12. The Court finds this characterization overstates the case. Moreover, it stops short of identifying a specific, non-complying condition that resulted in or contributed to pollution.
For the reasons discussed, the Court will deny summary judgment to Travelers based on section one of the pollution exclusion clause. The evidence is insufficient as to whether Pittston expected or intended to discharge pollutants before the date of the Environics study. Of course, after the study the issue is moot, because, as a matter of law, there was no covered occurrence. Likewise, the insurer has not produced sufficient evidence of conditions at Tankport that were not in compliance with the law and that are causally linked to the discharges of pollutants there.
This leaves only the question of the oil/water separator discharges into the drainage ditch that led to Caven Creek. First, as discussed with regard to the expected or intended requirement of the occurrence clause, the Court finds that there is a genuine issue of fact as to whether the separator discharged oil, or only "clean" water as it was supposed to do. The Court understands that significant contamination now exists in the Caven Creek area, but it is unclear at this point how much may be attributed to the separator and how much to seepage from Tankport operations and the Eagle Works legacy.
Second, the Court finds that the record is insufficient to rule even on the issue of whether this would constitute a body of water. The Court has not been informed of the nature of Caven Creek. It appears relevant to know, inter alia, whether this is a flowing stream, a dry waterbed, or tidal estuary. The Court has no firm evidence that it communicates with New York Harbor. Moreover, it has not been thoroughly briefed whether any of this makes a difference under the law.
Finally, it should be noted that, although denying summary judgment to the insurer on this issue, the Court is not granting it to the insured. As with the expected or intended occurrence definition issue, the stage appears to be set for a showing by the insurers on their burden under the pollution exclusion clause. However, with regard to the pre-1979 policies, the Court holds that this showing must be made to the trier of fact, as there is a genuine and material dispute on these issues.
(iii) Owned Property Exclusion
Like many CGL policies, the Travelers policies exclude from coverage damage to the insured's own property. Pittston makes the following arguments as to why it does not bar coverage here. First, it claims that there is off-site contamination both on the surface and due to migrating ground water pollution. Second, Pittston claims that the groundwater under Tankport is considered the property of the state, and therefore not "owned property."
Under New Jersey law, clean up of owned property is covered under a CGL policy when the clean up is necessary to prevent contamination of other property. State v. Signo Trading Int'l, Inc., 130 N.J. 51, 62-63, 612 A.2d 932 (1992) (citing Summit Assocs. v. Liberty Mutual Fire Ins. Co., 229 N.J. Super. 56, 64, 550 A.2d 1235 (App. Div. 1988)). This doctrine has been described as a "narrow exception" to the owned property exclusion. Id. at 64. Where the remediation is to be undertaken on the insured's owned property, a prima facie case exists for application of the owned property exclusion. The insured then has the burden of showing actual, off-site damage caused by on-site contamination, and an imminent and immediate threat of continued off-site damage, before it can claim coverage for remediation of its own property. Id.; Hatco, 801 F. Supp. at 1361.
Here, Travelers has disadvantageously cited examples of oil in Caven Creek, which is not on the property of the insured, in connection with its expected or intended argument. The issue of off-site pollution associated with the oil/water separator has also been raised. Pittston submits testimony that there is now off-site ground water pollution, and there is more contaminated ground water that is migrating off-site at the rate of ten to two hundred feet per year. Roland Decla. PP 18-21. The underground pools of oil are migrating off the site as well. Id. PP 25-28. The Court holds that this evidence establishes sufficient off-site contamination, and an imminent and immediate threat of further off-site contamination to warrant an exception to the owned property exclusion in this case.
