# Morton International, Inc. v. General Accident Insurance

> Supreme Court of New Jersey · July 21, 1993 · 134 N.J. 1

URL: https://www.frixlaw.com/law-library/cases/2062885

## Case

- **Full name:** Morton International, Inc., Successor to Morton Thiokol, Inc., Now Named Thiokol Corporation, Plaintiff-Appellant and Cross-Respondent, v. General Accident Insurance Company of America; A Pennsylvania Corporation (Successor to the Potomac Insurance Company and the United States Branch of General Accident Fire and Life Assurance Corporation, Ltd.); Affiliated Fm Insurance Company, a Rhode Island Corporation; Continental Casualty Company, an Illinois Corporation; First State Insurance Company, a Delaware Corporation, Defendants-Respondents, and Liberty Mutual Insurance Company, a Massachusetts Corporation; American Home Assurance Company, a New York Corporation; Insurance Company of North America, a Pennsylvania Corporation; Underwriters at Lloyd’s London, and Certain Subscribing London Market Insurance Companies, Defendants-Respondents and Cross-Appellants, and Aetna Casualty & Surety Company, a Connecticut Corporation; American Centennial Insurance Co., a Delaware Corporation; Fireman’s Fund Insurance Company, a California Corporation; Granite State Insurance Company, a New Hampshire Corporation; The Hartford Accident & Indemnity Company, a Connecticut Corporation; Insurance Company of the State of Pennsylvania, a Pennsylvania Corporation; Integrity Insurance Company, a New Jersey Corporation; International Insurance Company, an Illinois Corporation; Lexington Insurance Company, a Delaware Corporation; Mission Insurance Company, a California Corporation; Mission National Insurance Company, a California Corporation; National Union Fire Insurance Company of Pittsburgh, a Pennsylvania Corporation; And Northbrook Insurance Company, an Illinois Corporation, Defendants
- **Court:** Supreme Court of New Jersey
- **Decided:** July 21, 1993
- **Citations:** 134 N.J. 1; 629 A.2d 831; 62 U.S.L.W. 2079; 1993 N.J. LEXIS 719
- **Precedential status:** Published
- **Opinion:** Opinion by Stein
- **Judges:** Stein
- **Cited by:** 230 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/2062885

## How later opinions describe it (automated extraction)

- stating that the change to "occurrence based coverage ... was designed to `make it clear that occurrence embraces not only the usual accident, but also exposure to conditions which may continue for an unmeasured period of time'"
- noting possible reasons for the qualified pollution exception included concern that “occurrence” based policies extended coverage to most pollution situations; increased concern about pollution claims to environmental catastrophes; concern over public reaction to environmental…
- declining to enforce an exclusion clause because "[t]o do so would contravene this State's public policy requiring regulatory approval of standard industry-wide policy forms to assure fairness in rates and in policy content, and would condone the industry's misrepresentation t…
- holding that the pollution exclusion’s drafting and regulatory history enhanced a fuller understanding of the meaning of its terms

## Opinion text

The opinion of the Court was delivered by
STEIN, J.
This case concerns insurance coverage for environmental pollution. The events affecting the coverage claims before us span a period of several decades, in the course of which societal indifference concerning environmental-pollution damage has been supplanted by a heightened awareness of the need for environmentally-sound waste-disposal practices and an increasingly aggressive governmental effort to remediate the consequences of past environmental damage. That evolution understandably has influenced the insurance industry’s concern about its exposure for damages
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caused by environmental pollution, and has resulted in an industry-wide determination to modify the scope of insurance coverage for such damages.
The claims for coverage involve Comprehensive General Liability (CGL) policies covering plaintiff and its predecessors during the period 1961 to 1976, issued by three primary carriers and a large number of excess carriers. Four principal variations of CGL policies are involved, and no dispute exists concerning the language of the critical provisions that affect the question of coverage. Because the policies are essentially standardized, industry-wide forms, our interpretation of their coverage provisions may affect significantly the allocation of damages for environmental pollution of New Jersey property among insurance carriers, industry, and government. The scope of the relief sought by plaintiff requires us to consider not only the kinds of pollution-causing events entitled to coverage under the various policies, but also whether remediation expenses and response costs imposed under the authority of federal and state environmental statutes constitute sums that the insured is legally obligated to pay “as damages” because of property damage covered by the policies. Because the economic consequences are significant, the issues before us already have generated a multiplicity of reported decisions by federal and state courts.
I
The procedural history and material facts are set forth in abundant detail in the Appellate Division’s comprehensive and thoughtful opinion.
Morton Infl v. General Accident Ins. Co.,
266
N.J.Super.
300 , 629 A.2d 895 (1991). A useful perspective concerning that history and those facts is afforded by this Court’s opinion in
New Jersey Department of Environmental Protection v. Ventron Corp.,
94
N.J.
473 , 468 A.2d 150 (1983). Plaintiff, Morton International, Inc. (plaintiff or Morton), is the successor in interest to Ventrón Corporation (Ventron), and the claims it now asserts derive from liability imposed on Ventrón in that litigation.
