On certification to the Superior Court, Appellate Division, whose opinion is reported at 338 N.J. Super. 395 (2001).
The issues before the Court are: 1) whether, under the "continuous trigger theory" of liability, an insurance policy in effect at the time the Borough of Bellmawr (Borough) was depositing waste in a landfill provides coverage for resulting environmental pollution claims against the Borough; and 2) the appropriate coverage among the carriers whose policies have been triggered under the "continuous trigger theory."
The Helen Kramer Landfill (Landfill), located in West Deptford, New Jersey, operated from about 1963 until 1981. In April 1978, the Borough approved the Landfill as an appropriate trash disposal site. From May 1978 until January 1981, the Borough dumped municipal waste into the Landfill, without separating harmful pollutants from the municipal trash deposited at the site.
In 1981, the Environmental Protection Agency (EPA) revoked the Landfill's registration and a New Jersey court ordered its closure. An extensive Remedial Investigation and Feasibility Study conducted by the EPA between 1983 and 1985 revealed the presence of hazardous chemicals in the soil, surface waters, and ground waters at the Landfill. On September 8, 1983, the Landfill was placed on the Superfund national Priorities List, a list of the nation's most threatening hazardous waste sites. In September of 1985, the EPA ordered a series of remedial actions to clean up the contamination that had emanated from the Landfill.
In 1989, the EPA sued hundreds of entities, including the Borough that allegedly had contributed to the contamination of the Landfill, to recover all response and remediation costs. In 1997, the Borough and others agreed to settle with the EPA by paying $95 million over a five-year period, which would contribute to the approximately $123 million paid by the federal in cleanup costs. The Borough contributed $449,036.39 to the settlement.
The Borough maintained comprehensive general liability insurance (CGL) policies with two principal insurance carriers during the time it was depositing municipal waste into the Landfill, Century Indemnity Company (Century) and Quincy Mutual Fire Insurance Company (Quincy). The Borough also maintained CGL policies with several other insurance companies during the time the cleanup took place. The Century policy was in effect from June 18, 1977 until June 18, 1978 and the Quincy policies were in effect from June 18, 1978 until June 18, 1981.
In 1991, the Borough filed a declaratory judgment action against its insurance carriers Quincy, Century, and the Harleysville Insurance Company. Harleysville was dismissed from the lawsuit in 1993. Thereafter, Quincy was ordered to indemnify the Borough for any liability relating to the Landfill, including litigation expenses, counsel fees and costs. Quincy and Century subsequently entered into an agreement stating that Century and Quincy would pay the Borough's defense costs but that the carriers later could pursue the allocation of indemnification costs between them.
In October 1996, Quincy filed suit seeking a declaratory judgment determining the respective liabilities pursuant to the insurance policies issued by Quincy and other insurance carriers. Quincy's claims against all but Century were dismissed. During the non-jury trial, Dr. Ralph Lee Steiner testified for century as an expert in landfill procedures and operations. Dr. Steiner testified about the leachate, the liquid that passed through the contaminated material, and stated that the unlined Landfill acted like a sponge rather than a vessel or tank for this liquid. Dr. Steiner testified that it would have taken about 185 to 200 days from the time the Borough began dumping for the Landfill to reach field capacity, which is the maximum amount of liquid a landfill can hold before liquid seeps through the bottom and contaminates the groundwater. Thus, Dr. Steiner testified that it was not
possible for the waste deposited on may 1, 1978, the date the Borough began depositing waste in the Landfill, to generate contamination in the groundwater before June 18, 1978. Quincy did not rebut this testimony.
The trial court resolved the coverage issue in favor of Century, finding that Quincy was not entitled to contribution for the Borough's environmental liability. The court found that the property damage necessary to trigger coverage under a CGL policy occurs not when waste is deposited in a landfill but when leachate escapes and contamination occurs. Based on Dr. Steiner's testimony that the contamination could not have occurred until 185 to 200 days after the dumping, the Quincy policy alone was in effect when the damage occurred.
