INSURANCE LAW

Ciba-Geigy Corp. v. Liberty Mutual Ins. Co. (N.J. Super. Ct., Law Div. 1/28/98) A New Jersey trial court has found coverage under both "accidentbased" and "occurrence based" policies for cleanup costs forenvironmental contamination that took place at Ciba-Geigy's TomsRiver, New Jersey dyes and resins facility over a thirty-yearperiod. In Ciba-Geigy Corp. v. Liberty Mutual Ins. Co., No. L-97515-87, N.J. Super. Ct., Law Div., January 28, 1998, JudgeLawrence Weiss found that the insurers had failed to meet theirburden of proving that Ciba-Geigy had expected or intended theenvironmental contamination at its plant. The insurers also failedto prove the applicability of the pollution exclusion contained ina number of the policies. As a result, all policies in effect from1952, the year the facility began operation, to 1984 were triggeredunder the "continuous trigger" theory. 1. Meaning of the term "accident": Some of the policies in the1950's and 60's issued to Ciba-Geigy's predecessor providedcoverage on a "caused by accident" basis. The court held that NewJersey law does not differentiate between the term "accident" and"occurrence." Accordingly, the court analyzed coverage for bothaccident-based policies and occurrence-based policies under thestandards set forth in Morton Int'l v. General Accident Ins. Co. ofAm., 134 N.J. 1 (1993). The insurers had argued that since thepolicies used the term "accident" to trigger coverage for propertydamage and the term "occurrence" to trigger bodily injury coverage,there was a distinction between the two terms which the parties tothe contract understood. Under the insurers' interpretation, theterm "accident" has a temporal meaning and would require thatliability for the property damage must arise out of a sudden orabrupt event. The court rejected this argument, stating that theterm "accident" has been interpreted to encompass events that takeplace over an extended time, so long as the injury was neitherexpected nor intended. 2. Was there an "occurrence" under the Policies: The court ruledthat Ciba-Geigy, as the insured, has the burden of showing that theclaim is within the scope of the policies. Therefore, the insuredmust prove that it suffered a loss, that the loss occurred duringthe time in which the policies were in effect and that it was thetype of loss contemplated by the policies. The insurer then hasthe burden of proving that the loss was expected or intended. Following the New Jersey Appellate Division's ruling in Carter-Wallace, Inc. v. Admiral Ins. Co., No. A-3558-95T3, N.J. Super.Ct., App. Div., May 15, 1997, the court found that the expected orintended language in the occurrence definition operates as anexclusion. The Carter-Wallace decision and the issue of burden ofproof is presently on appeal before the New Jersey Supreme Court. Oral argument is tentatively scheduled for mid-March 1998. The evidentiary burden that the insurer has with regard to theoccurrence language is set forth in Morton. The trial court heldthat Morton requires that a subjective analysis of whether theinsured actually expected or intended the harm for which coverageis being sought must be applied absent "exceptional circumstances,from which intent may be inferred." The court noted that Mortonsets forth five factors which must be considered in environmentalcoverage litigation to establish whether "exceptional circumstancesexist." They include: (a) the duration of the discharges; (b) whether the discharges occurred intentionally, negligently or innocently; (c) the quality of the insured's knowledge concerning the harmful propensities of the pollutants; (d) whether regulatory authorities attempted to discourage or prevent the insured's conduct; and (e) the existence of subjective knowledge concerning the possibility or likelihood of harm. Two cases which undertook the Morton analysis were cited by thecourt. In both of these cases, Carter-Wallace and Chemical LeamanTank Lines, Inc. v. Aetna Cas. & Surety Co., 89 F.3d 976 (3d Cir.1996), the courts found that the Morton criteria for theexceptional circumstances test was not met. In both cases thecourts emphasized that there was no evidence of any "stonewalling"by the insured in its dealings with the regulatory agencies. Aspecific finding of "stonewalling" by the insured had been made inMorton. The "stonewalling" issue is an important one in thecourt's view in Ciba-Geigy. Judge Weiss found that "[t]here was nopattern of `stonewalling' or obfuscation of the type present inMorton." (Slip Op. at 34). He supports this conclusion in part byreferring to the trial testimony of John Wilford, a New JerseyDepartment of Health employee who went to the Toms River plant forone day in the early 1960's to review plant records on wellsampling. Mr. Wilford stated at trial that the Toms River plantnever tried to hide anything from him. In contrast, according toMr. Wilford, the plant in Morton deliberately tried to hide itscontaminating discharges from the state. Judge Weiss focused on the Morton factor of whether the regulatoryauthorities attempted to discourage or prevent Ciba-Geigy's conductand reviewed in less detail the evidence presented at trial withrespect to the other four Morton