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Morrone v. Harleysville Mut. Ins. Co.

May 22, 1995


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

Approved for Publication August 2, 1995.

Before Judges Pressler, Conley and Newman. The opinion of the court was delivered by Conley, J.A.D.

The opinion of the court was delivered by: Conley

The opinion of the court was delivered by CONLEY, J.A.D.

Defendant insurer (Harleysville) appeals a summary judgment entered on November 4, 1994 in plaintiff insured's declaratory judgment action directing Harleysville to provide plaintiff a defense under Garage Policy insurance contracts. We affirm, but in doing so we note that Harleysville's obligations, within the context of the allegations in the underlying litigation, are limited to damages arising from groundwater contamination. Because the underlying litigation alleges such contamination during the terms of the policies, Harleysville must provide a defense, subject to appropriate apportionment and reimbursement. *fn1 See State v. Signo Trading Intern., Inc., 130 N.J. 51, 66, 612 A.2d 932 (1992); SL Industries, Inc. v. American Motorists Ins. Co., 128 N.J. 188, 215, 607 A.2d 1266 (1992).

From July 31, 1981 to July 31, 1986, Harleysville provided plaintiff with "Garage Policy Insurance" under five separate one year policies. The policies were "occurrence" as opposed to "claims-made" policies and provided coverage for, pertinent hereto, "property damage to which this insurance applies caused by an accident and resulting from garage operations" ... "occurring during the policy period." The policies, however, contained an "owned property" exclusion.

Plaintiff sold the property in 1986. The underlying complaints that triggered the declaratory judgment action were brought against plaintiff by subsequent purchasers. The remaining complaint alleges that during a period of time encompassing the policy periods at issue there were gasoline leaks on the property causing both soil contamination and groundwater contamination and ultimately resulting in damage to the subsequent owners.

Harleysville asserts that it does not owe its insured a duty to defend because the alleged injuries to the subsequent owners did not occur until after the policy periods. Relying upon Hartford Acc. & Indem. Co. v. Aetna Life & Cas. Ins. Co., 98 N.J. 18, 483 A.2d 402 (1984), Harleysville contends that the time of the assertion of the damage, i.e., sometime after the sale of the property to the underlying plaintiffs, is the "occurrence" triggering coverage. Since that "occurrence" was after its policies had expired, Harleysville contends that it has no obligation to provide a defense or to indemnify plaintiffs.

In Hartford, Judge Skillman, then a trial Judge, had held that the insurer in that bodily injury case did not have a duty to defend its insured under an occurrence policy where the asserted bodily injury became manifest eleven days after the policy's expiration. In so concluding, Judge Skillman noted as "a general rule" that the time of the occurrence of an accident is "not the time the wrongful act was committed but the time when the complaining party was actually damaged." 98 N.J. at 27. That view was affirmed by us and the Supreme Court, with the latter adopting and quoting Judge Skillman's unreported opinion. Hartford, however, concerned coverage for bodily injury caused by the ingestion of a prescription drug and "expressly declined to resolve the time of an occurrence in the case of progressive bodily injury [or progressive property damage]." Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437, 453, 650 A.2d 974 (1994).

The Supreme Court has recently addressed that issue and rejected what Hartford referred to as the "general rule" in the context of occurrence liability policies in environmental exposure litigation. Owens-Illinois, Inc. v. United Ins. Co., supra, 138 N.J. at 454-56. In Owens, the Court determined which trigger theory should apply to bodily injury and property damage resulting from exposure to asbestos. As to the claims respecting property damage, the Court observed that "asbestos products cause continuous property damage from installation until removal" and held that "claims of asbestos-related property damage from installation through discovery or remediation (the injurious process) trigger the policies on the risk throughout that period." 138 N.J. at 455-56. Referring to the applicability of the "continuous trigger" approach to toxic waste cases in general, the Court said:

Property-damage cases are analogous to the contraction of disease from exposure to toxic substances like asbestos. Like a person exposed to toxic elements, the environment does not necessarily display the harmful effects until long after the initial exposure. "Thus, while property damage is not, of course, an insidious disease, many of the same considerations apply." [138 N.J. at 455, quoting Lac D'Amiante du Quebec, Ltee. v. American Home Assurance Co., 613 F. Supp. 1549, 1561 (D.N.J. 1985)].

And see Gottlieb v. Newark Ins. Co., 238 N.J. Super. 531, 535-537, 570 A.2d 443 (App. Div. 1990). See also Continental Ins. Companies v. Northeastern Pharm. & Chem Co., Inc., 811 F.2d 1180, 1189 (8th Cir. 1987), aff'd, 842 F.2d 977 (8th Cir. 1988), cert. denied, 488 U.S.821 (1988), ("We ... adopt the majority view that environmental damage occurs at the moment that hazardous wastes are improperly released into the environment and that a liability policy in effect at the time this damage is caused provides coverage...."). Accord, Ray Indus. Inc. v. Liberty Mut. Ins. Co., 974 F.2d 754, 766 (6th Cir. 1992); Port of Portland v. Water Quality Ins. Syndicate, 796 F.2d 1188, 1194 (9th Cir. 1986); Trustees of Tufts University v. Commercial Union Insurance Company, 415 Mass. 844, 858, 616 N.E.2d 68, 74 (1993); Buckeye Union Ins. Co. v. Liberty Solv. & Chemicals Co., Inc., 17 Ohio App. 3rd 127, 132; 477 N.E.2d 1227, 1233 (Ohio App. 1984); Boeing Co. v. Aetna Cas. & Sur. Co., 113 Wash. 2d 869, 886, 784 P.2d 507, 515 (Wash. 1990). And see generally, Martin J. McMahon, Annotation, Event Triggering Liability Insurance Coverage as Occurring Within Period of Time Covered by Liability Insurance Policy Where Injury or Damage is Delayed, 14 A.L.R.5th 695, § 26(a), at 887-897 (1993) (toxic waste cases).

We thus reject Harleysville's contention that the property damage within the meaning of the policy did not arise until the occurrence of the alleged injury to the plaintiffs in the underlying litigation. That litigation alleges exposure of gasoline to the insured's property during the terms of the policies. That is sufficient to trigger potential coverage and, thus, the duty to defend, unless some exclusion applies.

Harleysville relies upon an exclusion for "owned property" damage. The particular exclusion here, typical of "owned property" exclusions, provides that coverage afforded under the policy does not apply to "property damage to property owned ... by the insured...."See State v. Signo Trading Intern., Inc., supra, 130 N.J. at 63 (warehouse owner's general liability policy did not cover costs of cleanup of hazardous materials performed by or on behalf of an insured on its own property when costs were incurred to alleviate damage to insured's property and not to property of third ...

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