STATE OF NEW JERSEY VS. J.R.T., JR.  (91-11-1280 AND 10-02-0149, PASSAIC COUNTY AND STATEWIDE)(RECORD IMPOUNDED)
A-5156-13T1
N.J. Super. Ct. App. Div.Jun 16, 2017Check Treatment NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5156-10T2
SPARTAN OIL COMPANY,
Plaintiff-Appellant,
v.
NEW JERSEY PROPERTY-LIABILITY
INSURANCE GUARANTY ASSOCIATION,
Defendant-Respondent,
and
PLANET INSURANCE COMPANY and
RELIANCE INSURANCE COMPANY,
Defendants.
_______________________________________
Argued February 27, 2012 - Decided June 8, 2012
Before Judges Sabatino, Ashrafi and
Fasciale.
On appeal from the Superior Court of New
Jersey, Law Division, Morris County, Docket
No. L-2487-10.
Kristin V. Hayes argued the cause for
appellant (Wiley Malehorn Sirota &
Raynes, attorneys; Ms. Hayes, of counsel
and on the brief; Carolyn R. Conway, on the
brief).
Hugh P. Francis argued the cause for
respondent (Francis & Berry, attorneys;
Mr. Francis, of counsel; Joanna Huc, on
the brief).
PER CURIAM
Plaintiff Spartan Oil Company appeals from a June 3, 2011
order granting summary judgment to defendant New Jersey
Property-Liability Insurance Guaranty Association (NJPLIGA) and
dismissing plaintiff's coverage action for environmental
contamination. We affirm.
I.
In reviewing a grant of summary judgment, we apply the same
standard under Rule 4:46-2(c) that governs the trial court. See
Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J.
436, 445-46 (2007). We must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am.,142 N.J. 520
, 540 (1995). Viewed most favorably to
plaintiff, the summary judgment record establishes the following
facts.
Spartan Oil Company was in the business of delivering
heating oil. In the early 1990s, while operating under the name
Region Oil Company, it purchased and subsequently renewed a
commercial motor vehicle liability policy from Planet Insurance
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Company for coverage for its fleet of delivery vehicles.
Spartan1 delivered heating oil to Plaza Cleaners in Morristown
during the coverage period of the insurance policies, March 1992
through March 1994. Its drivers pumped heating oil from its
vehicles into an external intake pipe located on the outside of
Plaza Cleaners, and the fuel traveled through an internal feed
line to an underground tank under the basement. Unbeknownst to
Spartan, the fuel line was corroded and had developed holes.
Over time, seepage from the fuel line caused serious
environmental contamination, which the owner of the property,
Morristown Associates, did not discover until 2003.
Morristown Associates filed suit against several oil
delivery companies in 2006, and Spartan was added as a defendant
in 2009. The amended complaint of Morristown Associates alleged
liability of the heating oil companies under three theories:
violations of the Spill Compensation and Control Act, N.J.S.A.
58:10-23.11 to -23.11z; violations of the Water Pollution
Control Act, N.J.S.A. 58:10A-1 to -35; and common law
negligence. Eventually, Spartan was successful in obtaining
dismissal of the complaint by summary judgment because the
statute of limitations had run.
1
Except when quoting from documents in the record, we will use
the designation Spartan to mean both Region Oil Company and
Spartan Oil Company.
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In January 2010, Spartan notified defendant Reliance
Insurance Company, as the successor to Planet Insurance Company,
that it was seeking reimbursement of its defense costs based on
the commercial motor vehicle liability policies it had purchased
in 1992 and 1993. Because Reliance was insolvent at that time,
defendant NJPLIGA was responsible for the policies pursuant to
the New Jersey Property-Liability Insurance Guaranty Association
Act, N.J.S.A. 17:30A-1 to -20.
NJPLIGA denied Spartan's claim of coverage based on
subsection a(2) of the pollution exclusion provision of each
policy, which stated in relevant part that the insurance
coverage did not apply to:
POLLUTION EXCLUSION
. . . .
a. "Bodily injury" or "property
damage" arising out of the actual, alleged
or threatened discharge, dispersal, release
or escape of pollutants:
1) Before the pollutants or any
property in which the pollutants
are contained are moved from the
place where they are accepted by
the "insured" for movement into or
onto the covered "auto" or
2) After the pollutants or any
property in which the pollutants
are contained are moved from the
covered "auto" to place [sic]
where they are finally delivered,
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disposed of or abandoned by the
"insured".
. . . .
Pollutants means any solid, liquid, gaseous
or thermal irritant or contaminant . . . .
[Emphasis added.]
