Vantage Development Corp., Inc. v. American Environment Technologies Corp.

• Decision Date: 18 July 1991
• Citation: 251 N.J.Super. 516,598 A.2d 948
• Parties: VANTAGE DEVELOPMENT CORP., INC., a New Jersey Corporation and Rocklee, Inc., a New Jersey Corporation, Plaintiff, v. AMERICAN ENVIRONMENT TECHNOLOGIES CORP., and Peter Melber, et al., Defendants.
• Court: New Jersey Superior Court

Page 516

251 N.J.Super. 516

598 A.2d 948

VANTAGE DEVELOPMENT CORP., INC., a New Jersey Corporation and Rocklee, Inc., a New Jersey Corporation, Plaintiff, v. AMERICAN ENVIRONMENT TECHNOLOGIES CORP., and Peter Melber et al., Defendants.

Superior Court of New Jersey, Law Division Bergen County.

Argued June 14, 1991.

Decided July 18, 1991.

Stephen D. Cuyler, Florham Park, for Selective Ins. Co. of America (Cuyler, Burk & Matthews, attorneys; Stephen D. Cuyler and Anne M. Mohan, on the briefs)

Bruce D. Nimensky, Morristown, for Vantage Development Corp., Inc. and Rocklee, Inc. (Berger & Bornstein, attorneys; Bruce D. Nimensky, on the briefs).

LAWRENCE D. SMITH, J.S.C.

The primary issue raised in this case addresses the scope and meaning of the so-called "absolute pollution exclusion" which was recently incorporated in general liability policies of insurance. Does that exclusion preclude coverage for remediation expenses incurred to prevent the migration to neighboring properties of oil deposited on an insured's property by a trespasser? For the reasons which follow, I find coverage is excluded.

Plaintiffs, Rocklee, Inc., and Vantage Development Corp., Inc. (Vantage), seek to recover under two policies of insurance for remediation expenses incurred in connection with an oil spill which occurred on January 29, 1989, on property owned by Rocklee and located at 16 Paris Avenue, Rockleigh, New Jersey. Vantage, a successor in title to Rocklee, ostensibly has no interest under the policies. Rocklee attributes the spill to the acts of an unknown party. As a consequence of those acts, oil flowed into an adjoining waterway and eventually into the Sparkill Creek in Orange County, New York. On January 30, 1989, American Environment Technologies Corp. (AET) was retained to clean up and prevent the spread of oil to neighboring properties. AET proceeded with cleanup activities ¹ which consisted of containing the oil spill, testing to determine the extent of contamination, excavating and removing contaminated soil.

Two policies of insurance are involved--a standard fire insurance policy which also covers various additional enumerated risks and perils and a comprehensive general liability insurance policy--both issued by Selective Insurance Co. (Selective). Rocklee theorizes that both policies provide coverage for costs incurred for containment, soil testing and soil removal. The The comprehensive general liability policy provides coverage for:

spill produced no damage to property other than damage to soil and a brook. Buildings were not damaged. Selective moves for summary judgment.

all sums which the insured shall become legally obligated to pay as damages because of

A. bodily injury or

B. property damage

to which this insurance applies, caused by an occurrence and arising out of the ownership, maintenance or use of the insured premises and all operations necessary or incidental thereto....

Claims for damages resulting from the discharge of pollutants or contaminants are excluded by the following provision:

It is agreed that each and every exclusion and any exception(s) to such exclusion forming a part of this policy and relating to the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acid, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants are replaced in their entirety by the following exclusion:

The company shall have no obligation under this policy (1) to investigate, settle or defend any claim or suit against any insured alleging actual or threatened injury or damage of any nature or kind to persons or property which arises out of or would not have occurred but for the pollution hazard; (2) to pay any damages, judgements, 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 (3) for any losses, costs or expenses arising out of any obligation, order, direction or request of or upon any insured, including but not limited to any governmental obligation, order, direction or request, to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize irritants, contaminants or pollutants.

"Pollution hazard" means an actual exposure or threat of exposure to the corrosive, toxic or other harmful properties of any solid, liquid, gaseous, or thermal pollutants, contaminants, irritants or toxic substances, including smoke, vapors, soot, fumes, acids or alkalis, and waste materials consisting of or containing any of the foregoing arising out of the discharge, dispersal or release or escape of any of the aforementioned irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water. Waste material includes any materials which are intended to be or have been recycled, reconditioned or reclaimed.

The existence of a broad, comprehensive pollution exclusion was signalled by a separate notice provision which reads:

ATTENTION

IMPORTANT NOTICE

Re: Pollution Exclusion

This policy contains an absolute Pollution Exclusion (Form 943). This means, under this policy, there is no coverage for any liability which any insured may have for damages arising out of pollution.

Clean-up and defense costs arising out of pollution are also not covered under this policy.

We urge you to read Form 943 carefully and discuss any questions with your agent.

The capitalized words, "Attention," "Important Notice," are set forth in bold print, the largest and most prominent print in the Package of documents which comprise the policy. The verbiage highlighted in the quotation, "no coverage" and "also not covered," are also set forth in bold print which immediately strikes the eye.

