March 17, 1999
AMERICAN EMPLOYERS' INSURANCE COMPANY AND COMMERCIAL UNION INSURANCE COMPANY (AS SUCCESSOR TO CERTAIN OBLIGATIONS OF EMPLOYERS' SURPLUS LINE INSURANCE COMPANY AND EMPLOYERS' LIABILITY ASSURANCE CORPORATION, LTD), PLAINTIFFS-RESPONDENTS,
ELF ATOCHEM NORTH AMERICA, INC., DEFENDANT-RESPONDENT, AND PENNWALT CORPORATION AND ITS SUCCESSORS AND ASSIGNS, A.C.E. INSURANCE COMPANY (BERMUDA) LTD., THE AETNA CASUALTY AND SURETY COMPANY, ALLIANZ UNDERWRITERS INSURANCE COMPANY, ALLSTATE INSURANCE COMPANY, AS SUCCESSOR TO NORTHBROOK EXCESS AND SURPLUS INSURANCE COMPANY, FORMERLY NORTHBROOK INSURANCE COMPANY, AMERICAN HOME ASSURANCE COMPANY, AMERICAN RE-INSURANCE COMPANY, ATLANTA INTERNATIONAL INSURANCE COMPANY, BIRMINGHAM FIRE INSURANCE COMPANY OF PENNSYLVANIA, CALIFORNIA UNION INSURANCE COMPANY, CENTENNIAL INSURANCE COMPANY, THE CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA, CHICAGO INSURANCE COMPANY, CITIZENS CASUALTY COMPANY OF NEW YORK, CONTINENTAL CASUALTY COMPANY, THE CONTINENTAL INSURANCE COMPANY, EMPLOYERS INSURANCE OF WAUSAU, A MUTUAL COMPANY, FEDERAL INSURANCE COMPANY, FIREMAN'S FUND INSURANCE COMPANY, FIRST STATE INSURANCE COMPANY, GIBRALTAR CASUALTY COMPANY, GRANITE STATE INSURANCE COMPANY, GREAT AMERICAN INSURANCE COMPANY, THE HANOVER INSURANCE COMPANY, THE HOME INSURANCE COMPANY, ILLINOIS INSURANCE EXCHANGE, INSURANCE COMPANY OF NORTH AMERICA, INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, INTERNATIONAL INSURANCE COMPANY, INTERNATIONAL SURPLUS LINES INSURANCE COMPANY, CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, LONDON MARKET INSURANCE COMPANIES, LEXINGTON INSURANCE COMPANY, MUTUAL MARINE INSURANCE COMPANY, NATIONAL CASUALTY COMPANY, NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, NEW ENGLAND INSURANCE COMPANY, NORTH RIVER INSURANCE COMPANY, NORTH STAR REINSURANCE CORPORATION, OIL CASUALTY INSURANCE, LTD., OLD REPUBLIC INSURANCE COMPANY, PACIFIC EMPLOYERS INSURANCE COMPANY, PENNSYLVANIA PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION, PURITAN EXCESS AND SURPLUS LINES INSURANCE COMPANY, ROYAL INDEMNITY COMPANY, SAFETY NATIONAL CASUALTY CORPORATION, ST. PAUL FIRE AND MARINE INSURANCE CO., ST. PAUL SURPLUS LINES INSURANCE CO., TALEGEN HOLDINGS INC. (FORMERLY CRUM AND FORSTER, INC.), THE TRAVELERS INDEMNITY COMPANY, UNAT (A MEMBER OF AMERICAN INTERNATIONAL GROUP), WINTERTHUR SWISS GROUP, X.L. INSURANCE COMPANY, LTD. (NBA EXCESS AND SURPLUS LINES BERMUDA, LTD.) THE YASUDA FIRE & MARINE INSURANCE COMPANY OF AMERICA, ZURICH INSURANCE COMPANY, AND JOHN DOES ONE THROUGH TWO HUNDRED, DEFENDANTS, THE NEW JERSEY PROPERTY-LIABILITY INSURANCE GUARANTY ASSOCIATION, DEFENDANT-APPELLANT, AND ELF ATOCHEM NORTH AMERICA, INC. AND PENNWALT CORPORATION, THIRD-PARTY PLAINTIFFS,
AIU INSURANCE COMPANY; AMERICAN RE-INSURANCE COMPANY; BIRMINGHAM FIRE INSURANCE COMPANY OF PA; CALIFORNIA UNION INSURANCE COMPANY (SUCCEEDED BY CIGNA SPECIALTY INSURANCE CO.); CENTENNIAL INSURANCE COMPANY; CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA; CHICAGO INSURANCE COMPANY; THE CONTINENTAL CORPORATION (AS SUCCESSOR-IN-INTEREST TO HARBOR INSURANCE COMPANY); CONTINENTAL CASUALTY CO.; FEDERAL INSURANCE COMPANY; GIBRALTAR CASUALTY COMPANY; GREAT AMERICAN INSURANCE COMPANY; THE HANOVER INSURANCE COMPANY; THE HOME INSURANCE COMPANY; INSURANCE COMPANY OF NORTH AMERICA; INTERNATIONAL INSURANCE COMPANY; LIBERTY MUTUAL INSURANCE COMPANY; NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA; NEW ENGLAND INSURANCE COMPANY; NORTH BROOK INSURANCE COMPANY (SUCCEEDED BY ALLSTATE INSURANCE COMPANY); OLD REPUBLIC INSURANCE COMPANY; PACIFIC EMPLOYERS INSURANCE COMPANY; PURITAN EXCESS AND SURPLUS LINES INSURANCE COMPANY (AS SUCCESSOR-IN-INTEREST TO PURITAN INSURANCE COMPANY, FORMERLY THE MANHATTAN FIRE AND MARINE INSURANCE COMPANY); ROYAL INDEMNITY COMPANY; SAFETY NATIONAL CASUALTY CORPORATION (FORMERLY KNOWN AS SAFETY MUTUAL CASUALTY CORPORATION OF AMERICA); ST. PAUL FIRE AND MARINE INSURANCE COMPANY; ST. PAUL SURPLUS LINES INSURANCE COMPANY; TALEGEN HOLDINGS, INC.; AND TEXAS PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION, THIRD-PARTY DEFENDANTS.
