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Diamond Shamrock Chemicals Co. v. Aetna Casualty and Surety Co.

Decided: January 30, 1989.

DIAMOND SHAMROCK CHEMICALS COMPANY, PLAINTIFF-RESPONDENT,
v.
THE AETNA CASUALTY AND SURETY COMPANY, ET AL., DEFENDANTS-APPELLANTS



On appeal from the Superior Court of New Jersey, Chancery Division, Morris County.

Antell, Dreier and Brochin. The opinion of the court was delivered by Brochin, J.s.c. (temporarily assigned).

Brochin

Plaintiff Diamond Shamrock Chemicals Company is a large corporation engaged in the business of manufacturing chemical products for home and industrial use. The defendants are Aetna Casualty and Surety Company and other primary and excess insurers which insured Diamond under comprehensive general liability policies issued between 1951 and 1984. Diamond's complaint seeks a declaration that by virtue of these policies, it is entitled to indemnification from its insurers for the costs of remedying the consequences of dioxin contamination which has resulted from its manufacturing operations on its property at 80 Lister Avenue, Newark, New Jersey.

The defendants' answers deny liability and assert affirmative defenses based on the language of the relevant policies, including exclusion clauses, which define their coverage. In order to test these affirmative defenses, the parties made various motions for partial summary judgment. Leave was sought to appeal to this court from several of the trial court's orders on these motions, but leave was granted for an appeal only from an order which ruled that the clauses of the policies which exclude claims for damages to the insured's own property are "inapplicable" to bar the indemnification which Diamond seeks.

The basic insuring agreement contained in Diamond's comprehensive general liability policies reads as follows:

The company will pay on behalf of the insured all sums which the insured shall become liable to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence. . . .

The relevant exclusion clauses state:

This policy does not apply:

(i) to property damage to

(1) property owned or occupied by or rented to the insured,

(2) property used by the insured, or

(3) property in the care, custody or control of the insured or as to which the insured is for any purpose exercising physical control;

(j) to property damage to premises alienated by the named insured arising out of such premises or any part thereof.

(In this opinion we refer to clause "i" as the "owned property" exclusion and clause "j" as the "alienated property" exclusion.)

The court's ruling that these provisions are "inapplicable" was incorporated in an order entered February 4, 1988, which reads as follows:

Ordered that the motions of defendants Aetna Casualty and Surety Company . . . joined by the defendants listed . . . for summary judgment to exclude coverage for property damage to the insured's property, and/or to exclude coverage for property damage to property in the care, custody or control of the insured, and/or to exclude coverage for property damage to premises alienated by the insured are denied, and that Diamond's cross-motion to declare the aforesaid exclusions inapplicable is granted, all as more particularly set forth in the Court's oral statement . . . on December 11, 1987. . . [Emphasis added.]

The only issues now before us are those raised by defendants' appeal from the underlined portion of this order. We reverse and remand, holding only that the exclusions are potentially applicable and that a final decision as to their applicability should be made on the basis of a fully developed record.

Diamond acquired the manufacturing facility at 80 Lister Avenue, Newark, in 1951 and sold it in 1971. It reacquired the site and adjacent property in 1984 and 1986 to facilitate the clean up or containment of the dioxin contamination which was ordered by the DEP.

From 1951 until early 1969, Diamond manufactured a chemical at its 80 Lister Avenue facility which it used in the production of various herbicides. Dioxin, a chemical which has proven highly toxic to laboratory ...


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