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

  • The Murphy Administration plans to spend $200 million on wind port. https://t.co/Se09U5ZHvy
    4 hours ago
  • NJDEP aims to simplify permitting process. https://t.co/UTm92DtrAC
    1 day ago
  • U.S. Supreme Court will hear PennEast Pipeline appeal of New Jersey eminent domain dispute. https://t.co/AqqvTw1QD2
    4 weeks ago
  • Fishing to be allowed in future wind farm off the coast of Atlantic City. https://t.co/x8vlsXFtcW
    1 month ago

Recent Blog Posts

Recent Appellate decision emphasizes the consequences of failing to perform due diligence

In December 2020, the NJ Appellate Division published a decision emphasizing the importance for purchasers of property use their “due diligence” period to learn as much as possible about the
Read More
Recent Appellate decision emphasizes the consequences of failing to perform due diligence

New Jersey has ambitious goals for emission reductions

New Jersey’s Global Warming Response Act (“GWRA”) calls for New Jersey to decrease its greenhouse gas emissions by 80% from their 2006 levels by 2050. In January 2020, Governor Murphy
Read More
New Jersey has ambitious goals for emission reductions

San Diego Receives Federal Funding to Fight Mexican Sewage

San Diego has just received substantial federal funding from the EPA to address a chronic problem: raw sewage coming from Tijuana Mexico. That sewage has been migrating over the border
Read More
San Diego Receives Federal Funding to Fight Mexican Sewage

New Jersey Supreme Court rules for NJ Transit in insurance claim for damages due to Superstorm Sandy

A New Jersey Supreme Court opinion issued on January 27, 2021 affirmed an Appellate Division decision in favor of NJ Transit over its insurers. In 2012, when Superstorm Sandy hit
Read More
New Jersey Supreme Court rules for NJ Transit in insurance claim for damages due to Superstorm Sandy

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
  • Dark Waters: How a Class Action Catapulted NJ to Forefront of 'Forever Chemicals' Battle

    NJ Law Journal Jan 09, 2020

    As property owners become increasingly aware of PFAS contamination, and as individuals exposed to PFAS learn of the health risks associated with exposure, liability will likely affect entire supply chains.

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

Quick Contact Form