SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
A-0258-95T1
KIMBER PETROLEUM CORPORATION,
a New Jersey corporation and
successor to Kimber-Allen
Petroleum Corporation,
Plaintiff-Appellant,
v.
TRAVELERS INDEMNITY COMPANY
and CALIFORNIA UNION INSURANCE
COMPANY, now Century Indemnity
Company, successor to Cigna
Specialty Insurance Company,
formerly known as California
Union Insurance Company,
Defendants-Respondents,
and
THE HARTFORD INSURANCE GROUP,
NATIONAL UNION FIRE INSURANCE
OF PITTSBURGH, AMERICAN INTERNATIONAL
ADJUSTMENT COMPANY, INC., GREAT
AMERICAN SURPLUS LINES INSURANCE
COMPANY, INTERNATIONAL SURPLUS LINES
INSURANCE COMPANY, NORTHWESTERN
NATIONAL INSURANCE COMPANY, and THE
NEW JERSEY PROPERTY-LIABILITY INSURANCE
GUARANTY ASSOCIATION, JOHN DOE COMPANIES,
Defendants.
___________________________________________________________________
Submitted: November 25, 1996 - Decided: February 26, 1997
Before Judges Petrella, Landau and Wallace.
On appeal from the Superior Court of New
Jersey, Law Division, Union County.
Anderson Kill Olick & Oshinsky, attorneys
for appellant (Michael S. Gordon, on the brief).
Graham, Curtin & Sheridan, and Mary Kay Vyskocil
(Simpson Thacher & Bartlett) of the New York Bar,
admitted pro hac vice, attorneys for respondent
Travelers Indemnity Company (Joseph R. McDonough
and Ms. Vyskocil, on the brief).
Reggerio & Leodori and Paul Koepff and Kathleen L.
Beiermeister (O'Melveny & Myers) of the New York
Bar, admitted pro hac vice, attorneys for respondent
Century Indemnity Company (Ms. Beiermeister, on the
brief).
The Opinion of the Court was delivered by
WALLACE, JR., J.A.D.
Plaintiff Kimber Petroleum Corporation appeals from the Law
Division's grant of summary judgment in favor of defendants
Travelers Indemnity Company (Travelers) and California Union
Insurance Company, now Century Indemnity Company (Century). On
appeal plaintiff essentially contends that: (1) summary judgment
was improperly granted because there are genuine issues of material
fact which require jury resolution; and (2) discovery should have
been permitted because the insurance industry's regulatory history,
drafting history and other documents concerning the absolute
pollution exclusion clause have been deemed relevant in other New
Jersey cases and are particularly relevant here. We affirm.
The facts in this case are undisputed. Plaintiff sells and
distributes gasoline from major brand-name refiners to gas stations
in New Jersey. Between 1986 and 1990, plaintiff was named a
defendant in a variety of third-party actions arising out of
environmental damage caused by leaking underground gasoline storage
tanks which were either owned, leased or supplied by plaintiff.
During this time the New Jersey Department of Environmental
Protection (DEP) issued a number of directives under the New Jersey
Spill Compensation and Control Act (the Spill Act), N.J.S.A. 58:10-23.11 to -23.11z, to plaintiff ordering it to pay the costs to
remediate contamination from those leaking underground gasoline
storage tanks.
After defendants denied coverage, plaintiff instituted this
action in September 1990 against nine insurance companies,
including defendants Travelers and Century, seeking a declaratory
judgment that defendants were liable under policies issued by them
to plaintiff for defense, investigation costs, and indemnification.
The complaint also included claims for breach of contract,
negligent inspection, violation of the Consumer Protection Act,
breach of warranty of uniformity, failure to warn, and breach of
implied warranty of fitness. The complaint alleged that plaintiff
had been sued by DEP and three other third parties for damages
allegedly caused by contamination from underground gasoline storage
tanks supplied with gasoline by plaintiff.
Both Travelers, a primary carrier, and Century, an excess
carrier, answered the complaint denying most allegations and
asserting by way of defense the pollution exclusion clause in their
respective policies. On July 29, 1992, both Travelers and Century
moved for summary judgment on the ground that the absolute
pollution exclusion clause in their respective policies operated to
exclude from coverage the underlying claims lodged against
plaintiff. Plaintiff opposed the motions arguing that genuine
issues of material fact exist to preclude the entry of summary
judgment. Further, plaintiff sought discovery prior to
consideration of the motions.
