On appeal from the Superior Court of New Jersey, Law Division, Union County.
Approved for Publication February 26, 1997.
Before Judges Petrella, Landau and Wallace. The Opinion of the Court was delivered by Wallace, Jr., J.A.D.
The opinion of the court was delivered by: Wallace
The Opinion of the Court was delivered by WALLACE, JR., J.A.D.
Plaintiff Kimber Petroleum Corporation appeals from the Law Division's grant of summary judgment in favor of defendants Travelers Indemnity Company (Travelers) and California Union Insurance Company, now Century Indemnity Company (Century) . On appeal plaintiff essentially contends that: (1) summary judgment was improperly granted because there are genuine issues of material fact which require jury resolution; and (2) discovery should have been permitted because the insurance industry's regulatory history, drafting history and other documents concerning the absolute pollution exclusion clause have been deemed relevant in other New Jersey cases and are particularly relevant here. We affirm.
The facts in this case are undisputed. Plaintiff sells and distributes gasoline from major brand-name refiners to gas stations in New Jersey. Between 1986 and 1990, plaintiff was named a defendant in a variety of third-party actions arising out of environmental damage caused by leaking underground gasoline storage tanks which were either owned, leased or supplied by plaintiff. During this time the New Jersey Department of Environmental Protection (DEP) issued a number of directives under the New Jersey Spill Compensation and Control Act (the Spill Act), N.J.S.A. 58:10-23.11 to -23.11z, to plaintiff ordering it to pay the costs to remediate contamination from those leaking underground gasoline storage tanks.
After defendants denied coverage, plaintiff instituted this action in September 1990 against nine insurance companies, including defendants Travelers and Century, seeking a declaratory judgment that defendants were liable under policies issued by them to plaintiff for defense, investigation costs, and indemnification. The complaint also included claims for breach of contract, negligent inspection, violation of the Consumer Protection Act, breach of warranty of uniformity, failure to warn, and breach of implied warranty of fitness. The complaint alleged that plaintiff had been sued by DEP and three other third parties for damages allegedly caused by contamination from underground gasoline storage tanks supplied with gasoline by plaintiff.
Both Travelers, a primary carrier, and Century, an excess carrier, answered the complaint denying most allegations and asserting by way of defense the pollution exclusion clause in their respective policies. On July 29, 1992, both Travelers and Century moved for summary judgment on the ground that the absolute pollution exclusion clause in their respective policies operated to exclude from coverage the underlying claims lodged against plaintiff. Plaintiff opposed the motions arguing that genuine issues of material fact exist to preclude the entry of summary judgment. Further, plaintiff sought discovery prior to consideration of the motions.
The trial Judge found that the absolute pollution exclusion clauses were clear and unambiguous and did not require additional interpretation or definition. Consequently, the Judge granted summary judgment in favor of Travelers and Century. The trial Judge's opinion was embodied in orders dated October 30, 1992, which were supplemented by orders dated November 25, 1992 and amended by orders dated December 7, 1992. Plaintiff's motion for leave to appeal was denied in both this court and the Supreme Court.
By letter dated August 26, 1993, plaintiff requested that the Judge vacate the grant of summary judgment and permit plaintiff to conduct discovery concerning the drafting and regulatory history of the absolute pollution exclusion clause, based upon the Supreme Court's July 21, 1993 decision in Morton International, Inc. v. General Accident Insurance Co. of America, 134 N.J. 1, 629 A.2d 831 (1993), cert. denied, 512 U.S. 1245, 114 S. Ct. 2764, 129 L. Ed. 2d 878 (1994) and two out-of-state decisions. The trial Judge denied plaintiff's request.
In June 1994, plaintiff again sought reconsideration based on a Louisiana Supreme Court case holding that the absolute pollution exclusion clause was ambiguous. On July 1, 1994, the trial Judge wrote to counsel declining to reconsider the matter.
While not documented in the record, the parties represent that, between December 21, 1994 and July 1995, plaintiff negotiated settlements with all of the insurance company defendants except Travelers and Century. On July 7, 1995, the trial Judge dismissed with prejudice and without costs all claims against Hartford Insurance Group, National Union Fire Insurance Company of Pittsburgh, Northwestern National Insurance Company, and New Jersey Property-Liability Insurance Guaranty Association.
