Search Site
Menu
NJ Supreme Court Case Alters Insurance Coverage Allocations in Environmental Claims

On September 24, 2013, the New Jersey Supreme Court handed down an important insurance case in Farmers Mutual Fire Ins. Co. of Salem v. New Jersey Property-Liability Ins. Guar. Ass’n, ____ N.J. ____ (2013) that could change the way that insurance coverage is allocated for environmental claims when dealing with an insolvent insurance carrier.

In Owens-Illinois v. United Insurance Co., 138 N.J. 437 (1994), the Court recognized the difficulty in determining the degree of harm caused by contamination within any particular year from the start date to manifestation. See id. at 457-59. As such, the Court treated the progressive damages as an occurrence triggering the insurance policies in each of the intervening years. See id. at 478-79. Ultimately, the Court determined that the allocation of remediation costs among the policies is based on an insurance carrier’s years on the risk and the degree of the risk assumed as measured by the coverage provided. See id. at 479. This allocation methodology was reaffirmed in Carter-Wallace, Inc. v. Admiral Insurance Co., 154 N.J. 312 (1998).

In Farmers Mutual, that Court held that in long-tail environmental or bodily injury exposure claims (e.g. asbestos), where multiple successive liability policies are triggered, any allocation of defense and indemnity costs to periods where an insurer has become insolvent must now be absorbed by other solvent insurers until the solvent insurers’ policies are exhausted regardless of the Owens-Illinois insurance allocation. Only when they are exhausted will the New Jersey Property-Liability Insurance Guaranty Association (“NJPLIGA”) be required to step into the shoes of the insolvent insurer and pay its share (subject to the other limitations in the PLIGA statute, such as the $300,000.00 statutory cap).

This is likely a major benefit to the insured because periods of insolvent insurance, which are common for these types of claims where old policies are triggered, will most likely not have to be absorbed by the insured, as the exhaustion of multiple solvent policies, including excess policies, often requires quite a large number, depending on the circumstances. In addition, the insured may be spared the expense of obtaining coverage through NJPLIGA, which can be an administratively difficult process when dealing with lost policy issues or with insurers that became insolvent long ago, where it may be too late to submit any kind of claim or where the insured was given notice of an insolvency but failed to file a proof of claim.

Thus far, this ruling has been touted as good news for policyholders in New Jersey. However, altering the procedure for allocation in an already complicated and often time-consuming allocation scheme could add frustration to insurers and insured’s alike, but only time will tell.

Leave a Reply

Your email address will not be published. Required fields are marked *

Our Attorneys

Recent Twitter Posts

  • State's Tidal Wetlands Could be Swamped by Rising Seas. https://t.co/hoCylgBVyN
    3 weeks ago
  • Scientist finds rare plant last seen in NJ 100 years ago. https://t.co/03jJRVd3cc
    1 month ago
  • NJ is the first state to regulate PFNAs in drinking water. https://t.co/huLEDnc444
    1 month ago
  • Nation's oldest nuclear power plant to shut down permanently Monday. https://t.co/LHSjcNvZVW
    1 month ago

Recent Blog Posts

NJ Supreme Court Sees Standing in Tax Lienholders to Challenge Municipal Approval

On August 2, 2018, New Jersey’s Supreme Court held that a holder of a municipal tax lien may have standing to challenge a local planning board’s approval for a neighboring
Read More
NJ Supreme Court Sees Standing in Tax Lienholders to Challenge Municipal Approval

The Downside to Higher Ground: Appellate Division affirms finding of a townhome owner’s negligence and responsibility for water damage to a below unit caused by a prolonged leaking washing machine hose

On August 1, 2018, the Superior Court of New Jersey, Appellate Division ruled in favor of plaintiff in the matter captioned Joseph S. D’Elia v. Joyce Campisi and Liberty Mutual
Read More
The Downside to Higher Ground: Appellate Division affirms finding of a townhome owner’s negligence and responsibility for water damage to a below unit caused by a prolonged leaking washing machine hose

United States Supreme Court Tackles Key Clean Water Act Judicial Review Issue

National Association of Manufacturers v. Department of Defense, et al. 583 U.S. ____ (2018) Decided January 22, 2018 Since the passing of the Clean Water Act in 1972, the definition of “the waters
Read More
United States Supreme Court Tackles Key Clean Water Act Judicial Review Issue

New Jersey Voters to Decide Important State Constitutional Amendment concerning the Environment

On Tuesday, November 7, 2017, New Jersey voters will be asked to decide on a state constitutional amendment regarding the use of natural resource damages collected by the State in
Read More
New Jersey Voters to Decide Important State Constitutional Amendment  concerning the Environment

In the media

  • Gulf Coast Town Center facing foreclosure

    Naples Daily News, September 16, 2015

    Wells Fargo filed a lawsuit Sept. 8 against an affiliate of CBL & Associates, the owners of the decadeold, 1.2 million-square-foot mall in south Fort Myers for a $190.9 million unpaid loan. The center has 94 stores on 204 acres, with such anchors as Super Target, Belk, Best Buy, Dick’s Sporting Goods, Marshalls and Costco...

    Read More
  • Town liable for private company's leaking underground tanks, court rules

    NJ.com Jul 26, 2017

    CRANFORD -- A couple that owned a businesses in town and became sick from leaking underground tanks owned by an adjacent business can sue the township for damages because the tanks were partially ...

    Read More
  1. 1
  2. 2
  3. 3
  4. 4
  5. 5
Contact Our Firm

Quick Contact Form