Disapproval of Commercial Ins. Policy Forms of Ins. Co. of North America, Matter of
| Decision Date | 29 April 1993 |
| Parties | In the Matter of DISAPPROVAL OF COMMERCIAL INSURANCE POLICY FORMS OF INSURANCE COMPANY OF NORTH AMERICA, Indemnity Insurance Company of North America, Cigna Insurance Company, Pacific Employers Insurance Company, Cigna Property & Casualty Insurance Company, Century Indemnity Insurance Company, Cigna Fire Underwriters Insurance Company, Bankers Standard Insurance Company, Atlantic Employers Insurance Company. |
| Court | New Jersey Superior Court — Appellate Division |
Michael R. Cole, Morristown, for appellants Ins. Co. of North America, et al. (Riker, Danzig, Scherer, Hyland & Perretti, attorneys; Mr. Cole, of counsel; Jeanne M. Bratsafolis and Barbara Laczynski, on the brief).
Andrea R. Grundfest, Deputy Atty. Gen., for respondent Samuel F. Fortunato, Com'r of New Jersey Dept. of Ins. (Robert J. Del Tufo, Atty. Gen., attorney; Joseph L. Yannotti, Asst. Atty. Gen., of counsel; Ms. Grundfest and Jacqueline Dileo, Deputy Atty. Gen., on the brief).
Before Judges MICHELS, BILDER and BAIME.
The opinion of the court was delivered by
MICHELS, P.J.A.D.
Petitioners, Insurance Company of North America, Indemnity Insurance Company of North America, CIGNA Insurance Company, Pacific Employers Insurance Company, CIGNA Property & Casualty Insurance Company, Century Indemnity Insurance Company, CIGNA Fire Underwriters Insurance Company, Bankers Standard Insurance Company and Atlantic Employers Insurance Company (hereinafter collectively referred to as CIGNA), appeal from the final administrative action of respondent Samuel F. Fortunato, the Commissioner of the New Jersey Department of Insurance (Commissioner), which disapproved their proposed Absolute Pollution Exclusion endorsement [Form LD-6608 (7/91) ].
On September 13, 1991, CIGNA filed with the Department of Insurance (Department) a proposed endorsement which sought to add a pollution exclusion to their commercial multi-peril, general liability, farm liability and professional liability insurance programs written on and after November 15, 1991. The purpose of the proposed Absolute Pollution Exclusion was to make clear that these liability insurance policies were not to include coverage for losses resulting in any way from pollution. The Absolute Pollution Exclusion endorsement provided:
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
This endorsement replaces any pollution exclusion and amends all insurance provided under the following:
COMMERCIAL GENERAL LIABILITY FORM; FARM COVERAGE FORM;
OWNERS AND CONTRACTORS PROTECTIVE LIABILITY COVERAGE FORM;
PRODUCTS/COMPLETED OPERATIONS LIABILITY COVERAGE FORM;
RAILROAD PROTECTIVE LIABILITY COVERAGE FORM.
This insurance does not apply to any injury, damage, expense, cost, loss, liability or legal obligation arising out of or in any way related to pollution, however caused.
Pollution includes the actual or alleged presence in or introduction into the environment of any substance if such substance has, or is alleged to have, the effect of making the environment impure, harmful, or dangerous. Environment includes any air, land, structure or the air therein, watercourse or water, including underground water.
We shall have no duty to defend any suit arising out of or in any way related to pollution.
In accordance with Department regulations, as set forth in the New Jersey Administrative Code, CIGNA's filing included an "Actuarial Services--Property/Liability PP-1 Form," a "Commercial Lines Insurance--General Questionnaire" and a "Commercial Lines Insurance--Policy Approval Questionnaire." While these forms were all properly included with the filing, they were largely devoid of any additional information beyond that which was contained within the actual filing itself.
Of the limited information that was provided, CIGNA classified its filing as "new," as opposed to being a "revision." Further, CIGNA declared that the filing would have "no" impact on rates to be charged or losses to be paid, and it stated that the anticipated overall impact of the filing would be "indeterminable." Many of the other requests for information on the forms were left unanswered by CIGNA. There were no explanatory statements or supporting statistics proffered by CIGNA in connection with this filing.
In response to this filing, the Department directed a letter to CIGNA, dated September 24, 1991, which indicated that:
In order for the review of this filing to continue, the following questions/concerns must be addressed:
(1) All reference to Farm Liability insurance must be deleted from this submission. Farm Liability is a Personal Lines Coverage [and] any changes must be submitted pursuant to the Personal Lines Regulations.
