United States District Court, D. New Jersey
Jonathan Wheeler, Esq. Attorney for Plaintiffs
D. Gottilla, Esq., and David F. Swerdlow, Esq. Attorneys for
Defendant State Farm Insurance Company
Donovan Shea, Esq., and William Wendell Cheney, III, Esq.
LITCHFIELD CAVO LLP Attorneys for Defendant Clarendon
B. SIMANDLE U.S. DISTRICT JUDGE
INTRODUCTION ........................ 2
PROCEDURAL AND FACTUAL BACKGROUND ............. 3
Procedural Background ................. 4
Factual Background .................. 6
The Underground Storage Tank and Remediation . . .6
Clarendon Policy, Claim, and Denial ....... 10
State Farm Policy, Claim, and Denial ...... 16
Defendants' Expert Report ............ 22
STANDARD OF REVIEW ................... 25
ANALYSIS ......................... 26
Clarendon ...................... 28
Section I: "Land" not covered under Coverage A .
Section II: “Occurrence” during the policy period
. .......................... 32
Section II: Pollution Exclusion ......... 37
Section II: Owned Property Exclusion ...... 46
Pro-Rata, Time on the Risk Allocation ...... 53
Bad Faith Claim ................. 55
State Farm ...................... 56
Section I: “Land” not covered ..........
Section II: “Occurrence” during the policy period
. .......................... 60
Section II: Pollution Exclusion ......... 64
Bad Faith Claim and Punitive Damages ...... 67
CONCLUSION ........................ 68
an action by husband and wife Plaintiffs Nimrod and Marnie
Benjamin against two insurance companies, Defendant State
Farm Insurance Company (“State Farm”) and
Defendant Clarendon National Insurance
(“Clarendon”), as the holders of policies of
insurance issued by the Defendants for premises located at 72
Wynnewood Drive, Voorhees, New Jersey 08043. Plaintiffs
allege that the Defendants breached their contractual
obligations to pay benefits to Plaintiffs for a physical loss
to the insured premises, concerning leakage of heating oil
from a previously unknown underground storage tank, under
their respective policies of insurance. [Docket Item 1-2 at
5-6.] Unbeknownst to Plaintiffs when they purchased this
residential property and obtained these insurance policies,
the underground leakage had occurred many years prior.
before the Court are State Farm's Motion for Summary
Judgment [Docket Item 27] and Clarendon's Motion for
Summary Judgment [Docket Item 28].
reasons set forth below, the Court will grant in part and
deny in part State Farm's Motion for Summary Judgment and
will grant in part and deny in part Clarendon's Motion
for Summary Judgment.
PROCEDURAL AND FACTUAL BACKGROUND 
about April 29, 2015, Plaintiffs filed a complaint in the
Superior Court of New Jersey, Law Division, Camden County
against three parties: State Farm, Clarendon, and the U.S.
Department of Housing and Urban Development
(“HUD”). [Docket Item 1-2 at 2.] Plaintiffs
alleged that both State Farm and Clarendon had issued
policies of insurance covering Plaintiffs' premises
located at 72 Wynnewood Drive, Voorhees, New Jersey
(“the Property”) and wrongfully failed to pay
benefits under those policies after “a release of
heating oil from a previously unknown underground heating oil
tank.” [Id. at 5-6.] Plaintiffs alleged that
HUD “was the record owner of [those] premises . . .
prior to ownership by Plaintiffs” and knew or should
have known about the tank and breached its duty to disclose
the presence of the tank to Plaintiffs. [Id. at
removed the case to federal court on June 17, 2015, pursuant
to 28 U.S.C. §§ 1442(a)(1) on the grounds that it
had “federal defenses to raise against the action
against it, including but not limited to sovereign immunity
from suit in state courts, sovereign immunity from suits of
this type, absence of privity of contract with Plaintiffs
under federal law, [and] failure to state a claim upon which
relief may be granted under federal law.” [Docket Item
1 at 4.] No party filed a motion to remand at that time.