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The Department of Environmental Protection (DEP) had instituted suit against Ventrón and other defendants, Velsicol Chemical Corporation (Velsicol), Wood Ridge Chemical Corporation (Wood Ridge), and F.W. Berk and Company (Berk), to compel the defendants to bear the costs involved in remediating pollution of Berry’s Creek, an estuary of the Hackensack River, that had been caused by discharges from a mercury-processing plant operated for over forty years by the various defendants.' Justice Pollock’s opinion graphically described the end result of the defendants’ prolonged discharge of mercury and other pollutants:
Beneath its surface, the tract is saturated by an estimated 268 tons of toxic waste, primarily mercury. For a stretch of several thousand feet, the concentration of mercury in Berry’s Creek is the highest found in fresh water sediments in the world. The waters of the creek are contaminated by the compound methyl mercury, which continues to be released as the mercury interacts with other elements. Due to depleted oxygen levels, fish no longer inhabit Berry’s Creek, but are present only when swept in by the tide and, thus, irreversibly toxified.
[Id.
at 481-82, 468 A.2d 150 .]
This Court determined that the discharging of toxic mercury constituted an abnormally-dangerous activity, and imposed strict liability under common-law principles against all the defendants for remediation of the resulting nuisance and property damage.
Id.
at 493 , 468 A.2d 150 . We also held that all the defendants were jointly and severally liable under the Spill Compensation and Control Act of 1977 (Spill Act),
N.J.S.A.
58:10-23.11 to -23.11z, as amended,
L.
1977, c. 346, § 4, and that such liability would apply retroactively to discharges that had occurred prior to the Spill Act’s effective date.
N.J.S.A.
58:10-23.11f(b)(3) (as amended,
L.
1979, c. 346, § 4;
L.
1981, c. 25, § 1).
Id.
at 496-99, 468 A.2d 150 . Finally, we affirmed the judgment entered on the cross-claim asserted by Robert and Rita Wolf, purchasers of the plant property from Ventron, premised on Ventron’s fraudulent nondisclosure that the property had been contaminated by mercury pollution.
Id.
at 503-04 , 468 A.2d 150 .
When DEP instituted its action against Ventron, the insurers of the various owners and operators of the mercury-processing plant
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disclaimed coverage, requiring Ventron to retain counsel to provide a defense. At the conclusion of that litigation Morton, as Ventron’s successor, commenced this declaratory-judgment action, seeking reimbursement for the costs incurred in defending the suit filed by DEP and the cross-claim filed by the Wolfs, as well as indemnity for the cleanup and remediation expenses resulting from the DEP proceeding. Defendants are the primary and excess insurers of Ventron and its predecessors during the period with respect to which Morton seeks reimbursement and indemnity.
Early in the litigation, the trial court granted partial summary judgment in favor of all defendants concerning their obligation to defend and indemnify Ventron with respect to the Wolfs’ cross-claim. The parties filed cross-motions for summary judgment on the remaining issues: defendants asserted that the record presented no material disputed factual issue concerning whether Morton’s predecessors had intended or expected to cause property damage, whereas Morton contended that the Chancery Division was bound by the trial court’s determination in
Ventron
that no intent “to. pollute the waters of the State” had been proved. Those motions resulted in a ruling by the Chancery Division that none of the defendants was obligated to indemnify Morton for the costs of remediation of environmental damage — the amount of which remains undetermined — that were imposed on Ventron in the DEP litigation. Only General Accident Insurance Company of America (General Accident) was held liable for a portion of Ventron’s costs in defending the DEP suit. In a separate trial, Morton was awarded judgment against General Accident for approximately $100,000 for such defense costs, plus attorneys’ fees for prosecuting the claim to recover those costs. On appeal, the Appellate Division affirmed the Chancery Division’s judgment dismissing Morton’s claims for indemnification, and reversed that portion of the judgment awarding damages and counsel fees against General Accident. We granted Morton’s petition for certification and the joint cross-petition for certification of defendants Insurance Company of North America, American Home
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Assurance Co., Liberty Mutual Insurance Co., Certain Underwriters at Lloyd’s, London, and Certain London Markets Insurance Companies, 127
N.J.
563 , 606 A.2d 374 (1992).
A. Insurance Coverage
For purposes of the summary-judgment motions, no issue was raised concerning which insurers provided primary and excess coverage during the pertinent periods. Similarly, the relevant provisions of the various policies also appear to be undisputed.
Primary Insurance Coverage
1. Defendant General Accident has stipulated that it and its affiliate provided primary general-liability coverage from October 1960 to October 1971. (Although copies of the policies actually issued to Morton’s predecessors were not produced, the record contains sample forms of policies used by General Accident that the parties acknowledged, for purposes of summary judgment, corresponded to the actual policies.) Three different policy forms were in use by General Accident during this period.
