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Proformance Insurance Co. v. Riggins

April 27, 2010


On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-643-07.

Per curiam.


Submitted April 14, 2010

Before Judges Fisher and Espinosa.

This appeal arises from a declaratory judgment action concerning the contractual obligations of three successive insurers for the remediation costs associated with a leaking 550 gallon residential underground storage tank. Plaintiff Proformance Insurance Company (Proformance) appeals from an order granting partial summary judgment to defendant Metropolitan Property Casualty Insurance (MetLife). We reverse.

A leak was discovered in the underground storage tank of property owned by the insured, Don S. Kolbe, in January 2006. As a result, home heating fuel leaked into the groundwater at levels that exceeded standards established by the Department of Environmental Protection. Proformance insured the Kolbe property from July 11, 2004 through July 11, 2006. Defendant MetLife insured the property from July 11, 2002 through July 11, 2004.*fn2 It was alleged and not disputed that the leak was ongoing for four to eight years before it was discovered.

Proformance acknowledged its obligation to provide coverage for the remediation of the property and engaged two consultants to evaluate options, Firstech Environmental, Inc. (Firstech) and EnviroTrac Environmental Services, Ltd. (EnviroTrac). It was estimated that the area contaminating the groundwater extended approximately twenty feet below the house, below portions of both the slab on-grade area of the house as well as the basement floor and that, to address the area under the house, it was necessary to excavate an area of approximately thirty-five feet by twenty feet, to a depth of thirteen feet.

Each of the two environmental services consulted presented two options for remediation. One option included the demolition of the house (the "demolition option"), which would allow unrestricted access to the area of impact for direct removal of impacted soil and groundwater. In the other option, the house would not be demolished but structural supports would be used to preserve the house from the effects of the remediation process (the "support option"). Proformance received estimates for the two remedial options from both Firstech and EnviroTrac. The demolition option was recommended by EnviroTrac as "the most prudent course of action." EnviroTrac's estimate for the demolition option was $249,525, consisting of $57,000 for the actual remediation, $15,000 for the demolition of the house and $173,000 paid to the insured to compensate for the loss of the residence. EnviroTrac's estimate for the support option was $304,625, which included higher costs for virtually all phases of the process than the costs for the same tasks in the demolition option. The costs compared as follows:

TaskSupportDemolition Site Assessment$8,250$4,250 Site Preparation$55,000*fn3$188,000*fn4 Dewatering$15,500$2,500 Excavation/Installation$76,125$15,900 Disposal and Restoration$149,750$38,875

The vast disparity in the estimates for disposal and restoration is largely a function of the fact that, under the support option, this task includes $105,000 in costs for "1st Floor Restoration/Build-out" and "Property Restoration (Misc Items)" while the corresponding demolition estimate is only $2,000 for "Property Restoration (Misc items)" and does not include any cost for the restoration of the structure. The estimates provided by Firstech were also higher for the support option than for the demolition option. Proformance elected to retain EnviroTrac and chose the demolition option.

MetLife acknowledged an obligation to contribute to the cost of groundwater remediation. Such coverage is provided by Section II, Coverage F of the MetLife policy, which states in pertinent part:

We will pay all sums for . . . property damage to others for which the law holds you responsible because of an occurrence.

"Occurrence" is defined in the MetLife policy as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions, resulting in bodily injury or property damage during the term of the policy."

MetLife agreed that the damage caused by the undetected release of contaminants from the leaking storage tank was subject to a continuous-trigger and allocation among the three successive insurers pursuant to Owens-Illinois, Inc. v. United Insurance Co., 138 N.J. 437 (1994) and Carter-Wallace, Inc. v. Admiral Insurance Co., 154 N.J. 312, 321 (1998).*fn5 However, MetLife argued that, pursuant to an exclusion to Coverage F, it has no obligation to contribute to compensating the insured for the house demolished in the remediation process. That exclusion states that the policy does not cover "property damage to property owned by you." As a result, MetLife contended that its obligation to contribute to remediation costs should be limited to treatment of the groundwater, including excavation and the cost of demolition of the house, but not the rebuilding of the structure and backfilling of the soil. MetLife characterized claims for those damages as ...

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