Ohaus v. Continental Cas. Ins. Co.

• Decision Date: 22 July 1996
• Parties: Robert E. OHAUS; Blair C. Ohaus; James G. Ohaus; John C. Ohaus; Thomas C. Ohaus; Deborah O. Casselberry and Ohaus Corporation, Plaintiffs-Appellants, v. CONTINENTAL CASUALTY INSURANCE COMPANY; Employers Insurance of Wausau; Federal Insurance Company; First State Insurance Company; Insurance Company of North America; New Jersey Manufacturers Insurance Company; New Jersey Property Liability Insurance Guaranty Association; and North River Insurance Company, Defendants, and The Travelers Indemnity Company, Defendant-Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 501

292 N.J.Super. 501

679 A.2d 179

Robert E. OHAUS; Blair C. Ohaus; James G. Ohaus; John C.

Ohaus; Thomas C. Ohaus; Deborah O. Casselberry and Ohaus Corporation, Plaintiffs-Appellants, v. CONTINENTAL CASUALTY INSURANCE COMPANY; Employers Insurance

of Wausau; Federal Insurance Company; First State

Insurance Company; Insurance Company of North America; New

Jersey Manufacturers Insurance Company; New Jersey Property

Liability Insurance Guaranty Association; and North River

Insurance Company, Defendants,

and

The Travelers Indemnity Company, Defendant-Respondent.

Superior Court of New Jersey,

Appellate Division.

Argued May 15, 1996.

Decided July 22, 1996.

Thomas E. Mesevage, Roseland, for appellants (Lowenstein, Sandler, Kohl, Fisher & Boylan, attorneys; Robert D. Chesler, of counsel; Mr. Mesevage, on the brief.)

Jeffrey S. Lipkin, Morristown, for respondent (Shanley & Fisher, attorneys; James M. Altieri, of counsel; Mr. Lipkin, on the brief).

Karen L. Jordan, Deputy Attorney General, amicus curiae for State of New Jersey, Department of Environmental Protection and Energy (Deborah T. Poritz, Attorney General of New Jersey, attorney; Mary C. Jacobson, Assistant Attorney General, of counsel; Ms. Jordan, on the brief amicus curiae).

Before Judges SHEBELL, STERN and NEWMAN.

The opinion of the court was delivered by

SHEBELL, P.J.A.D.

On May 8, 1992, plaintiffs filed their complaint, naming various insurance companies as defendants seeking a declaratory judgment compelling their insurers to provide them, pursuant to the terms of comprehensive general liability (CGL) policies, with coverage for environmental remediation liability imposed under the Environmental Cleanup Responsibility Act ("ECRA"), L. 1983, c. 330, (now known as the Industrial Site Recovery Act ("ISRA"), L. 1993, c. 139). Plaintiffs have settled with all defendants except The Travelers Indemnity Company ("Travelers").

Travelers moved for summary judgment. The Law Division judge heard argument on the motion, and reserved decision. On February 22, 1994, the judge entered an order granting summary judgment, and attached a statement of reasons supporting his decisions to the order. Plaintiffs appeal.

Ohaus Corporation (Ohaus), owned by the individual plaintiffs who are members of the Ohaus family, manufactured scales at its Florham Park facility beginning in 1969. In September 1986, Ohaus retained First Environment to conduct an environmental survey of its facility in connection with a planned inter-family redistribution of assets. The site is adjacent to the Pinch Brook County Golf Course and property owned by Metropolitan Life Insurance.

As a result of the survey, five areas of potential environmental concern were identified: an underground oil tank; an underground gasoline tank; a "drywell"; a "denuded" area; and a lowlands area. First Environment tested soil samples from the five areas and bored four groundwater monitoring wells. Soil beneath the oil tank revealed the presence of petroleum hydrocarbons, and soil in the dry well area indicated the presence of volatile organic compounds including methylene chloride, 1, 1-dichloroethylene, 1,1, 1-trichloroethane and trichloroethene. Floor drains in the flammables storage area were connected to the dry well. Soil in the other areas did not show the presence of volatile organic compounds above regulatory guidelines. In two of the four wells, the presence of volatile organic compounds was detected. Following excavation, the underground gasoline tank, dry well and denuded areas were backfilled with clean soil, and the floor drains leading to the dry well were sealed.

On December 2, 1988, Ohaus executed an agreement to transfer its assets to Mettler Instrument Corporation (Mettler). The agreement obligated plaintiffs to comply with environmental requirements and indemnify Mettler for any losses suffered as a result of their failure to comply. Pursuant to ECRA, Ohaus submitted to DEP its General Information Submission (GIS) and Site Evaluation Submission (SES). On May 1, 1989, Ohaus entered into an administrative consent order (ACO) with DEP.