(a) From October 1960 to October 10, 1964, General Accident’s policy provided property-damage-liability coverage for “all sums which the Insured shall become legally obligated to pay * * * for damages because of injury to or destruction of property * * * caused by accident.” The term “accident” was undefined. The policy afforded coverage “only to occurrences or accidents which happen during the policy period * *
(b) Effective October 10, 1964, the prior form of policy was amended by deleting the words “caused by accident” and substituting the words “resulting from an occurrence.” The endorsement also added the following definition of occurrence:
The word “occurrence” as used in this endorsement means an unexpected event or happening which results in injury to or destruction of tangible property during the policy period, or a continuous or repeated exposure to conditions which result in injury to or destruction of tangible property during the policy period provided the insured did not intend or anticipate that injury to or destruction of property would result * * *.
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(c) Effective October 1, 1966, and continuing through October 1971, General Accident’s policy revised the definition of occurrence as follows:
“Occurrence” means an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured.
2. Although neither the record nor the opinions below indicates the source of Ventron’s CGL coverage from October 10, 1971, to June 1972, primary CGL coverage was provided from June 14, 1972, through January 1, 1975, pursuant to three policies issued by Reserve Insurance Company (Reserve), which had been declared insolvent and liquidated prior to the institution of this litigation. Each of Reserve’s policies provided coverage for “all sums which the Insured shall become legally obligated to pay as damages because of property damage * * * caused by an occurrence,” and their definition of “occurrence” was substantially identical to the definition contained in General Accident’s policies from October 1966 to 1971. Reserve’s policies for the period June 14, 1973, to June 14, 1975, however, contained a so-called “pollution-exclusion clause” that was identical to exclusion “f” of the standard form CGL policy (standard pollution-exclusion clause), see,
e.g.,
Insurance Services Office (“ISO”) form GL 00 02, Ed. 01-73, that had been widely used by insurers from 1973 to 1985. That exclusion stated:
This insurance does not apply * * * (f) to bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.
3. Liberty Mutual Insurance Company (Liberty Mutual) provided primary CGL coverage to Ventron from January 1, 1975, through January 1, 1977. Its policies afforded coverage for “all sums which the insured shall become legally obligated to pay as damages because of * * * property damage * * * caused by an occurrence.” The policies defined “occurrence” as “an accident, including continuous or repeated exposure to conditions, which
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results in * * * property damage neither expected nor intended from the standpoint of the insured * * The Liberty Mutual policies also contained the standard pollution-exclusion clause.
Excess Insurance Coverage
Although the record is incomplete concerning the periods of coverage and the material terms of all the excess insurance coverage that Ventrón and its affiliates purchased during the relevant period, we set forth a brief summary of that coverage and, where available, the material provisions affecting coverage.
1. (1972-1978)
Defendant Affiliated FM Insurance Company (Affiliated FM) provided first-layer excess-liability coverage from March 1, 1972, to January 1, 1978, pursuant to two policies. The initial policy defined “occurrence” to mean “either an accident happening during the policy period or a continuous or repeated exposure to conditions which unexpectedly and unintentionally causes injury to persons or tangible property during the policy period.” The renewal policy defined “occurrence” as “an accident including continuous or repeated exposure to conditions, which results in personal injury or property damage neither expected nor intended from the standpoint of the insured.” Affiliated FM’s policies also contained the standard pollution-exclusion clause.
Defendant First State Insurance Company provided second-layer excess coverage from March 1, 1972, to March 1, 1975. Its policy contained the same definition of “occurrence” as was contained in the initial Affiliated FM policy and also included the standard pollution-exclusion clause.
From March 1, 1975, to March 1, 1978, defendant American Home Insurance Company provided second-layer excess coverage. Its policies followed the form of the policies issued by Affiliated FM, the first-layer excess carrier, and contained the standard pollution-exclusion clause.
2. (1966-1972)
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Defendant Insurance Company of North America (INA) apparently provided first-layer excess coverage to Ventrón and its affiliates from March 17, 1966, to March 1, 1972, pursuant to four policies. By stipulation, claims asserted under the second policy covering the period March 17, 1969 to March 9, 1970, have been dismissed. Under the initial policy, “occurrence” was defined to mean “either an accident happening during the policy period or a continuous or repeated exposure to conditions which unexpectedly and unintentionally causes injury to or destruction of property during the policy period.” The third and fourth policies defined “occurrence” to mean “an injurious exposure to conditions which results, during the policy period, in personal injury, property damage or advertising injury neither expected nor intended from the standpoint of the insured.” The initial INA policy, in effect from 1966 to 1969, contained a non-standard pollution-exclusion clause that provided:
Waste Disposal Exclusion. It is agreed that this policy shall not apply * * * to ipjury to or destruction of property resulting from the intentional or willful disposal of any waste products, fluids or materials.
The third and fourth policies contained a different non-standard pollution-exclusion clause:
This insurance does not apply: to bodily injury, personal injury or property damage arising out of pollution or contamination under that (1) caused by oil, or (2) caused by the discharge or escape of any other pollutants or contaminants, unless such discharge or escape results from a sudden happening during the policy period, neither expected nor intended from the standpoint of the insured.
