Farmers Mutual Fire Insurance v. New Jersey Property-Liability Insurance
215 N.J. 522
| N.J. | 2013Background
- Owens-Illinois established a continuous-trigger allocation for long-tail environmental contamination, prorated by years on risk and degree of risk.
- PLIGA Act created the Guaranty Association as insurer of last resort to handle insolvent carriers’ claims, with statutory exhaustion requirements.
- Two cases involve remediation costs after Newark Insurance became insolvent; Farmers Mutual paid remediation costs and sought reimbursement from the Guaranty Association.
- Trial court favored Owens-Illinois allocation; Appellate Division reversed, interpreting a 2004 PLIGA amendment to require exhaustion of solvent-carrier limits before statutory benefits are payable by the Guaranty Association.
- This Court affirms, holding the 2004 amendment overrides Sayre and requires exhaustion before Guaranty Association payments; nothing unconstitutional found about the amendment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the 2004 PLIGA Act amendment require exhaustion before Guaranty Association payments? | Farmers Mutual argues Owens-Illinois should apply and Guaranty Association pays Newark’s share. | Guaranty Association argues exhaustion of solvent policies is required before statutory benefits. | Yes; exhaustion required before Guaranty Association payments in continuous-trigger long-tail cases. |
| Does the 2004 amendment supersede Sayre's Sayre v. Insurance Co. of North America holding? | Farmers Mutual contends amendment overruns Sayre and Owens-Illinois scheme. | Guaranty Association contends amendment clarifies exhaustion and overrides Sayre. | Yes; Legislature reversed Sayre by defining exhaustion to require solvent-policy exhaustion first. |
| Is the 2004 exhaustion requirement unconstitutional as an impairment of contract? | Farmers Mutual claims Contracts Clause violation. | PLIGA Act serves public policy; regulation not unconstitutional. | No; exhaustion serves legitimate public objectives and does not substantially impair contracts. |
| Does the PLIGA Act, as amended, restrict the Guaranty Association’s role to payor of last resort? | Sayre-like interpretation would burden solvent carriers unnecessarily. | Amendment clarifies role and preserves Guaranty Association resources. | Yes; Guaranty Association is insurer of last resort and pays only after exhaustion of solvent coverage. |
Key Cases Cited
- Owens-Illinois, Inc. v. United Insurance Co., 138 N.J. 437 (New Jersey 1994) (continuous-trigger, pro rata allocation by years on risk and degree of risk)
- Carter-Wallace, Inc. v. Admiral Insurance Co., 154 N.J. 312 (New Jersey 1998) (allocation in progressive environmental property damage cases)
- Sayre v. Insurance Co. of North America, 305 N.J. Super. 209 (App.Div.1997) (Guaranty Fund exhaustion prior to Fund payment; Sayre applied prior to 2004 amendments)
- Spaulding Composites Co., Inc. v. Aetna Casualty & Surety Co., 176 N.J. 25 (New Jersey 2003) (issues on long-tail allocation and policy language relevance)
- Quincy Mut. Fire Ins. Co., 172 N.J. 437 (New Jersey 2002) (allocation reflecting days on risk for precise allocation)
- Benjamin Moore & Co. v. Aetna Casualty & Surety Co., 179 N.J. 87 (New Jersey 2004) (implications of continuous-trigger and allocation schemes)
- Elf Atochem N. Am., Inc. v. Am. Rights **, 157 N.J. 580 (New Jersey 1999) (PLIGA Act purpose and insurer obligations)
- Carpenter Tech. Corp. v. Admiral Ins. Co., 172 N.J. 504 (New Jersey 2002) (PLIGA Act framework and insurer obligations; exhaustion principle)