Reliance Ins. Co. v. Armstrong World Industries, Inc.

• Decision Date: 17 July 1992
• Citation: 259 N.J.Super. 538,614 A.2d 642
• Parties: RELIANCE INSURANCE COMPANY, Plaintiff, v. ARMSTRONG WORLD INDUSTRIES, INC., Defendant.
• Court: New Jersey Superior Court

Page 538

259 N.J.Super. 538

614 A.2d 642

RELIANCE INSURANCE COMPANY, Plaintiff, v. ARMSTRONG WORLD INDUSTRIES, INC., Defendant.

Superior Court of New Jersey, Law Division,

Cumberland County.

Decided July 17, 1992.

[614 A.2d 643]

Eisenstat, Gabage & Berman, Vineland, for plaintiff (Charles W. Gabage, counsel)

Hangley, Connolly, Epstein, Chicco, Foxman & Ewing, Philadelphia, Pa., for plaintiff (Steven R. Fischer, Counsel, Regina A. Vogel and Deborah Weinstein, on the brief).

Cohen, Shapiro, Polisher, Sheikman and Cohen, Philadelphia, Pa., defendant (Judah I. Labovitz, Counsel, Mark S. Herr, on the brief).

Covington & Burling, Washington, D.C., for defendant (Robert N. Sayler, Counsel, Kenneth L. Doroshow, counsel).

KLEINER, J.S.C.

Reliance Insurance Company has filed a complaint for declaratory judgment seeking a ruling that it is not liable to its insured, Armstrong World Industries, Inc., (hereafter Armstrong) for the defense expenses and settlement obligations

incurred by Armstrong in its response to environmental contamination damage claims asserted against Armstrong by the American National Can Corporation (hereafter ANCC). This matter is now before the court on Armstrong's motion for summary judgment and a cross motion filed by Reliance. ¹

Although environmental damage claims asserted against insureds have sparked numerous[614 A.2d 644] judicial rulings involving insurers' indemnity responsibility, the primary issue raised in this litigation has not been specifically addressed in any reported New Jersey decision. The issue posed is whether environmental contamination damage resulting from pollution of a long duration constitutes damage attributable to an "accident" within the ambit of a comprehensive property liability insurance policy.

The litigation which provoked this declaratory judgment action was filed on January 9, 1989, in the United States District Court for the Northern District of Illinois, Eastern Division, bearing Docket Number 89-C-168, wherein American National Can Company was plaintiff and Kerr Glass Manufacturing Corporation (hereafter Kerr Glass) was the initial sole defendant. That action was a suit to recover damages for contamination at a glass container manufacturing plant located in Millville, New Jersey.

The ANCC property was first established as a factory site in the 1800's by the Whitall-Tatum Company, (hereafter Whitall-Tatum). In 1938, Armstrong, also a glass manufacturer, acquired the property from Whitall-Tatum, and thereafter, sold the facility on March 31, 1969, to Kerr Glass. The asset-purchase agreement between Armstrong and Kerr Glass contained an indemnity provision:

Armstrong shall indemnify and hold harmless from and against any damage or loss suffered by Kerr as a result of ... any claim of any kind or nature

whatsoever with respect to the business carried on by Armstrong's Packaging Materials Operations arising out of facts or events occurring prior to the closing time

In 1983, a portion of the site was sold by Kerr to ANCC. In April 1985, title was transferred by ANCC to Triangle Acquisition Corporation (hereafter Triangle.)

In anticipation of the sale to Triangle, ANCC was required by the Environmental Cleanup Responsibility Act (ECRA), N.J.S.A. 13:1K-6 to 35, to investigate the environmental conditions at the site, to complete any required cleanup of environmental conditions prior to transference, or, alternatively, to enter into an administrative consent order with the New Jersey Department of Environmental Protection (DEP) to guarantee the investigation and cleanup of the site, pursuant to the legislative statement of policy set forth in N.J.S.A. 13:1K-7.

The Legislature finds and declares that the generation, handling, storage and disposal of hazardous substances and wastes pose an inherent danger of exposing the citizens, property and natural resources of this State to substantial risk of harm or degradation; that the closing of operations and the transfer of real property utilized for the generation, handling, storage and disposal of hazardous substances and wastes should be conducted in a rational and orderly way, so as to mitigate potential risks; and that it is necessary to impose a precondition on any closure of transfer of these operations by requiring the adequate preparation and implementation of acceptable cleanup procedures therefor.

The investigation by ANCC disclosed environmental contamination resulting from the release of hazardous substances. It thereupon instituted suit naming Kerr Glass as a defendant, seeking contribution for environmental response and cleanup costs, pursuant to 42 U.S.C.A. § 9607(a) the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980.

