and Surplus Insurance Company, formerly Northbrook Insurance Company, American Home Assurance Company, California Union Insurance Company, Continental Casualty Company, the Continental Insurance Company, Employers Insurance of Wausau, a Mutual Company, Federal Insurance Company, Fireman's Fund Insurance Company, First State Insurance Company, Granite State Insurance Company, Great American Insurance Company, the Home Insurance Company, Insurance Company of North America, Insurance Company of the State of Pennsylvania, the New Jersey Property-Liability Insurance Guaranty Association, North Star Reinsurance Corporation, Zurich Insurance Company, and John Does One Through Two Hundred, Defendants.
• Court: New Jersey Superior Court — Appellate Division

Page 601

280 N.J.Super. 601

656 A.2d 58

AMERICAN EMPLOYERS' INSURANCE COMPANY and Commercial Union Insurance Company (as successor to certain obligations of Employers' Surplus Lines Insurance Company and Employers' Liability Assurance Corporation, Ltd.), Plaintiffs-Appellants, v. ELF ATOCHEM NORTH AMERICA, INC., Pennwalt Corporation and its successors and assigns, Defendants-Respondents and The Travelers Indemnity Company, International Insurance Company, North River Insurance Company, Certain Underwriters at Lloyd's London and Certain Companies in the London Insurance Market, Defendants-Appellants, ¹ and The Aetna Casualty and Surety Company, Allianz Underwriters Insurance Company, Allstate Insurance Company, as successor to Northbrook Excess and Surplus Insurance Company, formerly Northbrook Insurance Company, American Home Assurance Company, California Union Insurance Company, Continental Casualty Company, the Continental Insurance Company Employers Insurance of Wausau, a Mutual Company, Federal Insurance Company, Fireman's Fund Insurance Company, First State Insurance Company, Granite State Insurance Company Great American Insurance Company, the Home Insurance Company, Insurance Company of North America, Insurance Company of the State of Pennsylvania, the New Jersey Property-Liability Insurance Guaranty Association, North Star Reinsurance Corporation, Zurich Insurance Company, and John Does One Through Two Hundred, Defendants.

Superior Court of New Jersey,

Appellate Division.

Argued March 6, 1995.

Decided April 11, 1995.

James W. Christie, Philadelphia, PA, for appellant American Employers' Ins. Co. (Christie, Pabarue, Mortensen & Young, attorneys; James A.A. Pabarue, Brian C. Vance and Maria E. Matteo, of counsel and on the briefs).

David J. Woll, New York City, admitted pro hac vice, for appellant the Travelers Indemn. Co. (Ribis, Graham & Curtin, Morristown, attorneys; Barry R. Ostrager, New York City, pro hac vice and Mr. Woll, of counsel, Joseph R. McDonough, Morristown, on the brief).

William McGuire, Newark, for appellant Certain Underwriters at Lloyd's London and Certain Companies in the London Ins. Market (Tompkins, McGuire & Wachenfeld, Newark, attorneys; Martin R. Baach, Mark J. Leimkuhler and Susan M. Guindi, Washington, DC, on the brief).

Gregory G. Tole, Newark, for appellants Intern. Ins. Co. and North River Ins. Co. (Robinson, St. John & Wayne, attorneys; Mr. Tole, on the brief).

Eugene R. Anderson, New York City, for respondent Elf Atochem North America, Inc. (Anderson, Kill, Olick & Oshinsky, attorneys; Mr. Anderson, Paul E. Breene and Jean M. Farrell, on the brief).

Before Judges DREIER, WEFING and BRAITHWAITE.

The opinion of the court was delivered by

DREIER, P.J.A.D.

Plaintiffs and certain of the defendant insurance companies appeal on leave granted in these consolidated cases from an order dissolving a temporary restraining order and denying a preliminary and permanent injunction prohibiting parallel litigation in Texas. Plaintiffs had instituted a declaratory judgment action in New Jersey against their insured and other carriers to determine their respective insurance coverages for various multi-state environmental and toxic tort claims against the insured.

In 1987, defendants Elf Atochem North America, Inc. and Pennwalt Corporation (collectively, Elf Atochem) ² notified plaintiffs of an environmental claim against them for alleged liabilities for the company's Dunlap Towing site in the State of Washington. Over the next two years, plaintiffs were notified of additional claims concerning thirty-six sites in fourteen states. The number of sites and jurisdictions has since grown to sixty-six sites in nineteen states. Plaintiffs requested information from defendant concerning the claims. On January 16, 1991, defendant gave notice of substantial private party environmental claims concerning its Bryan, Texas plant. The claims were brought by people who lived or worked in the area of the Bryan plant for exposure to arsenic and other substances causing bodily injury and property damage.