factors. In Morton, the fact ofstonewalling by the insured was considered in the context of onlyone of the five "exceptional circumstances" factors. An analysisof the other four factors also had been undertaken by the MortonCourt. The trial court opinion in Ciba-Geigy treats these otherfactors somewhat superficially. For instance, in looking at theduration of the discharges, there is no question that if the courtconsiders all of the waste activities as one occurrence, then thedischarges continued for decades. As for the nature of thedischarges, the recitation by the court as to how the plant'swastewater facilities operated indirectly supports a conclusionthat the discharges were intentional: Because the settling basins were unlined, it was expected that some of the water would seep into the ground. (Slip Op. at 19) In 1954, Ciba learned that seepage from WTP-1 had caused groundwater "contamination which adversely affected the water that it used to make its dyes." (Slip Op. at 21). In the mid-1960's, various entities became concerned about Toms River contamination. Wastewater discharge as designed by the system caused a high organic content. (Slip Op. at 27). Throughout the years the plant repaired sewer lines as they fell into disrepair. (Slip Op. at 31). The third Morton factor is briefly mentioned by the court in itsstatements that Ciba-Geigy only knew that the pollutants wereharmful in the workplace environment. This statement does not takeinto account the various efforts the plant undertook to correct itswastewater discharge problems because of its knowledge of harm tothe Toms River by such discharge. The final factor (subjectiveknowledge), while discussed by the court, does not comment on theevidence submitted at trial by the insurers. Judge Weiss stated that in the case of a non-egregious polluter,New Jersey courts have held that differences in the severity ofharm are relevant in determining whether the harm was "expected orintended." The court must look at whether the insured expected orintended damage that was qualitatively comparable to the damagethat triggered its liability under the present environmentalstatutes. Having concluded there were no egregious circumstancespresent, the court stated that the analysis should now turn towhether Ciba-Geigy subjectively expected or intended to causedamage to the groundwater. Judge Weiss stated he could rely on thetestimony of the plant employees to determine that Ciba-Geigyneither expected nor intended the damage. However, the court wenton to list various actions taken by the plant to show the insuredneither expected nor intended groundwater contamination. (Slip Op.at 35). These included retention of consultants to remedywastewater facilities, including the building of an ocean pipelinein 1964 in order to stop harmful discharges to the river. 3. Pollution Exclusion: Under Morton, gradual pollution is notexcluded under the standard pollution exclusion clause. Instead,under the regulatory estoppel theory, the New Jersey Supreme Courthas held that it will give effect to the pollution exclusion clauseonly if the insured intentionally discharged, dispersed, releasedor caused the escape of a known pollutant. Morton, 134 N.J. at 31. Coverage will be precluded where the insured intentionallydischarged a known pollutant, irrespective of whether the resultingproperty damage was intended or expected. In addressing the issue of what constitutes a "known pollutant,"the court stated that it was not enough for the insurers to showthat the contaminants at issue at the site are known to bepollutants today. Instead, the inquiry regarding a known pollutantrequires an analysis of what was known by the insured during thetime of the policies in issue. The term "time of the policies inissue" would include the time period from 1971 through 1984. However, in its findings of fact, the court did not address indetail what was known by Ciba-Geigy in each particular year from1971 through 1984. Instead, the court made general statementsabout what was known about the pollutants in the 50's, 60's and70's. In doing so, the court appears to have mixed the separateanalyses required under the Morton pollution exclusion ruling andthe Morton standard for determining whether there was an"occurrence." In determining whether the exclusion applied, thecourt looked at what Ciba-Geigy knew in the 1950's and '60's aboutthe nature of the pollutants. Under the court's own interpretationof the Morton ruling, the insured's knowledge in the 1950's and'60's is irrelevant. The court cites Pittston Co. v. Allianz Ins.Co., 905 F. Supp. 1279 (D.N.J. 1995) in support of its analysis ofthe pollution exclusion. However, Pittston did not deal with thestandard pollution exclusion, but instead dealt with an exclusioncontained within a special manuscript policy that was a rewordingof the occurrence definition. 4. Number of Occurrences: The court found there was only oneoccurrence at the site. The fact that there were different anddiscrete areas for waste disposal at the Toms River plant wasirrelevant. Instead, the court found that all of the waste wasgenerated from a continuous manufacturing process and that thisprocess should be treated as one occurrence.

