admin August 19th, 2009

In DEB Associates v. Greater New York Mutual Insurance Company, (NJ App. Div.- approved for publication) the court held there is insurance coverage for the costs to update and correct construction code deficiencies on floors of a building arising from wind damage to another floor. The seventh floor of the building had been damaged from a windstorm. When the code officials inspected the damaged floor, they discovered that the walls had been secured to the concrete flooring with mortar, but not steel angle irons, as is presently required under the building code.  There was no evidence that the failure to use angle irons violated the code when the building was constructed.

The trial court found that the evidence was undisputed that the “repairs to the other floors would not have been required if the seventh floor wall had not collapsed and also that the angle irons were required [to be installed on all floors] as a consequence of the December 2003 partial collapse.” Although the parties agreed that the repair of the seventh floor required GNY to pay to reconstruct that floor in accordance with the current code, they disagreed as to coverage for repairs to the separate, undamaged portions of the building.

After reviewing case law from other jurisdictions, and restating that coverage sections of an insurance policy are to be liberally construed in favor of coverage; that exclusions are to be narrowly construed, and that ambiguities are to be construed against the insurer, the court concluded that since there was a causal connection between the collapse of the seventh floor wall and the requirement to bring the other floors in compliance with the existing building code, there is coverage for the corrective work. The court specifically stated that the decision was limited to the facts of the case, and that it may be different if the code problems were unrelated to the collapse of the wall. Since, however, the work to install angle irons to the remainder of the building was directly related to the cause of the initial collapse, involving the same structural part of the building and the same building code provisions. The court also stated that while the policy specifically excluded pre-existing code violations, the policy did not specifically exclude situations where a covered structure is grandfathered under the code but lost that status due to the occurrence. The court concluded that if the insurer had intended to exclude coverage in these situations, it could have written the policy to specifically exclude the coverage.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of insurance companies in coverage matters. For additional information about the matters in this bulletin or in the firm’s Insurance Coverage Practice, please contact Steven A. Kunzman, Esq. 

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admin August 19th, 2009

On June 5, 2009, the New Jersey Appellate Court ruled that an insurer is obligated to pay counsel fees incurred by the insured for a declaratory judgment action that the insurer had filed in Federal Court in Illinois, but was deferred in favor of a New Jersey action in which the insured was ultimately successful.

The case of Myron v. Atlantic Mutual (approved for publication) involved a New Jersey based company’s claim for insurance coverage for claims under the Telephone Consumer Protection Act (TCPA). Myron, a New Jersey based company, had been sued in numerous jurisdictions for allegedly sending “junk faxes” in violation of the TCPA, including one filed in Illinois as a class action.  Atlantic Mutual initially agreed to defend under a reservation of rights. After more than a year, Atlantic filed a declaratory judgment action in the United States District Court for the Northern District of Illinois seeking a determination that the Atlantic Mutual policy did not cover the claims. The declaratory action was filed shortly after the Seventh Circuit Court of Appeals (which includes Illinois) issued a decision in another action denying coverage for TCPA claims. The Court, however, dismissed Atlantic Mutual’s action due to lack of jurisdiction since the amount in controversy was less than the required $75,000.

Finding additional invoices, Atlantic Mutual re-filed.  Five days later, Myron filed a declaratory judgment action in Bergen County, New Jersey. Although the Bergen County action was dismissed due to the earlier filed Illinois federal court action, the Illinois federal court granted Myron’s motion for abstention, reasoning that New Jersey had the most substantial interest in the insurance coverage dispute. Myron then re-filed in New Jersey and was ultimately successful on the merits of Atlantic Mutual’s duty to defend, leaving the indemnity determination pending the outcome of the underlying TCPA litigation.  The court also granted Myron’s claims for counsel fees in the New Jersey declaratory action in accordance with New Jersey Court Rule 4:42-9(a)(6), which permits an award of counsel fees to a successful claimant “[i]n and action upon a liability or indemnity policy of insurance.” The trial court, however, denied Myron’s application for reimbursement of approximately $160,000 in fess incurred in the Illinois declaratory action reasoning, in part, that the rule should not apply “extraterritorially.”

