Nav-Its, Inc. v. Selective Ins. Co.

• Decision Date: 07 April 2005
• Citation: 183 N.J. 110,869 A.2d 929
• Parties: NAV-ITS, INC., Plaintiff-Appellant and Cross-Respondent, v. SELECTIVE INSURANCE COMPANY OF AMERICA, Defendant-Respondent and Cross-Appellant.
• Court: New Jersey Supreme Court

869 A.2d 929

183 N.J. 110

NAV-ITS, INC., Plaintiff-Appellant and Cross-Respondent, v. SELECTIVE INSURANCE COMPANY OF AMERICA, Defendant-Respondent and Cross-Appellant.

Supreme Court of New Jersey.

Argued January 4, 2005.

Decided April 7, 2005.

Ellis I. Medoway, Haddonfield, argued the cause for appellant and cross-respondent (Archer & Greiner, attorneys; Mr. Medoway and Arthur H. Jones, Jr., on the briefs).

Gary S. Kull, Basking Ridge, argued the cause for respondent and cross-appellant (Carroll McNulty & Kull, attorneys).

Wendy L. Mager, Princeton, submitted a brief on behalf of amicus curiae Complex Insurance Claims Litigation Association (Smith, Stratton, Wise, Heher & Brennan, attorneys).

Justice WALLACE delivered the opinion of the Court.

This case concerns the applicability of a pollution exclusion provision in a commercial general liability insurance policy. The question presented is whether the exclusion for injuries caused by the "discharge, dispersal, release or escape of pollutants" bars coverage for personal injury allegedly caused by the exposure to toxic fumes that emanated from a floor coating/sealant operation performed by the insured. An exception to the pollution exclusion allows coverage where the injury takes place inside a building "within a single 48-hour period and the exposure occurs within the same 48-hour period." We conclude that the pollution exclusion provision applies to traditional environmental pollution claims and is not a bar to coverage in this case.

I.

The material facts are relatively simple. Plaintiff NAV-ITS, Inc. (Nav-Its), is a construction contractor specializing in tenant "fit-out" work, including the building of partitions, the laying of concrete, the installation of doors, and the application of finishes, such as paint, sealants, and coatings.

On April 22, 1998, Nav-Its entered into a contract to perform fit-out work at the Parkway Shopping Center (Center) in Allentown, Pennsylvania. Nav-Its obtained Comprehensive General Liability (CGL) insurance coverage for its activities at the Center from defendant Selective Insurance Company of America (Selective). Nav-Its hired T.A. Fanikos Painting (Fanikos) as a subcontractor on the project to perform painting, coating and floor sealing work. Fanikos performed that work from July 27 to August 5, 1998. During that time, Dr. Roy Scalia, a physician with office space in the Center, was allegedly exposed to fumes that were released while Fanikos performed the coating/sealant work. As a result of that exposure, Dr. Scalia suffered from nausea, vomiting, lightheadedness, loss of equilibrium, and headaches. He sought medical treatment in September 1998.

In December 2000, Dr. Scalia filed a complaint against Nav-Its and several others for personal injuries arising out of his exposure to fumes at his office from July 27 through July 31, 1998, and from August 3 through August 5, 1998. Nav-Its forwarded the complaint to Selective, seeking defense and indemnification. Relying on the pollution exclusion in its policy, Selective refused to provide coverage to Nav-Its. Dr. Scalia's case against Nav-Its was subsequently resolved through binding arbitration.

Nav-Its then commenced the present action against Selective, seeking a declaratory judgment that Selective was obligated to defend and indemnify it in connection with the underlying personal injury action. Nav-Its also sought reimbursement for the costs incurred in defending the suit filed by Dr. Scalia.

Early in the litigation, Selective moved for summary judgment, and Nav-Its filed a cross-motion for partial summary judgment. The trial court denied Selective's motion and granted partial summary judgment in favor of Nav-Its, finding that Selective had an obligation to defend and indemnify Nav-Its in accordance with its insurance policy. The trial court concluded that Nav-Its had a reasonable expectation that liability arising out of normal painting operations would be covered under the policy. Selective moved for reconsideration, but once again the trial court denied relief. In a written decision, the trial court expanded its reasoning and concluded that the pollution exclusion clause in the policy applied only to traditional environmental pollution claims.