filed its answer on July 8, 2015. [Docket Item 5.] State
Farm, in its answer, filed a cross-claim for contribution
“from all other parties, presently named or later
impleaded, in the event that State Farm is determined to be
liable to plaintiffs.” [Docket Item 11 at 6.] HUD filed
its answer to the cross-claim on July 28, 2015. [Docket Item
November 25, 2015, HUD filed a Motion to Dismiss for lack of
jurisdiction. [Docket Item 19.] In lieu of filing a response
in opposition, Plaintiffs' counsel filed a letter
indicating that “Plaintiffs [did] not oppose entry of
an Order granting dismissal of the claims against federal
Defendant HUD[.]” [Docket Item 21.] The Court
subsequently granted the Motion to Dismiss [Docket Item 22];
ordered dismissal of the cross-claim against HUD [Docket Item
26]; and terminated HUD as a party on February 26, 2016.
course, State Farm filed a Motion for Summary Judgment.
[Docket Item 27.] Clarendon filed its Motion for Summary
Judgment on the same day. [Docket Item 28.] Plaintiffs filed
their respective Responses in Opposition [Docket Items 29,
30]. State Farm filed its Reply [Docket Item 35], as did
Clarendon [Docket Item 36.]
The Underground Storage Tank and Remediation
Nimrod Benjamin purchased the Property, a foreclosed
townhouse, on January 2, 2004. [Docket Item 27-4 ¶ 1.]
He and Marnie Benjamin married in 2008. [Docket Item 28-2
¶ 4.] The Property was constructed in 1976-77;
“[a]t the time it was constructed, it was reportedly
equipped with an underground heating oil tank ([underground
storage tank or] UST) system” (hereinafter
“UST”). [Id. ¶¶ 2-3.]
Plaintiffs were unaware, at least until 2012 and possibly
until May 2014, that the underground heating oil tank existed
on the Property. [Docket Item 27-4 ¶¶ 2, 4; 28-2
¶ 7.] At all times during Plaintiffs'
ownership of the Property, it was heated by oil drawn from an
above-ground oil tank, which had been previously installed in
the garage in 2002. [Docket Items 27-4 ¶ 3; 28-2
¶¶ 9-10.] Although a Voorhees township official
notified Mr. Benjamin by letter on January 3, 2012 that the
Property contained a UST “that did not appear to be in
use, ” the Benjamins did not believe that the
instructions regarding the UST in that letter were applicable
to them since they did not know a UST was on the property and
were aware only of the above-ground tank. [Docket Item 28-2
May of 2014, Plaintiffs hired Superior Tank and Energy
Company of Bristol, Pennsylvania, to remove the UST and
dispose of it. [Docket Item 27-4 ¶ 5.] When it was
removed, 200 gallons of oil were reportedly pumped out of the
UST and transported to be recycled. [Docket Item 28-2 ¶
18.] At that time, a municipal inspector who was present
suspected a fuel oil discharge, the New Jersey Department of
Environmental Protection (“NJDEP”) was notified,
and Plaintiffs were directed to remediate the Property by
notice dated May 30, 2014. [Docket Item 27-4 ¶ 6.]
subsequently hired Moore's Tank Services, Inc.
(“Moore's”) to investigate potential soil and
groundwater contamination in the area where the UST had been;
on July 21, 2014, Moore's collected soil samples and
subsequently found fuel-oil impacted soil in the side yard
and under the garage. [Docket Item 28-2 ¶¶ 21-22.]
Moore's also determined that groundwater had been
contaminated by fuel oil. [Id. ¶ 23.]