The pollution exclusion itself, which is styled in the notice provision as "absolute," has been so viewed by several courts. See Alcolac, Inc. v. California Union Ins. Co., 716 F.Supp. 1546, 1549 (D.Md.1989); Budofsky v. Hartford Ins. Co., 147 Misc.2d 691, 556 N.Y.S.2d 438, 440 (Sup.Ct.1990). Plaintiffs ostensibly concede that oil is a pollutant. See United States v. Standard Oil Co., 384 U.S. 224, 226, 86 S.Ct. 1427, 1428, 16 L.Ed.2d 492 (1966) (oil is a pollutant when introduced into the waterways); Guilford Industries Inc. v. Liberty Mut. Ins. Co., 688 F.Supp. 792 (D.Me.1988), aff'd 879 F.2d 853 (1 Cir.1989). See also Broadwell Realty v. Fid. & Cas., 218 N.J.Super. 516, 528 A.2d 76 (App.Div.1987).

Selective contends the absolute pollution exclusion precludes coverage for losses arising out of any spillage, release or discharge of oil. ² Rocklee contends the exclusion was not intended to preclude reimbursement for expenses incurred to contain and remove pollutant "dumped" on an insured's property by a trespasser, at least to the extent that those expenses were incurred to prevent migration of contaminant to neighboring properties. See Broadwell Realty, supra, 218 N.J.Super. at 525, 528 A.2d 76. The relevant facts are undisputed and the issues ripe for summary disposition. Michaels v. Brookchester, Inc., 26 N.J. 379, 387, 140 A.2d 199 (1958); Trucking Employers of No. Jersey v. Vrablick, 177 N.J.Super. 142, 425 A.2d 1068 (App.Div.1980).

In interpreting an insurance policy, a court may not ignore the clear and certain terms of a policy or change their meaning in an effort to construe them. When the policy is clear and unambiguous, the parties are bound by the language used and the court must accordingly give it effect. Longobardi v. Chubb Ins. Co. of N.J., 121 N.J. 530, 537, 582 A.2d 1257 (1990); Werner Industries, Inc. v. First State Ins. Co., 112 N.J. 30, 35, 548 A.2d 188 (1988).

If, on the other hand, the language of a policy will support two interpretations, one favorable to the insured and the other favorable to the insurer, a court is obligated to apply that interpretation which favors coverage. Butler v. Bonner and Barnwell, Inc., 56 N.J. 567, 576, 267 A.2d 527 (1970); Ohio Cas. Ins. Co. v. Flanagin, 44 N.J. 504, 513-514, 210 A.2d 221 (1965); Mazzilli v. Acc. & Cas. Ins. Co. of Winterthur, 35 N.J. 1, 7, 170 A.2d 800 (1961); Kievit v. Loyal Protect. Life Ins. Co., 34 N.J. 475, 482, 170 A.2d 22 (1961); Sinopoli v. No. River Ins Co., 244 N.J.Super. 245, 251, 581 A.2d 1368 (App.Div.1990). If there is any doubt, uncertainty or ambiguity in the phraseology of a policy, or if that phraseology is susceptible to two meanings, a construction favoring coverage must be adopted. Ohio Cas. Ins. Co., supra, 44 N.J. at 513, 210 A.2d 221; Kook v. Am. Sur. Co. of N.Y., 88 N.J.Super. 43, 52, 210 A.2d 633 (App.Div.1965).

The language of the policy must be read to determine the understanding that would be assigned by the general public, Kievit, supra, 34 N.J. at 488, 170 A.2d 22; Parnell v. Rohrer Chev. Co., 95 N.J.Super. 471, 480, 231 A.2d 824 (App.Div.1967); Edgewater Nat'l Bank v. Safeguard Ins. Co., 81 N.J.Super. 383, 388, 195 A.2d 653 (App.Div.1963), so as to fulfill "the reasonable expectations of the average purchaser in the light of the contract language." Linden Motor Freight v. Travelers Ins. Co., 40 N.J. 511, 193 A.2d 217 (1963); Allen v. Metropolitan Ins. Co., 44 N.J. 294, 305, 208 A.2d 638 (1965); Sinopoli, supra, 244 N.J.Super. at 251, 581 A.2d 1368. Those expectations, however, must be "objectively reasonable." Werner Industries, supra, 112 N.J. at 35, 548 A.2d 188; Broadwell Realty, supra, 218 N.J.Super. at 524, 528 A.2d 76. The focus is and must be on the language of the policy.

When dealing with clauses of exclusion, strict interpretation is required. Mazzilli, supra, 35 N.J. at 8, 170 A.2d 800; Sinopoli, supra, 244 N.J.Super. at 250, 581 A.2d 1368. One factor which courts "necessarily consider" is whether the insurer, by the use of "alternative or more precise language," could have "put the matter beyond reasonable question." Mazzilli, supra, 35 N.J. at 7, 170 A.2d 800; Ohio Cas. Ins. Co., s...