Meanwhile, on July 5, 2002, the Appellate Division decided Leo Haus, Inc. v. Selective Insurance, 353 N.J.Super. 67, 801 A.2d 419 (App.Div.2002). The panel found that the pollution exclusion clause, similar to the one in the present case, was clear and unambiguous and barred coverage for the plaintiff's injury claim caused by the release of carbon monoxide gas from a defective heater over a one-year period. Id. at 72-73, 801 A.2d at 422. Selective again moved for reconsideration based on the Leo Haus decision and sought a stay of the award of attorney's fees. The trial court, relying on S.N. Golden Estates, Inc. v. Continental Casualty Co., 293 N.J.Super. 395, 680 A.2d 1114 (App.Div.1996), which it read to limit the application of a similar pollution exclusion to environmental claims, denied reconsideration. The trial court also found that the exception to the exclusion applied because Dr. Scalia suffered individual exposures every day he entered his office, namely that each exposure began and ended in a less than forty-eight hour period.

Nav-Its's motion for additional attorney's fees and for the release of funds that had previously been deposited by Selective was granted. The trial court ordered the release of all deposited funds to Nav-Its within forty-five days. Selective appealed and a stay of the order to release the funds was granted.

On appeal, in an unpublished opinion, the Appellate Division reversed, finding that pollution exclusion clauses are not necessarily limited to the clean up of traditional environmental damage. Nevertheless, the panel found that a jury must decide whether each period of time that Dr. Scalia was at work represented a separate exposure of less than forty-eight hours, or one continuous period of exposure. The panel also left to the jury the question of whether Nav-Its violated the thirty-day notice provision in the policy. We granted Nav-Its' petition for certification and Selective's cross-petition. NAV-ITS, Inc. v. Selective Ins. Co. of Am., 181 N.J. 286, 854 A.2d 920 (2004).

II.

Selective's insurance policy provided CGL coverage for Nav-Its for the period May 7, 1998, through May 7, 1999. The policy provided in the "Coverages" section that it "will pay those sums that the insured becomes legally obligated to pay as damages because of `bodily injury' or `property damage' to which this insurance applies." Further, Selective was required to defend any suit seeking those damages. The policy contained a pollution exclusion endorsement that provided in relevant part:

[Selective] shall have no obligation under this coverage part:

a. to investigate, settle or defend any claim or suit against any insured alleging actual or threatened injury or damage of any nature or kind of persons or property which:

1. arises out of the `pollution hazard:' or

2. would not have occurred but for the `pollution hazard:' or

b. to pay any damages, judgments, settlements, losses, costs or expenses of any kind or nature that may be awarded or incurred by reason of any such claim or suit or any such actual or threatened injury or damage; or

c. for any losses, costs or expenses arising out of any obligation, order, direction or request of or upon any insured or others, including but not limited to any governmental obligation, order, direction or request, to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, in any way respond to, or assess the effects of `pollutants.'

The policy defined pollutants as "any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." Under the policy, "[w]aste includes materials to be recycled, reconditioned or reclaimed." It also defined "Pollution Hazard" to mean "an actual exposure or threat of exposure to the corrosive, toxic or other harmful properties of any `pollutants' arising out of the discharge, dispersal, seepage, migration, release or escape of such `pollutants.'"

The policy also contained a limited exception to the pollution exclusion. That exception provided that the pollution exclusion does not apply to:

B. Injury or damage arising from the actual discharge or release of any "pollutants" that takes place entirely inside a building or structure if:

1. the injury or damage is the result of an exposure which takes place entirely within a building or structure; and

2. the injury or damage results from an actual discharge or release beginning and ending within a single forty-eight (48) hour period; and

3. the exposure occurs within the same forty-eight (48) hour period referred to in 2. above; and

4. within thirty (30) days of the actual discharge or release:

a. the company or its agent is notified of the injury or damage in writing; or

b. in the case of `bodily injury,' the `bodily injury' is treated by a physician, or death results, and within ten (10) additional days, written notice of such injury or death is received by the company or its agents.

Strict compliance with the time periods stated above is required for coverage to be provided.

III.

A.

Nav-Its contends that there are conflicting Appellate Division decisions on the issue of whether a pollution exclusion bars coverage for nontraditional environmental pollution claims. Nav-Its notes that different panels of the Appellate Division considered that issue in Golden Estates, supra,293 N.J.Super. 395,680 A.2d 1114,Byrd ex rel. Byrd v. Blumenreich, 317 N.J.Super. 496, 722 A.2d 598 (App.Div.1999), and Leo Haus, supra, 353 N.J.Super. 67,801 A.2d 419, and reached conflicting results. Nav-Its urges that the reasoning in Golden Estates, that the applicability of the pollution exclusion clause should be limited...