This Court considered the parens patriae argument in Hatco and found that it was an open question under New Jersey law whether the State had a property interest in groundwater for the purposes of the owned-property exclusion in insurance policies. Since then, the issue has been addressed by two New Jersey trial courts with conflicting results. In Reliance Ins. Co. v. Armstrong World Indus., cited by Travelers, the court found that the property interest in groundwater resided in the title holder of the surface land. This holding was disagreed with in UMC/Stamford, Inc. v. Allianz Underwriters Ins. Co., 276 N.J. Super. 52, 60-61, 647 A.2d 182 (Law Div. 1994). There, the court found that the State's codified policy of protecting groundwater from contamination means that the proprietary interests in the groundwater exceeds those of the title holder of the surface land. See N.J.S.A. 58:10-23.11c-d, 58:10A-6, 58:10A-18.
Moreover, the UMC/Stamford court reasoned:
by its very nature, groundwater is a migratory fluid which uncontrollably seeps through porous soil particles. Therefore, because under such circumstances it is nearly impossible to naturally contain such a water source, as well as any contaminants or pollutants subsumed within its path, it would be unreasonable simplistically to assign ownership rights strictly on the basis of water that may only momentarily be coursing and flowing below a property's surface.
UMC/Stamford, 276 N.J. Super. at 61.
Accordingly, the court held that coverage for groundwater contamination was not barred by the owned property exclusion. This reasoning is persuasive. As a matter of reasonable expectations, a surface property owner does not believe that he has sole property rights in ground water beneath his property. The public policy importance of ground water leads to the conclusion that there is an interest, distinct from the property owner's, in the ground water. The Court notes that the Appellate Division has recently held in accord. Morrone v. Harleysville Mutual Life Ins. Co., 283 N.J. Super. 411, 418-20, 662 A.2d 562 (App. Div. 1995).
Travelers maintains that the qualification to the Signo exception, that there be actual damage to off-site property, bars coverage in this case. They argue that here the off-site damage is not certain enough, because clean-up efforts have not yet begun and costs allocable to preventing further off-site damage have not been determined. Travelers points out that the claims made here are not by other property owners, but by NJDEPE, who would make the claim regardless of whether the damage was on Tankport land or other land.
Travelers' arguments fail on this point. Although the certainty of off-site harm is an important element in showing that the coverage is a reasonable expectation of the insured, the cases do not hold that there must be a claim raised by a neighboring landowner to trigger this expectation. Here, there is concrete evidence that the groundwater has migrated, and that the oil/water separator contamination exists off-site. Thus, "present injury has already been demonstrated." Signo, 130 N.J. at 64. Therefore, the Court will rule as a matter of law that the owned property exclusion does not bar coverage in this case.
F. The Fortuity, Known Loss and Loss in Progress Doctrines
Travelers also argues that coverage is barred under the doctrines of fortuity, known loss and/or loss in progress. Travelers argues that the known loss doctrine precludes coverage in this case, because Pittston knew as of the date it bought Tankport that environmental damage was already occurring there. It further points to the enactment of environmental statutes and specific accidents at the site. Travelers argues that "if Pittston entered into a new policy knowing of a loss incurred in a prior year, that loss is not a fortuity and is not covered under the subsequent policies." Travelers S.J. Brief at 21.
Travelers' statement of the issue shows that it considers the known loss issue to be essentially the same as the question of whether the insured expected or intended the environmental damage under the occurrence definition. As will be set forth in more detail below in connection with Insurance Company of North America's motion for summary judgment on the basis of known loss, the Court believes that Travelers is correct. Because the "expected nor intended" issue has been exhaustively explored supra, it will not be repeated here. The Court holds that summary judgment will not be granted on the issue of known loss for any policy that began before the date of the Environics report.
Like dry land at Tankport, moral high ground is scarce in this case. Nonetheless, each party has managed to find its own small rise from which to shout the iniquities of the others. On the one hand, Pittston appears to have presided over an industrial site with disastrous consequences for the environmental health of our community and now disavows knowledge of the harm that seemingly must have been taking place during its aegis. On the other, Travelers accepted premiums for over twenty years and now seeks to avoid coverage of its insured, and likewise disclaims prior knowledge of the nature of this notorious site. The Court believes that the issue of whether and when Pittston expected or intended the environmental damage is best pictured as a continuum. As the years wore on, the unpleasant facts surfaced one by one, until there came a day when Pittston could no longer maintain a convenient ignorance of Tankport's condition.