In July 2010, Spartan filed the present action seeking a
declaratory judgment that it is entitled to reimbursement of its
defense expenses of $208,800 for the underlying action brought
by Morristown Associates. NJPLIGA filed an answer denying
liability for the defense costs. Both parties moved for summary
judgment on the question of whether there was coverage under the
policies in light of the pollution exclusion provisions.2 In an
oral decision, the trial court found that no genuine issues of
material fact existed, and it concluded that the pollution
exclusion of the policies barred coverage. The court reasoned:
[T]his pollut[ion] occurred after the oil
referred to as a pollutant . . . [was] moved
from the covered auto, . . . into the pipes
and into the system, and they were
delivered. They were finally delivered.
There is no way that the company could turn
off or . . . retrieve the oil once it left
the nozzle, and that's delivery.
Consequently, given that policy [sic]
direct, clear, and unambiguous meaning which
2
Spartan had dismissed its complaint against defendants Planet
Insurance and Reliance Insurance.
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I believe it has, under these circumstances,
there is no coverage.
By order dated June 3, 2011, the court denied Spartan’s motion
and granted NJPLIGA's motion for summary judgment and dismissal
of the cause of action. This appeal followed.
II.
Spartan contends the trial court erred in its "interpre-
tation of the law and the legal consequences that flow from
established facts[, which] are not entitled to any special
deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan,
140 N.J. 366, 378 (1995). We agree that the interpretation of an insurance policy upon established facts is a question of law for the court to determine, Simonetti v. Selective Ins. Co.,372 N.J. Super. 421
, 428 (App. Div. 2004), and that our standard of
review is plenary.
A duty to defend under an insurance policy is "neither
identical nor coextensive" with the duty to indemnify the
insured against losses, and it "must be analyzed separately."
Flomerfelt v. Cardiello, 202 N.J. 432, 444 (2010). Spartan argues that long-standing case law requires that the court examine only the four corners of the underlying complaint to determine whether the insurer has a duty to defend. See Abouzaid v. Mansard Gardens Assocs., LLC,207 N.J. 67
, 79-80 (2011);Flomerfelt, supra
, 202 N.J. at 444-45; Voorhees v.
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Preferred Mut. Ins. Co., 128 N.J. 165, 173-174 (1992); Ohio Cas. Ins. Co. v. Flanagin,44 N.J. 504
, 512 (1965); Danek v. Hommer,28 N.J. Super. 68
, 77 (App. Div. 1953), aff'd o.b.,15 N.J. 573
(1954).
The Supreme Court recently restated the procedural analysis
and legal principles that govern an insurer's duty to defend:
"[T]he complaint should be laid
alongside the policy and a determination
made as to whether, if the allegations are
sustained, the insurer will be required to
pay the resulting judgment, and in reaching
a conclusion, doubts should be resolved in
favor of the insured." Thus, if "the
complaint comprehends an injury which may be
within the policy," a duty to defend will be
found. In other words, "potentially
coverable" claims require a defense.
. . . .
[T]he potential merit of the claim is
immaterial: the duty to defend "is not
abrogated by the fact that the cause of
action stated cannot be maintained against
the insured either in law or in fact — in
other words, because the cause is
groundless, false or fraudulent." Moreover,
the duty to defend remains even if the
asserted claims are "poorly developed and
almost sure to fail."
[Abouzaid, supra, 207 N.J. at 79-81
(citations omitted).]
Thus, analysis of the duty to defend emphasizes "the nature of
the claim asserted, rather than the specific details of the
incident or the litigation's possible outcome . . . ."
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Flomerfelt, supra, 202 N.J. at 444. It is the nature of the claim "that governs the insurer's obligation."Ibid. However, "[w]here .
. . the complaint excluded the potential for a covered claim, no defense [is] warranted."Abouzaid, supra
, 207
N.J. at 86.
Spartan contends the trial court erred in looking beyond
the face of the complaint filed by Morristown Associates and
considering the underlying facts. More specifically, it argues
that "[t]he fundamental flaw in the trial court's reasoning is
that it made determinations - when the delivery was complete;
when the discharge occurred; and whether the delivery was made
correctly - not relevant to the coverage determination."
Spartan's argument relies on an incomplete picture of the
law. At times and in particular circumstances, the Supreme
Court has condoned looking beyond a complaint to the underlying
facts alleged by the claimant. Harleysville Ins. Cos. v.
