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General Acc. Ins. Co. of America v. State

Decided: January 5, 1995.

GENERAL ACCIDENT INSURANCE CO. OF AMERICA, PLAINTIFF-RESPONDENT,
v.
STATE OF NEW JERSEY, DEPARTMENT OF ENVIRONMENTAL PROTECTION AND JOHN DOE INSURANCE COMPANIES 1 THROUGH 20, DEFENDANTS, AND N. B. FAIRCLOUGH & SON, INC., DEFENDANT-APPELLANT, V. HARTFORD INSURANCE COMPANY; INTERSTATE FIRE INSURANCE COMPANY AND CHICAGO INSURANCE COMPANY; MISSION INSURANCE COMPANY; NATIONAL GRANGE MUTUAL INSURANCE COMPANY; NATIONAL UNION INSURANCE COMPANY; NORTHBROOK INSURANCE COMPANY; RELIANCE INSURANCE COMPANY; AND SELECTIVE INSURANCE COMPANY, THIRD-PARTY DEFENDANTS.



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

Before Judges Pressler, Conley and Newman

Conley

The opinion of the court was delivered by

CONLEY, J.A.D.

In February 1974 an act of vandalism caused a spill of approximately 1,300 gallons of No. 2 fuel oil from a tank truck located on the premises of defendant N.B. Fairclough and Son (N.B.) where it operated a fuel storage business. Plaintiff General Accident Insurance Company (General Accident) provided commercial general liability and automobile insurance policies to N.B. for the period of December 31, 1972 to December 31, 1975. As a result of the oil leak, contamination of the ground water and private wells occurred and the Department of Environmental Protection and Energy commenced remediation and cleanup procedures against N.B. and issued two directives, December 31, 1985 and April 8, 1987, and an Administrative Order on February 18, 1988 pursuant to N.J.S.A. 58:10-23.11f. In response thereto, General Accident, as the insurer of N.B., hired an environmental counselor as well as an engineering firm and over the years has expended in excess of $100,000 in compliance with the DEPE directives and order. It is undisputed that the bulk of these expenditures has been for remedial investigation engineering costs. No remediation plan is

yet in place. The 1988 DEPE directive ordered N.B. to prepare a Remedial Investigative/ Feasibility Study (RI/FS). Apparently, that has not been completed.

In 1987, General Accident filed a declaratory judgment action contending that under the provisions of the commercial general liability insurance policies issued to N.B., it had no obligation to defend or indemnify N.B. against the directives and order of DEPE.*fn1 After various pleadings were filed, General Accident and N.B. entered into a consent order in 1990 which provides in pertinent part that:

1. General Accident will provide indemnity coverage to Fairclough in an amount not to exceed the aggregate sum of $100,000 for claims other than bodily injury claims related to the site.

2. General Accident shall continue to provide Fairclough with a defense of all DEP claims arising out of certain DEP "directive letters" pertaining to the site.

3. Upon exhaustion of the sum of $100,000 through indemnity payments, as differentiated from defense expenses, General Accident's obligation to provide a defense shall terminate, provided however that both parties reserve the right to move before this Court for a determination of the propriety of any payment of any portion of the indemnity limits to a third party.

In 1994, pursuant to this consent order, General Accident filed a motion to enforce litigant's rights, contending that the over $100,000 it had already expended on engineering costs in response to DEPE'S remediation investigation requirements constituted indemnity or liability coverage and was not cost of defense. Its obligation then to defend N.B. any further in connection with DEPE'S cleanup directives and order had ceased.

In granting the motion and declaring that General Accident was relieved of any further responsibility to provide a defense and/or indemnity payments to N.B. under ...


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