On appeal from the Superior Court of New Jersey, Law Division, Middlesex County.
Approved for Publication August 14, 1996.
Before Judges King, Landau and Kleiner. The Opinion was delivered by King, P.j.a.d.
The opinion of the court was delivered by: King
This case presents a claim that a liability insurance company must, upon the demand of the insured, defend an environmental damage claim, if the insured waives in advance any potential conflict of interest. We decline to rule that an insured may unilaterally compel the insurer to provide a defense in the circumstance. If, of course, the insured prevails in a subsequent damage action against the insurance carrier, the insurer must pay the costs of defense, indemnity for loss, interest on those claims, and perhaps counsel fees per R. 4:42-9(a)(6).
Plaintiff Princeton University (Princeton) filed a complaint and an amended complaint in 1994 against several of its insurance carriers. The amended complaint alleged that Aetna Casualty & Surety Company (Aetna), The Insurance Company of North America (INA), and the excess insurance companies (Centennial and North River) breached their obligations to Princeton to defend the claims relating to environmental contamination at two sites, the James C. Forrestal Campus (Forrestal site) and the Helen Kramer Landfill (Kramer site).
Princeton filed a motion for partial summary judgment in September 1995 seeking a ruling that Aetna and INA were obligated to pay Princeton's past and future defense costs incurred in connection with the Forrestal and Kramer sites. Judge Hamlin heard argument on the motion in November 1995 and issued a decision denying partial summary judgment. On April 23, 1996 we granted Princeton's motion for leave to appeal this interlocutory order. R. 2:2-3(b). After settling with Aetna, Princeton withdrew its appeal against Aetna.
Princeton seeks liability insurance coverage from INA for claims arising out of separate proceedings relating to alleged environmental property damage at the Forrestal and Kramer sites.
Princeton has owned and operated the Forrestal Campus since 1951. Some of the major research facilities located on the Forrestal Campus include the Jet Propulsion Laboratory, the High-Energy Physics Laboratory, and the Princeton Plasma Physics Laboratory. The research "projects range from a multi-billion dollar fusion research center sponsored by the United States Department of Energy to research grants in the one thousand dollar range." On January 7, 1993 the New Jersey Department of Environmental Protection (NJDEP) issued a "Directive and Notice to Insurers" regarding the Forrestal site. The NJDEP had tested groundwater at the site and found it contaminated with tetrachlorethane (PCE) and trichloroethane (TCE). The NJDEP ruled that:
7. Princeton University is responsible for the discharges of hazardous substances at the Site which have contaminated and continue to contaminate the lands and waters of the State.
8. Pursuant to N.J.S.A. 58:10-23.11g(c), Princeton University is strictly liable, without regard to fault, for all costs of the cleanup and removal of the hazardous substances discharged at the Site.
Without admitting fault or liability, Princeton entered into a Memorandum of Understanding with the NJDEP, detailing steps which it would take to remediate the Forrestal site. The NJDEP also identified Princeton as a potentially responsible party for groundwater contamination found at residential and business sites west of the Forrestal site but agreed to address this issue at a later date.
In 1983, the Helen Kramer Landfill was placed on the National Priorities List established pursuant to the Comprehensive Environmental Response Control and Liability Act (CERCLA), 42 U.S.C.A. § 9605(a). The EPA and the NJDEP have commenced separate actions against the owner of the Kramer site and others. On September 6, 1991 Princeton was named as a third-party defendant in those actions. The complaints allege that Princeton is partially responsible for cleanup costs at the Kramer site because liquid sewage sludge generated by Princeton was dumped there. Strict liability is also the basis for these claims.
INA issued three comprehensive general liability policies to Princeton for the periods from July 1, 1980 to July 1, 1987. The policies provide:
The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of
to which this insurance applies, caused by an occurrence, and the Company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent. . .
The policies define "occurrence" as "an accident, including continuous or repeated exposure to conditions which results in bodily injury or property damage neither expected not intended from the standpoint of the insured."
Princeton notified INA that it was potentially liable for contamination at the Forrestal and Kramer sites. INA has refused to undertake the defense of Princeton or reimburse it for defense costs incurred. Princeton now contends that INA must undertake the defense at this point because Princeton has agreed to waive "any perceived or actual conflict of interest" and "agrees that INA may reserve its rights to contest coverage while paying costs of defense or undertaking the defense of these proceedings."
Princeton contends that pursuant to provisions in its comprehensive general liability policies INA has a duty to undertake its defense in the NJDER proceedings relating to the Forrestal and Kramer sites. INA maintains that it has no such present duty. Judge Hamlin ...