The trial judge found that the absolute pollution exclusion
clauses were clear and unambiguous and did not require additional
interpretation or definition. Consequently, the judge granted
summary judgment in favor of Travelers and Century. The trial
judge's opinion was embodied in orders dated October 30, 1992,
which were supplemented by orders dated November 25, 1992 and
amended by orders dated December 7, 1992. Plaintiff's motion for
leave to appeal was denied in both this court and the Supreme
Court.
By letter dated August 26, 1993, plaintiff requested that the
judge vacate the grant of summary judgment and permit plaintiff to
conduct discovery concerning the drafting and regulatory history of
the absolute pollution exclusion clause, based upon the Supreme
Court's July 21, 1993 decision in Morton International, Inc. v.
General Accident Insurance Co. of America,
134 N.J. 1 (1993), cert.
denied, ___ U.S. ___,
114 S. Ct. 2764,
129 L. Ed.2d 878 (1994),
and two out-of-state decisions. The trial judge denied plaintiff's
request.
In June 1994, plaintiff again sought reconsideration based on
a Louisiana Supreme Court case holding that the absolute pollution
exclusion clause was ambiguous. On July 1, 1994, the trial judge
wrote to counsel declining to reconsider the matter.
While not documented in the record, the parties represent
that, between December 21, 1994 and July 1995, plaintiff negotiated
settlements with all of the insurance company defendants except
Travelers and Century. On July 7, 1995, the trial judge dismissed
with prejudice and without costs all claims against Hartford
Insurance Group, National Union Fire Insurance Company of
Pittsburgh, Northwestern National Insurance Company, and New Jersey
Property-Liability Insurance Guaranty Association.
On July 10, 1995, plaintiff again sought reconsideration of
the October 30, 1992 and December 7, 1992 orders based on newly
discovered evidence. Travelers opposed plaintiff's motion, asking
that it be rejected without further briefing by the parties and
that the material submitted by plaintiff in support of its motion
be stricken from the record. On July 27, 1995, the trial judge
denied plaintiff's motion. On August 21, 1995, plaintiff filed its
notice of appeal. We denied both Travelers' motion to dismiss the
appeal as untimely filed and plaintiff's motion to supplement the
record.
Plaintiff argues that the Supreme Court's reasoning in Morton International, supra, 134 N.J. 1, should control the disposition of this matter. In Morton, the insured sought coverage under policies that provided indemnification for property damage "resulting from an occurrence" except where that property damage arose out of the discharge, dispersal, release or escape of contaminants or
pollutants in or upon land. Id. at 10-11. That exclusion,
however, did not apply if "such discharge, dispersal, release or
escape is sudden and accidental." Id. at 11. An occurrence was
defined as an "unexpected event or happening . . . or a continuous
or repeated exposure to conditions" resulting in property damage
"provided the insured did not intend or anticipate that injury to
or destruction of property would result." Id. at 10.
In establishing the parameters of the pollution exclusion
clause, the Court held that the phrase "sudden and accidental" did
not characterize or relate to the damage caused by the pollution,
but only to the "discharge, dispersal, release or escape" of
pollutants for which coverage was provided. Id. at 28.
Consequently, the Court held that the phrase "sudden and
accidental" described "only those discharges, dispersals, releases,
and escapes of pollutants that occur abruptly or unexpectedly and
are unintended." Id. at 29. However, the Court went on to note
that such an interpretation would "sharply and dramatically"
restrict the coverage that had previously been provided under
Comprehensive General Liability (CGL) policies for property damage
caused by accidental pollution because, under occurrence-based
policies, coverage was provided for any type of property damage
that was "neither expected nor intended from the standpoint of the
insured." Ibid. When the standard pollution exclusion clause was
presented to state insurance regulatory agencies, the industry
maintained that the exclusion would simply clarify existing
coverage and that there would be a continuation of coverage for
pollution-caused injuries which resulted from an accident. Ibid.