Garitta, 170 N.J. 223, 236, 238 (2001) (duty to defend wrongful death action was assessed by looking past the complaint to the insured's actual intent "in unique circumstance[s]" where the "heart" of the complaint was based on "a single course of conduct"); SL Indus., Inc. v. Am. Motorists Ins. Co.,128 N.J. 188
, 198-99 (1992) (duty to defend age discrimination action was
triggered by facts disclosed in interrogatories, which insurer
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could not ignore even though they were not in the pleadings);
Hartford Accident & Indem. Co. v. Aetna Life & Cas. Ins. Co., 98
N.J. 18, 24-25 (1984) (duty to defend negligence action required examination of extrinsic evidence because critical fact for coverage to apply was not relevant to underlying action and thus was not pleaded); Burd v. Sussex Mut. Ins. Co.,56 N.J. 383
, 388-89 (1970) (duty to defend atrocious assault action required examination of facts beyond complaint when existence of coverage required resolution of factual issue not decided by the underlying case); Polarome Int'l, Inc. v. Greenwich Ins. Co.,404 N.J. Super. 241
, 272-277 (App. Div. 2008) (duty to defend personal injury action required examination of facts beyond the complaint because it was impossible for the insurer to determine from the complaint whether exposure to insured product occurred during the policy period), certif. denied,199 N.J. 133
(2009).
In Burd, supra, 56 N.J. at 388, Chief Justice Weintraub
stated: "when coverage, i.e., the duty to pay, depends upon a
factual issue which will not be resolved by the trial of the
third party's suit against the insured, the duty to defend may
depend upon the actual facts and not upon the allegations in the
complaint." Chief Justice Weintraub provided the following
illustration:
[I]f a policy covered a Ford but not a
Chevrolet also owned by the insured, the
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carrier would not be obligated to defend a
third party's complaint against the insured
which alleged the automobile involved was
the Ford when in fact the car involved was
the Chevrolet. The identity of the car,
upon which coverage depends, would be
irrelevant to the trial of the negligence
action.
[Ibid.]
We must view the allegations of Morristown Associates'
amended complaint side-by-side with the terms of the insurance
policies to determine if it alleges facts requiring coverage.
If the policies are ambiguous, they will be interpreted most
favorably to Spartan to give effect to the insured's reasonable
expectation of coverage. Flomerfelt, supra, 202 N.J. at 441-43.
The policies provided coverage for "property damage . . .
caused by an accident and resulting from the ownership,
maintenance or use of a covered auto," but they excluded
coverage for "discharge, dispersal, release or escape of
pollutants: . . . [a]fter the pollutants . . . are moved from
the covered auto to [the] place where they are finally
delivered, disposed of or abandoned by the insured." (Emphasis
added). Spartan argues that the Morristown Associates complaint
alleged negligence of Spartan "during" the delivery of heating
oil to Plaza Cleaners and, therefore, the pollution exclusion
did not apply.
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The amended complaint alleged generally that Spartan was
negligent because it "knew, or in the exercise of reasonable
care, should have known, that the improper delivery of fuel oil
created a risk of harm to the Property of [Morristown
Associates]," and that "contamination of [the] Property was
proximately caused by [Spartan's] negligence, including the
failure to use reasonable care in the delivery of fuel oil,
[and] the failure to promptly notify [Morristown Associates] of
the contamination." (Emphasis added). More specifically, the
factual allegations of the complaint stated the following in
paragraphs twelve and thirteen:
12. On multiple occasions . . Region Oil .
. . delivered fuel oil to an underground
storage tank, owned by Plaza Cleaners, and
located in the leasehold of Plaza Cleaners.
13. On information and belief, the fill and
vent lines to the underground storage tank
at Plaza Cleaners were corroded. As a
result, the fuel oil delivered by . . .
Region Oil . . . was discharged into the
soil and groundwater at the Property.
[Emphasis added.]
The complaint contained no explicit allegation either that
Spartan's negligence occurred "during" delivery of the heating
oil or "after" the oil was "finally delivered." However, the
reference to "the fuel oil delivered" implied that the delivery
had already occurred.
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While the allegations of the complaint may contain some
ambiguity as to the specific time that the pollution occurred in
relation to the oil that was delivered, the policies themselves
are not ambiguous. They exclude coverage after final delivery
of the oil. In an insurance policy, an ambiguity exists when
"the phrasing of the policy is so confusing that the average
policyholder cannot make out the boundaries of coverage." Weedo
v. Stone-E-Brick, Inc., 81 N.J. 233, 247 (1979). The phrasing
of the exclusion in this case is not confusing.
