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NL Indus., Inc. v. Commercial Union Ins. Co.

ELR Citation: 29 ELR 20019
Nos. 97-5028 et al., 154 F.3d 155/(3d Cir., 09/03/1998)

The court holds that New York law shall apply to interpret the pollution exclusion and late notice provisions in a lead manufacturer's insurance policies. If, however, New York law differs from that of the state where the waste site is located, then the law of the waste site will apply. The lead manufacturer seeks insurance coverage for environmental pollution at multiple sites in a number of states. However, New Jersey, which is the forum state, New York, and the states of the waste sites each construe the "sudden and accidental" language in pollution exclusion clauses differently. Likewise, some states, such as New Jersey, require a demonstration of prejudice in order to assert the defense of late notice, while others, such as New York, do not.

The court first holds that the choice of law for interpreting the pollution exclusion is between New York and the state of contamination. The court further holds that in the event of a conflict between the law of New York and the law of the waste site, the law of the waste site should be applied because under the site-specific approach it would have the dominant significant relationship to the issue. New York and the state of the waste site have strong interests in having their law apply. The lead manufacturer is not a New Jersey policyholder, but has its headquarters and principal place of business in New York where the policy was executed and issued. New Jersey's only connection with this litigation is that the lead manufacturer was incorporated and has some operations there. Thus, to the extent that New Jersey is the location of the contaminated sites, its interest in applying its domestic law does not differ from that of other polluted locations. In addition, New York and the state of the waste site have national interests in commerce that weigh in favor of having their law apply. Commerce would be hindered if New Jersey law were applied to determine a dispute with which that state does not have a dominant and significant relationship. Furthermore, the interests of the parties militates in favor of having the law of the waste site apply. The insurance contracts are silent on the applicable choice of law. However, they contain sweeping declarations of coverage that should be given effect where the risks arose. Although case management problems for the trial court will be substantial, they can be resolved through the ingenuity and skill of court and counsel.

The court next holds that the law of the waste site as it pertains to late notice provisions should govern if it differs from the law of New York. The fact that the lead manufacturer did business in New Jersey and was incorporated there does not make it a New Jersey policyholder entitled to the protection of New Jersey law at the expense of the laws of the competing states.

Counsel for Appellant
Mark E. Ferguson
Bartlit, Beck, Herman, Palenchar & Scott
54 W. Hubbard St., Rm. 300, Chicago IL 60610
(312) 494-4400

Counsel for Appellee
Steven R. Brock
Rivkin, Radler & Kremer
EAB Plaza, Uniondale NY 11556
(516) 357-3000

Before Greenberg and Nygaard, JJ.