Plaintiff Jackson Township Municipal Utilities Authority (Jackson M.U.A.) initiated this action for declaratory judgment pursuant to N.J.S.A. 2A:16-50 et seq., against defendants Hartford Accident and Indemnity Company, Merchants Mutual Insurance Company, Insurance Company of North America, Harleysville Mutual Insurance Company, Royal Globe Insurance Company and Newark Insurance Company. The issue raised is: Does a general liability insurance carrier owe to its insured, a municipal utilities authority, a duty to defend and indemnify when the authority has been charged with negligently contaminating and polluting ground water, causing property damage and personal injury?
Plaintiff Jackson M.U.A. functions pursuant to the provisions of N.J.S.A. 40:14B-1 et seq. As part of its operation it collects from its system liquid waste and hauls and dumps the waste at designated landfills. Plaintiff has been named as a third-party defendant in two actions initiated by residents of the Legler section of Jackson Township, Ocean County, New Jersey. The first action was instituted in the United States District Court, entitled Adelung v. Township of Jackson, filed in August 1979,
Docket 79-2613. The second action, entitled Ayers v. Township of Jackson, was filed in the Superior Court, Law Division, Ocean County, in October 1980, Docket L-5808-80. Both actions are still pending. In each the plaintiff residents allege that Jackson Township acquired a landfill in 1972 and was negligent in the selection of the landfill site and in the design and maintenance of the landfill, resulting in the seepage of pollutants into the Cohansy aquifer. It is alleged that this caused contamination of the residents' ground water, resulting in personal injury and property damage. The township has joined Jackson M.U.A. as a third-party defendant as well as 20 other companies, haulers and other public entities, alleging that these parties deposited dangerous toxic wastes in the landfill which caused the pollution. Specifically, the township charges that Jackson M.U.A. knew, or in the reasonable exercise of foresight, should have known that liquid waste would leach through the soil and contaminate the residents' wells. Jackson M.U.A. as well as the other haulers are alleged to have deposited the liquid waste "in and around the landfill continuously from prior to the date the landfill was opened until the present." From the pleadings and oral argument, there appears to be a significant question as to whether the liquid waste dumped by Jackson M.U.A. contained industrial waste or was collected exclusively from residential dwellings. It is charged with intentional wrongdoing, nuisance and trespass, as well as negligence. The township seeks contribution, indemnification and damages for the cost of the installation of a public water system which was installed by the township in order to provide water free of pollutants, as well as other damages.
General liability coverage was provided to plaintiff by defendant Hartford Accident and Indemnity Company from February 1, 1971 through February 1, 1977; by defendant Insurance Company of North America from February 1, 1977 to February 1, 1978, and by defendant Harleysville Mutual Insurance Company from February 1, 1978 to June 13, 1980. Each policy insured against claims for bodily injury or property damage caused by
an occurrence. All of the policies define "occurrence" as meaning an accident, including bodily injury or property damage "neither expected or intended from the standpoint of the insured." Except for the Hartford policy for the year February 1, 1972 to February 1, 1973, each policy contains what is commonly known as a pollution exclusion clause which reads as follows:
This policy does not apply
Jackson M.U.A. moves for partial summary judgment, arguing that from the terms of the policy, the carriers owe a defense in light of the allegations of the third-party complaint that contamination occurred during a period of time the policies were in effect. It argues that there is no genuine issue as to any material fact challenged and, therefore, it is entitled to an order requiring the carriers to assume its defense as a matter of law. Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 74-75 (1954). Hartford, Insurance Company of North America and Harleysville cross-move for summary judgment arguing that the pollution exclusion clause is applicable, since the alleged occurrence of bodily injury and property damage arose out of the discharge of pollutants and was not sudden and accidental.
A liability insurer's duty to defend comes into being when the complaint against the insured states a claim constituting a risk insured against, and that duty is not excused because the claim cannot be maintained against the insured either in law or in fact. Danek v. Hommer, 28 N.J. Super. 68 (App.Div.1953), aff'd 15 N.J. 573 (1954). As stated in Danek:
Liability of the insured to the plaintiff is not the criterion; it is the allegation in the complaint of a cause of action which, if sustained, will impose a liability covered by the policy.
So in the resolution of the problem, the complaint should be laid alongside the policy and a determination made as to whether, if the allegations are sustained, the insurer will be required to pay the resulting judgment, and in reaching a conclusion, doubts should be resolved in favor of the ...