Thus, the language of the clause did not support that
representation. The Court opined:
Rather than "clarify" the scope of coverage,
the clause virtually eliminated pollution-caused property-damage coverage, without any
suggestion by the industry that the change in
coverage was so sweeping or that rates should
be reduced. For those reasons, we decline to
enforce the standard pollution-exclusion
clause as written. To do so would contravene
this State's public policy requiring
regulatory approval of standard industry-wide
policy forms to assure fairness in rates and
in policy content, and would condone the
industry's misrepresentation to regulators in
New Jersey and other states concerning the
effect of the clause.
[Id. at 30.]
Here, the interpretive tension is between the absolute
pollution exclusion clause and the provisions for completed
operations and products hazards coverage. Plaintiff relies on
documents and transcribed testimony from insurance industry leaders
in contending that the absolute pollution exclusion clause was
never intended to be absolute and that exceptions were contemplated
for completed operations risks, products hazards, and certain other
off-premises emissions. Therefore, plaintiff contends that its
underlying liabilities to DEP and third-party property owners fall
within the protection of the completed operations and products
hazards provisions, putting them outside the scope of the absolute
pollution exclusion clause and entitling plaintiff to coverage.
Plaintiff's policy with Travelers defined "completed
operations hazards" as including:
[B]odily injury and property damage arising
out of operations or reliance upon a
representation or warranty made at any time
with respect thereto, but only if the bodily
injury or property damage occurs after such
operations have been completed or abandoned
and occurs away from premises owned by or
rented to the Named Insured. "Operations"
include materials, parts or equipment
furnished in connection therewith. Operations
shall be deemed completed at the earlier of
the following times:
(1) when all operations to be performed by or
on behalf of the Named Insured under the
contract have been completed,
(2) when all operations to be performed by or
on behalf of the Named Insured at the
site of the operations have been
completed, or
(3) when the portion of the work out of which
the injury or damage arises has been put
to its intended use by any person or
organization other than another
contractor or subcontractor engaged in
performing operations for a principal as
a part of the same project.
Operations which may require further service
or maintenance work, or correction, repair or
replacement because of any defect or
deficiency, but which are otherwise complete,
shall be deemed completed.
The completed operations hazard does not
include bodily injury or property damage
arising out of
(a) operations in connection with the
transportation of property, unless the
bodily injury or property damage arises
out of a condition in or on a vehicle
created by the loading or unloading
thereof.
(b) the existence of tools, uninstalled
equipment or abandoned or unused
materials, or
(c) operations for which the classification
stated in the policy or in the Company's
manual specifies "including competed
operations";
. . . .
The policy went on to define "products hazards" as including:
[B]odily injury and property damage arising
out of the named insured's products or
reliance upon a representation or warranty
made at any time with respect thereto, but
only if the bodily injury or property damage
occurs away from premises owned by or rented
to the Named Insured and after physical
possession of such products has been
relinquished to others.
The pollution exclusion endorsement in the policy captioned
"Total Exclusion-Waste and Pollutants" provided:
It is agreed that the exclusion relating to
the emission, discharge, seepage, release or
escape of any liquid, solid, gaseous or
thermal waste or pollutant is deleted and
replaced by the following:
This insurance does not apply:
(1) to bodily injury or property damage
arising out of the actual, alleged or
threatened discharge, dispersal, release
or escape of pollutants:
(a) at or from any premises the named
insureds own, rent or occupy,
(b) at or from any site or location used
by or for the named insureds or
others for the handling, storage,
disposal, processing or treatment of
waste,
(c) which are at any time transported,
handled, stored, treated, disposed
of, or processed as waste by or for
the named insureds or any person or
organization for whom the named
insureds may be legally responsible,
or
(d) at or from any site or location on
which the named insureds or any
contractors or subcontractors
working directly or indirectly on
the named insureds' behalf are
performing operations:
(i) if the pollutants are brought
on or to the site or location
in connection with such
operations, or
(ii) if the operations are to test
for, monitor, clean up, remove,
contain, treat, detoxify or
neutralize the pollutants;
(2) to any loss, cost or expense arising out
of any governmental direction or request
that the named insureds test for,
monitor, clean up, remove, contain,
treat, detoxify or neutralize pollutants.
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.
