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In E.M. Sergeant Pulp & Chemical Co., Inc. v. Travelers Indemnity Co., Inc., plaintiff policyholder sought coverage and defense costs for environmental pollution claims under policies allegedly issued by defendant insurer. Civ. No. 12-1741, 2015 WL 9413094 (D.N.J. Jan. 17, 2017). Plaintiff, a distributor of heavy industrial inorganic chemicals and raw materials, owned property in Newark from 1942 to 1984 and leased the same to Sergeant Chemical Company, a now-defunct distributor of similar products. In 2004, the United States Environmental Protection Agency notified plaintiff that it was a Potentially Responsible Party in the Lower Passaic River Study Area, part of the Diamond Alkali Superfund Site. In 2009, plaintiff was named a third-party defendant in a lawsuit alleging property damage originating from plaintiff’s Newark property and the activities that took place thereon some 50+ years back.
In light of the potential for cleanup liability, plaintiff policyholder undertook a search for historic insurance policies that might have been in effect at the time of the alleged polluting operations. Plaintiff also filed claims with defendant and another insurer, Columbia, for coverage and defense, alleging those insurers had issued policies between 1943 and 1964. Neither plaintiff nor the insurer, despite their diligent efforts, was able to locate any relevant policy. However, plaintiff’s search did produce certain documents, which plaintiff claimed, indirectly prove that it had property damage coverage from defendant in the relevant time period. Defendant denied it had ever issued a policy, and plaintiff subsequently sued for coverage.
On the insurer’s motion for summary judgment, the district court examined plaintiff’s evidence of coverage. Such documents included: four ledger pages, which contained debit and credit entries; a 1964 application submitted on the behalf of plaintiff to Fireman’s Fund (“Fireman’s”) for excess coverage, which identified the primary insurer as “Insurance Co. of NA;” and a note from Fireman’s underwriting file. Plaintiff also took discovery from defendant and obtained certain policy forms relating to standard prefixes for property damage, bodily injury, and in some instances, medical payments. Plaintiff also offered the expert opinion from an experienced insurance archaeologist, who opined that the missing policies provided coverage for public liability, including both third-party bodily injury and property damage, continuous from 1948 through 1965.
In its opinion, the court cited to the insured’s burden to prove that insurance coverage has been triggered by a preponderance of the evidence. Most commonly, an insured will base its claim on a policy that exists and can be introduced in evidence. However, the court reasoned that a policy that cannot be found is not fatal to an insured’s claim; it only presents a more formidable evidentiary hurdle for the insured. Nonetheless, the court found that plaintiff policyholder had presented enough evidence to meet its burden of proof. Specifically, despite “scant” indirect documentary evidence, plaintiff’s expert testimony was “the difference.” The informed expert opinion, when added to the secondary evidence of coverage, sufficed to create a triable issue.
Environmental cleanup liability often arises many years after an entity had owned or operated a site. Historic site records, especially insurance policies, may be lost, misplaced, or destroyed as the years pass. Policies in existence before pollution exclusions were implemented are of expectedly great value to policyholders faced with liability for expensive environmental investigation and remediation. Thus, the Sergeant case illuminates the importance of not only recordkeeping, but also conducting a thorough and timely search for policy-related records from insurers and brokers. Sergeant further emphasizes the importance of retaining an experienced and informed expert witness, especially when documentary evidence is observably scant.
The attorneys at Lieberman & Blecher, P.C. are experienced in assisting companies and individuals with insurance questions in the environmental cleanup and liability context. We welcome you to contact our office with any related concerns and look forward to an opportunity to work with you and your company.