Defendants Certain Underwriters at Lloyds, London and Certain London Markets Insurance Companies also provided excess coverage from November 1, 1966, to February 1, 1970, under two policies insuring against liability for property damage arising out of an “occurrence,” defined to mean “an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in * * * property damage * * * during the policy period.” Those policies did not contain a pollution-exclusion clause.
3. (1960-1961)
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Defendant Continental Casualty Company provided first-layer excess-liability coverage to Morton’s predecessors from January 1960, to January 1961, for property-damage liability arising out of an “occurrence,” defined to mean “an event, or continuous or repeated exposure to conditions, which unexpectedly or unintentionally caused injury, damage or destruction during the policy period.” That policy contained no pollution-exclusion clause.
Defendants Certain Underwriters at Lloyds, London and Certain London Markets Insurance Companies also provided second- and third-level excess coverage under two policies covering the period from March 15, 1960, to March 15, 1961, but the record is unclear concerning which of two different pollution-exclusion clauses those policies adopted. One of the clauses excludes
liability imposed by law on the assured for * * * (3) property damage caused by seepage, pollution or contamination unless (a) such seepage, pollution or contamination is caused by accident and results in property damage during the period of the policy, or (b) subsequent to seepage, pollution or contamination an accident ensues which causes property damage during the period of the policy and then only for property damage proximately caused by such accident.
The other clause excludes liability imposed by law on the assured for “personal injuries or property damage resulting from any gradual cause such as subsidence, seepage, pollution or contamination.” Our disposition does not require us to determine which clause was in force.
B.
Factual Background Pertinent to Resolution of Morton’s Coverage Claims.
The Appellate Division concluded, based on its examination of the extensive record, that the trial court properly had determined as a matter of law that Morton’s predecessors had intended to cause environmental damage. 266
N.J.Super.
at 333 , 629 A.2d at 913 . Before us, Morton asserts that the Appellate Division improperly “inferred intentional consequences” on the basis of “the intentional character of the acts of disposal,” and contends that summary judgment was inappropriate in view of the sharply-conflicting evidence concerning the subjective knowledge and intent of Morton’s predecessors. Morton also relies on the
Ventron
*15
trial court’s finding that the evidence in that case did not demonstrate an “intent to pollute”:
Surely Berk and W.R.C.C. intended to and volitionally did manufacture mercury compounds and dump waste on the Velsicol property. However, the Court cannot find that the acts were done with the intent to pollute the waters of the State or with the knowledge that such an invasion was substantially certain to occur. No such knowledge or intent may be imputed to defendants under an intentional tort theory.
Based on the
Ventrón,
trial court’s conclusion, Morton argues that at the very least a triable issue of fact was presented with respect to the subjective intent of Morton’s predecessors.
We offer those preliminary observations to afford a perspective for the discussion to follow. Both the Chancery Division, as well as the Appellate Division, in concluding that Morton’s predecessors inevitably had “intended to pollute Berry’s Creek,” 266
N.J.Super.
at 333 , 629 A.2d at 913 , relied heavily on the conclusions reached by this Court in
Ventrón,
based on expert testimony at trial, that “the tract is saturated by an estimated 268 tons of toxic waste, primarily mercury,” 94
N.J.
at 481 , 468 A.2d 150 , and “[t]he contamination at Berry’s Creek results from mercury processing operations carried on at the site for almost fifty years.”
Id.
at 482 , 468 A.2d 150 . However, the record evidence relied on by the Chancery Division to demonstrate that Morton’s predecessor had intended or expected environmental damage contains few references to mercury discharge, particularly during the 1950s and early 1960s. Rather, the record reflects that from the mid-1950s until institution of the
Ventron
suit, State officials consistently informed Morton’s predecessors that they were discharging “unacceptable” emissions into Berry’s Creek, accompanying those remonstrances with periodic reports analyzing the chemical content of the mercury plant’s emissions. State officials insisted that remedial action be taken, but their warnings resulted only in a prolonged course of evasive action by the operating companies. The record reveals that not until 1970, however, did company officials expressly acknowledge that the “unacceptable” emissions had included discharges of mercury.
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We first identify the relevant operating and parent companies. Berk operated the mercury-processing plant from 1929 to 1960, on a forty-acre tract west of Berry’s Creek. In 1960, Wood Ridge, a wholly-owned subsidiary of Velsicol, purchased Berk’s assets, including the property, and proceeded to operate the plant until 1974. In 1967, Wood Ridge distributed thirty-three of the forty acres to Velsicol but was permitted to dispose of waste on Velsicol’s portion of the tract. Ventrón acquired all of Wood Ridge’s capital stock in 1968, continuing to operate the plant until 1974, when it sold the plant assets to a chemical company and the 7.1-acre tract on which the plant had been located to Rita and Robert Wolf.