Century issued one excess liability insurance policy to
plaintiff, which was in effect between May 30, 1985 and May 18,
1986. That policy contained a separate endorsement captioned
"Absolute Pollution Exclusion Endorsement," which provided:
In consideration of the premium charged, it is
hereby agreed and declared that this policy
shall not apply to bodily injury or property
damage arising out of the discharge,
dispersal, release or escape of smoke, vapors,
soot, fumes, acids, alkalies, toxic chemicals,
liquids or gases, waste materials or other
irritants, contaminants or pollutants into or
upon land, the atmosphere or any water course
or body of water.
Century's excess policy has a broad pollution exclusion clause
and has no corresponding completed operations and products hazards
provisions. By its terms Century's policy does not alter the
provisions of Travelers' policy. Thus, if coverage is found under
the completed operations provisions of Travelers' policy and
plaintiff's liability is determined to be in excess of Travelers'
policy's limits, coverage under Century's excess policy would be
triggered.
Although the trial judge found plaintiff's industry-intent
evidence unpersuasive, we have considered the documents containing
insurance industry official comments concerning the absolute
pollution exclusion clause. Robert Sullivan, vice president of
government affairs for Crum & Foster Insurance Company in
Morristown, appeared before the Department of Insurance on December
18, 1985. He testified that despite the language of the absolute
pollution exclusion clause, insurance companies still provided
"significant coverage for completed operations and product
liability in certain off-site discharges . . . [and] a considerable
amount, admittedly for certain classes of risk, of pollution
liability coverage, even under the almost total pollution exclusion
that the current forms provide." Sullivan's testimony referred to
a form of the absolute pollution exclusion clause drafted by the
Insurance Services Office, Inc. (ISO). This organization is a non-profit corporation that makes ratings, policy forms and related
services available to any United States property/casualty insurer.
At least one form of that absolute pollution exclusion clause is
virtually identical to the clause in Travelers' policy.
In a 1985 "explanatory memorandum" concerning that form of the
pollution exclusion endorsement, ISO indicated that "the exclusion
does not apply to damages arising out of products or completed
operations nor to certain off-premises discharges of pollutants.
Clean-up costs are specifically excluded as a clarification of
current intent." ISO published a workbook concerning its policy
forms and endorsements which made specific reference to pollution
liability coverage and the "new pollution exclusion" which it said
excluded pollution coverage under most circumstances and
specifically excluded cleanup and similar costs. However, it noted
that "there is coverage for some off-site emissions, including the
Products/Completed Operations exposure." The workbook illustrated
that:
The insured would be covered for bodily injury
and property damage liability arising out of
the following situations, whether the emission
of pollutants is sudden or gradual:
* The insured's chemical products are sold
to a manufacturer and escape while being
used in the manufacturer's operations.
* The insured installs a tank on someone
else's premises (other than a waste
disposal or treatment site) and the tank
leaks, resulting in the release of
pollutants.
* The insured or a subcontractor, while
working at a jobsite, ruptures an oil
pipe by accidentally ramming it with a
bulldozer.
[However], all cleanup costs and related or
similar costs incurred at government request
or direction are specifically excluded.
ISO justified the need for an absolute pollution exclusion
clause because of the "erratic and potentially ruinous [judicial]
interpretations" of current pollution coverage provisions. It
explained:
Under our new exclusion, coverage is
provided in the basic policy for products/
completed operations and some other off
premises exposures. No distinction is made
between "sudden" and "gradual" emissions.
There will be three ways of obtaining coverage
for exposures, both "sudden" and "gradual",
that are now excluded: a standard endorsement
deleting the pollution exclusion (except that
part relating to clean-up costs) from either
of the two new CGL policies; and two self-contained pollution liability coverage parts,
one with and one without coverage for clean-up
costs imposed by governmental agencies.
In a February 6, 1986 letter from the ISO manager of its
commercial casualty division to insurance company members of ISO's
General Liability Committee, the author attached an ISO response to
a question about the scope of the absolute pollution exclusion
clause:
Given that recent court interpretations of the
"sudden and accidental" pollution exclusion
have found a great degree of coverage that was
never intended nor contemplated in the rates,
the drafters of the new pollution exclusion
consciously used broad terms to ensure that
coverage intent would be upheld. The new
exclusion is designed to exclude all pollution
damages except those arising out of products,
completed operations and certain other off-premises emissions.