A majority of the Appellate Division affirmed, holding that the "continuous trigger theory" for liability from groundwater contamination began when the leachate reached the groundwater and not when the Borough dumped its waste. It found that century was not liable because its policy was in effect only at the time of the initial dumping of the waste. In addition, the panel held that if Century had been liable on the claim, the appropriate allocation would be based on days of coverage. The dissenting member of the panel believed the initial trigger of coverage was the Borough's dumping of toxic waste in the Landfill beginning in April 1978.
The Supreme Court granted certification.
HELD: Exposure relating to the Borough of Bellmawr's initial depositing of toxic waste into the Kramer Landfill is the first trigger of coverage under the continuous trigger theory and constitutes and "occurrence" under Century Indemnity Company's policy. When an insurer was on the risk only for a portion of a year that is included in the continuous trigger period, the Owens-Illinois allocation formula should reflect days rather than years on the risk when the underlying facts require that degree of precision in the allocation of liability.
1. Insurance policies cover losses resulting from "occurrences" that take place during the policy period. Therefore, when an insured has been covered by several policies over the relevant period of time, identifying the appropriate trigger of coverage, or when an occurrence took place, will be critical in determining which insurer is liable for the damages that have accrued. The trigger is the event or events that under the terms of the insurance policy determines whether a policy must respond to a claim under the given circumstances. In environmental contamination cases, the damage that triggers liability often cannot be linked to a single event. Often the damage has occurred along a continuous timeline during which successive policies were in effect. (Pp. 8-11)
2. In Keene Corp. v. Insurance Co. of North America, a court first applied the continuous trigger theory in determining coverage for asbestos-related claims. Subsequent to that decision, many jurisdictions, including New Jersey, have applied the continuous trigger theory in both asbestos and environmental damage claims. In Owens- Illinois, Inc. v. United Insurance Company, the Court applied the continuous trigger theory to asbestos-related personal injury and property damage claims and held that in asbestos-related personal injury cases, the required damage occurs from the time the asbestos fibers are inhaled and continues until manifestation of an asbestos-related disease. This decision was compelled by important public policy considerations, including the need to adapt tort law to the peculiarities of mass-exposure tort cases. Thus, the Court concluded that the continuous trigger theory would be better suited to address the public interest in enhancing available insurance coverage for environmental damages and would enable courts to better channel the available resources into remediation of environmental harms. The Court also acknowledged the applicability of this theory to environmental contamination cases. (Pp. 11-19)
3. Despite the fact that many jurisdictions have applied the continuous trigger theory to environmental contamination cases, there is no consensus regarding the scope or the start of the injurious process covered under the theory. Some jurisdictions hold that the initial triggering event should be the injury-in-fact. Some jurisdictions, following Keene, have included initial exposure in the injurious process when applying the continuous trigger theory to environmental contamination claims. In addition, although factually and procedurally distinct, a line of cases interpreting the "owned-property" exclusion in CGL policies also appears to define the "injurious process" more broadly. (Pp. 19-28)
4. The parties do not dispute the application of the continuous trigger theory of coverage to environmental contamination claims; rather this case turns on the application of the theory to the facts. The Appellate Division found that the triggering occurrence was when the leachate seeped into the groundwater. The Court disagrees and adopts the analysis of the dissent in the Appellate Division. As noted by the dissent, Dr. Steiner's testimony demonstrates the inescapable conclusion that the initial deposit of toxic wastes into the Landfill set off the injurious process resulting in groundwater contamination. The fact that the depositing of the toxic waste is part of the injurious process is enough for it to constitute injury under the policies. (Pp. 28-34)
5. A bright-line rule triggering coverage when toxic waste is first deposited in a landfill is more consistent with Owens-Illinois and subsequent environmental contamination cases. The Court adopts a rule that takes into consideration the impossibility under certain circumstances of establishing exactly when the groundwater contamination began. This rule also recognizes the ability of insurance companies to spread the costs of indemnification across the industry. (Pp. 34-37)
6. There is no dispute that the pro rata risk allocation established in Owens-Illinois should apply. The appropriate theory of allocation should be in proportion to the degree of the risks transferred or retained during the years of exposure. In a case where the insurer was only on the risk for a portion of the year that is included in the trigger period, the formula should reflect days rather than years. Principles of simple justice dictate the rejection of Quincy's argument that Century should be responsible for an entire year within the continuous trigger period because it was on the risk for a portion of that year. (Pp. 37-41)
Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the trial court for an allocation of liability between the Quincy and Century policies that is consistent with this opinion.
