(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
[This is a companion case to Pfizer, Inc. v. Employers Insurance of Wausau (A-66/67-97) and
HM Holdings, Inc. v. Aetna Casualty & Surety Insurance Co. (A-68/69/70-97) also decided today.]
Argued December 1, 1997 -- Decided June 11, 1998
O'HERN, J., writing for a unanimous Court.
Unisys Corp. (Unisys) seeks coverage for environmental liabilities incurred by one of its
predecessors, the Burroughs Corporation. The liabilities at issue here arose from operations at twenty-one
sites in six states, including New Jersey. Unisys is a Delaware corporation with headquarters in Pennsylvania.
Burroughs has maintained a substantial and continuous presence in New Jersey for eighty-seven years. The
policies at issue here were purchased between 1958 and 1983 from several insurers, none of which are
headquartered in New York.
Unisys argued that New Jersey law applies to the issues of the pollution exclusion clause and the
defense of late notice, since two substantial sites, representing forty-three percent of the total damages in the
first phase of the litigation, are in New Jersey. The insurers argued that the law of the site or, alternatively,
the law of New York, where the contracts were entered into, applies.
The trial court held that New York law would apply. It noted the progress of on-going clean-ups of
the contaminated sites, found no immediate danger to New Jersey residents, and concluded that the suit was
essentially for reimbursement and did not give rise to the important policy considerations requiring
application of New Jersey's law. The Supreme Court granted Unisys' motion for leave to appeal.
HELD: In the case of New Jersey sites, New Jersey law should govern; in the case of other sites, the law of
the waste sites should govern if it differs from New Jersey's.
1. The first issue concerns the law governing the pollution exclusion clause. It is clear that the competing
interests of the states favor the application of New Jersey law to the New Jersey sites. At issue is the extent
of that interest because Unisys has either cleaned up or committed funds to clean up the sites. The Court is
hesitant to say that New Jersey no longer has an interest in providing funds to remediate the New Jersey
sites. To penalize a company that has advanced funds to expedite the cleanup of hazardous waste sites
would counter the public policy that encourages rapid cleanup of environmental contaminants. Application
of New York law to the issue of coverage under the pollution-exclusion clause at the New Jersey sites would
frustrate New Jersey's policies. One cannot say that the parties would have expected that New York law
would govern liability at waste sites in New Jersey or, as Unisys claims, that New Jersey law would govern
waste sites elsewhere. In the case of New Jersey sites, New Jersey law should govern; in the case of other
sites, the law of the waste sites should govern if it differs from New Jersey's. (pp. 5-7)
2. With respect to the choice of law governing the late-notice provision, the competing interests of the states
favor application of the law of the waste sites. (p. 8)
3. Some insurers, noting that the cases had been settled in principle or in fact, moved to dismiss the appeal
as moot. Because the issues are important and recurring, the motion to dismiss is denied. (p. 9)
To the extent that it remains operative, the order of the Law Division is REVERSED and the matter
is REMANDED for further proceedings. The settlements of the parties are unaffected.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, GARIBALDI, STEIN and COLEMAN join
in JUSTICE O'HERN's opinion. JUSTICE POLLOCK did not participate.
SUPREME COURT OF NEW JERSEY
A-
71 September Term 1997
UNISYS CORPORATION, TOWNSHIP LINE &
UNION MEETING ROADS BLUE BELL, P.A.
19424,
Plaintiff,
v.
INSURANCE COMPANY OF NORTH AMERICA,
LIBERTY MUTUAL INSURANCE COMPANY,
CERTAIN UNDERWRITERS OF LLOYD'S
LONDON, THE INSTITUTE OF LONDON
UNDERWRITERS, COMPANIES COMBINE,
COMPANIES INSURANCE, GENERAL RE-INSURANCE CORPORATION, AMERICAN RE-INSURANCE COMPANY, COMMERCIAL UNION
INSURANCE COMPANY (Formerly THE
EMPLOYER'S LIABILITY ASSURANCE
CORPORATION AND EMPLOYER'S
COMMERCIAL UNION INSURANCE
COMPANY), HOME INSURANCE COMPANY,
AETNA CASUALTY & SURETY COMPANY,
AIU INSURANCE COMPANY, AMERICAN
HOME ASSURANCE COMPANY, LEXINGTON
INSURANCE COMPANY, NATIONAL UNION
FIRE INSURANCE COMPANY OF
PITTSBURGH, PA, NORTHBROOK EXCESS &
SURPLUS LINES INSURANCE COMPANY,
NORTH RIVER INSURANCE COMPANY,
ROYAL INSURANCE COMPANY OF AMERICA,
WAUSAU INTERNATIONAL UNDERWRITERS
and DOE INSURANCE COMPANIES, 1
through 100,
Defendants,
and
UNISYS CORPORATION,
Third Party Plaintiff-
Appellant,
v.
EMPLOYERS INSURANCE OF WAUSAU, a
Mutual Company, CERTAIN
UNDERWRITERS OF LLOYD'S, LONDON,
and TRAVELERS INDEMNITY COMPANY,
Third Party Defendants-Respondents,
and
EVANSTON INSURANCE COMPANY,
Third Party Defendant.
