On appeal from the Superior Court, Law Division, Essex County.
King, Long and R.s. Cohen. The opinion of the court was delivered by R.s. Cohen, J.A.D.
Johnson Matthey, Inc. (JMI), is a Pennsylvania corporation. It has headquarters and does business primarily in Pennsylvania. It is authorized to do business in New Jersey, and has operated a manufacturing plant in Winslow, New Jersey, for some time. In this case, JMI sued a number of its liability insurers for declarations that their policies cover liabilities and costs arising out of litigation in which charges were made against JMI that waste from its Winslow plant went to four different disposal sites, all in New Jersey.
In one case, involving the cleanup of Price's Landfill, there was a settlement with the Federal Government to which JMI contributed some $2.5 million. There were also toxic tort claims relating to Price's Landfill, to the settlement of which JMI contributed some $200,000, and claims relating to the KinBuck Landfill, to the settlement of which JMI contributed some $6,000. There are also yet-unquantified remediation cost claims relating to three landfills, to which JMI may have to contribute.
The defendant insurers all provided JMI with general liability coverage, at various times, either as primary, excess or umbrella insurers. In this litigation, they raised a number of issues, all still unresolved,*fn1 in opposition to JMI's complaint for coverage. In late 1989, JMI made an in limine motion for a ruling
as to what state's body of substantive law governed the issues to be decided in the case. The motion judge ruled that Pennsylvania law controlled. JMI was granted leave to appeal, and we reverse.
The primary insurance coverage issue is whether leakage of pollutants onto the land is a "sudden and accidental" occurrence. This is a concept appearing in the policies; Pennsylvania and New Jersey courts have reached different interpretations of the phrase. Both states say that coverage is afforded to sudden and accidental discharges of pollutants. Pennsylvania rules, however, that a pollution discharge occurring gradually over time is not sudden and accidental. Lower Paxton Tp. v. United States Fidelity and Guar. Co., 383 Pa.Super. 558, 557 A.2d 393 (1989). New Jersey holds to the contrary that sudden and accidental discharges include a gradual release of pollutants. Broadwell Realty Serv., Inc. v. Fidelity & Cas. Co., 218 N.J. Super. 516, 528 A.2d 76 (App.Div.1987). The resolution of this particular coverage issue is apparently of great significance to the parties.
Although the "sudden and accidental" coverage issue is the one that is now foremost in the litigants' minds, the in limine ruling made by the Law Division Judge apparently related to every substantive issue that might arise in the litigation between JMI and its insurers. The March 30, 1990 order recites that plaintiff JMI asked for an in limine ruling "on which law should apply to determinations of law and fact in the disposition of this case," and then orders "that Pennsylvania law shall be applied in this case."
Our choice-of-law approach is governed by State Farm Mut. Auto. Ins. Co. v. Simmons' Estate, 84 N.J. 28, 417 A.2d 488 (1980). There, the Supreme Court concluded
that the proper approach in resolving conflict-of-law issues in liability insurance contract controversies . . . calls for recognition of the rule that the law of the place of the contract ordinarily governs the choice of law because this rule will generally comport with the reasonable expectations of the parties concerning the principal situs of the insured risk during the term of the policy and will furnish needed certainty and consistency in the selection of the applicable law.
At the same time, this choice-of-law rule should not be given controlling or dispositive effect. It should not be applied without a full comparison of the significant relationship of each state with the parties and the transaction. That assessment should encompass an evaluation of important state contacts as well as a consideration of state policies affected by, and governmental interest in, the outcome of the controversy. [Id. at 37, 417 A.2d 488 (citations omitted)].
The Simmons Court discussed with approval the "most significant relationship" standard of the Restatement (Second) of Conflict of Laws Sec. 188 (1971),*fn2 and the specific treatment of casualty insurance policies in Restatement Sec. 193:
The validity of a contract of fire, surety or casualty insurance and the rights created thereby are determined by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issue, some other state has a more significant relationship under the principles stated in Sec. 6 to the transaction and parties, in which event the local law of the other state will be applied.
Restatement Sec. 6, to which the Sec. 193 refers, lists the factors relevant to every choice of law in the absence of a statutory directive.*fn3 See generally Appleman, Insurance Law and Practice § 7076 (1981).
A complication presented by this case is that it seems to proceed simultaneously on two levels, treating two different matters as one. The first is the proper choice of law on which to decide the question of the meaning of the "sudden and accidental" policy language. The second is the proper disposition of the global conflicts question of what state's law "shall be applied in this case." The trial judge treated the two matters as one, and the parties have followed suit. We will first deal with the issue of which state's law determines the meaning of "sudden and accidental," and then with the proper disposition of the global conflicts question.
The Law Division Judge ruled for the application of Pennsylvania law, noting that JMI is a Pennsylvania corporation, the insurance agent was a Pennsylvania corporation, and all of the significant aspects of the execution of the policies took place in Pennsylvania, including payment of premiums, correspondence between the parties, and the domicile and business locations of the parties. The Judge went on to quote an unpublished New Jersey trial court opinion to the effect that the existence of a landfill problem in New Jersey and the insured's relationship to property there do not give New Jersey an interest in the insurance dispute between the parties, and further that the nature of the tort is not a legitimate factor to ...