On appeal from the Superior Court of New Jersey, Law Division, Camden County, CAM-L-3695-05.
The opinion of the court was delivered by: Parrillo, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 20, 2006
Before Judges Parrillo, Hoens and Sapp-Peterson.
This is an insurance coverage dispute arising from environmental contamination at a Camden site owned by plaintiff Sensient Colors, Inc., the insured under certain insurance policies covering the site issued by defendants, including Zurich American (Zurich), among others. Relying on these policies, plaintiff requested Zurich to indemnify and defend it in actions brought by the United States Environmental Protection Agency (EPA) to collect monies it had spent cleaning up the Camden site, and by the owners of an adjacent property, Pleasant Gardens, for contamination on their property. Zurich agreed to do so, reserving its right to contest coverage, which it eventually did in a declaratory judgment action filed in New York. Plaintiff then filed suit in New Jersey seeking a declaration of coverage, and damages for breach of contract and fiduciary duty. Plaintiff's lawsuit was ultimately dismissed on Zurich's motion, in favor of the first-filed New York action. Plaintiff now appeals, arguing the motion judge erred in strictly applying the "first-filed" doctrine as an absolute rule rather than as a matter of comity, ignoring its underlying equitable principles. We agree and reverse.
By way of background, since 1922 plaintiff owned and operated a factory at 31st Street and Lemuel Street in Camden where it manufactured various food, drug and cosmetic colorants, organic pigments and dispersions.*fn1 The factory was located in a commercial-residential zone, within 100 feet of a residential neighborhood and adjacent to a low-income housing project, Pleasant Gardens, with nineteen low-rise apartment buildings housing about 1000 residents. Operations at the plant facility ceased in 1997.
On January 9, 1998, the New Jersey Department of Environmental Protection (DEP) removed from the site 42 drums of acids, bases, solvents and lube oil from a collapsing shed and drained a leaky caustic tank containing sodium hydroxide. Immediately thereafter on January 13, 1998, DEP referred the matter to the EPA, whose assessment revealed several hundred abandoned containers of hazardous wastes, pollutants and contaminants, some of which were leaking.
Because DEP and local government lacked the resources to do the necessary removal, EPA assumed responsibility for the task in July 1998. By December 1998, EPA disposed of all containerized hazardous substances on the site. EPA then embarked on a Phase I soil removal operation on September 26, 2001, removing the top foot of lead-contaminated soil. The soil removal revealed extensive soil staining and buried wastes. EPA eventually removed approximately 71,000 tons of soil and 8,000 tons of debris. At the time, EPA noted that "[a]additional work may be necessary at the site to address residual contamination."
Further investigation in March 2002 led to the removal of buried petroleum and chlorinated organic sludge waste, and to the excavation of additional lead-contaminated soil. Phase II of the operation began in September 2002. By Spring 2004, plaintiff's site was still contaminated. At the time, EPA and the site's contract purchaser, Westfield Acres Urban Renewal Associates II, L.P. (Westfield Acres), executed an agreement and covenant not to sue, wherein Westfield Acres agreed to demolish the buildings and EPA agreed, to the extent funds were available, to address the remaining soil contamination.*fn2 With respect to the adjacent property, EPA discovered that the contamination that had leached onto the Pleasant Gardens site was "currently overlain by an asphalt parking lot and will not be addressed under th[e] removal action." Consequently, EPA has not yet remediated the soil on the Pleasant Gardens site.
As a result of the environmental contamination, litigation ensued. On November 26, 2003, Pleasant Gardens sued plaintiff in the Law Division, alleging unlawful disposal of hazardous substances on its residential property. And on July 6, 2004, plaintiff received from EPA a Notice of Potential Liability and Demand for Reimbursement of Costs, stating EPA's total response costs as of May 20, 2004, were $10,867,466.11.
Plaintiff immediately tendered both actions to Zurich, seeking defense and indemnity under comprehensive general liability insurance policies sold by Zurich, a New York company, and brokered in New York by Corroon & Black Company of New York, Inc., a New York insurance broker. These policies were effective from July 1, 1974 to July 1, 1977, and from November 1, 1979 to November 1, 1984. Zurich acknowledged receipt, advised it would participate in the defense of these actions, but reserved its right to contest coverage under its policies pending an investigation and analysis.
On March 8, 2005, Zurich filed a summons and complaint in New York state court against plaintiff and "ABC Insurance Companies 1-10," seeking declaratory judgment that it had no duty to defend or indemnify plaintiff in either the EPA demand action or the Pleasant Gardens lawsuit because the standard pollution exclusion and owned-property exclusion clauses in its insurance policies excluded coverage to plaintiff. Less than two months later, on April 29, 2005, plaintiff filed a declaratory judgment action in New Jersey against Zurich, as well as sixteen other insurance companies who had also issued insurance policies to plaintiff, the New Jersey Property-Liability Insurance Guaranty Association (PLIGA), and XYZ Insurance Companies 1-10, seeking both a declaration that defendants were obligated to defend and indemnify plaintiff, and damages against Zurich for breach of contract and breach of the duty of good faith and fair dealing.*fn3
In the New Jersey action, Zurich moved to dismiss plaintiff's complaint in favor of its first-filed New York lawsuit. Plaintiff opposed the application arguing that the two matters were not identical and that full relief could not be afforded in New York, which had no jurisdiction over PLIGA and did not recognize a cause of action for breach of the implied covenant of good faith and fair dealing. In further support of its contention that the case belonged here, plaintiff argued that the site of contamination was exclusively in New Jersey and remediation was not yet complete; EPA's clean-up costs were ...