J. Josephson, Inc. v. Crum & Forster Ins. Co.

• Decision Date: 06 August 1996
• Citation: 293 N.J.Super. 170,679 A.2d 1206
• Parties: J. JOSEPHSON, INC., Plaintiff-Respondent, v. CRUM & FORSTER INSURANCE COMPANY, Fireman's Fund Insurance Company, Lumbermen's Mutual Casualty Company, Pacific Employers Insurance Company and Zurich-American Company, Defendants, and Hartford Insurance Group, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 170

293 N.J.Super. 170

679 A.2d 1206

J. JOSEPHSON, INC., Plaintiff-Respondent, v. CRUM & FORSTER INSURANCE COMPANY, Fireman's Fund Insurance Company, Lumbermen's Mutual Casualty Company Pacific Employers Insurance Company and Zurich-American Company, Defendants and Hartford Insurance Group, Defendant-Appellant.

Superior Court of New Jersey Appellate Division.

Argued May 8, 1996.

Decided Aug. 6, 1996.

Michael F. O'Neill, Bedminster, for appellant (Purcell, Ries, Shannon, Mulcahy & O'Neill, attorneys; Susan R. Rubright, on the brief).

Ellis Medoway, Haddonfield, for respondent (Archer & Greiner, attorneys; Mr. Medoway and Edward C. Laird, on the brief).

Before Judges KING, LANDAU and KLEINER.

The opinion of the court was delivered by

KING, P.J.A.D.

This pollution insurance coverage dispute presents several issues for resolution. We conclude that the Law Division judge: (1) correctly decided that New Jersey's substantive law applied even though the waste disposal was in the Commonwealth of Pennsylvania; (2) correctly construed the implications of the comprehensive general liability policy (CGL) in the circumstances of the lawful disposal of hazardous waste through properly licensed and regulated haulers and disposal sites; (3) incorrectly granted summary judgment to the insured in the face of a claim that the insured intentionally polluted in violation of the standard enunciated in Morton International v. General Accident, 134 N.J. 1, 629 A.2d 831 (1993), cert. denied, --- U.S. ----, 114 S.Ct. 2764, 129 L. Ed.2d 878 (1994), where the record and discovery were too incomplete for such a factual determination; and (4) incorrectly ruled that pollution coverage was available under the personal injury endorsement feature of the insured's CGL policy, see United States Bronze Powders, Inc. v. Commerce & Industry Insurance Company, 293 N.J.Super. 12, 17-18, 679 A.2d 674 (App.Div. 1996).

I.

On February 2, 1990 plaintiff J. Josephson, Inc. (plaintiff) filed a nine-count complaint against defendants, Kemper Insurance Group (Kemper), Lumbermen's Mutual Casualty Company (Lumbermen's), Fireman's Fund Insurance Company (Fireman's Fund), Hartford Insurance Group (Hartford or defendant) and Crum &amp Forster Insurance Company (Crum & Forster), plaintiff's general liability insurers, seeking a declaratory judgment that it was entitled to a defense and indemnification from these defendants in connection with environmental pollution claims made against plaintiff with respect to three waste sites in New Jersey, one New York site and another in Elkton, Maryland. Hartford denied the material allegations of the complaint and asserted separate defenses, including a bar to coverage by the exclusions in Hartford's liability policies.

On November 1, 1991 plaintiff filed a second amended complaint adding two additional insurers as defendants: Pacific Employers Insurance Company (Pacific) and Zurich-American Insurance Company (Zurich). The complaint added a demand for declaratory relief seeking coverage relating to claims arising out of a waste site in Pennsylvania and also added a claim for bad faith; plaintiff deleted claims concerning the Elkton, Maryland site. Defendant answered and denied liability under its policy.

Pursuant to Case Management Order I, plaintiff moved for partial summary judgment on the issues of choice of law and the interpretation of the pollution exclusion clauses in defendant's policy. Also the Case Management Order stayed discovery pending the summary judgment motion on these substantive issues.

The motion was heard by Judge Napolitano on May 14, 1992. At that time Hartford took the position that no decision on choice of law could be made because discovery had not been completed and plaintiff had denied the requisite discovery. The judge dismissed Hartford's concern, noting that the Case Management Order barred discovery pending these motions. The judge said that he had everything he needed to resolve the choice of law issue, namely, the existence of the policies, the location of the sites, and the identity of the parties. He concluded that New Jersey law applied. He did not address the requested interpretation of the pollution exclusion clauses in the policies at that time. One year later, in April 1993, the judge issued a written decision, subsequently published, J. Josephson v. Crum & Forster Ins. Co. 265 N.J.Super. 230, 626 A.2d 81 (Law Div.1993), in which he elaborated on his reasons for finding that New Jersey law applied to all locations, both in-state and out-of-state. In a footnote the judge declined to render the requested interpretation of the pollution clauses, concluding that at this stage of the litigation, such a ruling would be nothing more than an advisory opinion. Id. at 233 n. 1, 626 A.2d 81. After the judge issued his written decision, Lumbermen's sought leave from this court to appeal that portion of the decision dealing with the choice of law. The motion was denied on June 28, 1993.

