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Chemical Leaman Tank Lines, Inc. v. Aetna Cas. & Sur. Co.

ELR Citation: 27 ELR 20083
Nos. Nos. 93-5777, -5794, 89 F.3d 976/(3d Cir., 06/20/1996) Aff'd in part

Present BECKER, STAPLETON, MANSMANN, SCIRICA, COWEN, NYGAARD, ALITO, ROTH, LEWIS, McKEE and SAROKIN, Circuit Judges.

The court holds that under New Jersey law, a chemical transporter is entitled to indemnification from its excess liability insurers for costs it incurred in accordance with a Comprehensive Environmental Response, Compensation, and Liability Act consent decree entered into with the U.S. Environmental Protection Agency to clean up contamination at its truck-cleaning facility. The court first notes that the New Jersey Supreme Court would inquire into the insured's intent to cause environmental harm of a particular sort, rather than some general injury to the environment, to determine whether insurance coverage should be precluded. Thus, the court holds that the district court's jury instructions fairly and adequately asked the jury to consider whether the transporter expected or intended injury to the soil, groundwater, or wetlands at its facility. The court holds that "exceptional circumstances" do not exist that would permit a presumption of the transporter's subjective intent to cause property damage. The transporter's regulatory history can hardly be described as a pattern of stonewalling characterized by promises of compliance that were consistently unfulfilled. The court holds that New Jersey Supreme Court precedent, which refuses to enforce the term "sudden" in the standard pollution exclusion because the insurance industry misled state regulators as to the term's effect when obtaining approval for the exclusion, applies to the transporter's excess liability policies. The insurers' policies contained the standard pollution exclusion precluding coverage of nonsudden discharges of pollutants, and a pollution exclusion that closely parallels the language of the standard exclusion. And whether or not the insurers directly misrepresented the effect of the term "sudden" in the pollution exclusion clause, they benefitted from its misleading effect.

The court next holds that any mistake in the district court's jury instructions that the pollution exclusion clause required separate findings with regard to the transporter's intent to discharge into the soil, groundwater, or wetlands was not so fundamental as to amount to plain error. The court holds that the district court did not abuse its discretion in excluding evidence of environmental problems at the transporter's other truck-cleaning facilities. The court holds that the district court properly instructed the jury that it could find, under the state's "continuous trigger" theory, that property damage occurred during a policy period if there is proof that a continuous, indivisible process of injury occurred during that period. The court, however, reversed the district court's holding that all policies are jointly and severally liable under the continuous trigger theory, and remanded for a risk-based reallocation of liability between insurers and among the triggered policies in accordance with state precedent. Finally, the court holds that the transporter's failure to notify its insurers until four years after entering into the consent decree did not relieve the insurers from providing coverage.

[A prior decision in this litigation is published at 24 ELR 20410.]

Counsel for Plaintiff
Kevin B. Clark
Willkie, Farr & Gallagher
Three Lafayette Center
1155 21st St. NW, 6th Fl., Washington DC 20036
(202) 328-8000

Counsel for Defendant
Brian J. Coyle
Harwood & Lloyd
130 Main St., Hackensack NJ 07601
(201) 487-1080

Before SCIRICA, NYGAARD and McKEE, Circuit Judges.