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Harvard Industries Inc. v. Aetna Casualty & Surety Co.

Decided: November 18, 1993.

HARVARD INDUSTRIES, INC.; HARMAN AUTOMOTIVE, INC.; HARMAN AUTOMOTIVE -- PUERTO RICO, INC.; THE KINGSTON-WARREN CORPORATION; HAYES-ALBION CORPORATION; HARVARD TRANSPORTATION CORPORATION; TRIM TRENDS, INC.; AND DECKERVILLE DIE FORM CO., PLAINTIFFS,
v.
AETNA CASUALTY & SURETY COMPANY; AFFILIATED FM INSURANCE COMPANY; ALLSTATE INSURANCE COMPANY; AMERICAN EMPIRE SURPLUS LINES INSURANCE COMPANY (FORMERLY KNOWN AS GREAT AMERICAN SURPLUS LINES INSURANCE COMPANY); AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY; AMERICAN MOTORISTS INSURANCE COMPANY; CALIFORNIA UNION INSURANCE COMPANY; CHARTER OAK FIRE INSURANCE COMPANY; CHICAGO INSURANCE COMPANY; COLUMBIA CASUALTY COMPANY; CONTINENTAL CASUALTY COMPANY; CONTINENTAL INSURANCE COMPANY; FIREMAN'S FUND INSURANCE COMPANY; FIRST STATE INSURANCE COMPANY; FIRST STATE UNDERWRITERS AGENCY OF NEW ENGLAND CORPORATION; GREAT AMERICAN INSURANCE COMPANY; HARBOR INSURANCE COMPANY; HARTFORD ACCIDENT AND INDEMNITY COMPANY; HIGHLANDS INSURANCE CO.,; HOME INDEMNITY COMPANY; HOME INSURANCE COMPANY; H.S. WEAVER (UNDERWRITING) AGENCIES, LIMITED; INSCO LIMITED; INSURANCE COMPANY OF NORTH AMERICA; INTEGRITY INSURANCE COMPANY; LEXINGTON INSURANCE COMPANY; LIBERTY MUTUAL INSURANCE COMPANY; NEW JERSEY PROPERTY-LIABILITY INSURANCE GUARANTY ASSOCIATION; NORTH STAR REINSURANCE CORPORATION; NORTH-WESTERN NATIONAL INSURANCE CO.; ST. PAUL FIRE AND MARINE INSURANCE COMPANY; SAFETY MUTUAL CASUALTY COMPANY; THE TRAVELERS INDEMNITY COMPANY; TRAVELERS INSURANCE COMPANY; TWIN CITY FIRE INSURANCE COMPANY; UNDERWRITING MEMBERS OF LLOYDS OF LONDON; UNITED STATES FIRE INSURANCE COMPANY; ZURICH INSURANCE COMPANY; AND DOES 1-500, DEFENDANTS.



Fisher, Jr.

Fisher

FISHER, J.S.C.

This action concerns the interpretation and application of what is known in the insurance

industry as the "absolute pollution exclusion." Such an exclusion, contained in a policy of insurance issued by defendant American Empire Surplus Lines Insurance Company ("American Empire") to plaintiffs, gave rise to the present dispute. This absolute pollution exclusion derives its name from the fact that it does not limit its applicability to claims arising from "sudden and accidental" events as in a clause recently considered by our Supreme Court in Morton International, Inc. v. General Accident Insurance Company of America, N.J. (1993).

The issues before this court as to the scope of the pollution exclusion are of novel impression in New Jersey. The parties have referred to a number of unreported decisions concerning the "absolute pollution exclusion,"*fn1 as well as one reported decision,*fn2 by the courts of this state. Those decisions, however, do not focus on the precise arguments raised by plaintiffs in seeking to avoid the effect of the exclusion under the circumstances of this case.*fn3

I

INTRODUCTION

On January 15, 1993, plaintiffs Harvard Industries, Inc., and its related entities,*fn4 commenced an action in this court seeking insurance coverage from approximately forty insurance carriers for a variety of occurrences described in the complaint.

American Empire has moved for summary judgment, contending that the "absolute pollution exclusion" contained in its policy of insurance bars coverage of Harvard's claims. To resolve this motion, the court must consider the manner in which our courts interpret insurance policies, the relevant language of the policy, and the nature of the claims for which Harvard seeks coverage from American Empire.*fn5

II

THE JUDICIAL APPROACH TO THE INTERPRETATION OF INSURANCE POLICIES

It is often stated that insurance contracts must be liberally construed in favor of a policyholder, and strictly construed against the insurer, in order to provide the protection for which the insured bargained. Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 41, 161 A.2d 717 (1960). In this regard, insuring clauses are to be viewed liberally in favor of coverage and exclusions are to be strictly construed. See Sinopoli v. North River Ins. Co., 244 N.J. Super. 245, 250, 581 A.2d 1368 (App. Div. 1990). If the words of the policy are ambiguous, or the policy's language uncertain, then the policy will be construed in the insured's favor. Corcoran v. Hartford Fire Ins. Co., 132 N.J. Super. 234, 243, 333 A.2d 293 (App. Div. 1975). This does not mean, however, that a court should scour a policy in an effort to locate an ambiguity or contort the language of the policy to create uncertainty. Sinopoli, supra, 244 N.J. Super. at 250.

Since insurance contracts are ordinarily drafted and prepared by an insurer "guided by his own interests and goals in the transaction," Simses v. North American Co. for Life and

Health Ins., 175 Conn. 77, 394 A.2d 710, 714 (Conn. 1978), they are often viewed as "contracts of adhesion." Such disparate bargaining power has prompted our courts to construe such contracts in the light most favorable to the insured since the policy is often offered to the insured on a take-it-or-leave-it basis. See, Mazzilli v. Acc. & Cas. Ins. Co. of Winterthur, 35 N.J. 1, 7-8 (1961). On the other hand, if the insured is a sophisticated business entity with substantial bargaining power, it does not necessarily follow that the insured is entitled to have all doubts and ambiguities construed in its favor. See McNeilab, Inc. v. North River Ins.Co., 645 F. Supp. 525, 546 (D.N.J. 1986), aff'd o.b. 831 F.2d 287 (3d Cir. 1987); Erie County v. American States Ins. Co., 573 F. Supp. 479, 487 (E.D.Pa. 1983), aff'd 745 F.2d 45 (3d Cir. 1984).

Although the arguments before the court do not necessitate an assessment of the parties' bargaining power, what is before the court suggests that it may be unlikely that the doctrine of contra proferentem will apply if an ambiguity can be found in any of the policies in question.*fn6 In any event, because the arguments concerning the scope and application of the absolute pollution exclusion arise by way of a motion for summary judgment, and because the movant has not suggested that the parties possessed equal bargaining power, the court will construe any ambiguities in the policy in the light most favorable to the insured, even though the present record may suggest otherwise.*fn7

III

THE POLICY IN QUESTION

A. The Absolute Pollution Exclusion

Harvard's motion is based upon what has been referred to by the parties as the absolute pollution clause. That clause states:

It is agreed that the exclusion relating to 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 is replaced by the following:

1. to bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants:

(a) at or from premises owned, rented or occupied by the Named Insured;

(b) at or from any site or location used by or for the Named Insured or others for the handling, storage, disposal, ...


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