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Insurance Company of North America v. Anthony Amadei Sand & Gravel

December 22, 1999

INSURANCE COMPANY OF NORTH AMERICA, PLAINTIFF,
v.
ANTHONY AMADEI SAND & GRAVEL, INC., AND ANTHONY AMADEI, DEFENDANTS-APPELLANTS, AND DENNIS DUBIN, DAVID EHRLICH, GLOUCESTER ENVIRONMENTAL MANAGEMENT SERVICES, INC., JACK M. LISS, NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, RICHARD H. WINN, TOWNSHIP OF GLOUCESTER, GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA, THE HOME INSURANCE COMPANY AND FIREMAN'S FUND INSURANCE COMPANY, DEFENDANTS, AND AETNA CASUALTY & SURETY COMPANY, DEFENDANT-RESPONDENT.



The opinion of the court was delivered by: Coleman, J.

Argued September 27, 1999

On certification to the Superior Court, Appellate Division.

The primary issue presented in this appeal is whether the right to trial by jury attaches to a declaratory judgment action brought by an insurance company claiming that its insured is not entitled to coverage for environmental remediation. The case began as a jury trial but, after the parties rested, the trial court removed the case from the jury and entered judgment for the insured. The Appellate Division reversed, concluding that the insurer is entitled to a jury trial and that there are disputed issues of material fact that must be decided by a jury.

We granted certification, 158 N.J. 73 (1999), and now reverse. We hold that an action by an insurer against its insured for a judgment declaring that its policy does not provide coverage for indemnification for future environmental clean-up costs is essentially an action for specific performance, to which a right to trial by jury does not attach.

I.

On July 17, 1969, Gloucester Township in Camden County (Gloucester) entered into a contract with defendant Anthony Amadei Sand & Gravel, Inc. (AS&G) to operate the Gloucester landfill known as Environmental Management Services, Inc. (GEMS). Defendant Anthony Amadei (Amadei) and his now deceased partner Sidney Liss personally guaranteed the contract. In return, AS&G was permitted to conduct a sand and gravel excavation business at the GEMS landfill. Amadei had no previous training in hydrology, nor any landfill operating experience. Amadei claimed that the operation of the landfill was a "carry-over operation," whereby AS&G simply continued the operations and practices that were previously in existence. The contract obligated AS&G to obtain public-liability insurance and provide an indemnification bond in favor of Gloucester.

AS&G operated the landfill from 1969 until 1975. During that time, Amadei allowed numerous parties to dump chemical liquid waste in the landfill, both as loose liquid, and in sealed steel drums. AS&G received permission from Gloucester and the New Jersey Department of Health to accept such waste. In 1970, the Bureau of Solid Waste Management informed Gloucester that liquid waste in the form of paint sludges and thinners could be dumped in the GEMS landfill. Less than a month later, the Bureau rescinded that approval after two inspectors observed a fire at the landfill.

Also in 1970, Amadei sought approval from the newly created New Jersey Department of Environmental Protection (DEP) to operate as a solid-waste disposal facility. In his registration statement, Amadei acknowledged that he was accepting "chemicals (liquid or solid)" and "waste oil." On August 11, 1970, Amadei received approval from the DEP to continue operating the landfill as a solid-waste disposal facility.

The DEP approval lasted approximately one month. On September 13, 1970, a tanker truck that was disposing oil became stuck in the landfill and failed to shut off its disposal valve. The tanker's oil dispersed in one area and washed into a nearby stream. As a result of that incident, the DEP rescinded its prior approval and prohibited AS&G from depositing in the landfill any chemicals, including oils, greases, septic tank cleanings, and sewer plant sludge.

At approximately the same time, residential neighbors of the landfill obtained an injunction enjoining the dumping of any oils, chemicals, or liquids, with the exception of water, in the landfill. Amadei interpreted the injunction as restricting only the dumping of loose liquids and continued to accept sealed containers of waste. At one point Amadei attempted to prevent a chemical company from dumping drummed waste at the GEMS landfill, but the then New Jersey Public Utility Commission (PUC) ordered him to accept the drums. Notwithstanding the order from the PUC, neighbors of the landfill returned to court claiming that the injunction had been violated. Amadei was not cited for violating the injunction until 1974, despite the fact that the landfill was frequently inspected in 1973, and drummed waste was clearly visible.

Also in 1974, Aetna Casualty & Surety Company (Aetna) issued AS&G two insurance policies that are at the center of the coverage issue involved in this appeal. Specifically, Aetna issued a $500,000 per occurrence primary policy and a $5,000,000 excess policy effective October 18, 1974 through October 18, 1975. The policies insured AS&G for losses due to bodily injury or property damage arising out of an "occurrence." An "occurrence" was defined as "an accident, including continuous or repeated exposure to conditions which result in bodily injury or property damage which is neither expected nor intended from the standpoint of the insured." The policies also contained pollution-exclusion clauses, which excluded coverage for bodily injury or property damage resulting from the non-accidental discharge of pollutants. AS&G continued its operations at least until after the expiration of the Aetna policies.

In 1983, as a result of the environmental pollution caused by the GEMS landfill, the DEP and several of the landfill's neighboring landowners initiated lawsuits seeking cleanup costs from AS&G and GEMS. The litigation was split into two phases: Phase I concerned issues related to the landfill closure, while Phase II concerned groundwater contamination.

During the pendency of that litigation, in May 1986, the Insurance Company of North America (INA), another insurer of AS&G and GEMS, filed a declaratory judgment action seeking a determination that it had no obligation to indemnify AS&G and GEMS for claims arising out of their operation of the GEMS landfill. INA joined Aetna as a party, seeking contribution because of the two policies Aetna issued to AS&G for the 1974-75 policy year. Aetna filled a cross-claim seeking a declaratory judgment that under the 1974-75 policies, Aetna had no obligation to defend or indemnify AS&G or Amadei against INA's claims. The gist of Aetna's complaint was that the environmental damage was not an "occurrence" as defined in its policies and, alternatively, that the pollution-exclusion clauses applied. Both contentions required a determination of whether Amadei intended or expected the environmental damage that ensued from the operation of the landfill.

In 1989, the parties settled Phase I of the underlying litigation for $32,500,000. Extensive legal maneuvering by all parties continued until 1995, at which point INA amended its complaint dismissing all parties except Amadei, AS&G, Gloucester and Aetna. Eventually, the matter proceeded to trial before a jury on September 18, 1995. On the first day of trial, the court dismissed INA's declaratory judgment action because it had entered into settlement negotiations with Gloucester ...


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