Argued December 1, 1997 -- Decided June 11, 1998
On appeal from the Superior Court, Law
Division, Middlesex County.
Andrew P. Napolitano argued the cause for
appellant (Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, attorneys; Mr.
Napolitano, Eric I. Abraham, Robert E.
Mensel, Raymond B. Biagini, a member of the
District of Columbia bar, Ray M. Aragon, a
member of the District of Columbia bar, and
Juanita R. Brooks, a member of the California
bar, of counsel; Mr. Napolitano and Mr.
Abraham, on the briefs).
Catherine M. Colinvaux, a member of the
Massachusetts bar, argued the cause for
respondent Employers Insurance of Wausau, A
Mutual Company (Mendes & Mount, attorneys;
William S Wachenfeld and Robert Priestley, on
the briefs).
William T. Corbett, Jr., argued the cause for
respondent Travelers Indemnity Company
(Shanley & Fisher, attorneys).
The opinion of the Court was delivered by
O'HERN, J.
This case is a companion to Pfizer, Inc. v. Employers
Insurance of Wausau, ___ N.J. ___ (1998), and HM Holdings, Inc.
v. Aetna Casualty & Surety Insurance Co., ___ N.J. ___ (1998),
also decided today. This is also a multistate, multisite
environmental insurance coverage case. In this action involving
cleanup sites in New Jersey, California, Michigan, and New York,
the Law Division ruled that New York law will govern (1) whether
the sudden and accidental pollution-exclusion clause contained in
certain of the insurance policies bars coverage of the Unisys
Corporation (Unisys) claims and (2) whether a late-notice defense
applies to bar coverage for Unisys.
Unisys seeks coverage for environmental liabilities incurred by one of its predecessors, the Burroughs Corporation. As in Pfizer, supra, and HM Holdings, supra, we make no findings of fact. The liabilities at issue here arose from operations at twenty-one sites in New Jersey, California, Pennsylvania, Kentucky, Michigan, Wisconsin, and New York. Unisys initially sought coverage for environmental liabilities incurred by another predecessor, the Sperry Rand Corporation. In July 1994, Unisys added the Burroughs' claims against Employers Insurance of Wausau (Wausau), The Home Insurance Company (Home), and various London market insurers. (The term "London market insurers" refers to insurers who have entered into contracts of insurance providing indemnity for the plaintiffs and who are either underwriters and
syndicates at Lloyd's of London or a company doing business in
the London Insurance Market.) Unisys later joined Evanston
Insurance Company (Evanston) and Travelers Indemnity Company
(Travelers). After preliminary discovery, the parties selected
the seven Phase I Burroughs sites for discovery and trial.
Unisys is a Delaware corporation with headquarters in
Pennsylvania. Throughout the coverage periods, Burroughs
operated in many states. Burroughs did maintain a substantial
and continuous business presence in New Jersey for eighty-seven
years. Between 1958 and 1983, Burroughs bought comprehensive
general liability (CGL), umbrella, and excess policies of
insurance from Wausau, Travelers, Evanston, and Home, none of
which are headquartered in New York. Two Phase I sites are in
New Jersey; two are in California; two are in Michigan; and one
is in New York. Forty-three percent of the estimated Phase I
cleanup cost is for New Jersey cleanup.
Anticipating choice-of-law issues, the trial court requested
that the parties state their positions. Unisys argued that New
Jersey law applies to the issues of late notice and the
pollution-exclusion clause, maintaining that the insured risk was
foreseeably multistate, the insurers did not include a choice-of-law provision in the policies, and that two substantial sites,
representing forty-three percent of the total damages in Phase I,
are in New Jersey. Wausau and Travelers countered that either
the law of the site or, alternatively, the law of New York, where
the contracts were entered into, applies.
The trial court held:
In evaluating the significance of New
Jersey interests, the court notes that
although Unisys has a presence here, their
commitment and resources, as compared to
their overall national and international
operations, is not of such magnitude as to
constitute a compelling reason to invoke this
jurisdiction's substantive law. . . . In
view of the progress of ongoing clean-ups [of
the waste sites] and the absence of any
immediate danger to New Jersey residents,
this suit is essentially for reimbursement
and does not give rise to the important
policy considerations requiring application
of New Jersey's substantive law.
In 1971, New York statutory law began
requiring insurers to include a pollution
exclusion clause in liability policies. The
rationale for this requirement was . . . to
prohibit commercial or industrial enterprises
from buying insurance to protect themselves
against liabilities arising out of the
pollution of the environment. Considering
this strong public policy, this Court finds
that New York's interest in this litigation
is paramount.
Accordingly, the trial court found that the case "does not
give rise to the important policy considerations requiring the
application of New Jersey's substantive law." We granted Unisys'
motion for leave to appeal that ruling.
150 N.J. 21 (1997).
of the pollution-exclusion clause?
The analysis differs from Pfizer, supra, and HM Holdings, supra, in that two of the waste sites are located in New Jersey. It is therefore clear that factor one, derived from Restatement (Second) of Conflict of Laws section 6 (1971) (Restatement), the
competing interests of the states, favors the application of New
Jersey law, at least insofar as the New Jersey sites are
involved. At issue is the extent of that interest because Unisys
has either cleaned up or committed funds to clean up the sites.
