Nestle Foods Corp. v. Aetna Cas. and Sur. Co.

• Decision Date: 29 December 1993
• Docket Number: Civ. No. 89-1701 (CSF).
• Citation: 842 F. Supp. 125
• Parties: NESTLÉ FOODS CORPORATION, Plaintiff, v. AETNA CASUALTY AND SURETY COMPANY, Defendant.
• Court: U.S. District Court — District of New Jersey

842 F. Supp. 125

NESTLÉ FOODS CORPORATION, Plaintiff, v. AETNA CASUALTY AND SURETY COMPANY, Defendant.

Civ. No. 89-1701 (CSF).

United States District Court, D. New Jersey.

December 29, 1993.

Pitney, Hardin, Kipp & Szuch, Morris-town, NJ by William H. Hyatt, Jr., Donald W. Kiel, Robert G. Rose, Covington & Burling, Washington, DC by Mitchell F. Dolin, Laurence J. Eisenstein, Michelle Peterson, for plaintiff.

Harwood Lloyd, Hackensack, NJ by Brian R. Ade, Kim E. Sparano, for defendant.

OPINION

FISHER, District Judge.

Before the court are cross-motions for summary judgment for declaratory relief brought by plaintiff, Nestlé Foods Corporation ("Nestlé"), and by defendant, Aetna Casualty & Surety Company ("Aetna"). For the reasons set forth below, plaintiff's summary judgment motion is granted in part and denied in part, and defendant's summary judgment motion is denied in its entirety.

This insurance-coverage action was filed by Nestlé in April 1989 to secure indemnification and defense-cost coverage for its environmental liabilities to the state and federal governments in connection with the Lone Pine Landfill. From February 20, 1974, to January 1, 1984, Aetna issued a series of general-liability insurance policies to Nestlé which provided coverage for, inter alia, "all sums which the insured shall become legally obligated to pay as damages because of ... property damage." See Morton Int'l Inc. v. General Accident Ins. Co., 134 N.J. 1, 24-25, 629 A.2d 831 (1993) (Damages "because of property damage" encompass cleanup obligations imposed by a governmental authority for environmental contamination.). The parties have stipulated to the fact that there has been property damage which will trigger coverage under each of the Aetna policies unless any defense or exclusion applies.

Since the 1940's, Nestlé has owned and operated a coffee-manufacturing plant in Freehold Township, New Jersey. Both parties acknowledge that trash and wastes from the Nestlé plant were picked up by Freehold Cartage, Inc., a duly licensed waste hauling company, which, in turn, transported and disposed of them at, among other locations, the Lone Pine Landfill, a state-regulated waste-disposal facility.

The State of New Jersey closed the landfill in 1979. During the 1980's Nestlé and other companies became the subject of proceedings initiated by the New Jersey Department of Environmental Protection ("DEP") (since 1991 the Department of Environmental Protection and Energy) and the United States Environmental Protection Agency ("EPA"). Pursuant to decrees entered by this court in 1990 and 1992, Nestlé and other companies have been required to fund a cleanup of the landfill and its environs. See United States v. Acton Corp., 733 F.Supp. 869 (D.N.J.1990); United States v. Acton Corp., No. 91-2873-GEB (D.N.J. Jan. 6, 1992).

During the 1960's and 1970's, Nestlé used the solvents trichloroethene ("TCE") and methylene chloride ("MC") as part of its decaffeination process at the Freehold plant. The EPA held Nestlé liable because it had found TCE, MC and other contaminants in the groundwater at Lone Pine and concluded that some of these contaminants are traceable to Nestlé's waste stream. Both parties to this suit acknowledge that TCE and MC were among the waste products transported by Freehold Cartage, Inc. and disposed of at the Lone Pine Landfill. The groundwater contamination that had occurred at Lone Pine was not discovered until the early 1980's. The EPA notified Nestlé that it was a potentially responsible party with respect to Lone Pine in July of 1982. Nestlé was named as a third-party defendant in the DEP's Lone Pine lawsuit in August 1983.

Nestlé's summary-judgment motion centers on whether coverage for property damage is barred by either of two exclusionary clauses in the Aetna policies: the expected/intended exclusion and the pollution exclusion. Nestlé alleges that Aetna is precluded as a matter of law from raising the expected/intended defense on the basis of estoppel. Nestlé asserts that, since Aetna issued and renewed Nestlé's policies between 1974 and 1983 with specific knowledge of Nestlé's manufacturing and environmental practices, Aetna is estopped from invoking the expected/intended defense. Likewise, or in the alternative, since Aetna allegedly unearthed no evidence to support an expected/intended defense during its five-year coverage investigation, Aetna is precluded from asserting the defense because its current assertion of the expected/intended defense is in bad faith and barred as a matter of law.