 

NEGLIGENCE

McGill v. McDonald's Corp.; Muller v. McDonald's Corp. (N.J. Super. Ct., App. Div. 1/26/98) Reversing the lower court's grant of summary judgment, theappellate court held that a franchisor may be held liable forinjuries sustained by its franchisee's employees in the course ofa robbery. The court suggested that the adequacy of a franchisor'straining program addressing how employees should react to a robberymust be considered in determining liability. Plaintiffs, employees of a McDonald's, were closing the restaurantone night when they were robbed at gunpoint. During the robbery,one plaintiff was shot and killed and the other was criticallyinjured. Plaintiffs sued the franchisor, McDonald's Corp. fornegligent failure to provide adequate security. The precise issue in this context had never been addressed by theNew Jersey courts. Generally, franchisors can be held liable forthe tortious acts of third parties only if a negligent action orinaction of the franchisor was a proximate cause of the injury. Inthis case, however, the court stated that because defendant failedto exculpate itself by proving that no unreasonable action orinaction on its part proximately caused the robbery. Summaryjudgment in its favor had been improper.

 

NEGLIGENCE

Carr v. Norris (N.J. Super. Court, App. Div. 1/26/98) The court held that absent evidence of foreseeability that criminalassaults would occur in the parking lot of a McDonald's restaurant,the McDonald's franchisee, as a proprietor of a small business, hadno duty to provide private security for the protection of thepublic. Plaintiff was among a group of young men who went by foot todefendant McDonald's late one evening. The men were ordering fromthe drive-through window when a car containing another group of mendrove up to the window. Although words were exchanged between thetwo groups, the second group eventually drove away and defendantserved plaintiff's group of friends. Because plaintiff and hisfriends appeared to be intoxicated, defendant called the police. Before the police arrived, the other group of men returned and beatplaintiff with a tire iron. Plaintiff brought suit against defendant alleging negligence infailure to provide security. To succeed with such a claim, aplaintiff must establish that the criminal assaults were reasonablyforeseeable. To establish foreseeability, plaintiffs often provideevidence of past criminal acts which have occurred near thedefendant's property, the size and location of the property, thedesign of the building and the size of the parking lot. In thiscase, the only information which plaintiff provided related to twoother crimes, substantially different from the crime at issue,which had occurred on defendant's premises. Due to the lack ofevidence, the appellate court affirmed the grant of summaryjudgment in favor of defendant.

 

LANDLORD/TENANT

Pop's Cones, Inc. v. Resorts Int'l Hotel, Inc. (N.J. Super. Ct., App. Div. 1/23/98) In a landlord/tenant dispute, the court held that due to NewJersey's relaxation of the strict requirement of a "clear anddefinite promise" in establishing a prima facie case of promissoryestoppel, plaintiff had in fact introduced evidence sufficient todefeat a motion for summary judgment. Plaintiff ran a TCBY yogurt franchise. In 1994, plaintiff enteredinto discussions with defendant regarding the possibility ofplaintiff renting space on the Atlantic City boardwalk. To enticeplaintiff into renting the space, defendant allowed plaintiff tooperate a TCBY cart on its premises at no charge for the summer of1994. Shortly thereafter, plaintiff informed defendant that itscurrent lease was up for renewal and that it had to inform thelandlord of its decision. Defendant told plaintiff to give noticeand to "pack up ... and plan on moving." In reliance on this andother statements made by defendant, plaintiff did not renew itslease. Negotiations continued until, in January 1995, plaintiffreceived a letter withdrawing defendant's offer to lease space toPlaintiff. Plaintiff made every effort to lease a new location,but was unable to reopen its business until July 1996. The elements of a claim for promissory estoppel are: (1) a clearand definite promise by the promisor; (2) made with the expectationthat the promisee would rely on it; (3) the promisee did in factreasonably rely on it; and (4) the promisee suffered detriment ofa definite and substantial nature in reliance on it. Here,Defendant argued that there was no clear and definite promise and,therefore, any reliance upon the statements was not reasonable. The court stated that the essential justification for thepromissory estoppel doctrine is to avoid the substantial hardshipor injustice which would result if the promise at issue was notenforced. The court reasoned that this is particularly true where,as here, a plaintiff does not seek to enforce a contract not fullynegotiated, but instead seeks damages resulting from itsdetrimental reliance. Noting that New Jersey law has evolved toallow the "clear and definite promise" requirement to be met whereenforcing the promise is the only way to avoid injustice, the courtfound that the first element was sufficiently met and that thefacts at least raise a jury question.