On March 28, 1994 plaintiff moved for summary judgment against all defendants as to all sites involved in the litigation. Hartford cross-moved for partial summary judgment on the issue of precisely when the damage occurred with respect to three New Jersey sites and as to all policies which contained an absolute pollution exclusion clause. Four days before the return of the motion, Hartford moved on short notice to amend the judge's choice-of-law order. Prior to the motion hearing date, September 23, 1994, plaintiff reached a settlement and dismissed all defendant carriers from the action except Hartford. This settlement left only the claims against Hartford regarding the Industrial Solvents and Chemical Company (ISCC) Pennsylvania site in issue.

Plaintiff's summary judgment motion was argued before Judge Napolitano on September 23, 1994. Again, Hartford argued that summary judgment was inappropriate because there was insufficient discovery to enable the court to determine whether plaintiff intentionally discharged a known pollutant. The judge disagreed. Holding that the law required coverage in environmental tort cases except where the insured intended to cause the harm, the judge found further discovery unnecessary because "there is no sensible way to infer intent to harm the environment when [as here] licensed waste haulers are used to dispose of waste properly in accordance with very specific regulatory requirements." The judge found, as a matter of law, that plaintiff "did not intend environmental damage when it follows the law and uses licensed waste haulers to dispose of [hazardous waste]." The judge found it "inconceivable that this type of behavior could be consistent with an intention to pollute."

The judge refused to revisit his decision on the choice-of-law ruling and denied Hartford's motion in that regard. He also denied Hartford's cross-motions for partial summary judgment.

On September 23, 1994 the judge ordered Hartford to pay plaintiff about $153,000 in incurred remediation costs and $266,000 for incurred defense costs, plus prejudgment interest. Hartford was also ordered to assume the defense of and indemnification for future claims.

No order issued, however, with respect to the denial of Hartford's cross-motions for partial summary judgment on the absolute pollution exclusion clauses and Hartford's application for reconsideration of the choice-of-law ruling. Hartford raised a series of objections to the form of plaintiff's proposed order on these issues. On January 24, 1995 the judge filed an order denying Hartford's cross-motion for partial summary judgment based on the absolute pollution exclusion clauses. He found it unnecessary to reach that issue because the Hartford policies upon which plaintiff was granted summary judgment were sufficient to cover the defense and indemnification costs awarded plaintiff. The judge also found that the personal injury liability endorsement provided an alternative basis for coverage, even if the absolute pollution exclusion clauses barred coverage. Finally, Hartford's application for reconsideration of the choice-of-law ruling was denied. On the same day, the judge filed a supplemental order, (1) granting plaintiff's motion for summary judgment against Hartford, and (2) modifying the amounts Hartford was ordered to pay plaintiff for counsel fees and interest awarded under the September 23, 1994 order.

II.

Plaintiff is a Georgia corporation which manufactures wall coverings. Since 1969 plaintiff's principal place of business has been in South Hackensack, New Jersey, where it leased four buildings and maintained over one hundred employees.

In the wallcovering manufacturing process, various patterns were printed on a sheet known as a substrate, composed of PVC or paper sheeting. The primary machinery employed in the process were Gravure printers which used several stations to apply various colors to the substrate and used inks mixed with one or more solvents. Different types of wastes were created in this process. One type was created from the non-reusable material left in the printing pans; another was scrap substrate generated from a defective product or the process of trimming the substrate to the appropriate dimensions; pan washers which were essentially washing machines for the ink-mixture pans created another type of waste; and, finally, the rags used to manually wipe down some of the pans were also waste materials.

These wastes were considered hazardous. Plaintiff contracted with licensed waste disposal haulers to transport and dispose of them. The type of waste generated and transported by these haulers was identified on DEP official waste manifests. The documents showed that plaintiff contracted with Scientific Chemical Processing, Inc. (SCP) to transport and treat some of its waste which SCP deposited at three locations in New Jersey: 416 Paterson Plank Road, Carlstadt; 411 Wilson Avenue, Newark; and Lone Pine in...