Another ISO document, in question and answer form, provides
the most detailed response to a question concerning the scope of
and exceptions to the pollution exclusion clause:
The new ISO "pollution" exclusion is intended
to be all inclusive and, therefore, does not
contain any specific exceptions, per se, such
as the "sudden and accidental" exception in
the former exclusion which all but totally
emasculated the intent of the exclusion.
Whether or not some courts will avoid the
seemingly clear import of the new wording
remains to be seen.
. . . .
On the other hand, there are situations
involving a discharge, dispersal, etc. of
toxic materials which do not fall within the
scope of the exclusion. Examples of this are
situations coming within the products hazard
since a bodily injury or property damage
occurring to a consumer, for instance, is not
within the exclusion. A similar example would
be the completed operations hazard since the
use of the present tense verbs "working" and
"are performing" in subsection (d) of
Exclusion f.(1.) suggests that it does not
apply to operations that are completed.
. . . .
One word of caution is appropriate here. Note
that section (2) of the exclusion (which deals
with the "cleanup," etc. aspect) seems
unlimited and would defeat coverage for those
types of costs, however caused and wheresoever
occurring. This is particularly significant
since these types of costs and liabilities
have, to date, been by far the most expensive
aspect of the pollution problem.
On February 28, 1986, the Commissioner of Insurance approved
use of an absolute pollution exclusion in commercial liability
insurance policy forms. The Commissioner did not endorse any
particular form of the absolute pollution exclusion, but required
that the clause adopted by the companies conform with certain
conditions set out in the agency bulletin.
With this background, we are persuaded that Morton, supra,
134 N.J. 1, does not require that we ignore the pollution exclusion
clause here. In Morton, the Court found that, prior to the
introduction of the standard pollution exclusion clause, CGL
policies provided coverage for gradual pollution-related damages.
Id. at 29. Insurance industry officials assured state regulators
that the insertion of the new pollution exclusion would not affect
scope of coverage but would simply clarify the coverage provisions
in the existing policies. Id. at 30. The insertion of that
exclusion, however, had the opposite effect; coverage was severely
restricted rather than maintained at its prior level. Ibid. The
Court interpreted the standard pollution exclusion clause so as to
hold the industry to its representations to the state regulators
and to maintain coverage at the level asserted to exist in the
policies. Ibid.
The insurers contend that the damages sustained by plaintiff
fall solely within the pollution exclusion. This position,
however, does not transform this case into a Morton situation
requiring judicial intervention and special interpretation of the
pollution exclusion clause against its plain language. Here,
unlike in Morton, the insurance industry candidly acknowledged that
the absolute pollution exclusion would totally prohibit coverage
for pollution-related damages, allowing only for very narrow
exceptions. We find no evidence that the insurance industry misled
regulators. Rather, they consistently maintained that the absolute
pollution exclusion clause excluded all pollution-related damages
except for those falling within the completed operations and
products hazards coverage if such coverage was purchased by the
insured. The question remains whether the pollution exclusion
clause can coexist with completed operations hazards coverage where
damages are pollution related. The trial judge did not reach this
question because he concluded that the pollution exclusion clause
was unambiguous and should be enforced as written.
The parties have not directed us to any New Jersey precedent
regarding the relationship between the absolute pollution exclusion
clause and the completed operations hazards coverage. Other
jurisdictions are divided on this issue. Compare Gregory v.
Tennessee Gas Pipeline Co.,
948 F.2d 203, 208 (9th Cir. 1991)
(under Louisiana law, pollution exclusion applies to product-completed operation hazard) and Crescent Oil Co. v. Federated Mut.
Ins. Co.,
888 P.2d 869, 874 (Kan. Ct. App. 1995) ("[T]he products
completed operations clause does not cover hazards excluded by the
pollution exclusion.") with West American Ins. Co. v. Tufco
Flooring E., Inc.,
409 S.E.2d 692, 695 (N.C. Ct. App. 1991)
("[Pollution exclusion is] expressly inapplicable to and overridden
by the `completed operations' coverage.").
