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State of New Jersey Department of Environmental Protection v. DiFlorio

December 28, 2007

STATE OF NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, PLAINTIFF,
v.
DOMINICK DIFLORIO, CAROL MIGLIACCIO, C&M CONSTRUCTION OF NEW JERSEY, INC., AND THOMPSON REALTY CO. OF PRINCETON, INC., DEFENDANTS.
THOMPSON REALTY CO. OF PRINCETON, INC., THIRD-PARTY PLAINTIFFAPPELLANT/CROSS-RESPONDENT,
v.
DOMINICK DIFLORIO, CAROL MIGLIACCIO, C&M CONSTRUCTION COMPANY OF NEW JERSEY, INC., VINCENT VARELLA, JOSE VARELLA, JR., INDIVIDUALLY AND AS SOLE HEIRS OF THE ESTATE OF HILDA VARELLA, DECEASED AND THE ESTATE OF HILDA VARELLA, THIRD-PARTY DEFENDANTS, AND FIRST AMERICAN TITLE INSURANCE COMPANY, THIRD-PARTY DEFENDANT-RESPONDENT/CROSS-APPELLANT.



On appeal from the Superior Court of New Jersey, Law Division, Somerset County, L-2070-02.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 30, 2007

Before Judges Skillman, Winkelstein and Yannotti.

Thompson Realty Company of Princeton purchased a parcel of property, Block 5.02, Lot 24, in Franklin Township, Somerset County (the property), on December 27, 1999, from the Estate of Hilda Varella and Varella's heirs (collectively, Varella). Thompson hired General Land Abstract Company to perform a title search and procure a title insurance policy from First American Title Insurance Company.

The search failed to disclose a New Jersey Department of Environmental Protection (NJDEP) Notice of Violation (NOV) of the Freshwater Wetlands Protection Act, N.J.S.A. 13:9B-1 to -13:9B-30, which had been recorded in Somerset County on December 9, 1999. The NOV had been issued after the NJDEP discovered that wetlands on the property had been subject to illegal dumping, allegedly by defendant Dominic DiFlorio, the owner of an adjacent lot, and his girlfriend, defendant Carol Migliaccio, who operated defendant C & M Construction from DiFlorio's property. Because the NOV did not name the property owner, and was not attached to or noted on the deed to the property, the title search did not discover it and Thompson purchased the property without notice of the NOV.

The NJDEP subsequently sued Thompson and others in the Chancery Division to remediate the wetlands violations subject to the NOV. Before notifying First American of the lawsuit, Thompson settled the NJDEP's claim, agreeing to clean the property. Thompson then sought coverage from First American to the extent of its $300,000 policy limit. First American denied coverage.

In a subsequent lawsuit in the Law Division, the NJDEP sued Thompson and the other defendants for penalties for the wetlands violations. Thompson brought a third-party complaint against First American in that action, seeking a declaration of coverage and damages. Thompson now appeals from the April 13, 2006 order of the Law Division dismissing its claim against First American.*fn1

We reverse.

The NJDEP's involvement in the events that culminated in Thompson's coverage claim began in April 1990, when Barbara Baus, an NJDEP employee whose duties included enforcement under the Freshwater Wetlands Protection Act, responded to a complaint that wetlands violations were occurring on the property. At the site, she observed "a large area of fresh fill that had been placed and graded" on the property. When questioned about the extent of the area affected by the fill, Baus testified that the illegally-filled area constituted approximately three of the 65.66 acres of lot 24; and that the fill was located on freshwater wetlands in the area designated as Area A on lot 24, as depicted on the map in evidence at trial.

Following the issuance of the NOV, DiFlorio, who had apparently been dumping construction debris on the property and was named in the NOV, took no action to remove the fill. Consequently, in 1995, the NJDEP sought relief in the Superior Court. The court ordered DiFlorio to present a remediation plan and to remediate the site for Freshwater Wetlands and Flood Hazard Area Control Act violations.*fn2 DiFlorio did not comply with the order. As a result, in 1999 the NJDEP sent the NOV to the Somerset County Clerk for recording.

In June 2001, the NJDEP filed suit in the Chancery Division seeking injunctive relief against Thompson, DiFlorio, C & M, and Migliaccio. Thompson did not notify First American of the NJDEP's lawsuit. Instead, in August 2001, Thompson contacted David Grodnick, a Vice President of General Land, with whom Thompson verbally consulted about how to defend the lawsuit.

On October 9, 2002, Thompson, DiFlorio, C & M, and Migliaccio entered into a partial settlement with the NJDEP that provided a remediation plan for the property. The settlement did not preclude defendants from pursuing claims against each other or other responsible parties. Thompson did not notify First American of its intention to enter into the settlement. Rather, it was not until December 20, 2002, more than two months after it agreed to the settlement, that Thompson filed a claim with First American for coverage.

Meanwhile, as a result of defendants' failure to comply with the 1995 Superior Court order, the NJDEP had filed suit in the Law Division seeking penalties against DiFlorio, Migliaccio, C & M and Thompson for violations of the Freshwater Wetlands Protection Act and the Flood Hazard Area Control Act.*fn3 The claims were limited to the illegal dumping that had taken place on lot 24. Thompson filed cross-claims against the other defendants and a third-party complaint against First American for coverage and damages.

First American and Thompson cross-moved for summary judgment on the coverage issue. The judge initially denied First American's motion and granted Thompson's motion, finding that the recorded NOV constituted a public record and none of the exclusions to coverage applied. After First American moved for reconsideration, arguing that Thompson's failure to notify it of the NJDEP action and of its settlement with the NJDEP precluded coverage under the policy, the court, in a July 14, 2005 order, modified its previous order. The court reaffirmed its decision that the NOV was a public record, but, as to coverage, it concluded that "disputed issues of material fact pertaining to notice, prejudice and waiver" existed with regard to whether Thompson was entitled to coverage for its obligations under the stipulation of settlement.*fn4

In March and April 2006, the Law Division conducted a bench trial encompassing the NJDEP's complaint for penalties; and Thompson's claims against DiFlorio, Migliaccio, C & M, and First American. As to its claim against First American, Thompson's position was that "the cost of the clean-up at an absolute minimum, bare bones clean-up will easily exceed the amount of the policy which is $300,000." Thompson's counsel asked that the judgment reflect that "when various phases of the clean-up are undertaken and these amounts are expended, if we ...


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