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Ohaus v. Continental Cas. Ins. Co.

July 22, 1996

ROBERT E. OHAUS; BLAIR C. OHAUS; JAMES G. OHAUS; JOHN C. OHAUS; THOMAS C. OHAUS; DEBORAH O. CASSELBERRY AND OHAUS CORPORATION, PLAINTIFFS-APPELLANTS,
v.
CONTINENTAL CASUALTY INSURANCE COMPANY; EMPLOYERS INSURANCE OF WAUSAU; FEDERAL INSURANCE COMPANY; FIRST STATE INSURANCE COMPANY; INSURANCE COMPANY OF NORTH AMERICA; NEW JERSEY MANUFACTURERS INSURANCE COMPANY; NEW JERSEY PROPERTY LIABILITY INSURANCE GUARANTY ASSOCIATION; AND NORTH RIVER INSURANCE COMPANY; DEFENDANTS, AND THE TRAVELERS INDEMNITY COMPANY, DEFENDANT-RESPONDENT.



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

Approved for Publication July 22, 1996.

Before Judges Shebell, Stern and Newman. The opinion of the court was delivered by Shebell, P.j.a.d. Judge Stern concurs.

The opinion of the court was delivered by: Shebell

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

On May 8, 1992, plaintiffs filed their complaint, naming various insurance companies as defendants seeking a declaratory judgment compelling their insurers to provide them, pursuant to the terms of comprehensive general liability (CGL) policies, with coverage for environmental remediation liability imposed under the Environmental Cleanup Responsibility Act ("ECRA"), L. 1983, c. 330, (now known as the Industrial Site Recovery Act ("ISRA"), L. 1993, c. 139). Plaintiffs have settled with all defendants except The Travelers Indemnity Company ("Travelers").

Travelers moved for summary judgment. The Law Division Judge heard argument on the motion, and reserved decision. On February 22, 1994, the Judge entered an order granting summary judgment, and attached a statement of reasons supporting his decisions to the order. Plaintiffs appeal.

Ohaus Corporation (Ohaus), owned by the individual plaintiffs who are members of the Ohaus family, manufactured scales at its Florham Park facility beginning in 1969. In September 1986, Ohaus retained First Environment to conduct an environmental survey of its facility in connection with a planned inter-family redistribution of assets. The site is adjacent to the Pinch Brook County Golf Course and property owned by Metropolitan Life Insurance.

As a result of the survey, five areas of potential environmental concern were identified: an underground oil tank; an underground gasoline tank; a "drywell"; a "denuded" area; and a lowlands area. First Environment tested soil samples from the five areas and bored four groundwater monitoring wells. Soil beneath the oil tank revealed the presence of petroleum hydrocarbons, and soil in the dry well area indicated the presence of volatile organic compounds including methylene chloride, 1, 1-dichloroethylene, 1,1, 1-trichloroethane and trichloroethylene. Floor drains in the flammables storage area were connected to the dry well. Soil in the other areas did not show the presence of volatile organic compounds above regulatory guidelines. In two of the four wells, the presence of volatile organic compounds was detected. Following excavation, the underground gasoline tank, dry well and denuded areas were backfilled with clean soil, and the floor drains leading to the dry well were sealed.

On December 2, 1988, Ohaus executed an agreement to transfer its assets to Mettler Instrument Corporation (Mettler). The agreement obligated plaintiffs to comply with environmental requirements and indemnify Mettler for any losses suffered as a result of their failure to comply. Pursuant to ECRA, Ohaus submitted to DEP its General Information Submission (GIS) and Site Evaluation Submission (SES). On May 1, 1989, Ohaus entered into an administrative consent order (ACO) with DEP.

In its August 1990 report on the results of its sampling and soil remediation and its plan for the proposed cleanup of soils, First Environment stated that it had taken soil samples and drilled an additional four monitoring wells at the site. It identified three areas as needing further investigation or remediation: the "groundwater beneath the site"; the denuded area, and the "former drywell excavation." The report noted that surface drainage at the site was to the north "into a low lying naturalized area near the golf course." Pinch Brook flowed through the golf course into Black Brook, which in turn flowed into the Whippany River. The groundwater, however, flowed in a westerly direction across the site.

With respect to groundwater contamination, it appears that four of the wells were found to contain volatile organic compounds above ECRA guidelines. First Environment considered the former dry well "a suspected . . . source of groundwater contamination." A well located 150 feet downgrade of the dry well area contained 92 ppb of trichloroethene and other contaminants, and a well adjacent to the dry well area revealed 35 ppb of trichloroethene. Trichloroethene was also found in two wells located at the northwestern property boundary. First Environment found no contaminants in an upgradient well or in the well south of the dry well area. Based on these test results and groundwater flow direction, it concluded that there was a "high probability that volatile organic compounds are migrating from the site in a westerly direction." It proposed a soil boring and groundwater monitoring program to determine the horizontal and vertical extents of the groundwater contaminants. New wells were to be drilled off-site, and additional wells were to be placed along the northwest and southwest boundaries.

On April 12, 1991, Ohaus first notified Travelers that it had "become aware of elevated levels of volatile organic compounds" at its facility, had notified DEP of the matter and was in the process of pursuing a sampling plan. Ohaus requested assurance that its policies covered its remediation, sampling, and other contamination-related costs.

Also in April 1991, First Environment conducted a groundwater boring program on the Metropolitan Life property, a contiguous tract south/southwest of the Ohaus site. In two of the four wells, "trace" amounts of contaminants including trichloroethene were found. It concluded that the Ohaus facility had not impacted the Metropolitan property at that time.

Around the same time, a groundwater boring sample from the Pinch Brook Golf Course to the northwest of the Ohaus site indicated the presence of trichloroethene at less than 10 ppb at a depth of twenty-two to twenty-four feet, and at 10 ppb at a depth of forty-four to forty-six feet. First Environment opined that these boring results showed "that the plume of contaminated groundwater centering to the rear of the . . . facility adjacent ...


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