July 30, 2013
FIRST INDUSTRIAL, L.P., (as successor-in-interest to CHERRY HILL INDUSTRIAL SITES, INC.), Plaintiff-Appellant,
GENERAL INSURANCE COMPANY OF AMERICA (a Safeco Company), HARLEYSVILLE INSURANCE COMPANY OF NEW JERSEY, PENNSYLVANIA GENERAL INSURANCE COMPANY (as successor to certain liabilities of American Employers' Insurance Company), Defendants-Respondents
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 4, 2013
On appeal from Superior Court of New Jersey, Law Division, Camden County, Docket No. L-4651-09.
Carl A. Salisbury argued the cause for appellant (Kilpatrick Townsend & Stockton, L.L.P., attorneys; Mr. Salisbury, on the brief).
Frank E. Borowsky, Jr., argued the cause for respondent General Insurance Company of America (Mr. Borowsky, of counsel and on the brief; Michael A. Field, of counsel; Stephanie M. Hehman, on the brief).
Margriet Schaberg argued the cause for respondent Harleysville Insurance Company of New Jersey (Riker Danzig Scherer Hyland & Perretti, L.L.P., attorneys; Lance J. Kalik, of counsel and on the brief; Ms. Schaberg, on the brief).
Elaine Whiteman Klinger argued the cause for respondent Pennsylvania General Insurance Company (Christie, Pabarue, Mortensen and Young, attorneys; Ms. Klinger, on the brief).
Before Judges Graves, Ashrafi and Espinosa.
Plaintiff First Industrial, L.P., brought this action against defendant insurance companies to obtain coverage for environmental remediation of its industrial property. It now appeals from orders of the Law Division dated August 22 and October 21, 2011, granting summary judgment to defendants, and also from an earlier order dated October 1, 2010, denying an extension of time for service of plaintiff's expert reports. We affirm.
Viewed most favorably to plaintiff, R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995), the summary judgment record established the following relevant facts and procedural history.
From 1963 to 1987, plaintiff's predecessor, Cherry Hill Industrial Site, Inc., constructed approximately thirty buildings on a previously vacant tract of farmland in Camden County. The site became known as the Cherry Hill Industrial Center. Over the years, space in the buildings was leased to various tenants.
In 1995, petroleum, metal, and PCB contamination was found at one of the buildings. In 1998, in preparation for a merger of plaintiff First Industrial with Cherry Hill Industrial, plaintiff discovered soil and groundwater contamination at fourteen of the buildings and on undeveloped land at the site. Plaintiff reported its findings to the New Jersey Department of Environmental Protection (NJDEP). After the merger, plaintiff became responsible for clean-up and remediation of the site. From 1998 to 2008, it spent approximately $900, 000 on costs of environmental consultation and remediation.
Plaintiff succeeded to the rights of Cherry Hill Industrial under insurance policies the latter had procured in earlier years. According to plaintiff, defendants General Insurance Company of America (General Insurance), Harleysville Insurance Company of New Jersey (Harleysville), and Pennsylvania General Insurance Company (Penn General), or their predecessors, issued general liability policies to Cherry Hill Industrial from 1966 through 1986. Plaintiff alleged it was entitled to coverage for its clean-up and remediation costs under those policies.
Plaintiff first notified defendants of its claims in October 1999 and January 2000. At that time, defendants declined to provide defense or indemnification coverage. Defendants claimed they engaged in dialogue with plaintiff about its claims but that plaintiff failed to provide "fundamental facts" about the timing and nature of the contamination at the site. Plaintiff disputed that contention, claiming that it provided extensive factual information to defendants regarding the potential sources of the contamination but that defendants did not review plaintiff's claims in good faith and never investigated the site to determine their coverage liability.
Plaintiff first brought suit in Camden County in April 2007 seeking a declaratory judgment that defendants were required to provide insurance coverage. Twenty months later, in December 2008, plaintiff voluntarily dismissed that first action so that the parties could exchange information and investigate the matter further. Plaintiff re-filed its complaint, commencing the present action, in February 2009 in Middlesex County. Defendants filed answers. After a change in the track designation of the case under Rule 4:5A to Track IV, the court set a discovery end date of June 25, 2010, thus initially providing 450 days of discovery for the re-filed action. The case was transferred to Camden County in September 2009.