JUSTICE LaVECCHIA, concurring in part and dissenting in part, in which JUSTICE VERNIERO joins, is of the view that the majority decision in the Appellate Division was proper and should not have been disturbed. The appellate majority made the compelling point that liability for the dumping at issue attached not as of the time the material was deposited in the Landfill, which was perfectly legal and authorized, but at the time that components of the dumped materials leached out of the Landfill and caused injury to the groundwater. Justice LaVecchia concurs in the Courts affirmance of the Appellate division's allocation of coverage among liable insurance carriers.
CHIEF JUSTICE PORITZ and JUSTICES COLEMAN, LONG, and ZAZZALI join in JUSTICE STEIN's opinion. JUSTICE LaVECCHIA has filed a separate opinion concurring in part and dissenting in part, in which JUSTICE VERNIERO joins.
The opinion of the court was delivered by: Stein, J.
This appeal raises two important issues relating to environmental pollution liability. First, we must determine under the "continuous trigger theory" of liability whether an insurance policy in effect at the time the Borough of Bellmawr (Borough) was depositing waste in a landfill provides coverage for resulting environmental pollution claims against the Borough. Although the trial record reveals that contaminants from the landfill could not have begun to be dispersed into the surrounding groundwater until after Century Indemnity Company's (Century) policy had expired, Quincy Mutual Fire Insurance Company (Quincy) contends that Century's policy is implicated because the Borough deposited hazardous waste in the landfill while Century's policy was in effect.
Second, we again must examine the appropriate allocation of coverage among the carriers whose policies have been triggered under the "continuous trigger theory." Quincy argues that if Century's policy is implicated its proportionate share of liability under the "continuous trigger theory" should be determined based on the number of years it was on the risk. Century maintains that its responsibility should reflect the number of days it was on the risk, that is, from the time the Borough began dumping until the time its policy expired.
The trial court concluded that Quincy was solely responsible for indemnifying the Borough for liability resulting from the contamination, thereby rejecting Quincy's argument that the act of discharging hazardous waste into the landfill constituted an "occurrence" under Century's policy. The Appellate Division affirmed. The court also noted that if it had determined that Century's policy was implicated the appropriate allocation of liability would be based on days on the risk rather than years on the risk. Quincy Mutual Fire Ins. Co. v. Borough of Bellmawr, 338 N.J. Super. 395, 403 n.2 (2001). We granted certification, 169 N.J. 609 (2001).
The Helen Kramer Landfill (Landfill), located in West Deptford, New Jersey, operated from approximately 1963 until 1981. In April 1978, the Borough approved the Landfill as an appropriate trash disposal site, and from May 1978 until January 1981, the Borough deposited municipal waste into the Landfill. The Borough made no attempt to segregate harmful pollutants from the municipal trash that was deposited in the facility.
In 1981, after complaints were registered relating to the Landfill, the Environmental Protection Agency (EPA) revoked the Landfill's registration and a New Jersey court ordered its closure. An extensive Remedial Investigation and Feasibility Study conducted by the EPA between 1983 and 1985 revealed the presence of hazardous chemicals in the soil, surface waters and ground waters at the Landfill. On September 8, 1983, the Landfill was placed on the Superfund National Priorities List, a list of the nation's most threatening hazardous waste sites established pursuant to the Comprehensive Environmental Response Control and Liability Act (CERCLA), 42 ...