 

EMPLOYMENT LAW

Bergen Commercial Bank v. Sisler (N.J. Super. Ct., App. Div. 1/20/98) The appellate court recognized a claim of reverse discrimination byan employee who was allegedly fired for being too young andreversed a trial court's granting of summary judgment against theformer employee. Plaintiff recruited defendant to join the Bank as a vice presidentat a salary of $70,000. Just prior to his starting date, theBank's chairman asked defendant his age and defendant respondedthat he was twenty-five years old. Merely eight days after hestarted working, the Bank's chairman and president suggested thathe relinquish his position and become a consultant. He refused,was demoted, and less than five months later was fired. Afterdefendant threatened suit, it was the Bank who instituted thisaction claiming that defendant had stolen certain computer files. Defendant asserted a counter-claim for age discrimination. The court noted that unlike the federal age discrimination statute,the New Jersey Law Against Discrimination ("NJLAD") does notestablish a minimum age for an age discrimination claimant. Thecourt noted that because defendant was not a member of the usualclass intended to be protected by the NJLAD, namely older workers,he could not assert a direct age discrimination claim. However,since the statute does not have a minimum age requirement, he couldassert a reverse discrimination claim.

 

CIVIL RIGHTS

Chester Residents Concerned for Quality Living v. Seif (3rd Cir. 12/30/97) A federal court recognized a private right of action to sue a stateenvironmental agency to enjoin the placement of a waste plant basedupon alleged "discriminatory effect" on a predominately minoritycommunity. Plaintiff alleged that the Pennsylvania Department of EnvironmentalProtection's ("PADEP") act of issuing a permit to a waste facilityin the City of Chester, a community which is predominantly black,violated regulations promulgated by the EPA under  602 of Title VIof the Civil Rights Act of 1964. The sole question in this casewas whether a private cause of action may be brought based upon analleged violation of such regulations. The court noted that a private right of action exists under  601,but this right only reaches instances of intentionaldiscrimination. In this case, Plaintiff sought the right toproceed under the discriminatory effect standard of  602, ratherthan the more stringent intent standard required under  601. Thecourt considered the legislative intent and the purposes of thelegislative scheme and found that a private right of action under 602 would be consistent with the legislative history and schemeof Title VI.

 

EMPLOYMENT LAW

Matczak v. Frankford Candy & Chocolate Co. (3rd Cir. 11/18/97) The court held that the assessment of whether or not an individualis substantially limited in a major life activity, and thereforeconsidered disabled for purposes of the Americans with DisabilitiesAct (ADA), should be made "without regard to mitigating measuressuch as medicines, or assistive or prosthetic devices." Plaintiff was diagnosed with epilepsy over thirty years ago andcontrolled it through medication. Seven months after plaintiffbegan working for defendant as a maintenance supervisor, hesuffered an epileptic seizure which resulted in hospitalconfinement for seventeen days and restricted workresponsibilities. Five months later, plaintiff was fired forinadequate work performance and because business was slow. The court noted that a disabled individual qualifies for protectionunder the ADA if the physical or mental impairment substantiallylimits one or more of the individual's major life activities. Thesole question on this appeal was whether an individual'squalification should be determined without considering the effectsof medication and other mitigating measures. The ADA does not specifically address the issue of mitigatingmeasures, so the court looked to EEOC interpretations and thelegislative history of the ADA for guidance. The EEOC hasconcluded that disabilities should be analyzed "without regard tomitigating measures such as medicines, . . .." Although the EEOC'sguidelines are not binding, they may be given controlling weightunless found to be clearly erroneous. In addition, the legislativehistory of the ADA indicated that people who were able to controltheir disability through medication were still entitled to theprotection of the ADA. Therefore, the court found summary judgmentin favor of defendant to be inappropriate at this time.

 

For more information on how to get a copy of these decisions or review past decisions, please enter our site and follow the decisions links. These synopses are intended as an information source for the clients and friends of CuylerBurk. Its contents should not be construed as legal advice, and readers should not act uponthe information contained within this web site without professional counsel. Transmission ofthe information is not intended to create, and receipt does not consititute, an attorney-clientrelationship between the sender and receiver. © 1997, Cuyler Burk. All rights reserved.