Discovery did not proceed smoothly. The parties filed several detailed discovery motions, and the court conducted informal case management conferences attempting to move discovery toward eventual resolution of the case. In December 2009, defendants requested a longer discovery period, but plaintiff indicated it was seeking to conclude discovery promptly and would have its expert reports completed by April 16, 2010.
On January 7, 2010, the court held a formal case management conference on the record. The court was not persuaded by the parties' excuses for failing to provide document discovery or to schedule any depositions up to that time. It warned that sanctions would be imposed if counsel did not provide discovery in accordance with court rules and specific directives of the court's discovery scheduling orders. It issued a case management order dated January 13, 2010, extending the discovery end date to October 31, 2010, and also setting June 11, 2010, as the deadline to complete fact discovery, and July 19, 2010, as the deadline for service of plaintiff's expert reports.
On February 5, 2010, the court heard a summary judgment motion filed by plaintiff, which it denied. In conjunction with the argument on that motion, the court again addressed the discovery delays and repeated its warning that sanctions would be imposed for failure to comply with court orders on discovery.
In May 2010, defendants moved for an extension of the deadline for fact discovery and the discovery end date. Plaintiff opposed the motion and claimed that defendants were not providing fact discovery as ordered by the court. Counsel appeared in open court on July 19, 2010, the date set by the case management order for completion and service of plaintiff's expert reports. Plaintiff had not served any expert reports by that date and requested more time. The presiding judge extended the deadline for depositions of fact witnesses to August 10, 2010; the deadline for plaintiff's expert reports to August 30, 2010; and the discovery end date to December 5, 2010. The judge stated that he would not hold any more case management conferences and warned that documents not produced in discovery and witnesses who did not appear for noticed depositions by the discovery deadlines would be excluded from the evidence presented at trial. No trial date was scheduled at that time.
After the final case management rulings,  one fact witness could not be deposed by the August 10 deadline because of illness. Counsel agreed to postpone the deposition of William Gildea, a retired employee of Harleysville who had handled claims in the 1970s. Gildea's testimony was important to plaintiff because it alleged a Harleysville policy had been issued to Cherry Hill Industrial during one coverage year, 1978-79, but neither party had discovered an actual copy of the policy. Plaintiff asserted it needed Gildea's testimony to prove by other means and documents the existence of the Harleysville policy. Gildea's deposition was taken on August 25, 2010, after the deadline for completion of fact discovery.
Plaintiff did not serve any expert reports by the extended August 30, 2010 deadline. Instead, counsel for plaintiff wrote to the court a few days before that date seeking another extension of the deadline. Defendants objected. The court denied plaintiff's request by letter dated September 14, 2010.
On September 15, 2010, plaintiff filed a motion to extend the deadline for its expert reports. Defendants opposed the motion. The court heard argument on October 1, 2010, and denied the motion. Its order of the same date stated that plaintiff would be barred from presenting at trial the testimony of any expert whose report had not been produced by the August 30, 2010 deadline.
Plaintiff served three expert reports upon defendants on October 7, 2010. Only one of them, the report of professional engineer Richard P. Brownell, addressed issues regarding groundwater contamination from the site. The other two expert reports were prepared by insurance industry experts and pertained to the existence of policies that could not be found and to the alleged bad faith declination of claims by defendant insurance companies.
In January 2011, defendants moved for summary judgment, primarily arguing that plaintiff lacked evidence that groundwater contamination from the site was the result of occurrences during periods of time covered by their policies, and therefore, they were not required to provide defense or indemnification to plaintiff. Harleysville also sought summary judgment on the ground that plaintiff could not prove that a Harleysville policy had been issued to Cherry Hill Industrial. The return date of defendants' summary judgment motions was delayed by interlocutory proceedings before this court that are not relevant to the current appeal. Eventually, the presiding judge heard argument on defendants' motions and issued orders granting summary judgment and dismissing plaintiff's complaint on August 22 and October 21, 2011. This appeal followed.