On appeal, the Appellate Division reversed, holding that granting an award of the fees furthers the intent and purpose of the rule, “to discourage groundless disclaimers and to provide more equitably to an insured the benefits of the insurance contract without the necessity of obtaining a judicial determination that the insured, in fact, is entitled to such protection.” The Court also noted that this would prevent an insurer from using forum shopping to wear down an insured financially. The Court found that the two federal complaints were “battles in the war that Myron ultimately won,” and therefore can be characterized as part of the same action in the context of the applicability of Rule 4:42-9(a)(6).

This is a significant decision in that it imposes what is, in essence, a rule of procedure to a largely substantive issue. As the Court noted, it has applied the rule in suits in New Jersey where the substantive law of other jurisdictions has been applied.  In this case, however, the Court largely disregarded the distinction between the substantive laws as contained in legislation or common law, and elevated the rule based upon it’s espoused purpose, which is to provide an insured “the full benefits of the insurance contract” without the transactional costs necessitated by engaging in declaratory litigation.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of insurance companies in coverage matters. For additional information about the matters in this bulletin or in the firm’s Insurance Coverage Practice, please contact Steven A. Kunzman, Esq. 

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admin August 19th, 2009

The New Jersey Site Remediation Reform Act

On May 7, 2009 Governor Corzine signed the Site Remediation Reform Act (SRRA) into law.  The SRRA is the most significant piece of environmental legislation since the 1997 Brownfield and Contaminated Site Remediation Act.  One of the apparent purposes of the SRRA is to expedite the remediation of sites throughout the state while serving as a measure to clear the current backlog of cases in the NJDEP Site Remediation Program. The SRRA essentially privatizes certain aspects of the clean-up process by placing the responsibility for most remediation in the hands of consultants who will be licensed under the SRRA.

The Licensed Site Remediation Professional

The SRRA creates a program that licenses environmental consultants and contractors as a Licensed Site Remediation Professional (LSRP).  In most circumstances, an LSRP will be permitted to sign and certify reports during the investigation and remediation of a site. In all but a limited type of case, the LSRP will be responsible for investigating and selecting the remedy for a site and conducting the remediation in accordance with NJDEP regulations without the need for prior approval from the NJDEP. In lieu of the No Further Action letter (NFA), which the NJDEP presently issues to signify that site remediation is complete, the LSRP will issue a Response Action Outcome (RAO). Like the NFA, the RAO will, by operation of law, also constitute a covenant not to sue, protecting the site owner from further enforcement actions by the NJDEP for the contamination being remediated.  During the course of the investigation and remediation, the LSRP will submit investigative documents and reports to the NJDEP, which the NJDEP will inspect with the option to conduct a more detailed review. The NJDEP will also audit the LSRP’s work for a period of three years. The NJDEP is required to audit at least 10% of all documents submitted by an LSRP annually.  Entities presently under NJDEP oversight will have up to three years to transfer to the LSRP program.

Under the SRRA the NJDEP is to establish a temporary licensing program for the LSRPs within three moths and issue interim regulations within six months. The interim regulations will be in effect for a period of 18 months.

After the LSRP program becomes operational, parties subject to the Industrial Site Remediation Act (ISRA), which governs the transfer of certain commercial and industrial properties, will come under the LSRP program. This will allow a transaction to close with an LSRP Remediation Certification.  This includes the LSRP’s evaluation of the appropriate financial assurance as well as certification that the assurance has been established. As with other remedial actions, the LSRP certified Remedial Action Workplan will be sufficient and the RAO will replace the NFA.

NJDEP Retained Sites

The NJDEP will retain primary oversight responsibility where the person responsible for the remediation: 1) has a history of noncompliance with remediation laws and regulations, 2) has failed to meet a mandated or expedited deadline as established by the NJDEP or court order, or 3) has failed to complete the remedial investigation of an entire site within 10 years after discovery of the discharge and has failed to complete the investigation within 5 years of the enactment of the SRRA.  The NJDEP may elect to maintain oversight where the site contamination includes chromate waste; where the NJDEP determines that more than one environmentally sensitive natural resource has been injured by contamination from the site; where the site has contributed to PCB, mercury, arsenic or dioxin contamination to the sediments of a body of surface water, or where the site is in the highest priority of the NJDEP’s new site ranking system.