For a detailed summary of those portions of the record demonstrating knowledge by Morton’s predecessors that their emissions into Berry’s Creek were deleterious and unacceptable, as well as their failure over almost two decades to take remedial measures, we cannot improve on the Appellate Division’s recapitulation of the documentary evidence, from which we quote at length:
The record before Judge Huot demonstrated that as early as 1956 plaintiffs predecessor was informed that the effluent from the mercury processing plant contained an unacceptable level of pollutants. A report filed by two senior State Health Department public health engineers on April 9, 1956 detailed the results of their inspection of the property. These inspectors found that the plant consumed 60,000 gallons of water per day, about 90% of which was used for cooling purposes. Industrial wastes were produced from three buildings and consisted mostly of cooling water which had a high solid content, mainly insoluble dimethylcithiocarbonates which are organic and inorganic mercury compounds. The waste passed through a sedimentation tank from which the settled solids were recovered and reprocessed. The effluents from the settling tanks combined into a private sewer which discharged into an open ditch about 1200 feet from the plant, which in turn discharged the effluent into Berry’s Creek at a point 2500 feet from the plant. Both public health engineers concluded that the combined effluent from the plant had an unacceptably high level of suspended solids and that the settling tank serving the effluent from one of the buildings was not large enough.
On December 2, 1958 one of the public health engineers, John Wilford, again visited the property “to ascertain the current status of their program for the treatment or disposal of their industrial wastes in order to eliminate pollution of Berry’s Creek.” He reported that the company had not been successful in persuading the Wood-Ridge Sewage Treatment Plant to accept plaintiffs wastes. Wilford made an inquiry about having a large settling tank constructed with an outfall to Berry’s Creek. Nothing about the processing at the plant had changed.
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Wilford explained to the company’s vice-president that a settling tank would not, itself, reduce the pollution to acceptable limits and that if the company intended to continue discharging effluent into Berry’s Creek it would have to submit plans and specifications to the Department of Health for approval. Wilford admonished the corporate official “that as this matter has been brought to [his] attention over two years ago, this department has a right to expect some appreciable progress toward the elimination of this problem.” A four-point course of action was outlined to the company to which its vice-president agreed to comply. By March 17, 1959, however, it was clear to Wilford the company had made no progress “toward eliminating the polluting industrial waste therefrom from Berry’s Creek.” According to Wilford, the company was “cognizant” that its wastes contained mercury compounds which had to be removed.
In September 1959 and again in February 1960 Edward Griche, Inc. conducted an investigation into the nature of the waste emitted by the plant and the type of treatment which would clean the effluent. Both reports showed that the effluent from the processing plant contained many “deleterious characteristics” which included high suspended solids concentration. The report explored several treatment methods, some of which had proven to be highly successful and relatively cheap.
The State Department of Health again inspected the premises on February 4, 1960 taking samples of the industrial waste effluent for the purpose of determining “the current pollutional potential of the wastes.” The written report which issued after that inspection showed that the “pollutional aspect” of the company’s wastes first came to the attention of the State Department of Health in 1956. Although the report indicates that the company was “very cooperative” and “desirous of rectifying the present pollution,” it had yet to decide what type of treatment facility to install and was unable to negotiate for waste disposal with the Borough of Wood-Ridge. Samples of the effluent were taken from three buildings on the premises with a report noting that “no treatment as such is afforded the industrial wastes.” The conclusion of this report, as in an earlier report, stated “the combined industrial wastes effluent from S.W. Berk & Company is unacceptable for discharge into Berry’s Creek.” The report warned that the decision as to the type of waste treatment to be effected had been under consideration for several years; the author threatened legal action to secure compliance with the pertinent statutes.
By March 22,1960 the company knew that the municipal sewerage system would not be able to handle its wastes, even with pretreatment. A letter from the company to the Department of Health indicated, however, that the company was seeking “professional help on design of a treatment plant.” By May 1960 it appeared that Velsieol would purchase Berk’s property and assets. Velsicol was informed of the State Department of Health’s inspection report of February 1960 and was told that Berk had been “planning to make certain installations to reduce the amount of pollution resulting from its operations____” The sale was completed and the company’s name changed to Wood-Ridge Chemical Corporation in July 1960. The State Department of Health again inspected the premises in August 1960 and issued a written report which noted that, despite the name change, “the official personnel remain the same as do also the chief production processes.” At
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the time of this inspection, however, the plant was closed with full production expected to resume by October. Consequently, no sampling of waste was possible and the report merely noted that all production units produced wastes which flowed through a series of settling basins and united in a common ditch leading to Berry’s Creek just below the outfall of the Wood-Ridge Sewerage Treatment Plant. Settling was the only treatment of the waste provided and it was observed that some of the settling basins were in need of cleaning. Again, the company represented to department officials that it was “now planning to construct its own treatment devices.”
The plant was again inspected on December 5,1960. The department’s analysis of the plant’s effluents indicated “a deleterious waste due chiefly to its high turbidity, suspended solids and ether soluble content” The effluent sample taken during the December 1960 visit was removed from a 5-foot deep, 40-foot square lagoon which had recently been excavated behind the industrial property. That lagoon received all the industrial waste effluents from the plant buildings and acted as an additional settling tank with an average detention period of about two days. The lagoon effluent emptied into Berry’s Creek through an underground storm drain pipe. The report concluded with the suggestion that the company proceed with its plans to install additional waste treatment equipment on the premises in order to provide a nonpolluting final effluent.