An unambiguous insurance contract is interpreted in
accordance with the plain and ordinary meaning of its terms,
Voorhees, supra, 128 N.J. at 175, in light of "'the objectively reasonable expectations of the insured,'" Nav-Its, Inc. v. Selective Ins. Co.,183 N.J. 110
, 118 (2005) (quoting Doto v. Russo,140 N.J. 544
, 556 (1995)). Exclusions are to be interpreted narrowly. Princeton Ins. Co. v. Chunmuang,151 N.J. 80
, 95 (1997).
We are not aware of legal authority that explicitly defines
"delivery" in this insurance context. The policies themselves
also do not define the phrase "finally delivered." The trial
court reasonably relied on a common definition of "deliver" as
meaning to have given into another's possession. The court
stated:
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I refer to the simple definition of
deliver. It's commonly interpreted as
meaning, quote, "to have given into
another's possession or keeping or surrender
something." That's what happened here.
Although the fuel oil discharge and the
resulting contamination occurred while the
fuel oil was traveling through the fill
pipes toward the tank, it occurred after
Spartan Oil deposited the oil from its truck
into the heating oil system. As such,
Spartan Oil had already surrendered the fuel
oil in any rational meaningful and
unambiguous way.
Under these circumstances, the
pollution exclusion is clearly triggered.
The trial court also found that the complaint contained no
allegation of negligence in the manner in which Spartan's
drivers delivered the oil into the intake pipe at Plaza
Cleaners. We agree with the trial court's interpretation of the
policies and its reading of the Morristown Associates complaint.
Whether the term is "delivered" or "finally delivered," the
delivery of the oil occurred upon the fuel entering the property
and heating system of Spartan's customer, Plaza Cleaners. At
that point, Spartan no longer had possession or control of the
oil. It had been transferred into the possession of Plaza
Cleaners.
There is no allegation in the complaint that the seepage
and contamination occurred while the oil was in possession of
Spartan and before its delivery to Plaza Cleaners. There is
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also no allegation that Spartan spilled oil onto the soil and
into groundwater in the course of pumping it from its vehicle to
the intake pipe at Plaza Cleaners.3
The policies in this case contained an exception to the
pollution exclusion for circumstances where the fuel was
discharged from the vehicle but not delivered to the place
delivery was intended. The exception stated:
Paragraphs a. and b. of this exclusion do
not apply if:
1) The pollutants or any
property in which the pollutants
are contained are upset,
overturned or damaged as a result
of the maintenance or use of a
covered "auto" and
2) The discharge, dispersal,
release or escape of the
pollutants is caused directly by
such upset, overturn or damage.
While not directly applicable to spillage from the nozzle or the
hose at the delivery point, this exception indicates that an
accidental spill from the vehicle while the oil was still in
Spartan's possession would be covered by the policy. The
exception addresses the finding of no coverage in circumstances
3
Although outside the allegations of Morristown Associates'
complaint, expert reports were prepared in the underlying case,
and they included no contention that Spartan or any other oil
delivery companies had spilled oil onto the ground as they were
transferring the fuel from their vehicles to the intake pipe.
14 A-5156-10T2
where the fuel is unintentionally discharged from the vehicle
and causes property damage, as occurred in A & S Fuel Oil Co.,
Inc. v. Royal Indem. Co., Inc., 279 N.J. Super. 367, 368 (App. Div.), certif. denied,141 N.J. 98
(1995).
More to the point, the trial court in this case did not
conclude, as Spartan argues, that the pollution exclusion
applied simply because the fuel was discharged from the nozzle
of Spartan's truck. It was its discharge into Plaza Cleaners'
heating system that constituted final delivery and triggered the
pollution exclusion.
The essential fact for determining insurance coverage in
this case is when delivery of the fuel oil to its final
destination occurred. That fact was not determined during the
underlying Morristown Associates litigation because the claims
against Spartan were dismissed on the statute of limitations,
not their merits. Consequently, Burd, supra, 56 N.J. at 388-89,
suggests these circumstances are appropriate for a court to look
past the express words of the underlying complaint to come to an
understanding of what the claimant actually alleged as the basis
for Spartan's liability.
We conclude that the meaning of "finally delivered" in the
pollution exclusion is the same as the meaning of "delivered" in
the Morristown Associates complaint. The heating oil was
15 A-5156-10T2
"finally delivered" or just "delivered" when it was placed into
the possession of the customer. That occurred when the oil
entered the customer's heating system, which included its intake
and fill lines.
In sum, we agree with the trial court's interpretation of
the insurance policies and its understanding of the allegations
of the underlying complaint. Because Spartan had already and
finally "delivered" the oil before the contamination occurred,
the pollution exclusion applied and the insurance policies did
not cover liability for the contamination.
Affirmed.
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