Other Aspects of the SRRA

In addition to the LSRP program, the SRRA also requires the NJDEP to establish a new site ranking system to prioritize remediation sites within a year of the law’s enactment.  DEP may choose to retain oversight responsibilities of some of the highest ranked sites instead of relying on LSRPs.

The NJDEP is also to establish “presumptive remedies” for the remediation of schools, day care facilities and residential properties.  Certain exceptions will be available on a case-by-case basis.

The Spill Act is modified in terms of what constitutes an innocent purchaser, so that LSRP-certified work is considered equivalent to that overseen and approved by the NJDEP.

The NJDEP is to establish a program for providing permits for institutional and engineering controls.  The program will provide for specific financial assurance requirements. In addition, financial assurances for site remediation can include a letter of credit.

Executive Order #140

Simultaneous with the signing of the SRRA, Governor Corzine signed Executive Order #140 (EO).  This order requires the NJDEP to file annual reports on the progress of the LSRP program, and to post all documents submitted by an LSRP on the internet. These actions are geared towards increased transparency of the program.  In addition, the EO requires the NJDEP to increase its level of oversight where sites have groundwater that is contaminated above groundwater standards or where the site is to be used for educational or residential purposes. The EO also requires that the NJDEP’s review of 10% of all documents submitted by the LSRPs shall include at least one review of case documents submitted by every LSRP.  

Conclusion

The SRRA is intended to expedite the remediation of contaminated sites throughout the state and to improve a process that has often been fraught with delays due to an overburdened NJDEP. Similar programs have been successfully implemented in other states and it is the expectation that the ultimate result will be an improved process to remediate sites in New Jersey. If it is implemented in the manner intended, it will surely benefit the business community as well as the health and welfare of the people of the state.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contact Steven A. Kunzman, Esq. who heads our Environmental Department. 

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admin August 14th, 2009

The Supreme Court issued its decision in Burlington Northern & Santa Fe Railway v. United States on May 4, 2009. The essential rulings in the 8-1 decision are that, 1) a party is not considered an “arranger” in CERCLA unless they intended to dispose of their waste, and 2) that liable parties at a multi-party Superfund site are not jointly and severally liable if there is a “reasonable basis” to apportion the liability.  Accordingly, the Court held that where a defunct or insolvent entity has a discernable portion of the liability for contamination at the site, that “orphan share” would become the responsibility of the government.

The essential facts of the case involved a small chemical manufacturer, B&B that repackaged agricultural chemicals.  A portion of their property was leased to the Burlington Northern and Union Pacific Railroads, which played no part in the company’s operations. Shell Oil had sold a soil fumigant for agricultural purposes to B&B, which was intended for repackaging and sale.  Shell had provided strict instructions on the handling of the product to avoid spills and contamination. The Supreme Court held that Shell could not be considered an arranger since it did not take “intentional steps to dispose of hazardous substances.” On the apportionment issue, the court acknowledged that CERCLA does not specify joint and several liability, it is a judicial doctrine based in the Restatement (Second) of Torts. The Court held, based upon the language of the Restatement, that “apportionment is proper when ‘there is a reasonable basis for determining the contribution of each cause to a single harm.” The Court concluded that there was sufficient evidence for apportionment, and that the evidence need not be precise.

This decision enables a defendant in the Superfund case to reduce its share of liability if it can prove a reasonable basis for apportionment. It also clarifies that the government is responsible for an “orphan share” if there is a basis to develop facts to support apportionment to the “orphan” party.  In essence, the decision reduces the impact of the court created “joint and several” liability scheme in CERCLA matters. The decision will likely result in more emphasis being placed on state statutes that provide a broader foundation for liability, such as the New Jersey Spill Act; although the decision may be influential where a Court enters in the balancing of equitable factors in apportioning liability. As a practical matter, it is likely that the decision will cause more intense investigation and use of experts by individual parties, as opposed to groups, in future Superfund litigation.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental cost recovery litigation. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contact Steven A. Kunzman, Esq. who heads our Environmental Department. 

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