In our view, the crux of the appeal is a single question: Did the trial court abuse its discretion in denying an extension of time to plaintiff to serve its expert reports? If it did not, plaintiff cannot prove groundwater contamination from the site resulted from covered occurrences during any of the three defendants' alleged policy periods. On the other hand, if the trial court erred in denying an extension of time for plaintiff to serve its expert report on the timing of the contamination, and if plaintiff's expert Brownell is permitted to testify about his hydro-geological findings and opinions, then genuine issues of fact exist that preclude summary judgment in favor of at least two of the defendants, General Insurance and Penn General.
As a secondary issue, if Gildea's testimony and documents in the summary judgment record were sufficient to create a genuine issue of fact regarding the existence of a Harleysville policy in 1978-79, then summary judgment was also improperly granted to Harleysville.
We begin by acknowledging our standard of review from discovery rulings of the trial court. The Supreme Court confirmed in Pomerantz Paper Corp. v. New Community Corp., 207 N.J. 344 (2011), that:
In general, we apply an abuse of discretion standard to decisions made by our trial courts relating to matters of discovery. That is, "[w]e generally defer to a trial court's disposition of discovery matters unless the court has abused its discretion or its determination is based on a mistaken understanding of the applicable law." As it relates to extensions of time for discovery, appellate courts, including this Court, have likewise generally applied a deferential standard in reviewing the decisions of trial courts.
[Id. at 371 (citations omitted) (quoting Rivers v. LSC P'ship, 378 N.J.Super. 68, 80 (App. Div.), certif. denied, 185 N.J. 296 (2005)).]
In that same regard, we have stated: "The right of a trial court to manage the orderly progression of cases before it has been recognized as inherent in its function." Casino Reinvestment Dev. Auth. v. Lustgarten, 332 N.J.Super. 472, 488 (App. Div.), certif. denied, 165 N.J. 607 (2000). Thus, the trial court is authorized to fix "the timing for service of experts' reports." Id. at 489.
In Leitner v. Toms River Regional Schools, 392 N.J.Super. 80, 87-88 (App. Div. 2007), we listed factors that the trial court should take into consideration in determining whether to extend discovery deadlines:
(1) the movant's reasons for the requested extension of discovery;
(2) the movant's diligence in earlier pursuing discovery;
(3) the type and nature of the case, including any unique factual issues which may give rise to discovery problems;
(4) any prejudice which would inure to the individual movant if an extension is denied;
(5) whether granting the application would be consistent with the goals and aims of "Best Practices";
(6) the age of the case and whether an arbitration date or trial date has been established;
(7) the type and extent of discovery that remains to be completed;
(8) any prejudice which may inure to the non-moving party if an extension is granted; and
(9) what motions have been heard and decided by the court to date.
Appeals from discovery rulings have depended on weighing these or similar factors, and appellate courts have repeatedly stated that each case must be decided on its own facts, subject to the abuse of discretion standard of review. See Bender v. Adelson, 187 N.J. 411, 428 (2006) (finding no abuse of discretion in trial court's ruling barring expert testimony because of late discovery); Leitner, supra, 392 N.J.Super. at 93 (reversing as a mistaken exercise of discretion the trial court's denial of an initial, routine discovery extension, despite plaintiffs' lack of diligence in pursuing discovery, where no trial or arbitration date had been set and where defendants could not show prejudice); Rivers, supra, 378 N.J.Super. at 80-81 (finding no abuse of discretion in denial of discovery extension "where the delay rests squarely on plaintiff's counsel's failure to retain an expert and pursue discovery in a timely manner, '" (quoting Huszar v. Greate Bay Hotel & Casino, Inc., 375 N.J.Super. 463, 473-74 (App. Div.), rev'd on other grounds, 185 N.J. 290 (2005))); Huszar, supra, 375 N.J.Super. at 471-74 (affirming trial court's ruling denying an extension of discovery where plaintiffs' attorney had not pursued discovery diligently and where the discovery period had already ended); Ponden v. Ponden, 374 N.J.Super. 1, 10-12 (App. Div. 2004) (reversing denial of discovery extension to permit supplemental expert report, and emphasizing the importance of whether a trial or arbitration date had been set at the time that an extension was sought), certif. denied, 183 N.J. 212 (2005); Casino Reinvestment Dev. Auth., supra, 332 N.J.Super. at 488-90 (in a condemnation case, finding no abuse of discretion in the trial court's denial of a motion to extend time for supplemental appraisal reports).