New Jersey courts have addressed the absolute pollution
exclusion clause and the completed operations hazards coverage
separately. We have consistently held that the pollution exclusion
clause is clear and unambiguous. A & S Fuel Oil v. Royal Indem.
Co.,
279 N.J. Super. 367, 371 (App. Div.), certif. denied,
141 N.J. 98 (1995); Nunn v. Franklin Mut. Ins. Co.,
274 N.J. Super. 543, 547
(App. Div. 1994); Vantage Dev. Corp. v. American Env't Techs.
Corp.,
251 N.J. Super. 516, 525-26 (Law Div. 1991). Further, we
made the same observation about the completed operations hazards
provision. See Williams v. Aetna Cas. & Sur.,
151 N.J. Super. 68,
70 (App. Div. 1977) (language of policy provision was plain and
unambiguous and required no construction to ascertain its meaning).
Generally, words in an insurance policy should be interpreted
according to their plain and ordinary meaning. Voorhees v.
Preferred Mutual Ins. Co.,
128 N.J. 165, 175 (1992); Longobardi v.
Chubb Ins. Co.,
121 N.J. 530, 537 (1990). We should not engage in
a strained construction to support the imposition of liability.
Longobardi, supra, 121 N.J. at 537. While insurance policies
should be construed in favor of the insured, we "`should not write
for the insured a better policy of insurance than the one
purchased.'" Ibid. (quoting Walker Rogge, Inc. v. Chelsea Title &
Guar. Co.,
116 N.J. 517, 529 (1989)).
In our view, the pollution exclusion clause and the completed
operations hazards coverage can coexist within the same policy
because the conditions under which they each operate are distinct.
In the present case, although titled "Total Exclusion," the
pollution exclusion clause in Travelers' policy details very
specific instances or situations that will nullify the insurance
coverage for bodily injury or property damage "arising out of the
actual, alleged or threatened discharge, dispersal, release or
escape of pollutants." With respect to operations, the pollution
exclusion clause speaks in the present tense and refers to an
exclusion of insurer liability where the named insured or its
contractors or subcontractors "are performing operations" and two
other conditions (not relevant here) exist at the same time. This
is to be contrasted with the completed operations hazards
provision, which provides coverage only in instances where the
operations are completed and the bodily injury or property damage
occurs away from premises owned by or rented to the named insured.
Thus, if the pollution-causing substance escapes from property
owned, rented or occupied by the named insured and causes bodily
injury or property damage, the pollution exclusion clause will not
permit the named insured to be indemnified for its liability
arising therefrom. However, if the named insured performs an
operation, such as gasoline delivery, upon property it does not own
or rent, and pollution-related damage arises out of that operation
after the operation has been completed, the pollution exclusion
clause would not prohibit indemnification unless the damages sought
to be recovered constituted "any governmental direction or request
that the named insureds test for, monitor, cleanup, remove,
contain, treat, detoxify or neutralize the pollutants."
Consequently, if the claim against the insured by a third party,
not a governmental entity, is for property damage sustained by that
third party after the insured completed its operations upon
property not owned, rented or occupied by the insured, the insured
would be entitled to indemnification.
The underlying claims against plaintiff consist of directives
by DEP to pay money damages for remediation or cleanup of the
properties contaminated by gasoline supplied by plaintiff, and
suits by third-party property owners for damages they sustained as
a result of the leaking gasoline. The pollution exclusion clause
expressly denies coverage and indemnification for DEP-mandated
cleanup costs whenever the damages occurred, that is, pre- or post-completion of the gasoline delivery operation.
With respect to the third-party property damage claims, the
analysis is not so simple. If the third-party property owners
sustained gasoline-contamination damages which emanated from
leaking storage tanks on property plaintiff owned, rented or
occupied, the pollution exclusion clause would operate to preclude
recovery by plaintiff under the policy. If, however, plaintiff
delivered gasoline to storage tanks on property with which it had
no connection, and the gasoline leaked out of the storage tank
causing damage to the third-party property owners after the
delivery operation was completed, then the coverage which plaintiff
purchased under the completed operations hazards provision would be
triggered, and plaintiff would be entitled to indemnification for
those damages.