In February 1964 the State’s supervising engineer for the stream pollution control program wrote to the corporation’s vice-president observing that a year prior the company informed the State Department of Health that it had contracted with consulting engineers to design suitable industrial waste treatment facilities to treat the lagoon effluent. The State complained that it received no engineering studies or- proposals with respect to treatment facilities. Cautioning that the lagoon was nothing more than a temporary or preliminary step leading to treatability studies on the plant’s effluents, Wood-Ridge Chemical was directed to advise the State of its treatment program status and when completion of a satisfactory facility would occur. In response, the company forwarded a “report on industrial waste treatment facilities, Wood-Ridge Chemical Corporation,” authored by Clinton Bogert Associates, Consulting Engineers. Representatives from the company met with State Board of Health officials on August 5, 1964. At that time they reached an agreement in which the company was immediately to authorize final planning of new plant sewers and facilities for the collection and treatment of industrial wastes and to submit them to the department for-approval within the next several weeks. These treatment facilities would be similar in general design to those recommended by the Clinton Bogert report. The effluent quality standards listed in the Bogert report would be adhered to as minimum requirements before the effluent was discharged into Berry’s Creek and the existing waste-holding lagoon would be abandoned after completion and operation of the waste treatment facilities. This agreement was memorialized in a letter from the bureau to the company dated August 6, 1964.
By letter dated November 2, 1964 Wood Ridge reported to the Department of Health about its progress on the waste treatment facility. Wood Ridge promised that construction of a tile sewer and collecting sump for separation of process wastes would be completed by the end of November, after which further laboratory
*19
work would be done on the effluent and final plans for the treatment plant could be completed by March 31, 1965. The department responded by seeking greater haste on the company’s part and indicating the hope that an adequate design and construction of a treatment project would be completed within the next few months so that “the source of pollution to Berry’s Creek may be finally abated.” By January 25, 1965 the Department of Health had apparently not received any information about the laboratory studies which were to accompany final installation of the sewers and collecting sump and sought additional information about the progress of the project. Apparently the sewer and collecting sump were completed on January 15,1965. Wood Eidge planned to have the laboratory studies complete by March, with the planned treatment facilities “on stream by July 1965.” In June 1965, however, the health department had received no reports on the laboratory studies or the design of the waste treatment facilities. Even by March 31,1966 no treatment plant had been designed, let alone completed, at the site.
By late 1969 or early 1970 the federal Environmental Protection Agency became involved in the company’s waste problems. John Ciancia, Chief of the Industrial Waste Section of the Federal Water Quality Administration, visited the site and determined that it was discharging process waste containing mercury. On October 23, 1970 the company approved a capital expenditure for improved effluent treatment — a problem characterized by a company document as “currently at an emergency level.” That document asserted that
We are discharging mercury at a rate which we cannot measure precisely, but which has been estimated by the F.W.Q.A [Federal Water Quality Administration] at 4.2 lbs./day (55 GPM total discharge, averaged over 24 hours, 7 PPM mercury content). The preliminary standard which the F.W.Q.A. appears to be accepting from other mercury users is a maximum of 0.5 lbs./day, which we definitely exceed... Ventron has already suffered adverse publicity because of alleged mercury discharges, and we will certainly receive more if we do not institute controls approved by the F.W.Q.A. While the current furor over mercury pollution undoubtedly contains much exaggeration and misinformation, it is unquestionably a toxic substance, and as such we are under a moral obligation, as well as an impending legal one, to effectively control the mercury effluent from our processes.
From subsequent correspondence between the federal agency and Ventron (by then, 1971, owner of the processing plant), we deduce that the parties were attempting to work out the details of a new treatment process to reduce the amount of mercury admittedly being deposited into Berry’s Creek. Ventron never succeeded in preventing mercury contaminated effluent from reaching Berry’s Creek. As noted, the processing plant tract was sold to the Wolfs in 1974 and their development of the property caused additional pollution problems which resulted in the suit filed by the DEP.
[ 266
N.J.Super.
at 311-317 , 629 A.2d at 901-904 .]
