{"id":477,"date":"2023-03-06T19:35:37","date_gmt":"2023-03-06T23:35:37","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/insurancelaw\/?p=477"},"modified":"2023-03-06T19:35:37","modified_gmt":"2023-03-06T23:35:37","slug":"coverage-denied-in-nj-environmental-suit-based-on-policys-pending-litigation-exclusion","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/insurancelaw\/2023\/03\/06\/coverage-denied-in-nj-environmental-suit-based-on-policys-pending-litigation-exclusion\/","title":{"rendered":"Coverage Denied in NJ Environmental Suit Based on Policy\u2019s Pending Litigation Exclusion"},"content":{"rendered":"

By: Sheila Raftery Wiggins<\/a><\/strong><\/p>\n

The New Jersey Appellate Division ruled that an insurer is not obligated to indemnify an insured for natural resources damages that it may pay in the underlying lawsuit brought by the New Jersey Department of Environmental Protection (\u201cNJDEP\u201d) because of the Policy\u2019s Prior or Pending Litigation Exclusion.\u00a0 This exclusion applies because the NJDEP\u2019s suit is based on the same environmental contamination alleged in a 1987 Administrative Consent Order between the NJDEP and the insured.\u00a0 Handy & Harman, et. al v. Beazley USA Services Inc. (Syndicates 623 and 2623 at Lloyd\u2019s London)<\/em>, A-2068-20 (N.J. App. Div. March 2, 2023) (unpublished).<\/p>\n

Lesson<\/u>:\u00a0 An administrative consent order \u2013 required by an environmental statute in order for the property to be sold in the 1980\u2019s \u2013 is sufficient to constitute a \u201cclaim,\u201d as defined by the Policy\u2019s Prior or Pending Litigation Exclusion.<\/p>\n

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Factual background<\/u>:\u00a0 Handy and Harman operated a metal etching business in New Jersey in 1984-\u201985 and then sold the property.\u00a0 Because the metal etching business used trichloroethylene (\u201cTCE\u201d) and other chemicals, the sale agreement required certain pre-closure approved cleanup and detoxification plans approved by NJDEP pursuant to the then-effective Environmental Cleanup Responsibility Act (\u201cECRA\u201d), N.J.S.A 13:1K-6 to -14.\u00a0 Under the ECRA, property transactions cannot proceed unless the NJDEP approves a negative declaration finding remediation has been completed or is no longer necessary or the NJDEP approves the Cleanup Plan.<\/p>\n

Pursuant to ECRA, Handy & Harman entered into an Administrative Consent Order (\u201cOrder\u201d) with NJDEP in January 1987 in order to sell the property.\u00a0 The Order listed many requirements, including that the property owner promptly prepare and submit a Sampling Plan and Cleanup Plan to the NJDEP.\u00a0 In 1990, Handy & Harman submitted a Cleanup Plan to NJDEP and then contaminated soils were removed.\u00a0 Since 1986, no industrial activities have occurred at the site.<\/p>\n

Policy<\/u>:\u00a0 In 2017, Handy and Harman purchased an Enviro Covered Location Insurance Policy from Beazley for the period of December 2017-December 2020.<\/p>\n

The Policy contains the Prior or Pending Litigation Exclusion which excludes coverage arising from any claim, decree or legal proceedings against the insured or involving the covered location which:<\/p>\n