Plaintiff emphasizes our decision in Tucci v. Tropicana Casino and Resort, Inc., 364 N.J.Super. 48, 51 (App. Div. 2003), where we reversed the trial court's exclusion of the plaintiffs' expert report served thirty-nine days beyond the deadline the court had set at a case management conference. We noted in Tucci that late submission of relevant records to the expert and the personal problems of the plaintiffs' attorney explained the delay, and that the defendants had not shown any prejudice resulting from late service of the expert report. Id. at 52.
On the other hand, defendants cite Tynes v. St. Peter's University Medical Center, 408 N.J.Super. 159 (App. Div.), certif. denied, 200 N.J. 502 (2009), as the most relevant precedent. In that medical malpractice case, the parties conducted discovery for more than four years, and in one of many case management hearings, the trial court set a firm discovery end date and a firm deadline for the plaintiffs to serve their expert reports. Id. at 163-66. The plaintiffs missed the deadline and filed a motion to extend discovery, claiming they could not serve their expert report without the deposition of a retired doctor who was scheduled to be deposed after the deadline. Id. at 170. We affirmed the trial court's denial of an extension for the expert report, and the eventual dismissal of the plaintiffs' case. Id. at 176. We stated: "[P]laintiffs did not present sound reasons for the discovery extension or their failure to pursue [the doctor's] deposition and serve their expert reports prior to the discovery end date." Id. at 170.
In this case, always mindful that we defer to the trial court's discovery rulings in the absence of an abuse of discretion, we conclude that the facts are more closely aligned with Tynes than with Tucci. Most important, we can find no adequate explanation for plaintiff's failure to obtain and serve at least the Brownell hydro-geology report by the deadline set by the court.
Reminiscent of Tynes, plaintiff argues that it could not submit its expert reports until after it took Gildea's deposition, which was adjourned beyond the discovery deadline to accommodate Harleysville. But Gildea was a claims handler who could not offer any pertinent information on the nature and timing of the contamination at the site. Plaintiff has pointed to no relevant information in Brownell's report that referenced Gildea's deposition testimony. In fact, Brownell did not list Gildea's deposition as an item he reviewed before completion of his report. Even if Gildea's testimony was needed for completion of reports by the insurance industry experts, plaintiff did not provide a convincing reason for requiring more time beyond the August 30, 2010 deadline to complete the vital hydro-geology expert report on the nature and timing of the contamination. Cf. Tynes, supra, 408 N.J.Super. at 171 (plaintiffs did not present a convincing reason as to why they could not serve timely expert reports on issues that were not dependent on the later-obtained fact deposition of a witness).
Plaintiff contends that defendants delayed fact discovery. But defendants argue more persuasively that plaintiff had twelve years to obtain scientific and engineering information to establish the liability of defendants for covering the costs of remediating the site and, further, that the pertinent facts establishing soil and groundwater contamination were in plaintiff's possession, not defendants'. Plaintiff first learned of the extensive contamination of the site in 1998, during its due diligence investigation in preparation for its merger with Cherry Hill Industrial. It notified defendants in 1999 and 2000 of their potential liability on policies issued in the past. Plaintiff entered into agreements with the NJDEP for remediation of the site. It consulted with experts, conducted testing of the site, and remediated the contamination over the next ten years. The information plaintiff contends it supplied to defendants was also available to plaintiff's own expert.
