On appeal from the Superior Court of New Jersey, Law Division, Middlesex County.
Approved for Publication October 19, 1995
Before Judges Dreier, Braithwaite and Bilder. The opinion of the court was delivered by Dreier, P.j.a.d.
The opinion of the court was delivered by: Dreier
The opinion of the court was delivered by DREIER, P.J.A.D.
Defendants, The Hartford Accident and Indemnity Company and Fireman's Fund Insurance Company, appeal from a declaratory judgment determining that the comprehensive general liability insurance policies issued by the two insurers to plaintiff, Astro Pak Corporation, require the insurers to indemnify Astro Pak against the claims of Transtech Industries and its affiliated companies. Transtech is the owner and was the operator of the Kin-Buc disposal facility in Edison Township. The facility was one of the largest government-approved landfills in New Jersey. Astro Pak itself was a licensed transporter of liquid hazardous waste, solvents and chemicals.
Between April 12, 1973 and July 15, 1976 *fn1 Astro Pak transported and discharged at the Kin-Buc landfill over a million and a half gallons of waste, solvents and chemicals. Where the waste was contained in barrels, they were placed in the landfill as directed by the operator. Where the waste was liquid in a tank truck, the truck drivers would drive to the top of the landfill where the operator would have dug a hole, and the waste would be discharged into the hole and then covered. This immense landfill rose to heights of between four and nine stories. It supposedly was constructed to be impervious so that the deposited wastes would not affect the surrounding land or water. Unfortunately this was not so, and leachate from the landfill was polluting the adjoining Raritan River.
Disposal operations were terminated at the Kin-Buc landfill on July 18, 1976 pursuant to an order of the New Jersey Department of Environmental Protection. Upon receiving news that the landfill had been closed pursuant to a DEP order, Astro Pak immediately ceased all deliveries to the site. In 1979, the United States sued Kin-Buc, Transtech and others for the recovery of remediation costs. In 1983, it ordered eleven parties to remediate the site. No claim was made against Astro Pak in either proceeding.
In 1984, the Federal Environmental Protection Agency informed Astro Pak that it was potentially liable under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 to 9675, for some remediation costs. Astro Pak was assessed with 1.23% of the costs based upon the total volume of identifiable waste it had deposited at Kin-Buc and settled with the EPA for $87,804.52, presumably from its own funds and not from those of any insurer. Astro Pak also acknowledges that it participated in the settlement of a single personal injury suit brought by neighbors of the landfill.
In 1990, Transtech instituted a federal action against all the users of Kin-Buc, including Astro Pak. In Transtech's second amended complaint filed in March 1993, it sought recovery for past and future remediation costs which it estimated would exceed one hundred million dollars. It is this claim by Transtech that occasioned Astro Pak's declaratory judgment action to establish the liability of its principal insurers.
Fireman's Fund issued a comprehensive general liability policy to Astro Pak having aggregate and single occurrence limits of $250,000 for a three-year period, April 20, 1974 through April 20, 1977. The insurer alleges that it canceled its policy effective July 5, 1976. As of July 5, 1976 Astro Pak was insured by The Hartford Insurance Company under policies issued between July 5, 1976 and July 5, 1984. There is some confusion concerning the dates on which the policies of the two insurers were issued, but it appears that the changeover occurred in 1976 because it would coincide with the date that Fireman's Fund contends its coverage ceased, as well as confirm the parties' recollection that this was approximately the same time the Kin-Buc landfill was closed.
Both insurers are required to indemnify Astro Pak up to the policy limits for property damage caused by a covered occurrence. The policies, however, provided that property damage claims "arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence." The Hartford's aggregate limits were the same $250,000 for the first three years of coverage, thereafter the limit was raised to $300,000. The policies, however, contain a pollution-exclusion clause that makes the policies inapplicable
to 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 unto or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental. *fn2
The principal issue in this case involves the application of Morton Int'l, Inc. v. General Accident Ins. Co. of Am., 134 N.J. 1, 629 A.2d 831 (1993), cert. denied, U.S. , 114 S. Ct. 2764, 129 L. Ed. 2d 878 (1994), to the claims against these two insurers. With some refinements, Fireman's Fund contended that its exclusion clause applied because the dumping at the landfill had been an intentional discharge of a known pollutant upon the land, and that any "occurrence" under the policy was dependent upon there being actual damage which did not occur until after it was off the risk. The Hartford claimed that its policies only covered the period after plaintiff ceased delivery to the landfill, and, furthermore, at that time plaintiff knew of leakage from the landfill and thus the potential for loss. The Hartford, therefore asserts that its policies could not cover this claim. *fn3
After extensive briefing and argument in the Law Division, Judge Bachman reserved decision on December 16, 1993, and on April 25, 1994 delivered a comprehensive oral opinion rejecting defendants' defenses and determining that the respective policies of Fireman's Fund and The Hartford were available to plaintiff. He focused both upon the actions of plaintiff delivering the material to the landfill and the damages which were caused by the landfill leaking into the surrounding land and the Raritan River. He correctly interpreted Morton Int'l as precluding insurers from enforcing the pollution exception to the policy except where the discharge was intentional. He found as an uncontroverted fact that plaintiff had no knowledge of the initial pollution from the landfill which commenced as early as 1971, and that plaintiff discontinued dumping at the site as soon as it had any inkling that any pollutant was being discharged into ...