On appeal from Superior Court, Law Division, Essex County.
Approved for Publication March 7, 1995.
Before Judges Brody, Long and A.m. Stein. The opinion of the court was delivered by Long, J.A.D.
The opinion of the court was delivered by: Long
From approximately 1939 to 1983, Peter Vaida was the owner of ELTM, a tool manufacturing facility he operated at an industrial site in High Bridge, New Jersey. During portions of that period, the defendant insurance companies (Aetna, Cigna, Home and City) issued insurance policies providing comprehensive general liability insurance to ELAT, Inc. In January 1983, Plaintiff Elat acquired the assets of ELTM and leased the site until December 31, 1985. During that time, ELAT carried on substantially the same precision tool manufacturing business that ELTM had earlier conducted. ELTM was dissolved in 1986. Vaida died in 1987. Upon his death, the facility and the insurance policies issued by defendants became, by operation of law, the property of the estate of Peter Vaida (the "Estate").
In connection with its cessation of operations at the facility, Elat was required to comply with the environmental investigation provisions of the New Jersey Environmental Cleanup Responsibility Act ("ECRA"), N.J.S.A. 13:1K-6 to -35 (now, the Industrial Site Recovery Act, "ISRA"). (ECRA was enacted by the New Jersey Legislature following Elat's acquisition of the assets of ELTM and before the termination of the lease.)
The cleanup investigation revealed that, from approximately 1939 through 1983, ELTM's disposal of materials and wastes generated in manufacturing processes at the High Bridge premises resulted in extensive soil and groundwater contamination. Elat maintains that to date, it has spent over $1,000,000 in investigating and remediating the soils and groundwater, and that the future costs to remediate groundwater contamination will reach $1.5 to $1.95 million.
In July 1988, Elat instituted an action in the United States District Court against ELTM, the Estate and other affiliated entities seeking damages, contribution and indemnification for the costs incurred, and to be incurred in the future, in conducting the environmental investigation and remediation of the facility. In connection with this action, the Estate demanded coverage from defendants which was denied.
On May 1, 1991, the parties entered into a Consent Judgment pursuant to which ELTM, the Estate and others were adjudicated liable to Elat for damages in the amount of $628,360 for the costs incurred to investigate and remediate contamination of the soils and groundwater at the High Bridge premises, together with all such costs to be incurred in the future. The Estate, however, had a negative net value. Thus, it could not satisfy the judgment. In return for Elat's agreement not to execute on the Estate's other assets pending this action, the Estate assigned to Elat all of its rights and claims against defendants.
On November 15, 1991, Elat filed the present action against defendants. Defendants Home and City moved to dismiss the Complaint. The trial Judge granted the motion. In so doing, he held that the assignment from the Estate to Elat was ineffective because the policies contained express provisions that prohibited assignment unless consented to and endorsed by the insurers. He also held that N.J.S.A. 17:28-2 prohibits an injured party who has a judgment against an insured from maintaining an insurance coverage action directly against the insurance company until "execution against the insured has been returned unsatisfied by reason of bankruptcy or insolvency." Elat sought interlocutory relief which was denied. Subsequently, defendants Aetna and Cigna filed motions to dismiss the complaint which were granted. This appeal as of right by Elat followed.
Elat's primary argument on appeal is that what occurred in this case was not the kind of an assignment interdicted by the policies. We agree with this contention and reverse. Under the language of each of the relevant insurance policies, the insurer agreed to pay any and all damages for which the insured became legally obligated resulting from property damage arising from an occurrence. Also included were provisions prohibiting the assignment of any interest in the policies to a third party. City's policy contains an example of the language which is at the heart of this dispute:
Assignment of interest under this policy shall not bind the Company unless and until their consent is endorsed hereon.
Elat contends this language prohibits assignment of a policy and not assignment of a claim. We agree.
In Flint Frozen Foods v. Firemen's Ins. Co., 12 N.J. Super. 396, 399, 79 A.2d 739 (Law Div. 1951), rev'd on other grounds 8 N.J. 606, 86 A.2d 673 (1952), the court interpreted an insurance policy containing the following language which is effectively identical to the language at issue here: "Assignment of this policy shall not be valid except with the written consent of this company." The court held that once a loss occurs, the assignment is of the loss and not the policy and is thus not barred by a no-assignment ...