(2) The Department feels that the proposed exclusion is too broad. The pollution definition is too vague and may not be in compliance with N.J.S.A. 17:29AA-11. The Department does not permit the use of Asbestos Exclusions and the proposed endorsement could effectively exclude all losses due to Asbestos.
(3) Justification as to why you need a pollution exclusion more restrictive than ISO's must be provided. Do you have specific loss information to substantiate the need for this endorsement?
A written response to this letter must be received by the Department by October 21, 1991, in order for us to continue our review. Unless a response is received within this time frame, we will not have sufficient data/information to review the filing. The filing will be recommended for disapproval.
Thereafter, CIGNA responded in writing to the Commissioner on October 9, 1991. It addressed the Commissioner's concerns in the following manner:
In reply to your letter of September 24, 1991, we offer the following:
1. Please delete all reference to Farm Liability insurance from our submission. We will amend the "Absolute Pollution Exclusion--New Jersey" (LD-6608) to delete reference to the Farm Coverage Form and send you a revised LD-6608 for your records after the other issues have been resolved.
2. The Insurance Services Office's "Total Pollution Exclusion" (CG 2149) was filed and approved for use in New Jersey. The ISO exclusion applies to "Bodily Injury" or "Property Damage" arising out of pollutants.
We have elected to develop an independent exclusion because we wish to address the issue differently than ISO.
The major differences between the proposed endorsement and the ISO Total Pollution Exclusion are summarized below:
A. The ISO exclusion applies to "bodily injury" or "property damage". The CIGNA exclusion also applies to "bodily injury" and "property damage", which are by far the major potential sources of claim activity. In addition the CIGNA proposed exclusion also applies to all coverages under the policy. The effect of this is that the proposed exclusion applies to Personal Injury (i.e. Libel, Slander, etc.) as well as "bodily injury" and "property damage" in order to deal with an emerging litigation trend. From this perspective the proposed endorsement and the ISO exclusion are clearly very similar.
B. The ISO form eliminates all coverage for injury caused by "pollutants." The proposed endorsement applies to "pollution" claims rather than all claims caused by a pollutant. It is our belief that excluding "pollution" more clearly expresses our underwriting intent. For example, we believe the ISO Total Pollution Exclusion could be interpreted to exclude a bodily injury claim caused by a student spilling a beaker of acid on another student's arm in a chemistry lab because the claim arose out of a "pollutant". Clearly, it is not our intent to exclude this type of claim and the proposed exclusion would not apply in this example because this event would not be considered pollution. In this case, the proposed exclusion provides more coverage that the approved ISO Total Pollution Exclusion.
3. With respect to your comments concerning asbestos, the ISO Total Pollution Exclusion does not specifically mention asbestos nor does the proposed exclusion. The proposed exclusion and the ISO Total Pollution Exclusion have the same affect with respect to asbestos.
4. The companies shown above have incurred aggregate pollution liability claims of $320 million dollars in all states. While we do not have any specific information readily available for New Jersey, you can easily see that pollution liability claims have had a significant impact on our financial results.
In conclusion, we believe the proposed endorsement more clearly expresses its underwriting intent and request your approval to use it in New Jersey.
Subsequently, on November 14, 1991, the Department notified CIGNA that its filing had been disapproved. This letter announced that:
Commissioner Samuel F. Fortunato has DISAPPROVED the captioned filing. The reason for disapproval is based on the following:
The proposed Absolute Pollution exclusion is broader than ISO's in that it applies to all coverages under the policy including personal injury coverages. ISO's applies to Bodily Injury and Property Damage only. The ISO form excludes coverage for pollutants and defines specifically what is considered a pollutant. Proposed form excludes coverage for all pollution claims. This is an open ended exclusion in that it could exclude coverage for Asbestos which is not permitted by the Department. The proposed form is misleading and contrary to N.J.S.A. 17:29AA-11.
On November 21, 1991, CIGNA requested a hearing in order to present evidence in support of its proposed exclusion, and in opposition to the Commissioner's disapproval. This letter declared that We are in receipt of your letter dated November 14, 1991, disapproving the above-captioned file. Please accept this letter as our request for a hearing in this matter. We are requesting a hearing because we disagree with the Department's reasons for disapproval.
First, we are unaware of any requirement that all insurers use policy forms...
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