Search Site
NJ Supreme Court Recognizes Direct Claim for Contribution between Insurers

The New Jersey Supreme Court held recently that an insurer with an obligation to indemnify and defend has a direct claim for contribution against a co-insurer for costs associated with defending the insured in continuous property damage litigation. This is true even if the insured releases that co-insurer.

In Potomac Ins. Co. v. Pennsylvania Manufacturers’ Ass’n Ins. Co., 215 N.J. 409 (2013), several insurance companies became involved in a dispute between a municipality and a general contractor relating to construction defects at a school building, which was owned by the municipality. Each of the insurance carriers had covered the contractor during some period of the construction at the school and during the years following construction, prior to the municipality bringing suit. After considerable negotiation and legal action between the parties to determine liability, the contractor settled with an earlier insurance carrier and released that carrier of all claims, including any action for attorneys’ fees and costs. Subsequent to the release, a later insurer paid towards the settlement of the dispute between the municipality and the contractor. The later insurer then sought to recover defense costs from the earlier carrier under the “continuous trigger” methodology employed in New Jersey courts.

Under the continuous trigger theory, a progressive, indivisible injury that results from ongoing conditions that could be the basis for civil liability is considered an occurrence within each of the years of a commercial general liability insurance policy. In other words, New Jersey courts use a pro rata formula to determine the relative portion of defense and indemnity costs between successive insurance carriers when defending a continuous injury case, rather than allowing joint and several liability between carriers.

In Potomac, the Court examined two earlier cases explaining the continuous trigger theory – both involving environmental damages – and applied the theory to the successive insurers’ scenario. The Court held that employing the continuous trigger theory to recognize an insurer’s cause of action against a co-insurer for allocation of defense costs was in accord with the earlier line of cases. In reaching this decision, the Court noted that allowing such a claim found strong support based on the principles relied on in past cases, including incentivizing prompt and proactive involvement of all impacted insurance carriers in litigation, promoting early settlement, incentivizing individuals and businesses to carry sufficient coverage, and fairness between carriers. The Court also held that a release between one carrier and an insured could not bar a claim of a co-insurer against the insurer when the co-insurer was not party to the release.

This decision will likely have a significant impact in the area of environmental property damage and environmental-related insurance recovery. Going forward, when property suffers from contamination or other environmental damage over a period of time, insurers covering the property will have a claim against prior or subsequent insurers for contribution. Ideally, the principles detailed by the Court in Potomac will guide property owners and insurance carries in the future, simplifying the recovery process.

The attorneys at Lieberman & Blecher, P.C., who regularly assist clients with issues that arise in the context of environmental contamination and insurance recovery, will be closely following the developments in this area of the law. Our attorneys, who are highly experienced in environmental litigation, remediation, and insurance issues, have assisted many clients in cases involving multiple insurance carriers and property contamination. Our attorneys are poised to address the impact of this recent decision in present and future cases.

Leave a Reply

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

Our Attorneys

Recent Twitter Posts

  • Environmental groups criticize the NJDEP's issuance of permits for the Meadowlands power plant.
    1 week ago
  • NJDEP Awards Edison $166,404 "Clean Communities" grant.
    3 weeks ago
  • Newark and Camden receive $400K each to clean up contaminated sites.
    2 months ago
  • Murphy Administration rejects golf course expansion onto Liberty State Park.
    2 months ago

Recent Blog Posts

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

Appellate Division Case Demonstrates Importance of Carefully Negotiated Escrow Agreements

Real estate transactions involving commercial and residential properties frequently employ the use of escrow agreements to address potential environmental issues.  This practice is widespread in New Jersey and it permits
Read More
Appellate Division Case Demonstrates Importance of Carefully Negotiated Escrow Agreements

NJDEP Updates Soil Remediation Standards for 19 Contaminants

Effective September 18, 2017, new soil remediation standards govern the cleanup of contaminated sites in New Jersey.  The New Jersey Department of Environmental Protection (“NJDEP”) recently updated remedial standards for
Read More
NJDEP Updates Soil Remediation Standards for 19 Contaminants

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 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