Nor was plaintiff hampered by defendants' failure to provide timely discovery. Whatever disputes may have arisen with defendants regarding discovery of their documents pertaining to the existence of policies and the action or inaction taken in addressing plaintiff's claims, defendants did not participate in the investigation of the contamination and the remediation of the site. It was plaintiff rather than defendants that gathered the relevant factual information to produce an expert report and testimony on the nature and timing of the contamination, and thus, to establish property damage during the relevant policy periods. Plaintiff's corporate designee testified in deposition on August 4-5, 2010, that plaintiff was unaware of when and how the soil and groundwater contamination had occurred. We can find no excuse in this record for plaintiff delaying the important and necessary expert analysis on which plaintiff would make its claims until far into an extended discovery period.
Plaintiff first filed an action in 2007 seeking insurance coverage. Its current, re-filed action commenced in February 2009. By our count, the August 30, 2010 deadline provided plaintiff 516 days during the discovery period in the re-filed case to serve its expert reports. When the discovery period under the first-filed case is added to that number, plaintiff had more than ample time to produce the vital scientific evaluation it needed to proceed with its claims.
Furthermore, the barring of plaintiff's expert reports should not have come as a surprise to plaintiff. Beginning on January 7, 2010, the presiding judge repeatedly and emphatically warned counsel that evidence would be excluded if timely discovery of it was not made. By the time of the July 19, 2010 case management conference, the parties were well aware that the judge would not tolerate unexcused delays and would take action to move the case to resolution. The judge acted within his discretionary authority in barring expert testimony as a sanction for plaintiff's discovery violation. See Hoehn v. Barrett, 338 N.J.Super. 365, 370-71 (App. Div. 2001).
In sum, we conclude that the presiding judge did not abuse his discretion in denying another extension for plaintiff to serve its expert reports and in barring expert testimony when timely reports were not served.
Having reached that conclusion, we need not discuss extensively the court's orders granting summary judgment to defendants. Plaintiff had the burden of establishing that an "occurrence" during defendants' policy periods caused third-party property damage. See Quincy Mut. Fire Ins. Co. v. Borough of Bellmawr, 172 N.J. 409, 415 (2002); Carter-Wallace, Inc. v. Admiral Insurance Co., 154 N.J. 312, 329 (1998); Hartford Accident & Indem. Co. v. Aetna Life & Casualty Ins. Co., 98 N.J. 18, 26 (1984); Diamond Shamrock Chems. Co. v. Aetna Casualty & Sur. Co., 258 N.J.Super. 167, 216 (App. Div. 1992), certif. denied, 134 N.J. 481 (1993). In an environmental contamination case, the word "trigger is a shorthand term used to describe 'the event or events that under the terms of the insurance policy determines whether a policy must respond to a claim in a given set of circumstances.'" Quincy Mut. Fire Ins. Co., supra, 172 N.J. at 416 (quoting Owens-Illinois, Inc. v. United Insurance Co., 138 N.J. 437, 447 (1994)). In this case, plaintiff was required to present evidence to "trigger" the policies it alleged had been issued by defendants. Without expert analysis and testimony, it simply did not have that evidence.
As we have stated, as late as August 4-5, 2010, plaintiff's own corporate designee confessed ignorance about the timing of the contamination. While plaintiff attempts to rely on factual evidence about the contaminants found at the site and the tenants that used those contaminating substances, that information is not sufficient to prove the nature of the covered third-party property damages and their occurrence during the relevant policy periods. In Quincy Mut. Fire Ins. Co., supra, 172 N.J. at 434, the Supreme Court held that, under "the continuous trigger theory, " the discharge of contaminants into the soil constitutes an "occurrence" under applicable policies of insurance, but extensive expert evidence in that case was presented to demonstrate the effect on groundwater of the discharge of contaminants. See id. at 430-32. We have no doubt that expert evaluation and testimony regarding groundwater contamination is necessary to meet plaintiff's burden of proof in this case. Without such evidence provided by its engineering expert, plaintiff could not prove that any of the three defendants were liable to defend and indemnify it for third-party property damage.
Having reached these conclusions, we need not address the arguments of plaintiff and Harleysville on the issue of whether sufficient evidence was presented to establish a genuine factual dispute as to the existence of a Harleysville policy in 1978-79.