Federal Ins. Co. v. Purex Industries, Inc.

• Decision Date: 27 June 1997
• Docket Number: Civil Action No. 93-393(JBS).
• Citation: 972 F.Supp. 872
• Parties: FEDERAL INSURANCE COMPANY, By and Through ASSOCIATED AVIATION UNDERWRITERS, Plaintiff, v. PUREX INDUSTRIES, INC., Defendant. PUREX INDUSTRIES, INC., Counter-Claimant, v. FEDERAL INSURANCE COMPANY By and Through ASSOCIATED AVIATION UNDERWRITERS, Houston Fire & Casualty Insurance, by and through Geico General Insurance Co., and Liberty Mutual Insurance Co., Counter-defendants.
• Court: U.S. District Court — District of New Jersey

972 F.Supp. 872

FEDERAL INSURANCE COMPANY, By and Through ASSOCIATED AVIATION UNDERWRITERS, Plaintiff, v. PUREX INDUSTRIES, INC., Defendant.

PUREX INDUSTRIES, INC., Counter-Claimant, v. FEDERAL INSURANCE COMPANY By and Through ASSOCIATED AVIATION UNDERWRITERS, Houston Fire & Casualty Insurance, by and through Geico General Insurance Co., and Liberty Mutual Insurance Co., Counter-defendants.

Civil Action No. 93-393(JBS).

United States District Court, D. New Jersey.

June 27, 1997.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Jeffrey W. Moryan, Connell, Foley and Geiser, Roseland, NJ, and Gwen Freeman, Knapp, Petersen & Clarke, Glendale, CA, for Plaintiff and Counter-Defendant Federal Insurance Company by and through Associated Aviation Underwriters.

Stanley M. Spracker, Kenneth L. Doroshow, Weil, Gotshal & Manges, Washington, D.C., and George J. Tyler, Michael J. Canning, Giordano, Halleran & Ciesla, Middletown, NJ, for Defendant and Counter-Claimant, Purex Industries, Inc.

John C. Sullivan, Kathleen K. Kerns, Law Offices of Stanley P. Stahl, Voorhees, NJ, for Counter-Defendant Liberty Mutual Ins. Co.

Stephen J. Smirti, Jr., Pia E. Riverso, Rivkin, Radler & Kremer, Uniondale, N.Y., and Joni F. Mason, Rivkin, Radler & Kremer, Newark, NJ, for Counter-Defendants GEICO General Insurance Company and Houston General Insurance Company.

OPINION

SIMANDLE, District Judge:

                CONTENTS
                  I. Background and Procedural History ....................................876
                 II. Discussion ...........................................................877
                     A. Summary Judgment Standard .........................................877
                     B. Motion by Counter-Defendants for Summary Judgment on Statute of
                         Limitations Grounds ..............................................878
                

                        1. Choice of Law ........................................................878
                        2. Application of New Jersey Statute of Limitations .....................879
                     C. Cross-Motions for Summary Judgment on the Issue of Late Notice ..........880
                        1. Timeliness of Notice .................................................881
                        2. Prejudice to Insurers from Late Notice ...............................882
                     D. Cross-Motions for Summary Judgment on the Issue of Whether Purex's
                          Remediation and Compliance Costs Are Damages ..........................882
                     E. Purex's Motion for Summary Judgment on the Applicability of the Owned
                         Property Exclusion .....................................................883
                     F. Cross-Motions for Summary Judgment on the Issue of the "Voluntary
                         Payments" Exclusion ....................................................885
                     G. GEICO and Houston General's Motion for Summary Judgment Regarding
                         Mitigation of Damages and Purex's Cross-Motion for Summary
                         Judgment on the Reasonableness of Its Cleanup Plan .....................886
                     H. Liberty Mutual's Motion for Summary Judgment on the Grounds of a
                         "No Assignment" Clause in Its Policy ...................................889
                     I. AAU's Motions for Summary Judgment Regarding Specific Policy Coverage
                         and Non-Cumulation of Policy Limits ....................................890
                        1. Policy Number SPl-1195-LA ............................................890
                        2. Policy No. AP1-825/Binder No. B1-122859 ..............................891
                        3. Non-Cumulation of AAU Policies .......................................892
                     J. Insurers' Motion for Summary Judgment as to Defense Costs ...............892
                III. Conclusion .................................................................893
                

I. Background and Procedural History

This insurance coverage case was instituted by Federal Insurance Company (also known as Associated Aviation Underwriters, or "AAU") to seek a declaration of its responsibilities, if any, under certain policies of insurance issued to an entity known as Air-work Corporation, a now-defunct corporation whose assets were ultimately purchased by a wholly-owned subsidiary of defendant and counter-plaintiff Purex. Airwork operated an aircraft engine repair facility in Millville, New Jersey, from the mid-1940s until mid-1968.