The opinion of the court was delivered by: O'hern, J.
On appeal from the Superior Court, Law Division, Union County.
"In the arena of environmental insurance law, it sometimes appears that just as soon as one issue of importance is resolved, like Hydra, the many-headed serpent in Greek mythology, at least two new issues arise to replace it." General Accident Ins. Co. of America v. Department of Envtl. Protection, 143 N.J. 462, 463-64 (1996) (quoting Jeffrey L. Fillerup and Dominic S. Nesbitt, The Duty to Defend: Post-Montrose Issues, 718 PLI/Comm. 49 (PLI Commercial Law and Practice Course Handbook Series No. 4477, May-June 1995)). One such new issue that has arisen concerns the responsibility of a liability insurance guaranty association to stand in the shoes of an insolvent insurance company to provide indemnity for environmental cleanup costs incurred by the policyholder. The specific question is whether the New Jersey Property-Liability Insurance Guaranty Association (NJPLIGA) should indemnify a policyholder of an insolvent insurance carrier for environmental cleanup costs incurred at a facility of the policyholder in Bryan, Texas. The enabling legislation requires NJPLIGA to stand in the shoes of its insolvent member insurance companies only in proceedings involving "covered claims." N.J.S.A. 17:30A-8a(2). Covered claims include those in which "(1) the claimant or insured is a resident of this State at the time of the insured event; or (2) the property from which the claim arises is permanently located in this State." N.J.S.A. 17:30A-5d.
Thus the determination of whether NJPLIGA is obliged to provide coverage for the policyholder's claims with respect to the Bryan, Texas facility rests on whether the policyholder was a resident of New Jersey at the time of the insured event. Based on our review of New Jersey law and consideration of the purposes and objectives of NJPLIGA, we conclude that the policyholder is not a resident of New Jersey for the purposes of the NJPLIGA Act and that the claim is not a "covered claim" under the statute.
This appeal concerns a very small portion of a very large and complex environmental insurance coverage case. American Employers' Insurance Company and Commercial Union Insurance Company (referred to collectively as Commercial Union) filed an insurance declaratory judgment action against Elf Atochem North America, Inc., seeking to disclaim coverage for environmental damage claims relating to pollution at approximately eighty Elf Atochem sites throughout the United States, one of which is the Bryan, Texas site. Because Pennwalt Corporation is Elf Atochem's predecessor in this suit, defendant will be referred to as "Elf/Pennwalt." Elf/Pennwalt responded with counterclaims, cross-claims and a third-party complaint, one of which was against NJPLIGA. During the pendency of the New Jersey proceedings, Elf/Pennwalt filed a declaratory judgment action in Texas against Commercial Union seeking coverage for certain bodily injury claims arising from operations at the Bryan, Texas facility. The Law Division temporarily restrained Elf/Pennwalt from proceeding in Texas, but subsequently dissolved the restraints. On interlocutory appeal, the Appellate Division remanded the matter to the trial court for entry of an order enjoining Elf/Pennwalt from proceeding with the coverage action in Texas.