The private party claims relative to the Bryan site evolved into seventeen lawsuits including a 30,000 member certified class action (Hayden v. Elf Atochem North Am., Inc., C.A. No. H-92-1054 (U.S.D.C., S.D.Tex.; Houston Div.1992)). At a mediation session, plaintiffs learned that defendant thought it was in "poor shape from a liability perspective." Defendant later advised plaintiffs that another group of approximately twelve Bryan claimants were demanding substantial additional money.

On or about August 23, 1994, defendant gave plaintiffs and the other insurers global settlement and individual demands which have been supplemented as the Texas cases progressed. ³ The insurers were given less than a week to accept defendant's initial $23,000,000 demand, and defendant asked for standstill agreements with promises not to file suit against defendant. Plaintiffs did not agree.

Defendant indicated in a letter dated June 27, 1991 that the primary coverage was exhausted for certain years, and on August 23, 1994, defendant told plaintiffs that its primary coverage was completely exhausted as to the Bryan claims, and it was going to attempt to negotiate a settlement. ⁴

On August 29, 1994, plaintiffs instituted this New Jersey action against defendant and more than two dozen defendant insurance companies which, like plaintiffs, had issued comprehensive general liability insurance policies to defendant. The declaratory judgment action sought a declaration in one forum of the parties' rights and responsibilities under the insurance policies for claims against defendant in various states. The New Jersey action involves all of the sixty-six sites in nineteen states, with a potential liability of hundreds of millions of dollars. One of the sites covered by the suit includes the claims at Bryan, Texas.

During September 1994, defendant reached the tentative settlement agreements noted earlier with all pending Bryan claimants, some of whom would share in defendant's insurance recoveries, and on September 21, plaintiffs were informed of the pending settlements. The Hayden class action settlement is still awaiting the approval of the Federal District Court, and there may be some individual claims still open.

Defendant filed the Texas insurance coverage action on October 12, 1994, five weeks after the New Jersey action was instituted, seeking a declaration of insurance policy rights and obligations as it pertained to the Bryan, Texas site. (Defendant is also seeking statutory, common law and contractual relief and punitive damages against the insurers because of bad faith, fraud and violation of the Texas Unfair Claims Handling Practices Act). Defendant claims that the Texas action was brought in Harrison County, Texas, 200 miles from Bryan, because a site-specific claim can be tried there in less than two years of filing, where there would be a much longer delay in Brazos County, where Bryan is located. ⁵

Plaintiffs obtained an ex parte temporary restraining order from the New Jersey trial judge on November 4, 1994, enjoining defendant from proceeding with the Texas action. Defendant and the Bryan plaintiffs then claimed that enjoining the Texas action would endanger the proposed settlements since the acceptance of the settlements was based on the insurance coverage litigation occurring in a Texas court. They, therefore, moved to vacate the temporary restraining order.

Travelers Indemnity Company and the other non-plaintiff insurers were not served before the hearing on vacating the TRO, but the judge thought it was reasonable that only the moving party was served. Travelers' attorney, however, attended the November 10 hearing, but he was unprepared to argue the merits of defendant's claim to vacate the TRO. After arguments at the nonevidentiary hearing of November 10, 1994, the judge on November 11 telephoned the parties with his decision to dissolve the TRO and deny plaintiffs' request for a permanent injunction. After the trial judge denied a stay, this court granted a stay of the November 11, 1994 order, to remain in effect until a motion for leave to appeal was either denied or, if granted, until the appeal was concluded, and plaintiffs were directed to file a motion for leave to appeal.

On November 15, 1994, the trial judge issued a comprehensive letter opinion setting forth the basis for his prior decision. While acknowledging the rule in Westinghouse v. Liberty Mut. Ins. Co., 233 N.J.Super. 463, 559 A.2d 435 (App.Div.1989) that "there should be one comprehensive action to resolve the coverage questions raised by the insured [or insurer] for various sites ...," the judge determined that this case was an exception because of special circumstances. He found that plaintiffs were guilty of forum shopping by choosing to pursue their action in New Jersey when they knew the out-of-state sites would be litigated after the New Jersey sites and that "rushing" into a New Jersey court would "forestall the immediate settlement negotiations." ⁶

Although during the hearing the judge indicated he would not accept the affidavits of the Texas claimants' attorneys as proof of the necessity for the action in Texas, the judge relied on these same affidavits when he found that the New Jersey action placed defendant in an "extremely difficult position in regard to settlement negotiations with some of the various Texas cases." He also relied on their affidavits in assuming that there would be a speedier resolution for the Bryan plaintiffs if the Texas action proceeded. The rest of the multi-state sites, including another site in Texas and the Texas governmental claims for site clean-up costs were all to remain in the New Jersey action.

On December 16, 1994 we granted leave to appeal to plaintiffs, and then to defendants Travelers, International Insurance Company and North River Insurance Company. On ...