Moore's issued a report to the Benjamins on August 27,
2014, wherein it stated:
(1) Soil contamination extended from the location of the UST
along the side of the house, about 12 feet into the yard
toward the midpoint of the house, ended “near at the
rear of the house, ” and extended under the house;
(2) Contamination did not migrate toward the street or the
garage in the vicinity of the former tank;
(3) Contaminated soil appeared to increase away from the
location of the UST toward the rear of the property and was
encountered closer to the surface further from that location
(Mr. Moore believed this suggested “the possibility of
a second source of contamination or an older spill that has
(4) Elevated benzene levels indicated apparent degradation of
the heating oil and “suggest[ed] an older spill”;
(5) The Benjamins should immediately begin remediation; and
(6) “Age dating at least one sample, but three are
recommended, will indicate the age of the plume.”
[Docket Items 28-2 ¶¶ 24-26; 27-4 ¶ 8, citing
Docket Item 27-2 at 67-69.]
had Precision Testing Labs, Inc., test the soil as
recommended by Moore's. Precision issued a report on
September 4, 2014, stating that the “C&L age of the
petroleum on [the relevant sample] is estimated to be
greater than 20 years old.” [Docket
Items 28-2 ¶ 28; 27-4 ¶ 9, citing Docket Item 27-2
at 71 (emphasis in original).] Precision's report
continued: “The model [we used to determine this] can
estimate the age of #2 heating oil (or diesel fuel) up to 20
years old within a range of plus or minus two years.”
[Docket Item 27-2 at 72.]
hired Moore's to remediate the soil and groundwater that
reflected the existence of the heating oil and to prepare a
Remedial Action Report. [Docket Items 28-2 ¶ 30; 28-5 at
4-23.] In the course of the remediation process, Moore's
excavated and replaced 221.2 tons of impacted soil
(reflecting an area of 35' x 20' x 10.5' deep or
a volume of approximately 272 cubic yards [Docket Item 27-2
at 114]) and another contractor, Monarch Environmental
Services, pumped out 278 gallons of groundwater from the
excavation site. [Docket Item 28-5 at 10-12.] The area
excavated was entirely within Plaintiffs' property; there
was no evidence uncovered by Moore's that heating oil had
spread to either soil or groundwater beyond the property
line. [Docket Item 28-5 at 19.]
NJDEP issued a No Further Action Letter on May 15, 2015, and
Plaintiffs sold the townhouse on July 6, 2015. [Docket Item
28-2 ¶¶ 39-40.]
Clarendon Policy, Claim, and Denial
issued a homeowner's insurance policy (“Clarendon
Policy”) to Plaintiff Nimrod Benjamin with a policy
period of January 2, 2005 to January 2, 2006 for the
Property. [Docket Item 28-5 at 48.] The Clarendon Policy was
divided into Section I, “Property Coverages, ”
and Section II, “Liability Coverages.” [Docket
Item 28-5 at 51, 60.] Before both sections the policy
included a “Definitions” section. [Id.
I included five subsections, A through D and
“Additional Coverages”; Coverage A covered the
“Dwelling, ” Coverage B, “Other Structures,
” Coverage C, “Personal Property, ”
Coverage D, “Loss of Use, ” and the fifth
subsection, “Additional Coverages.” [Id.
at 51-55.] Section I also contained further subsections as
follows: “Perils Insured Against” [id.
at 55], “Exclusions” [id. at 57], and
“Conditions” [id. at 58-60].
II included two subsections, E and F; Coverage E covered
“Personal Liability, ” and Coverage F,
“Medical Payments to Others.” [Id. at
60.] Section II also contained further subsections as
follows: “Exclusions” [id. at 61-63],
“Additional Coverages” [id. at 63], and
“Conditions” [id. at 64].
Clarendon Policy also contained a further subsection,
entitled “Sections I and II--Conditions.”
[Id. at 64.]
Section I, Section II, and “Sections I and
II--Conditions, ” the Clarendon Policy contained a
number of endorsements which changed the policy.
