Search Site
Menu

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 & Sinkevich 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

  • New Jersey sets emergency water standards for new chemicals. https://t.co/trgaaLL1mD
    8 months ago
  • How will New Jersey manage stormwater as the climate changes and flooding increases? https://t.co/dhVLALyzZ2
    8 months ago
  • Unprecedented storms are slamming NJ – learn how to be the best advocate for your clients when the next flood hits.… https://t.co/TicH6iAjP0
    8 months ago
  • Trenton Water Works has removed 25 percent of lead pipes throughout its service area. https://t.co/KUvhMsJlvU
    9 months ago

Recent Blog Posts

Appellate Division applies rarely used equitable doctrine to preserve HOA

The Superior Court of New Jersey’s Appellate Division recently found that sums owed by a bank to a Homeowners’ Association (HOA) after the bank acquired a portion of a residential
Read More
Appellate Division applies rarely used equitable doctrine to preserve HOA

Screening for Criminal Record may lead to Fair Housing Act violation

A recent memo by the US Department of Housing and Urban Development (HUD) appears to lay the basis for a Fair Housing Act (the “Act”) complaint for discrimination in situations
Read More
Screening for Criminal Record may lead to Fair Housing Act violation

LBS Sues New Jersey Department of Transportation for Stormwater Easement in Cedar Grove

Lieberman Blecher & Sinkevich is proud to represent Carolyn O’Connell in her lawsuit against the New Jersey Department of Transportation (NJDOT), for the damage caused to her property by a
Read More
LBS Sues New Jersey Department of Transportation for Stormwater Easement in Cedar Grove

Religious Services Not Residential Uses, Appellate Division Holds

Weekly religious services, religious education programs, paid lunches and cooking classes are not residential activities within the meaning of a “residential use,” the Appellate Division held recently. In Welch v. Chai
Read More
Religious Services Not Residential Uses, Appellate Division Holds

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