Because all of the cleanup costs are not yet fully determined, we
hesitate to say that New Jersey no longer has an interest in
providing funds to remediate the New Jersey sites. Moreover, to
penalize a company that has advanced funds to expedite the
cleanup of hazardous waste sites would counter the public policy
that encourages rapid cleanup of environmental contaminants. As
counsel put it, that would "turn public policy on its head."
Finally, we ought not have a rule of law that distinguishes
between the "mom-and-pop" businesses that need access to
insurance funds to clean up hazardous materials and companies
that appear to have more cash reserves. If the sums reserved
prove to be insufficient to clean up the sites, New Jersey would
retain an interest in the outcome of the action.
Concerning the interest of commerce among the states, it is
clear that application of New York law to the issue of coverage
under the pollution-exclusion clause at the New Jersey sites
would frustrate New Jersey's policies.
Concerning the justifiable expectations of the parties and
their interests in predictability of result at the time the
insurance policies were issued, we cannot say that the parties
would have expected that New York law would govern liability at
waste sites in New Jersey or, as Unisys claims, that New Jersey
law would govern waste sites elsewhere. For example, all of the
subject Wausau policies were negotiated and issued in New York by
Wausau's Syracuse, New York office and Burroughs' New York-based
brokers. The premiums for these policies were paid to Wausau in
New York. Throughout this twenty-five year period, the Burroughs
insurance and risk management employees who were involved with
the Wausau policies were based in Detroit, Michigan. The
policies were countersigned by an agent authorized to countersign
policies in Michigan. There is simply no New Jersey connection
with the out-of-state sites.
With respect to factor four, the concern for judicial
administration, we respect the trial court's concerns for a
single governing law. We do not expect, however, that the issues
will be unmanageable. Wausau's counsel acknowledged that "[w]hen
Phase I is complete, the legal principles and central facts which
have emerged will likely translate to the remaining, less
significant sites, so that resolution of the remaining sites will
proceed more rapidly." An extraordinarily experienced trial
court is handling these cases and will make the issues
manageable. Hence, we believe that in the case of New Jersey
sites, New Jersey law should govern; in the case of the other
sites, the law of the waste sites should govern if it differs
from New Jersey's.
With respect to the choice of law to govern the applicability of the late-notice provision, the competing interests of the states favor application of the law of the waste sites. Unisys is a Delaware corporation with headquarters in Pennsylvania. New Jersey's interest in protecting New Jersey policyholders and, indirectly, those suffering losses covered under the policies, would be served by the application of New Jersey law to the New Jersey sites. That Unisys has reserved funds to clean up the sites should not impede its right to indemnity. The purpose of New York's law, to protect the well being of New York's domestic insurance companies, is not served by application to insurance companies that are not headquartered or based in New York. The interests of commerce would be hindered if New York law were applied to frustrate the policies of New Jersey law or the law of the waste sites. Concerning the justified expectations of the parties, it could hardly have been expected that New York law would govern the late notice of occurrences in states other than New York by policyholders not located in New York to insurance companies not located in New York. See HM Holdings, supra, ___ N.J. at ___ (slip op. at 10). We agree that it would simplify the trial of the matters were one law applied, but for the reasons stated in Pfizer, supra, we do not believe that can be determinative under the Restatement section 6 principles.
Finally, we have considered the motions of Travelers and
others to dismiss this appeal as moot. At oral argument, we were
informed that the cases had been settled "in principle" or in
fact as to each defendant. We have since received a copy of an
order approving the settlement agreement and dismissing the
complaints against Wausau. Because the issues are important and
recurring, Zirger v. General Accident Ins. Co.,
144 N.J. 327, 330
(1996), we consider it useful to set forth the analysis in a
multistate, multisite case involving New Jersey sites. The
motion to dismiss for mootness is denied.
To the extent that it remains operative, we reverse the
order of the Law Division and remand the matter for further
proceedings in accordance with this opinion. Nothing herein
shall disturb any resolutions of the issue made by the parties.
The settlements are unaffected.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, GARIBALDI, STEIN, and COLEMAN join in JUSTICE O'HERN's opinion. JUSTICE POLLOCK did not participate.
NO. A-71 SEPTEMBER TERM 1997
ON APPEAL FROM Appellate Division, Superior Court
ON CERTIFICATION TO
UNISYS CORPORATION, etc.,
Plaintiff,
v.
INSURANCE COMPANY OF NORTH AMERICA,
et al.,
Defendants,
and
UNISYS CORPORATION,
Third-Party Plaintiff-Appellant,
v.
EMPLOYERS INRUANCE OF WAUSAU, etc.,
et al.,
Third-Party Defendants-Respondents,
and
EVANSTON INSURANCE COMPANY,
Third-Party Defendant.
DECIDED June 11, 1998
Chief Justice Poritz PRESIDING
OPINION BY Justice O'Hern
CONCURRING OPINION BY
DISSENTING OPINION BY