Aetna also moves for summary judgment on the expected/intended defense, asserting that the pollution at Lone Pine was expected and intended applying the requisite factors under Morton, 134 N.J. at 86-87, 629 A.2d 831. Further, Aetna moves for summary judgment on the pollution exclusion issue, alleging that Nestlé's claim for coverage falls within the ambit of that exclusion. Finally, Aetna asserts that Nestlé is not entitled to insurance coverage pursuant to the personal injury liability endorsement of Aetna's policies and that Nestlé's claims for punitive damages should be dismissed under New Jersey substantive law.

Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56; Brown v. Hilton, 492 F.Supp. 771, 774 (D.N.J.1980). The burden of showing that no genuine issue of material fact exists rests initially on the moving party. Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir.1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977). This "burden ... may be discharged by `showing' ... that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). Once a properly supported motion for summary judgment is made, the burden shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial." Fed. R.Civ.P. 56(e); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986).

There is no issue for trial unless the nonmoving party can demonstrate that there is sufficient evidence favoring the nonmoving party so that a reasonable jury could return a verdict in that party's favor. Anderson, 477 U.S. at 249, 106 S.Ct. at 2510-11. In deciding a motion for summary judgment, the court must construe the facts and inferences in a light most favorable to the nonmoving party. Pollock v. American Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir. 1986). The role of the court, however, is not "to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249, 106 S.Ct. at 2511.

First, the court will address both parties' summary judgment motions on the expected/intended defense issue. Nestlé asserts that Aetna should be estopped from raising that defense, since Aetna's prior underwriting conduct is flatly inconsistent with its current litigating position. Specifically, Nestlé alleges that Aetna's independent investigations of Nestlé's manufacturing processes and environmental controls at Nestlé facilities, including the Freehold plant, taken together with Aetna's renewal of the subject policies each year, created a reasonable expectation that, if Aetna in fact had had cause for concern, it would have so informed Nestlé at the time, rather than remaining silent and invoking those concerns as a basis for denying a claim many years later. Nestlé cites Morton, 134 N.J. at 76, 629 A.2d 831, for the proposition that "an insurance doctrine closely related to `estoppel' holds that insurance contracts should be enforced to accord with the objectively-reasonable expectations of the insured...." After several years of silence, Aetna's assertion of the expected/intended defense is "inconsistent with public expectations and commercially accepted standards" and, therefore, should not be countenanced. Id. (quoting Sparks v. St. Paul Ins. Co., 100 N.J. 325, 338, 495 A.2d 406 (1985)). In further support of this line of reasoning, Nestlé refers to the conclusion reached in a Special Master Report in J.T. Baker, Inc. v. Aetna Cas. & Sur. Co., Civil Action No. 86-4794 (D.N.J. Sept. 23, 1993). "If facts are shown as to a particular site from which it is concluded that the insured `intended or expected' the particular harm in question ... an insurer may be estopped from asserting such as a basis for non-coverage if the insured can establish that the insurer in question had knowledge of essentially the same facts possessed by the insured and continued to renew coverage and collect premiums." J.T. Baker Report at 42-43.

Applying these principles to the instant case, Nestlé must present a record sufficient to establish that Aetna had knowledge of essentially the same facts possessed by Nestlé regarding the groundwater pollution problems at the Lone Pine Landfill. The information which Nestlé presents does not surmount this requirement. This information includes details of Aetna inspections of all Nestlé facilities, including the Freehold site itself, and an Aetna report regarding "pollution controls" at the Freehold plant, all of which do not relate to Lone Pine. Further, there are unresolved issues of material fact relating to the quality of Nestlé's knowledge relating to Lone Pine groundwater pollution. Accordingly, Nestlé fails to discharge its burden of demonstrating an absence of any genuine issue of material fact on the issue of Aetna's knowledge in the estoppel context. Nestlé's estoppel argument is thus utterly without merit, and summary judgment on this theory is denied.

Nestlé also asserts that Aetna should be barred from raising the expected/intended defense on the basis that Aetna's refusal to pay insured's claim in the wake of a 1983-88 claims-evaluation...