This, in turn, raises questions about the nature of the
underlying claims lodged against plaintiff. The claims can be
categorized as follows: (1) not-covered bodily injury or property
damage claims caused by pollution emanating from property owned,
rented or occupied by plaintiff and/or governmentally directed
cleanup costs; or (2) covered claims under the completed operations
hazards provision because they are claims for bodily injury or
property damage caused by pollution emanating from property not
owned, rented or occupied by plaintiff and occurring after
plaintiff completed its gasoline delivery operations to those
premises.
Plaintiff's complaint refers to five contaminated sites. The
first site is located in West Milford, New Jersey. DEP issued
directives between 1984 and 1987, requiring plaintiff to pay money
damages and to take steps to remediate contamination from
underground gasoline storage tanks. This property was used as a
gasoline station that was owned by plaintiff's subsidiary and
serviced by plaintiff. This pollution-related claim against
plaintiff falls within the plain meaning of the pollution exclusion
clause because: (1) the gas station consisted of property owned by
plaintiff, the insured; and (2) the indemnity sought by plaintiff
consists of governmental-agency-imposed cleanup costs. Similarly,
the third-party suit arising from that contamination cannot qualify
for coverage under plaintiff's completed operations hazards
provision because the property from which the pollutant emanated
was owned by plaintiff, placing this situation squarely within the
scope of the pollution exclusion clause.
The Colonia site was subject to a DEP directive to pay money
damages and to take steps to remediate contamination from leaking
underground storage tanks at property leased by plaintiff.
Plaintiff is not entitled to indemnity for these damages because
the pollution exclusion clause expressly applies to property leased
by the insured as well as to cleanup costs governmentally mandated.
The West New York site, also the subject of a DEP directive
for money damage and remediation, was not owned or operated under
a leasing agreement by plaintiff. Plaintiff's relationship with
that property was as a gasoline supplier only. Nevertheless, the
pollution exclusion, with its express reference to the insurer's
non-liability for governmentally ordered cleanup costs, prohibits
indemnification.
Plaintiff was subject to environmental damage claims with
respect to two locations in North Brunswick. The first concerned
a piece of property identified only as the North Brunswick site.
DEP issued a money-damage and remediation directive because of
gasoline contamination from leaking underground gasoline storage
tanks. While the passing of the property ownership to plaintiff is
not clear from the record, the pollution exclusion clause prevents
plaintiff from recovering expenses because they fall within DEP-directed cleanup costs. The second location in North Brunswick
involved a gas station called "Foreign Car Service." This location
was the subject of a DEP money-damage and remediation directive
because of leaking gasoline from the underground gasoline storage
tanks located there. Although this property was not owned by
plaintiff, the pollution exclusion clause prohibits indemnification
because these damages are cleanup costs.
The site in Warren is a gas station not presently owned by
plaintiff. Plaintiff owned and leased out the station from 1976 to
1978. Thereafter, it sold the property and became its gasoline
supplier. A neighboring property owner brought suit in 1989
seeking damages allegedly caused by leaking gasoline from
underground storage tanks. However, the underlying claim in that
complaint was not for property damage. According to plaintiff, the
damages constituted additional engineering fees which the
neighboring property owner had to incur in connection with his
subdivision approval application because the property had been
contaminated by gasoline in the past. What the neighboring
property owner sought was reimbursement of his expenses for testing
of the property to assure the municipality that there was no
ambient hydrocarbon contamination in order to get subdivision
approval. Because the completed operations hazards coverage
provides indemnification only for bodily injury or property damage,
this claim does not qualify.
In sum, the underlying claims for which plaintiff sought
defense and indemnification either fall squarely within the plain
language of the pollution exclusion clause or do not fit within the
equally clear provisions for completed operations hazards coverage.
Finally, plaintiff argues that the trial judge erred in granting summary judgment to defendants without first providing plaintiff with an opportunity to conduct discovery, which would have produced evidence that defendants' interpretation of the absolute pollution exclusion clause was contrary to the representations to state regulators that the exclusion was intended as something less than absolute. The trial judge denied discovery,
concluding that the pollution exclusion clause was unambiguous and
that there was no need to delve further into the insurance
industry's intent when the clause was initially promulgated. We
agree that there was no need for additional discovery. Plaintiff's
contention to the contrary is without merit. R. 2:11-3(e)(1)(E).
Affirmed.