to the trigger of coverage. Thus, to the extent Grace can prove that a continuing occurrence caused injury during a policy period, coverage will be triggered.
Similarly, like the Maryland Casualty policies, the Continental policies do not limit liability to only that damage proved to have occurred during the policy period. The policies state that Continental will pay Grace for all sums for which Grace becomes legally obligated to pay because of accidental property damage that occurs during the policy period. Under CERCLA's strict liability regime, Grace could be held liable to pay for all damage at the Hatco site even if its contribution to the site conditions consisted solely of damage caused during a single year. Because the policy language places Continental in Grace's shoes, it may be required to provide coverage for damage that occurred outside of the policy period, provided that Grace's liability for that damage resulted from damage that occurred during the policy period. Consequently, the joint and several liability applied to the Maryland Casualty policies for all damage sustained as a result of a continuing occurrence extending over more than one policy period applies to the Continental policies as well.
Grace contends that coverage is triggered from the date of first disposal through the date of manifestation of injury. It has failed, however, to establish as an undisputed fact, for purposes of summary judgment, that "injury" occurred within the meaning of the policy language at the time of first disposal. Nor has it established beyond dispute the date of the first disposal. Further, it has not established as undisputed fact that injury was a continuous process, is indivisible, and occurred during any given year.
The Court has been presented with no evidence that suggests that the disposals of chemical waste by Grace have resulted in continuous, indivisible injury to the Fords site. It is possible that only some portions of the property damage will meet these requirements. Thus, while it may appear that seepage and migration of chemicals into and under the ground will have been a continuous injurious process, that does not necessarily mean that surface contamination cannot be separated from the subsurface contamination, and allocated to specific policy periods for purposes of coverage. These and many other questions have not been briefed or otherwise addressed by the parties, and must await trial for resolution.
In its Reply Memorandum, Grace asserts that it seeks only a declaration as to the legal question of when coverage is triggered under the policies in issue, and that it does not seek to have the Court apply that standard to determine whether coverage actually was triggered for any particular policy. Reply Memorandum at 32-33. In view of the factual vacuum that exists, the Court can do no more than declare the general principles that will determine whether coverage has been triggered under the insurance contracts and related excess insurance contracts. The Appellate Division aptly noted in Gottlieb that the issue of when coverage has been triggered is "fact sensitive and not properly the subject of an absolute rule." 238 N.J. Super. at 537.
Accordingly, to the extent Grace can prove that: (1) injury or destruction to property commenced during a covered policy period, and (2) the injury or damage was continuous and indivisible through some date not later than the manifestation of the injury,
coverage would be "triggered" as to each policy in effect during that span of time. Further, provided that coverage is actually afforded by a policy and is not in any way precluded or excluded by the terms or conditions of the policy or by operation of law, that policy will be jointly and severally liable to the extent of policy limits for all damages that resulted from the entire continuing indivisible occurrence. To that extent, Grace's motion will be granted.
III. Cross-Motions for Summary Judgment On The Pollution Exclusion Provisions of Various Insurance Policies
The Insurers have moved for summary judgment in their favor holding that all excess umbrella insurance policies in effect from June 30, 1971 do not provide coverage for gradual pollution. Grace has cross-moved for summary judgment in its favor that all post-June 30, 1971 excess umbrella insurance policies provide coverage for gradual pollution provided that such pollution was unexpected and unintended.
By separate motion, Grace seeks a declaration that three excess insurance policies issued by American Employers' Insurance Company (" Employers'") that covered the period between October 20, 1962 and June 30, 1971, and one excess insurance policy issued by Employers' Commercial Union Insurance Company ("Commercial Union") that covered the period between June 30, 1971 and June 30, 1974, all provide coverage for gradual pollution.
The underwriters at Lloyd's of London and the London Market Companies (collectively, "the London defendants") also move separately for summary judgment as to the effect of the pollution exclusions in policies issued by them between 1959 and 1962.
For the reasons set forth below, the Court will grant the Insurers' motion in part and deny it in part, grant Grace's motions in part and deny them in part, and deny the London defendants' motion.