The Court has found that, as of the Environics report, no reasonable juror could fail to find that the day had arrived. Moving backward in time from that date, the moment where realization actually materialized, is a matter for the trier of fact. Moreover, as it is apparent that there must be a trial in this matter, the Court is reluctant to rule aggressively as a matter of law when it is inevitable that the record will be augmented. Thus, although summary judgment is denied today as to the bulk of the Travelers policies, the Court cannot rule out the possibility that a summary ruling may be feasible on a fuller record.
As to those policy years in which reasonable fact-finders may disagree, a jury trial is the most appropriate forum. The fields of insurance and industrial pollution are intertwined with the public interest. As to these greyer areas the moral sense of the community, as embodied by a jury, should control.
3. The Other Insurers
A. CMLP Policies
The CMLP policies were purchased late in Pittston's tenancy of Tankport, beginning in 1978. They were terminated in 1984. On their face, their primary focus appears to be for marine losses, such as damage to vessels or docks. Pittston claims that there is coverage for the clean-up of the site as well.
The different companies that subscribed to the policies are listed, supra, at note 2. Wausau has submitted its own omnibus motion. The other CMLP insurers have adopted a strategy of submitting separate motions on discrete issues. Because the Court finds that Pittston's claim for coverage under the CMLP policies fails on a threshold issue of policy construction, the Court need not reach these other issues and those motions will be dismissed as moot.
All of the policies are structured in two parts. Part one is titled "General Policy Terms and Conditions." This part has a preamble that states: "Unless otherwise specified, the following Terms and Conditions are deemed incorporated under all sections of this Policy." Section II
of Part One states:
This Policy is to cover any loss, damage, liability and/or expense that the assured shall be liable to pay and/or shall pay or sue and labor, arising out of, or in consequence of, the actual and/or potential discharge, emission, spillage, or leakage upon or into the seas, waters, land or air, of oil, petroleum products, chemicals or other substances of any kind or nature whatsoever.
C3. This provision is limited to exclude loss rising from and act of war, governmental negligence, willful negligence or misconduct of the insured's senior executives, punitive damages, and insured losses from owned or bareboat chartered vessels. C4.
Part Two is headed "Specific Policy Terms and Conditions." The number of sections varied from year to year, but three sections, titled "Charterer's Liability," "Wharfinger's Liability," and "Cargo Liability," appear in each. As their names suggest, these sections grant coverage for liability incurred arising out traditional marine risks, such as the charter of vessels, and the operation of the wharf, terminal or landing.
The gist of this controversy is that Pittston claims that section II of part one is a "stand-alone" grant of coverage in accordance with the sweeping language of the passage quoted above. Because that section specifically refers to the discharge of oil "upon or into the seas, waters, land or air," Pittston argues that it is covered for the escape of oil from any place onto the soil and thence into the groundwater. The insurers, on the other hand, claim that section one does not provide an independent grant of coverage. They maintain that section two, the "Specific Policy Terms" section, is the controlling section for determining which activities of Pittston are covered. Part one, according to them, only defines the extent or type of the coverages granted in part two.
In Pittston v. Allianz Ins. Co., 795 F. Supp. 678 (D.N.J. 1992), this Court considered the impact of the policy language on the choice of law issue. The Court wrote that:
To the extent the Pollution Clause provides stand alone coverage, it too would be governed by New Jersey law. The CMLP policies do not unambiguously provide stand-alone coverage. But without resort, at a minimum, to extrinsic evidence of practice and custom in the marine insurance trade, the language of the policies alone does not preclude a finding of stand-alone coverage.