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Muralo Company, Inc. v. Employers Insurance of Wausaus

October 05, 2000

THE MURALO COMPANY, INC.,
PLAINTIFF-APPELLANT,
V.
EMPLOYERS INSURANCE OF WAUSAU, AND ZURICH INSURANCE GROUP,
DEFENDANTS-RESPONDENTS,
AND
AETNA CASUALTY & SURETY COMPANY, GREATER NEW YORK MUTUAL INSURANCE COMPANY, HARTFORD ACCIDENT & INDEMNITY COMPANY, HOME INSURANCE COMPANY, NEW JERSEY MANUFACTURERS INSURANCE COMPANY, AND ROYAL INSURANCE COMPANY OF AMERICA,
DEFENDANTS.



Before Judges Pressler, Ciancia and Alley.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 12, 2000

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

This is an environmental contamination, declaratory judgment coverage action. Plaintiff Muralo Company, Inc. (Muralo), appeals from summary judgments dismissing its complaint against its two non-settling insurers, defendants Zurich Insurance Company (Zurich) and Employers Insurance of Wausau (Wausau), whereby it sought reimbursement for the defense costs and indemnity obligation incurred by it as the result of an underlying action brought against it by the so-called Winko parties, which litigation it had settled during the pendency of this coverage action. We affirm in part, reverse in part and remand for further proceedings.

There is no substantial dispute of relevant fact. In 1955, a company named Hotopp leased a site on Gates Avenue in Jersey City which it used for the manufacture of paint, varnish and industrial finish. In 1971, plaintiff acquired Hotopp and moved its entire manufacturing operation to Bayonne. Hotopp operated as a wholly-owned subsidiary of plaintiff until 1981, when it was dissolved and its operations merged directly into those of plaintiff. In 1972, shortly after Hotopp's move to Bayonne, another corporation, Winko New Jersey, wholly unrelated to Hotopp or plaintiff, purchased Hotopp's Jersey City site and leased it to its, Winko's, affiliated company, Republic Container Corporation. Republic operated a paperboard factory across the street from the Hotopp site on Kennedy Boulevard and apparently expanded its operations to the Hotopp site. In 1990, Republic contracted to sell its business assets to yet another company, triggering the applicability of the Environmental Cleanup Responsibility Act (ECRA), N.J.S.A. 13:1K-6 to -35. *fn1

Pursuant to the provisions of ECRA, the Department of Environmental Protection (DEP) became involved in the investigation and cleanup of Republic's Kennedy Boulevard paperboard factory, the original Hotopp Gates Avenue site, a parcel owned by Republic on Gates Avenue immediately adjacent to the Hotopp site, and a parcel owned by Republic just west of its Kennedy Boulevard site. During the course of litigation, the contiguous parcels comprising the original Hotopp site were designated as Parcels B through F, inclusive; the Republic-owned parcel adjacent to the Hotopp site was designated as parcel A; and the Republic-owned site on the Kennedy Boulevard side of the street was designated as Parcel G.

As it turned out, there was substantial soil contamination on all seven parcels requiring soil remediation, accomplished by removing the contaminated soil, removing underground tanks and buried drums of pollutants wherever they were found, and filling excavated areas with clean backfill. The only site requiring testing for groundwater contamination was Parcel F, and the results of testing on two occasions satisfied DEP that there was no groundwater contamination of a level requiring water remediation. DEP was obviously satisfied that removal of the contaminated soil, tanks and drums eliminated whatever threat there was to groundwater. These investigatory and remediation activities were concluded by DEP's issuance of a No Further Action Declaration for each of the sites pursuant to N.J.S.A. 58:10B-13.1 and N.J.A.C. 7:26C-2.6 between January 1993 and March 1997.

In June 1994 Winko and its affiliates (hereafter Winko) filed a complaint in the United States District Court for the District of New Jersey seeking compensation from plaintiff under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C.A. §9601, et seq. (CERCLA). *fn2 The basic allegations of the complaint were that plaintiff had released hazardous substances into the soil and in buried drums; that it had done so negligently, carelessly and recklessly; that the release of those substances "into the soil, surface water and/or ground water" caused "significant environmental contamination; and that it is liable to Winko for its damage resulting from the release "including but not limited to the soil, surface water and ground water contamination."

Plaintiff sought a defense from all the carriers from whom it had obtained general comprehensive and liability coverage during the period of Hotopp's use of the Gates Avenue property, including defendants Zurich and Wausau, which had each issued comprehensive general liability policies for a portion of that period. The carriers disclaimed, and plaintiff commenced this coverage action against eight insurers in 1996. In 1997 plaintiff and Winko settled the federal action, plaintiff paying $550,000 in full settlement of all claims of Winko attributable to the condition of the site, the site defined as including the parcels denominated as Parcel A through Parcel G, inclusive. There was no allocation of the settlement based on specific sites, or the nature of the contamination alleged, or the nature of the remediation undertaken, or, indeed, on any other basis.

In 1998, plaintiff and the carrier engaged in court-ordered mediation, which resulted in its settlement with five of the defendant carriers. The terms of those settlements are not part of this record and have not been disclosed to us. In any event those settlements left only Zurich and Wausau defending the coverage action. *fn3 Both were successful in obtaining partial summary judgment relieving them of both the defense and the indemnity obligation in respect of Parcels A and G, the non-owned parcels, and then a second and final summary judgment relieving them of the defense and the indemnity obligation in respect of Parcels B through F, the owned-parcels.

As we understand the record, the court's rationale for denying plaintiff both a defense and indemnity with respect to Parcels A and G was that plaintiff had failed to show that it had any liability for the contamination of those sites. In respect of Parcels B through F, its rationale was that the owned-property exclusion of the policies relieved the carrier of both its defense and indemnification obligations. We are satisfied that the court, though partly correct in its analysis, was also, however, partly in error.

We begin our analysis with those critical factual propositions as to which the record on the summary judgment motion permits no genuine substantial dispute. See Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). First, irrespective of the contrary allegations made by Winko in its complaint against plaintiff, the investigative materials produced in discovery convincingly establish, as found by the trial court, that plaintiff had never had anything to do with Parcel A or Parcel G or any contamination found thereon and hence could not be held liable to Winko for any remediation costs it incurred in respect of those parcels. Second, the discovery materials convincingly establish, as also found by the trial judge, that no remediation of groundwater on Parcels B through F was ever ordered by DEP and, for that reason, although the presence of some low-level contamination had been found, that contamination never reached the minimum levels established by DEP for remediation. Third, the discovery materials further established, as found by the trial court, that Winko's primary remediation costs were incurred in the removal of contaminated soil, its replacement by clean fill, and the removal of buried drums and tanks containing contaminants.

These underlying factual propositions are, in our view, both fundamental and critical in defining the scope of defendants' ...


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