Kerr Glass, in response, filed a third-party complaint against Armstrong for contribution and indemnification for the cleanup expenses attributable to waste disposal by Armstrong and its predecessor in title, Whitall-Tatum. ANCC, with leave of court, amended its complaint to include direct claims against Armstrong.

Although the federal court ultimately issued an order for partial summary judgment against Armstrong, the parties on March 12, 1991 entered into a separate settlement agreement which terminated the [614 A.2d 645] litigation. ² The financial responsibility of Armstrong pursuant to this settlement agreement caused Armstrong to seek indemnification from Reliance, its insurer from January 1, 1942, to January 1, 1953. Reliance has denied responsibility and has filed this suit for a declaratory judgment seeking to vindicate its position.

Armstrong was the named insured under comprehensive general liability insurance policies issued by Reliance or its predecessor, Standard Accident Insurance Company, (hereafter Standard Accident) for each year commencing January 1, 1942, and terminating January 1, 1952. Each policy was a policy for a one-year period. ³

As noted, the California stipulation was specifically included as a basis of the California decision and the court's ultimate judgment. It is undisputed that, although certain aspects of the California judgment are presently pending appeal, the Phase I issues have not been appealed and are binding upon the parties.

As a predicate to all rulings on these motions, Reliance seeks a preliminary ruling by this court, that the California decision, respecting insurance coverage and insurance policy terminology, is binding upon this court.

New Jersey recognizes that the collateral estoppel effect of a judgment is dependent upon the law of the state rendering it. Restatement (Second) of Conflict of Laws, § 95 comment g (1971); Lumbermens Mutual Casualty Co. v. Carriere, 170

N.J.Super. 437, 452, 406 A.2d 994 (Law Div.1979); Puzio v. Puzio, 57 N.J.Super. 557, 570, 155 A.2d 115 (App.Div.1959)

[614 A.2d 646] A stipulated judgment is the equivalent of a judgment after a contested trial for the purposes of res judicata or collateral estoppel. California State Auto. Ass'n. v. Superior Court, 50 Cal.3rd 658, 788 P.2d 1156, 1161, 268 Cal.Rptr. 284 (1990). Additionally, where portions of a case are severable, the non-appealed part is final and res judicata. American Enterprise v. Van Winkle, 39 Cal.2d 210, 216, 246 P.2d 935, 937 (1952).

Armstrong had sufficient opportunity to completely litigate the issue of the existence of insurance policies for periods prior to January 1, 1942. It chose to forego that opportunity and to enter into a stipulation that encompassed and led to a judicial finding that:

"2. Armstrong has withdrawn its claims for Standard Accident liability insurance coverage to Armstrong for periods prior to January 1, 1942, and the Court, therefore, determines that there is no such coverage."

Although Armstrong now contends that the determination in California was too broad and was only meant to encompass a stipulation by it that it was abandoning its claim for pre-1942 products liability coverage and was not abandoning its claim as to pre-1942 general comprehensive liability coverage, it cannot be permitted to raise that assertion before this court. Such an argument contravenes the entire doctrine of collateral estoppel. Were Armstrong unsatisfied with the California judgment, which included the California stipulation, it could have petitioned the California court to amend its findings so as to limit the scope of paragraph "2." Were the amendment denied, it could have appealed or cross appealed that ruling as part of the now pending appellate review of other aspects of the California litigation.

Thus, for the purposes of this litigation, the insurance coverage under scrutiny shall be Standard Accident policies for the years commencing January 1, 1942, until January 1, 1952,

which contain identical policy terms, as fully delineated by the California judgment. ⁴

Reliance also seeks a judicial determination that it had no duty to defend Armstrong in the ANCC litigation. Obtaining such a declaration through the mechanism of a summary judgment motion requires the court to find that Reliance owed no duty to indemnify Armstrong for any component of Armstrong's alleged liability arising from the complaint filed against Armstrong by ANCC.

Until this court concludes that there is no indemnity obligation owed Armstrong, this court is precluded from declaring that Reliance had no duty to defend Armstrong in the ANCC litigation and concomitantly no duty to reimburse Armstrong for the defense expenses that it incurred in defending and settling that litigation. Hartford Acc. & Indem. Co. v. Aetna Life & Cas. Co., 98 N.J. 18, 483 A.2d 402 (1984); Burd v. Sussex Mutual Ins. Co., 56 N.J. 383, 267 A.2d 7 (1970). Until all issues of indemnification are resolved, Reliance's motion, as it pertains to this particular issue is premature and must be denied without prejudice. ⁵

SCOPE OF COVERAGE

In any dispute respecting insurance coverage, the court must look to the insuring agreement. Each...