In response to a case management order that required the parties to proceed first with the Bryan, Texas coverage issues, NJPLIGA sought a partial summary judgment to dismiss the claims arising out of that site, asserting that these were not covered claims because Elf/Pennwalt is not a resident of New Jersey nor is the site located in New Jersey. The Law Division reasoned that Eastern Seaboard Pile Driving Corp. v. New Jersey Property-Liability Insurance Guaranty Ass'n, 175 N.J. Super. 589 (App. Div. 1980), had not provided "a bright-line rule for determining residency for purposes of NJPLIGA. There has to be a balancing act."
In determining Elf/Pennwalt's residence, the trial court considered that Elf/Pennwalt had been qualified to do business in New Jersey and had conducted business in New Jersey for many years. The court denied NJPLIGA's motion for summary judgment to dismiss the Bryan, Texas claims, concluding that Elf/Pennwalt "is a resident of several states and in this case is clearly a resident of the State of New Jersey for the purposes of [NJPLIGA]."
The Appellate Division denied NJPLIGA's motion for leave to appeal. Because the matter involves issues of important public policy and the costs to NJPLIGA of defending the Bryan, Texas suit are substantial, we granted leave to appeal. 153 N.J. 405 (1998).
NJPLIGA was created in 1974 to protect against the possible insolvency of insurance companies doing business in New Jersey. The Act imposed assessments on casualty insurers registered and issuing policies in New Jersey in order to create a fund to pay claims against carriers that have become insolvent. L. 1974, c. 17; N.J.S.A. 17:30A-1 to -20; see Railroad Roofing & Bldg. Supply Co., Inc., v. Financial Fire & Cas. Co., 85 N.J. 384, 389-90 (1981). Although NJPLIGA was created by statute, it is not a governmental entity, but rather a nonprofit, unincorporated association whose members consist of insurance companies licensed to issue certain types of insurance policies in New Jersey. NJPLIGA assumes the contractual obligations of insolvent insurance companies that were licensed to transact business within this State at the time the policy was issued or when the insured event took place. N.J.S.A. 17:30A-5d and -8. As noted, N.J.S.A. 17:30A-5d limits covered claims to those in which "(1) the claimant or insured is a resident of this State at the time of the insured event; or (2) the property from which the claim arises is permanently located in this State."
The Post-Assessment Property and Liability Insurance Guaranty Model Act (Model Act), which nearly every state has adopted in some form, was originally prepared by the National Association of Insurance Commissioners (NAIC) as a means of allocating the risk of insolvent insurers equitably among the several states. "Resident" was not defined in the original Model Act. The NAIC later adopted an amendment to the Model Act to clarify the meaning of the term "resident." The Model Act now provides coverage when "the claimant or insured is a resident of this state at the time of the insured event, provided that for entities other than an individual, the residence of a claimant, insured or policyholder is the state in which its principal place of business is located at the time of the insured event." NAIC Post-Assessment Property and Liability Insurance Guaranty Association Model Act, NAIC Model Laws, Regulations and Guidelines, Vol. III, p. 540-41 (1996). Thus, for those states that adopted the amendment, a corporation's residence is limited to the single state of its principal place of business.
In contrast, in states like New Jersey, in which the narrowing amendment has not been adopted, corporations may still be regarded as residents of several states. The main debate between the parties is whether the NJPLIGA Act should follow the definition of "resident" found in the amendment to the Model Act.
Each side claims to draw support from this amendment. Elf/Pennwalt claims that before the amendment the Model Act contained a latent ambiguity created by the insurance industry's undefined use of the term "resident" as it applied to corporations. Thus, Elf/Pennwalt argues that a corporation's residence should be limited to the single state of its principal place of business only in states that have adopted the amendment. In contrast, NJPLIGA and the amici National Conference of Insurance Guaranty Funds argue that the amendment simply clarifies what was the ordinary and natural understanding of the original Model Act. They contend that in order to ensure uniform national interpretation of guaranty fund ...
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