On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-1356-06.
The opinion of the court was delivered by: Payne, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Axelrad, Payne and Messano.
In its recent decision in Sensient Colors, Inc. v. Allstate Ins. Co., ___ N.J. ____ (2008), the New Jersey Supreme Court discussed, at length, the principles of comity applicable to its determination to reverse, as an abuse of discretion, a trial court order dismissing an insured's later-filed New Jersey insurance coverage action in favor of an insurer's first-filed New York action, when the underlying dispute concerned coverage for New Jersey environmental contamination claims. We are called upon in the present matter to apply allied principles, but in the far different context of an appeal from the dismissal of a first-filed action instituted by an insurer to determine allocation of coverage for nation-wide product liability claims.
In this case, plaintiff, Century Indemnity Company,*fn1 appeals from an order dismissing, without prejudice, its first-filed New Jersey declaratory judgment action, instituted to determine the coverage obligations of Century Indemnity, thirty-two other named defendant insurers, and the Pennsylvania Property and Casualty Insurance Guaranty Association to the insured, Mine Safety Appliances Company (MSA), a manufacturer of allegedly defective respiratory protection equipment that users claim caused them to contract respiratory illnesses such as silicosis, asbestos-related diseases, and coal workers' pneumoconiosis. A later-filed breach of contract action by MSA against Century Indemnity presently is being actively litigated in Pennsylvania, the state of incorporation and principal place of business of both Century Indemnity and MSA.
The decision in Sensient provides an analytical framework for our consideration of this appeal. Sensient arose from a coverage dispute between Zurich-American Insurance Company and its insured, Sensient Colors, Inc., arising from environmental contamination emanating from a former Camden factory site owned by Sensient, which had spawned a clean-up action by the U.S. Environmental Protection Agency (EPA) and the EPA's subsequent demand for reimbursement of clean-up costs, as well as a civil law suit by an adjacent property owner. While offering coverage to Sensient under a reservation of rights, Zurich simultaneously filed a coverage action against Sensient and its other insurers in a New York trial court, to which Sensient responded by filing a similar action in New Jersey. Following dismissal of the New Jersey action on the motion of Zurich and others, and reversal by us in a reported opinion, Sensient Colors Inc. v. Allstate Ins. Co., 388 N.J. Super. 374 (App. Div. 2006), the Supreme Court granted certification to review whether the trial court's dismissal on comity grounds was proper. Id. 189 N.J. 649 (2007).
Following its review, the Court agreed with us that the trial court had misused its discretion in dismissing the later-filed New Jersey action. ___ N.J. at ___ (slip op. at 19) (recognizing discretionary nature of determination) and 31 (finding an abuse of discretion by the trial court). In reaching that conclusion, the Court reaffirmed "'the general rule that the court which first acquires jurisdiction has precedence in the absence of special equities,'" id. at ___ (slip op. at 13-14) (quoting Yancoskie v. Del. River Port Auth., 78 N.J. 321, 324 (1978)), and it recognized that "any comity analysis should begin with a presumption in favor of the earlier-filed action." Id. at ___ (slip op. at 15). However, the Court also recognized that the first-filed doctrine was not to be inflexibly applied, and that it could be overcome by those special equities that it defined as "reasons of a compelling nature that favor the retention of jurisdiction by the court in the later-filed action." Id. at ___ (slip op. at 15).
The Court held that to obtain a stay or dismissal of a second-filed action on the basis of comity, a movant must initially establish that there is a first-filed action in another jurisdiction that involves substantially the same parties, claims and legal issues. Id. at ___ (slip op. at 21). Then, the party seeking to preserve the second-filed action must demonstrate the existence of one or more special equities that overcome the presumption favoring the first-filed suit. Id. at ___ (slip op. at 23).
When applying these factors, the Court declined to definitively determine whether the New York and New Jersey actions were substantially similar, a decision that was not required as the result of the Court's decision to preserve the New Jersey case. Id. at ___ (slip op. at 24). Instead, the Court focused on the special equities presented: primarily, New Jersey's strong public policy interest in remediating environmental contamination within its borders and ensuring the adequacy of funds for that purpose - interests that the Court determined, in light of the opposing approaches of New York and New Jersey to the enforcement of insurance policy pollution exclusion clauses, could only be reliably protected through the application, by New Jersey's courts, of New Jersey decisions that declined to give effect to such exclusions. Id. at ___ (slip op. at 25-28).
The Court noted our suggestion that Zurich's "jockeying for the more hospitable insurance laws of New York best explains its selection of New York as its favored forum," id. at ___ (slip op. at 38), and it considered Zurich's conduct in preemptively filing suit, without warning, along with factors applicable to a forum non conveniens analysis and a recognition of the more advanced status of the New Jersey action, as additional special equities relevant to its determination that the decision of the trial court to dismiss the second-filed New Jersey action was an abuse of discretion. Id. at ___, ___ (slip op. at 24, 29).
As we have noted, the matter before us differs from Sensient because it does not concern coverage for environmental contamination in this State, but rather, coverage for product liability claims across the country. Some of those claims undoubtedly have been instituted by New Jersey residents. However, we have not been informed of their number, and because the existence of a substantial group of New Jersey claimants might provide a public policy basis for retaining jurisdiction in New Jersey akin to that recognized in Sensient, we presume the number is quite small.*fn2
The present matter also differs from Sensient in that MSA's motion to dismiss was directed at the first-filed, not the second-filed action. Thus, principles of comity as traditionally applied in an attack on the second-filed suit are not directly at issue. New Jersey need not give deference to Pennsylvania in the circumstances presented. Nonetheless, many of the concepts that informed the Court's decision in Sensient are relevant in the present context, in that they provide a useful framework for analysis of a circumstance in which two competing actions are pending, and a court is called upon to determine which should prevail.
In this appeal, like that in Sensient, a conflict in insurance law underlies the dispute and, we are satisfied in concluding, it provided the motivation for Century Indemnity's determination to file a preemptive coverage action in New Jersey. In the latent injury context relevant here, both New Jersey's and Pennsylvania's courts have adopted a continuous trigger from initial exposure, through exposure in residence, to manifestation or suit to determine which carriers are on the risk in connection with latent injury claims. See Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437, 478-79 (1994); J.H. France Refractories Co. v. Allstate Ins. Co., 626 A.2d 502, 506-07 (1993). The two states differ, however, as to the method adopted for allocation of the risk among triggered carriers. New Jersey has rejected a joint-and-several allocation, Owens-Illinois, supra, 138 N.J. at 459-62, in favor of a pro-rata allocation that takes into consideration both the insurer's time on the risk and the degree of risk that it assumed. Id. at 462-64, 479. In a primary insurance context, Pennsylvania has embraced a joint-and-several allocation approach, whereby an insured may designate any of its triggered carriers to respond to a claim or claims until policy limits are exhausted, and it becomes the obligation of that carrier to seek contribution from other triggered carriers, either through enforcement of policy "other insurance" clauses or as an equitable remedy. J.H. France, supra, 626 A.2d at 507-09. The principal differences between the two approaches are (1) under a pro-rata approach, the insured bears the risk of loss in periods in which no ...