Several aspects of the documentary record are noteworthy. The first State Department of Health report in 1956 noted that samples of wastes in Berk’s settling tanks contained virgin mercu
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ry as well as organic and inorganic mercury compounds, and that effluent from the settling tanks discharged into an open ditch and eventually into Berry’s Creek. At that time, Department of Health engineers informed Berk officials that the effluent discharging from the plant into Berry’s Creek was unacceptable because of the high suspended-solids content and a high biological-oxygen demand (B.O.D.). During a follow-up visit in 1958, a state engineer, responding to a Berk executive’s account of efforts to expedite construction of a new settling tank, informed the executive that a settling tank would not itself reduce the B.O.D. to within acceptable limits, emphasizing that continued discharge of effluent into Berry’s Creek could be allowed only if Berk implemented further treatment in accordance with plans approved by the State. Thus, Berk’s executives were alerted to the risk that the high B.O.D. demand that characterized Berk’s effluent threatened depletion of the oxygen content of Berry’s Creek, which in turn would compromise the Creek’s capacity to accommodate fish, plants, and other wildlife. Moreover, although the early Department of Health reports did not focus on the extent to which the solids in Berk’s effluent included mercury, a March 1959 departmental memorandum reported a conversation with a Berk official indicating his awareness that whatever effluent treatment methodology was selected,
the removal of the mercurial compounds will be a necessity. These are mainly in suspension and a large proportion of them are already removed by sedimentation, but many particles are too fine to permit removal by this means. Work is to be undertaken to determine if they can be successfully removed by a flocculation process.
By early 1960, Berk and its successor, Wood Ridge, knew that the local sewerage authority would not process the company’s effluent, and represented to the State that the company would construct its own treatment facility. As a temporary measure, the company was then discharging its untreated effluent into a lagoon that provided an additional two-days detention before the ultimate discharge into Berry’s Creek. However, Wood Ridge took no action toward construction of a treatment facility until 1964, when it engaged a consulting engineering firm after state officials again
*21
complained about the company’s failure to have submitted plans for the proposed treatment facility. The consulting engineers’ report recommended the general design of Wood Ridge’s new treatment facilities, set forth minimum effluent-quality standards, and contemplated abandonment of the waste-holding lagoon. Although Department of Health officials agreed generally with the report’s proposals, Wood Ridge failed to complete the necessary laboratory studies and never filed final plans for the waste-treatment facility with state officials.
As noted, by 1970 the enforcement responsibility had shifted to the Federal Environmental Protection Agency (EPA), and the regulatory focus was then directed at the company’s discharge of mercury into Berry’s Creek. Whatever the company’s prior awareness of mercury discharges may have been, by October 1970, the company could not fail to acknowledge that mercury “is unquestionably a toxic substance, and as such we are under a moral obligation, as well as an impending legal one, to effectively control the mercury effluent from our processes.” Subsequently, Wood Ridge did install waste-treatment facilities that diminished the volume of mercury-contaminated effluent. However, until the plant ceased operations in 1974, Wood Ridge was unable to reduce the daily volume of mercury discharged into Berry’s Creek below the level considered to be tolerable by the EPA.
II
Issues of Insurance-Policy Interpretation
The Court is presented with a number of significant insurance-coverage issues. Cross-petitioners argue that we need not determine whether the property damage for which remediation was ordered in the
Ventron
litigation resulted from an “occurrence,” because in their view environmental-remediation costs imposed at the instance of governmental-enforcement agencies do not constitute “damages” as that term is used in standard CGL policies. They also contend that those policies containing the standard pollution-exelusion clause afford no coverage to Morton and its
*22
predecessors because the discharges of pollutants from the mercury-processing plant into Berry’s Creek and the surrounding area were not “sudden and accidental.” Morton argues that the record presents an issue of fact about whether the property damage requiring remediation was “intended or expected from the standpoint of the insured,” asserting that the Chancery Division’s grant of summary judgment on that issue was error. We also address the duty-to-defend questions raised by the Appellate Division’s reversal of the judgment for Morton against General Accident for a portion of Morton’s defense costs and counsel fees.
A.
“As Damages”
In their joint cross-petition for certification, several of the insurance company defendants (supported by
amicus
Insurance Environmental Litigation Association) argue that aside from the question whether the discharges of pollutants by Morton’s predecessors constitute covered “accidents” or “occurrences” under the various policies, the expenditures compelled by the judgment in the
Ventron
litigation do not constitute “damages” for which indemnification is payable under those policies. The Chancery Division, relying on
Broadwell Realty Services, Inc. v. Fidelity & Casualty Co.,
218
N.J.Super.
516, 525-30 , 528 A.2d 76 (App.Div. 1987), held that the term “damages” encompassed the remediation expenses mandated in
Ventron.
The Appellate Division did not address the issue. Although some variation appears in the language of the policies, the typical provision, characterized by the Liberty Mutual CGL policy,
supra
at 11, 629 A.2d at 836 , states:
The company will pay on behalf
of
the insured all sums which the insured shall become legally obligated to pay
as damages
because of * * * property damage to which this policy applies, caused by an occurrence * * *.
[Emphasis added.]
The insurers argue that the critical phrase “as damages” confines their duty of indemnity to judgments for traditional tort-liability money damages, and imposes no obligation to reimburse Morton for equitable remedies such as governmentally-mandated
*23
response costs intended to remediate environmental harm. They note and rely on the observation by the trial court that
[t]he State sought and received an Order for the cleanup of the land now owned by plaintiff. Money damages were not awarded to anyone by Judge Lester.
They also contend that the Spill Act, the primary statutory enactment on which defendants’ liability in the
Ventron
litigation was based, distinguishes between “cleanup and removal costs,” defined in
N.J.S.A.