Purex acquired Airwork Corporation in 1968 and Airwork operated the Millville facility under Purex's ownership from 1968 through 1985, when Purex sold the stock of Airwork to UNC Resources, triggering obligations under Environmental Cleanup Responsibility Act ("ECRA"), NJSA 13:1K-6 et seq. ECRA required that owners and operators of industrial establishments remediate their facilities as a precondition to the closure, sale or transfer of their business operations.

By late 1985, it became clear that the NJDEP would not give clearance in time for a December 31, 1985 sale date. Purex entered into an Administrative Consent Order ("ACO") with the NJDEP on December 12, 1985. The ACO allowed sale to go forward and set forth a timetable for compliance with ECRA. Under the terms of the ACO, the NJDEP reserved the right to pursue Purex under other environmental statutes.

Groundwater sampling at the Millville site first took place in late 1987. A report dated December 11, 1987 confirmed the presence of groundwater and soil contamination. After negotiations with the NJDEP and its environmental consultants, Purex submitted a cleanup plan to the NJDEP in late 1992, the core element of which is a pump and treat system. On June 2, 1993, the NJDEP issued a "Draft Cleanup Plan Approval." Purex began construction of the pump and treat remediation system in 1993 and began fully operating the system in March 1994.

To date, Purex claims to have incurred more than $12,000,000 in order to comply with its ECRA liabilities.

AAU instituted the instant declaratory judgment action in the Central District of California on July 15, 1992. Purex filed a motion to transfer the case to the District of New Jersey under 28 U.S.C. § 1404(a), which motion was granted by Honorable Terry J. Hatter, U.S.D.J., in January, 1993. After the transfer, in March, 1993, Purex filed a counterclaim against GEICO (denominated Houston Fire Insurance Company in the pleading) and Liberty Mutual. The present case, docketed in this court at Civil Action No. 93-393(JBS), has gone forward through the case management process.

Prior to the institution of these proceedings, other related suits were filed. Purex instituted an action in the California Superior Court in March, 1983 seeking coverage from several of its insurers for pollution claims at distinct sites. That action was styled Purex Industries, Inc. v. Leslie Walpole Proctor, et al., No. C446935 ("Purex I"). None of the insurers in the present case were parties to that action, and the case, as originally filed, did not state a claim for coverage for the ECRA claim arising out of the pollution of the Millville site.

After filing a second suit in the California Superior Court captioned Purex Industries, Inc. v. American International Underwriters Ins. Co., et al., No. C653256 ("Purex II") on July 6, 1987, which involved the Millville site but which was dismissed prior to service of process upon the insurers, Purex filed an action in the Superior Court of New Jersey styled Purex Industries, Inc. v. American International Underwriters Ins. Co., No. L-084740-87 ("Purex III"), on July 16, 1987. The purpose of that suit was to determine coverage for damages incurred from pollution at the Millville site. Houston Fire (GEICO) was named as a defendant in the original complaint in Purex III, as was AAU; Liberty Mutual was added as a defendant by way of an amendment to the complaint on August 3, 1987.

Purex III was ultimately the subject of an injunction in the California court in Purex I. An insurer not a party to the instant case, Harbor Insurance Company, filed a motion to enjoin Purex from proceeding with the Purex III litigation in New Jersey because it viewed the suit as multiplicitous. Judge Markey of the California Superior Court granted the motion in Purex I in 1987. Judge Markey's Order was affirmed on appeal on March 21, 1989. Consequently, Purex voluntarily dismissed Purex III in New Jersey without prejudice to Houston Fire (GEICO), AAU and Liberty Mutual. On September 18, 1989, Purex filed a third amended complaint in Purex I in California in order to put, inter alia, the Millville site at issue. Additionally, Purex's third amended complaint named additional insurers. Purex did not, however, name Liberty Mutual, AAU, or GEICO as defendants. The litigation proceeded in phases, with trial on a New York pollution site going to the jury in March, 1993. On June 2, 1993, eleven months after the instant litigation was instituted, the Millville phase of the Purex I trial began. It settled after the first day of trial. Id., ¶ 85.

Presently before the court are a voluminous set of summary judgment motions on behalf of Purex, AAU, GEICO, Houston General and Liberty Mutual.

II. Discussion

A. Summary Judgment Standard

The standard for granting summary judgment is a stringent one. A court may grant summary judgment only when the materials of record "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In deciding whether there is a disputed issue of material fact the court must view the evidence in favor of the non-moving party by extending any reasonable favorable inference to that party. See Aman v. Cort Furniture Rental Corp., 85 F.3d 1074, 1080-81 (3d Cir. 1996); Kowalski v. L & F Products, 82 F.3d 1283, 1288 (3d Cir.1996); Meyer v. Riegel Products Corp., 720 F.2d 303, 307 n. 2 (3d Cir.1983), cert. denied, 465 U.S. 1091, 104 S.Ct. 2144, 79 L.Ed.2d 910 (1984). The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party."...