On July 10, 1995, plaintiff again sought reconsideration of the October 30, 1992 and December 7, 1992 orders based on newly discovered evidence. Travelers opposed plaintiff's motion, asking that it be rejected without further briefing by the parties and that the material submitted by plaintiff in support of its motion be stricken from the record. On July 27, 1995, the trial Judge denied plaintiff's motion. On August 21, 1995, plaintiff filed its notice of appeal. We denied both Travelers' motion to dismiss the appeal as untimely filed and plaintiff's motion to supplement the record.
Plaintiff argues that the Supreme Court's reasoning in Morton International, supra, 134 N.J. 1, should control the Disposition of this matter. In Morton, the insured sought coverage under policies that provided indemnification for property damage "resulting from an occurrence" except where that property damage arose out of the discharge, dispersal, release or escape of contaminants or pollutants in or upon land. Id. at 10-11. That exclusion, however, did not apply if "such discharge, dispersal, release or escape is sudden and accidental." Id. at 11. An occurrence was defined as an "unexpected event or happening . . . or a continuous or repeated exposure to conditions" resulting in property damage "provided the insured did not intend or anticipate that injury to or destruction of property would result." Id. at 10.
In establishing the parameters of the pollution exclusion clause, the Court held that the phrase "sudden and accidental" did not characterize or relate to the damage caused by the pollution, but only to the "discharge, dispersal, release or escape" of pollutants for which coverage was provided. Id. at 28. Consequently, the Court held that the phrase "sudden and accidental" described "only those discharges, dispersals, releases, and escapes of pollutants that occur abruptly or unexpectedly and are unintended." Id. at 29. However, the Court went on to note that such an interpretation would "sharply and dramatically" restrict the coverage that had previously been provided under Comprehensive General Liability (CGL) policies for property damage caused by accidental pollution because, under occurrence-based policies, coverage was provided for any type of property damage that was "neither expected nor intended from the standpoint of the insured." Ibid. When the standard pollution exclusion clause was presented to state insurance regulatory agencies, the industry maintained that the exclusion would simply clarify existing coverage and that there would be a continuation of coverage for pollution-caused injuries which resulted from an accident. Ibid. Thus, the language of the clause did not support that representation. The Court opined:
Rather than "clarify" the scope of coverage, the clause virtually eliminated pollution-caused property-damage coverage, without any suggestion by the industry that the change in coverage was so sweeping or that rates should be reduced. For those reasons, we decline to enforce the standard pollution-exclusion clause as written. To do so would contravene this State's public policy requiring regulatory approval of standard industry-wide policy forms to assure fairness in rates and in policy content, and would condone the industry's misrepresentation to regulators in New Jersey and other states concerning the effect of the clause.
Here, the interpretive tension is between the absolute pollution exclusion clause and the provisions for completed operations and products hazards coverage. Plaintiff relies on documents and transcribed testimony from insurance industry leaders in contending that the absolute pollution exclusion clause was never intended to be absolute and that exceptions were contemplated for completed operations risks, products hazards, and certain other off-premises emissions. Therefore, plaintiff contends that its underlying liabilities to DEP and third-party property owners fall within the protection of the completed operations and products hazards provisions, putting them outside the scope of the absolute pollution exclusion clause and entitling plaintiff to coverage.
Plaintiff's policy with Travelers defined "completed operations hazards" as including:
Bodily injury and property damage arising out of operations or reliance upon a representation or warranty made at any time with respect thereto, but only if the bodily injury or property damage occurs after such operations have been completed or abandoned and occurs away from premises owned by or rented to the Named Insured. "Operations" include materials, parts or equipment furnished in connection therewith. Operations shall be deemed completed at the earlier of the following times:
(1) when all operations to be performed by or on behalf of the Named Insured under the contract have been completed,
(2) when all operations to be performed by or on behalf of the Named Insured at the site of the operations have been completed, or
(3) when the portion of the work out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing ...