On certification to the Superior Court, Appellate Division.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
The Court considers whether the pollution exclusion provision of the insured's commercial general liability policy applies only to traditional environmental pollution claims.
Plaintiff Nav-Its, Inc. (Nav-Its) is a contractor specializing in tenant"fit-out" work, including the building of partitions and the application of finishes such as paint, sealants and coatings. In April 1998, Nav-Its obtained from defendant Selective Insurance Company of America (Selective) a comprehensive general liability (CGL) insurance policy to cover work on a shopping center in Pennsylvania. Nav-Its hired a painting subcontractor to perform painting, coating and floor sealing work. The subcontractor performed that work from July 27 to August 5, 1998. A physician with office space in the shopping center, Dr. Roy Scalia, suffered from nausea, vomiting, light headedness, loss of equilibrium and headaches allegedly as a result of exposure to fumes released during the work.
In December 2000, Dr. Scalia filed a complaint against Nav-Its and others for personal injuries arising out of his exposure to fumes from July 27 through July 31, 1998 and from August 3 through August 5, 1998. Nav-Its forwarded the complaint to Selective, seeking defense and indemnification. Relying on the pollution exclusion provision in its policy, Selective refused to provide coverage to Nav-Its. In relevant part, the policy provided in the"Coverages" section that it"will pay those sums that the insured becomes legally obligated to pay as damages because of'bodily injury' or'property damage' to which this insurance applies."
The pollution exclusion endorsement provided that Selective was not obligated to, among other things, defend a claim or suit alleging injury or damage arising out of a"pollution hazard," and would not pay damages, settlements, losses, costs or expenses awarded as a result of such a claim. The exclusion stated further that Selective was not obligated for losses, costs or expenses arising out of any obligation or order, including a governmental obligation or order, to test for, monitor, clean up, remove, or respond to the effects of"pollutants." The policy defined pollutants as including, among others,"any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." Waste included"materials to be recycled, reconditioned or reclaimed." The policy defined"pollution hazard" to mean"an actual exposure or threat of exposure to the corrosive, toxic or other harmful properties of any'pollutants' arising out of the discharge, dispersal, seepage, migration, release or escape of such'pollutants.'" Finally, the policy contained a limited exception to the pollution exclusion, stating in part that it did not apply to exposures within a structure resulting from a release of pollutants"within a single-forty-eight hour period."
Dr. Scalia's case against Nav-Its was subsequently resolved through binding arbitration. Nav-Its then commenced a declaratory judgment action against Selective, contending that Selective was obligated to defend and indemnify it in connection with the underlying personal injury action. Selective moved for summary judgment and Nav-Its moved for partial summary judgment. The trial court denied Selective's motion and granted Nav-Its' motion, finding that Selective had an obligation to defend and indemnify Nav-its in accordance with its policy. The trial court denied Selective's subsequent motion for reconsideration, concluding that the pollution exclusion clause applied only to traditional environmental pollution claims.
Meanwhile, the Appellate Division decided Leo Haus, Inc. v. Selective Insurance Co., 353 N.J. Super. 67 (App. Div. 2002), and found that a pollution exclusion clause similar to this one barred coverage for a claim caused by the release of carbon monoxide gas from a defective heater over a one-year period. Based on that decision, Selective moved again for reconsideration in this case. The trial court denied reconsideration, relying on S.N. Golden Estates, Inc. v. Continental Casualty Co., 293 N.J. Super. 395 (App. Div. 1996), which it read as limiting a similar provision to environmental claims. The trial court also found that the exception to the exclusion in Nav-Its' policy applied because Dr. Scalia suffered individual exposures every day he entered his office with each exposure beginning and ending in a less-than-forty-eight-hour period.
The Appellate Division reversed, finding that pollution exclusion clauses are not necessarily limited to the clean up of traditional environmental damage. The panel found also that a jury must decide whether each period of time that Dr. Scalia was at work represented a separate exposure of less than forty-eight hours or one continuous exposure period. Finally, the panel left to the jury the question whether Nav-Its violated a thirty-day notice provision in the policy.
HELD: Because the history of the pollution-exclusion clause in comprehensive general liability policies demonstrates that its purpose was to have a broad exclusion for traditional environmentally-related damages, the Court holds that the pollution-exclusion clause in this case does not bar coverage for personal injuries arising from exposure to toxic fumes emanating from a floor coating-sealant operation performed by the insured.
1. Generally, courts should give the words of an insurance policy their plain, ordinary meaning. If the language is clear, the policy should be interpreted as written. If the policy is ambiguous, it will be construed in favor of the insured. Courts recognize that an insurance policy, which is usually prepared by insurance company experts, is a contract of adhesion between parties who are not equally situated. As such, courts endeavor to interpret insurance contracts to accord with the objectively reasonable expectations of the insured. Moreover, exclusions in insurance policies are narrowly construed. Nevertheless, if an exclusion is specific, plain, clear, prominent and not contrary to public policy, it will be enforced as written. (Pp. 11 -- 13).
2. After reviewing the evolution of environmental pollution provisions in CGL policies, testimony about the provisions presented to insurance regulators by the insurance industry, and this Court's prior rulings interpreting those provisions, the Court finds that the purpose of the pollution-exclusion clause in its various forms was to have a broad exclusion for traditional environmentally-related damages, such as remediating hazardous waste under the Comprehensive Environmental Response, Compensation & Liability Act (CERCLA). (Pp. 13 -- 19).
3. Read liberally, the exclusion at issue here would exclude from coverage essentially all pollution hazards except for those falling within the"exception" for exposure within a structure resulting from a release of pollutants"within a single forty-eight hour period." The Court rejects that interpretation as overly broad, unfair, and contrary to the objectively reasonable expectations of the New Jersey and other state regulatory authorities that were presented with an opportunity to disapprove the clause. Just as the Court determined in Morton International, Inc. v. General Accident Insurance Co. of Am., 134 N.J. 1 (1993), enforcing this pollution-exclusion clause as written would contravene the 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. Furthermore, limiting the scope of the pollution exclusion to injury or property damage arising from activity commonly thought of as traditional environmental pollution is consistent with the choice of the policy terms,"discharge, dispersal, release or escape" in Selective's policy. These are environmental law terms of art, thereby reflecting the exclusion's historical objective-avoidance of liability for environmental catastrophe related to intentional industrial pollution. Finally, the Court's decision is consistent with the decisions of the highest courts in California, Illinois, Massachusetts, Ohio, New York and Washington. (Pp. 19 -- 21).
4. Because the Court concludes that the pollution exclusion clause as presently approved should be limited to traditional environmental pollution, it disapproves of any contrary view expressed in this State's case law, including any decisions of the Appellate Division that may be read as in conflict. (P. 24).
5. The Court declines to address the ramifications of the 48-hour exception. Simply put, if the pollution exclusion is not applicable, neither is the exception to the pollution exclusion. (P. 25).
6. As a final observation, the Court notes that the insurance industry has revised its policies in the past to provide for the exclusion of certain coverage. The Court will review each change on the record presented. Industry-wide determinations to restrict coverage of risks, particularly those that affect the public interest, must be fully and unambiguously disclosed to regulators and to the public. (P. 25).
The judgment of the Appellate Division is REVERSED, and the matter is REMANDED to the trial court for further proceedings consistent with this opinion.
CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI and ALBIN join in JUSTICE WALLACE's opinion.
The opinion of the court was delivered by: Justice Wallace
JUSTICE RIVERA-SOTO did not participate.
This case concerns the applicability of a pollution exclusion provision in a commercial general liability insurance policy. The question presented is whether the exclusion for injuries caused by the "discharge, dispersal, release or escape of pollutants" bars coverage for personal injury allegedly caused by the exposure to toxic fumes that emanated from a floor coating/sealant operation performed by the insured. An exception to the pollution exclusion allows coverage where the injury takes place inside a building "within a single 48-hour period and the exposure occurs within the same 48-hour period." We conclude that the pollution exclusion provision applies to traditional environmental pollution claims and is not a bar to coverage in this case.
The material facts are relatively simple. Plaintiff NAV ITS, Inc. (Nav-Its), is a construction contractor specializing in tenant "fit-out" work, including the building of partitions, the laying of concrete, the installation of doors, and the application of finishes, such as paint, sealants, and coatings. On April 22, 1998, Nav-Its entered into a contract to perform fit-out work at the Parkway Shopping Center (Center) in Allentown, Pennsylvania. Nav-Its obtained Comprehensive General Liability (CGL) insurance coverage for its activities at the Center from defendant Selective Insurance Company of America (Selective). Nav-Its hired T.A. Fanikos Painting (Fanikos) as a subcontractor on the project to perform painting, coating and floor sealing work. Fanikos performed that work from July 27 to August 5, 1998. During that time, Dr. Roy Scalia, a physician with office space in the Center, was allegedly exposed to fumes that were released while Fanikos performed the coating/sealant work. As a result of that exposure, Dr. Scalia suffered from nausea, vomiting, lightheadedness, loss of equilibrium, and headaches. He sought medical treatment in September 1998.
In December 2000, Dr. Scalia filed a complaint against Nav-Its and several others for personal injuries arising out of his exposure to fumes at his office from July 27 through July 31, 1998, and from August 3 through August 5, 1998. Nav-Its forwarded the complaint to Selective, seeking defense and indemnification. Relying on the pollution exclusion in its policy, Selective refused to provide coverage to Nav-Its. Dr. Scalia's case against Nav-Its was subsequently resolved through binding arbitration.
Nav-Its then commenced the present action against Selective, seeking a declaratory judgment that Selective was obligated to defend and indemnify it in connection with the underlying personal injury action. Nav-Its also sought reimbursement for the costs incurred in defending the suit filed by Dr. Scalia.
Early in the litigation, Selective moved for summary judgment, and Nav-Its filed a cross-motion for partial summary judgment. The trial court denied Selective's motion and granted partial summary judgment in favor of Nav-Its, finding that Selective had an obligation to defend and indemnify Nav-Its in accordance with its insurance policy. The trial court concluded that Nav-Its had a reasonable expectation that liability arising out of normal painting operations would be covered under the policy. Selective moved for reconsideration, but once again the trial court denied relief. In a written decision, the trial court expanded its reasoning and concluded that the pollution exclusion clause in the policy applied only to traditional environmental pollution claims.
Meanwhile, on July 5, 2002, the Appellate Division decided Leo Haus, Inc. v. Selective Insurance Co., 353 N.J. Super. 67 (App. Div. 2002). The panel found that the pollution exclusion clause, similar to the one in the present case, was clear and unambiguous and barred coverage for the plaintiff's injury claim caused by the release of carbon monoxide gas from a defective heater over a one-year period. Id. at 72-73. Selective again moved for reconsideration based on the Leo Haus decision and sought a stay of the award of attorney's fees. The trial court, relying on S.N. Golden Estates, Inc. v. Continental Casualty Co., 293 N.J. Super. 395 (App. Div. 1996), which it read to limit the application of a similar pollution exclusion to environmental claims, denied reconsideration. The trial court also found that the exception to the exclusion applied because Dr. Scalia suffered individual exposures every day he entered his office, namely that each exposure began and ended in a less than forty-eight hour period.
Nav-Its's motion for additional attorney's fees and for the release of funds that had previously been deposited by Selective was granted. The trial court ordered the release of all deposited funds to Nav-Its within forty-five days. Selective appealed and a stay of the order to release the funds was granted.
On appeal, in an unpublished opinion, the Appellate Division reversed, finding that pollution exclusion clauses are not necessarily limited to the clean up of traditional environmental damage. Nevertheless, the panel found that a jury must decide whether each period of time that Dr. Scalia was at work represented a separate exposure of less than forty-eight hours, or one continuous period of exposure. The panel also left to the jury the question of whether Nav-Its violated the thirty-day notice provision in the policy. We ...