The subject of the cross-motions are all of the excess comprehensive general liability insurance policies at issue in this case that were in force between June 30, 1971 and June 1985. All post-1971 excess policies contained what are referred to as "pollution exclusions". There are two different exclusions contained in the various policies, which will be discussed below. Many of the excess policies also contained "following form" provisions that defined the extent to which their coverage followed the coverage provided in the underlying primary comprehensive general liability insurance policies. These provisions also varied from policy to policy. The underlying primary policies in effect during the period in issue all provided special policy limits for "gradual pollution."
The cross-motions require a two-part analysis. First, the parties maintain contrary positions as to whether the pollution exclusion clauses exclude all coverage for gradual pollution. Second, the parties maintain contrary positions as to the effect that the following form provisions contained in many of the excess policies have on any gradual pollution coverage in the underlying primary policies.
A. The Insurers' Motion On the Pollution Exclusions in the Post-1971 Policies
All of the excess insurance policies in effect from June 30, 1971 to June 30, 1985 contain some form of pollution exclusion. None of the primary insurance policies in effect between 1961 and 1976 contained pollution exclusions. The two Continental primary insurance policies in effect from June 30, 1976 to June 30, 1985 contained pollution exclusion provisions. Only two variations of pollution exclusions are involved in this case. They will be discussed individually.
1. The ISO Exclusion
All policies that contain pollution exclusions, other than those issued by the London defendants, with only minor variations, use the Insurance Services Office ("ISO") standard form exclusion, discussed at length in New Castle County v. Hartford Accident and Indem. Co., 933 F.2d 1162, 1181, 1192-1203 (3d Cir. 1991). That provision bars coverage for:
bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.
The Insurers contend that the ISO exclusion bars coverage for "gradual pollution", and that it is undisputed that all of the pollution in issue in this case was gradual. Therefore, they seek summary judgment in their favor that none of the policies including the ISO exclusion cover the claims asserted against Grace by Hatco.
The ISO exclusion is an absolute bar to coverage for property damage caused by pollution, with a narrow exception. That exception exists when the "discharge, dispersal, release or escape" is "sudden and accidental." The Insurers make several arguments why the Court should find gradual pollution excluded from coverage by the ISO standard pollution exclusion in this case.
First, they argue that the pollution exclusion unambiguously bars coverage for gradual pollution. The gist of the Insurers' argument is that the exclusion's requirement that the discharge or release of pollution be "sudden" precludes recovery for any discharge or release that is "gradual". This argument is essentially the common argument that "sudden" necessarily has a temporal meaning, and means either "abrupt" or of short duration. See New Castle, 933 F.2d at 1192. That argument has been litigated throughout the country. The numerous courts that have addressed the issue, however, have split, with no clear majority view having developed. See New Castle, 933 F.2d at 1195-96 nn. 60, 61 (collecting cases). This Court need not lay out the various arguments of the opposing views, as it believes that the Third Circuit Court of Appeals' extensive analysis under Delaware law in New Castle is highly persuasive and would be adopted without reservation by the New Jersey Supreme Court were it to reach the issue. The conclusion of the Third Circuit, that the term "sudden" is ambiguous, and that the phrase "sudden and accidental" should therefore be construed to mean "unexpected and unintended", New Castle, 933 F.2d at 1198-99, is essentially the same as the conclusion reached by the Appellate Division in Broadwell Realty Servs., Inc. v. Fidelity & Cas. Co., 218 N.J. Super. 516, 536 (App. Div. 1987) ("We thus construe the word 'sudden' as meaning unexpected and unintended").
The Insurers next argue that decisions finding ambiguity in the term "sudden" relied on the doctrine of contra proferentem, which they argue is inapplicable to the contracts in issue in this case. This argument fails because the Insurers misconstrue the doctrine of contra proferentem. Contra proferentum is a general doctrine under which ambiguous language in a contract is construed against its drafter. In re Estate of Miller, 90 N.J. 210, 221 (1982); see also In re Community Medical Center, 623 F.2d 864, 866 (3d Cir. 1980). It means literally "Against the party who proffers". See Black's Law Dictionary 327 (6th ed. 1990). The Insurers narrowly conceive of the doctrine as one of interpretation of insurance contracts against the insurer, and contend that it has no application when the parties to an insurance contract are equally sophisticated. This view has been rejected by the New Jersey Appellate Division:
principles [of interpretation] are no less applicable merely because the insured is itself a corporate giant. The critical fact remains that the ambiguity was caused by language selected by the insurer.