[Id. at 66-81.] They were as follows:
(a) “Replacement or Repair Cost Protection
Endorsement” [id. at 66];
(b) “Personal Property Replacement Cost”
[id. at 67];
(c) “Amendatory Endorsement - New Jersey”
[id. at 68-69];
(d) “Special Provisions - New Jersey”
[id. at 70-76];
(e) “Limited Fungi, Wet or Dry Rot, or Bacteria
Coverage” [id. at 77-79]; and
(f) “Workers' Compensation - Residence Employees,
New Jersey” [id. at 80-81].
provisions in the Clarendon Policy relevant to this action
are outlined as follows, in the order in which they appear
within the Policy:
. . .
5. “Occurrence” means an accident, including
continuous or repeated exposure to substantially the same
general harmful conditions, which results, during the policy
a. “Bodily injury”; or b. “Property
damage.” 6. “Property damage” means
physical injury to, destruction of, or loss of use of
. . .
Section I - Property Coverages
Coverage A - Dwelling We cover:
1. The dwelling on the “residence premises” shown
in the Declarations, including structures attached to the
2. Materials and supplies located on or next to the
“residence premises” used to construct, alter or
repair the dwelling or other structures on the
This coverage does not apply to land, including land on which
the dwelling is located.
. . .
Section I - Perils Insured Against
Coverage A - Dwelling and Coverage B - Other Structures
We insure against risk of direct loss to property described
in Coverages A and B only if that loss is a physical loss to
property. We do not insure, however, for loss:
. . .
2. Caused by:
. . .
e. Any of the following:
(1) Wear and tear, marring, deterioration;
(2) Inherent vice, latent defect, mechanical breakdown;
(3) Smog, rust or other corrosion, mold, wet or dry rot;
. . .
(5) Discharge, dispersal, seepage, migration, release or
escape of pollutants unless the discharge, dispersal,
seepage, migration, release or escape is itself caused by a
Peril Insured Against under Coverage C of this policy.
Pollutants means any solid, liquid, gaseous or thermal
irritant or contaminant, including smoke, vapor, soot, fumes,
acids, alkalis, chemicals and waste. Waste includes materials
to be recycled, reconditioned or reclaimed;
. . .
3. Excluded under Section I - Exclusions. Under Items 1. And
2., any ensuing loss to property described in Coverages A and
B not excluded or excepted in this policy is covered.
. . .
Section I - Exclusions
1. We do not insure for loss caused directly or indirectly by
any of the following. Such loss is excluded regardless of any
other cause or event contributing concurrently or in any
sequence to the loss.
a. Ordinance or Law, meaning enforcement of any
ordinance or law regulating the construction, repair, or
demolition of a building or other structure, unless
specifically provided under this policy.
. . .
Section I - Conditions
. . .
7. Other Insurance. If a loss covered by this policy is also
covered by other insurance, we will pay only the proportion
of the loss that the limit of liability that applies under
this policy bears to the total amount of insurance covering
8. Suit Against Us. No action can be brought unless the
policy provisions have been complied with and the action is
started within one year after the date of loss.
. . .
Section II - Liability Coverages
Coverage E - Personal Liability If a claim is made or a suit
is brought against an “insured” for damages
because of “bodily injury” or “property
damages” caused by an “occurrence” to which
this coverage applies, we will:
1. Pay up to our limit of liability for the damages for which
the “insured” is legally liable. Damages include
prejudgment interest awarded against the
2. Provide a defense at our expense by counsel of our choice,
even if the suit is groundless, false or fraudulent. We may
investigate and settle any claim or suit that we decide is
appropriate. Our duty to settle or defend ends when the
amount we pay for damages resulting from the
“occurrence” equals our limit of liability.
. . .
Section II - Exclusions
1. Coverage E - Personal Liability and Coverage F -Medical
Payments to Others do not apply to “bodily
injury” or “property damage”:
. . .
c. Arising out of the rental or holding for rental of any
part of any premises by an “insured.” This
exclusion does not apply to the rental or holding for ...