In its August 1990 report on the results of its sampling and soil remediation and its plan for the proposed cleanup of soils, First Environment stated that it had taken soil samples and drilled an additional four monitoring wells at the site. It identified three areas as needing further investigation or remediation: the "groundwater beneath the site"; the denuded area; and the "former drywell excavation." The report noted that surface drainage at the site was to the north "into a low lying naturalized area near the golf course." Pinch Brook flowed through the golf course into Black Brook, which in turn flowed into the Whippany River. The groundwater, however, flowed in a westerly direction across the site.

With respect to groundwater contamination, it appears that four of the wells were found to contain volatile organic compounds above ECRA guidelines. First Environment considered the former dry well "a suspected ... source of groundwater contamination." A well located 150 feet downgrade of the dry well area contained 92 ppb of trichloroethene and other contaminants, and a well adjacent to the dry well area revealed 35 ppb of trichloroethene. Trichloroethene was also found in two wells located at the northwestern property boundary. First Environment found no contaminants in an upgradient well or in the well south of the dry well area. Based on these test results and groundwater flow direction, it concluded that there was a "high probability that volatile organic compounds are migrating from the site in a westerly direction." It proposed a soil boring and groundwater monitoring program to determine the horizontal and vertical extents of the groundwater contaminants. New wells were to be drilled off-site, and additional wells were to be placed along the northwest and southwest boundaries.

On April 12, 1991, Ohaus first notified Travelers that it had "become aware of elevated levels of volatile organic compounds" at its facility, had notified DEP of the matter and was in the process of pursuing a sampling plan. Ohaus requested assurance that its policies covered its remediation, sampling, and other contamination-related costs.

Also in April 1991, First Environment conducted a groundwater boring program on the Metropolitan Life property, a contiguous tract south/southwest of the Ohaus site. In two of the four wells, "trace" amounts of contaminants including trichloroethene were found. It concluded that the Ohaus facility had not impacted the Metropolitan property at that time.

Around the same time, a groundwater boring sample from the Pinch Brook Golf Course to the northwest of the Ohaus site indicated the presence of trichloroethene at less than 10 ppb at a depth of twenty-two to twenty-four feet, and at 10 ppb at a depth of forty-four to forty-six feet. First Environment opined that these boring results showed "that the plume of contaminated groundwater centering to the rear of the ... facility adjacent to the loading docks and hazardous waste trailer has migrated beneath the grounds of the ... [golf course]."

In January 1992, First Environment issued its remediation results and proposed groundwater delineation activities. On March 3, 1993, DEP conditionally approved Ohaus's sampling plan. Among the conditions, it required Ohaus to install a monitoring well in the area of boring B-12 "to monitor for contamination moving off site." In May 1993, First Environment issued additional soil and groundwater sampling results, noting that with one exception considered anomalous, the presence of volatile organic compounds in the monitoring wells had decreased substantially. It attributed this decline to "natural alteration of volatile organic compounds through biological degradation," as well as to the earlier removal in May 1991 of the old dry well soil. It recommended quarterly monitoring of selected wells for a two-year period at a cost of $40,000.

On November 10, 1994, DEP, responding to plaintiffs' August groundwater monitoring report, indicated that increased contamination levels in particular wells would require drilling additional test wells, one on the golf course and two on the Metropolitan property. One of the wells showing an increase was on the property line between the Ohaus and the Metropolitan properties. After negotiations, DEP agreed that no additional testing of the golf course would be necessary, and rather than install monitoring wells at Metropolitan, plaintiffs could present a proposal to further investigate groundwater below that property.

On January 26, 1995, plaintiffs submitted to DEP their remedial action workplan and fourth quarter monitoring results. Included was a groundwater site map from August 1994 delineating small portions of both the golf course and Metropolitan properties as within the contaminated groundwater area. Noting that in times of high precipitation the monitoring wells closest to the old dry well show heightened contaminant readings, the report hypothesized that a soil column of residual pollution below the former dry well continues to discharge contaminants into the monitoring wells. The report proposed a delineation soil boring program and a soil vapor extraction/air sparging treatment system.

Plaintiffs allege that they expect to spend in excess of $620,000 in remediation and investigation costs by the end of the two-year monitoring period. Neither the golf course nor Metropolitan have made claims against Ohaus for contamination. We have denied plaintiffs' motions to supplement the record with additional reports of groundwater sampling.

Between April 1974 and April 1982, Ohaus was covered by a series of annual CGL policies issued by defendant. Defendant agreed to pay "all sums which the Insured shall become legally obligated to pay as damages because of [bodily injury or property damage to which the...