58:10-23.11b(d), and “damages,” citing
N.J.S.A.
58:10-23.11g(a). The essence of the insurers’ argument, however, is that the undefined phrase “as damages” unambiguously is understood in the context of insurance coverage to have a technical but settled meaning, and refers only to traditional third-party compensatory awards rather than equitable-type relief intended not to compensate claimants but to remediate environmental damage.
Morton, supported by
amici
State of New Jersey and New Jersey State League of Municipalities, argues that the policy term “as damages” encompasses the remediation costs imposed by the Ventron judgment. Morton preliminarily observes that the joint and several liability of the Ventron defendants was predicated both on the Spill Act and common-law nuisance principles,
Ventron, supra,
94
N.J.
at 493 , 468 A.2d 150 , asserting that at least the relief based on common-law principles is analogous to a traditional tort-law damages award. More generally, Morton argues that the undefined term “as damages” should not be construed technically but rather should be accorded its plain meaning in order to vindicate the objectively-reasonable expectations of insureds, who would assume that CGL policies would cover environmental-remediation costs as well as third-party liability claims.
In resolving those competing contentions, we are not required to write on a blank slate, numerous federal and state courts having preceded us in addressing the issue. Three Circuit Courts of Appeals, applying state law, have concluded that environmental-remediation costs are not covered damages under CGL policies.
See Gresham v. Commercial Union Ins. Co.,
951
F.
2d 872 , 875
*24
(8th Cir.1991) (Arkansas law);
Parker Solvents Co. v. Royal Ins. Cos. of America,
950 F.2d 571 (8th Cir.1991) (Arkansas law);
A. Johnson & Co. v. Aetna Casualty & Sur. Co.,
933 F.2d 66, 69 (1st Cir.1991) (Maine law);
Cincinnati Ins. Co. v. Milliken & Co.,
857 F.2d 979 , 981 (4th Cir.1988) (South Carolina law);
Continental Ins. Cos. v. Northeastern Pharmaceutical & Chem. Co.,
842 F.2d 977 , 985 (8th Cir.) (en banc) (Missouri law),
cert, denied,
488
U.S.
821 , 109
S.Ct.
66 , 102 L.Ed.2d 43 (1988)
{NEPACCO); Maryland Casualty Co. v. Armco, Inc., 822 F.
2d 1348, 1352 (4th Cir.1987) (Maryland law),
cert, denied,
484
U.S.
1008 , 108
S.Ct.
703 , 98 L.Ed.2d 654 (1988). A number of federal district courts have reached the same conclusion.
United States Fidelity & Guar. Co. v. Morrison Grain Co.,
734
F.Supp.
437, 450 (D.Kan.1990) (Kansas law);
Verlan, Ltd. v. John L. Armitage & Co.,
695
F.Supp. 950,
953-55 (N.D.Ill.1988) (Illinois law);
Hayes v. Maryland Casualty Co.,
688
F.Supp.
1513, 1515 (N.D.Fla.1988) (Florida law);
Travelers Ins. Co. v. Ross Elec.,
685
F.Supp.
742, 744-45 (W.D.Wash.1988) (Washington law). The Supreme Judicial Court of Maine has reached the same result.
See Patrons Oxford Mutual Ins. Co. v. Marois,
573 A.2d 16, 18-19 (1990). The rationale for the viewpoint that “damages” does not include equitable relief such as payment of environmental-response costs is expressed plainly by the Eighth Circuit in
NEPACCO, supra:
Viewed outside the insurance context, the term “damages” is ambiguous: it is reasonably open to different constructions. Webster’s Third New International Dictionary 571 (1971) defines “damages” as “the estimated reparation in money for detriment or injury sustained: compensation or satisfaction imposed by law for wrong or injury caused by a violation of a legal right.” The dictionary definition does not distinguish between legal damages and equitable monetary relief.
E.g., New Castle County v. Hartford Accident & Indemnity Co.
[ 673 F.Supp. 1359 ], at 1366 [ (D.Del.1987) ]. Thus, from the viewpoint of the lay insured, the term “damages” could reasonably include all monetary claims, whether such claims are described as damages, expenses, costs, or losses.
In the insurance context, however, the term “damages” is not ambiguous, and the plain meaning of the term “damages” as used in the insurance context refers to legal damages and does not include equitable monetary relief.
See Maryland Casualty Co. v. Armco, Inc.,
822 F.2d [1348] at 1352 [ (4th Cir.1987) ]. The CGL policies require Continental to “pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of ... property damage to which this insurance applies caused by an occurrence.” (Emphasis
*25
added.) “The obligation of the insurer to pay is limited to ‘damages,’ a word which has an accepted technical meaning in law.”
[Aetna Casualty & Surety Co. v.
]
Hanna,
224
F.2A
[499] at 503 [ (5th Cir.1955) ]. Although not defined in the CGL policies, “[t]he word ‘damages’ is not ambiguous in the insurance context. Black letter insurance law holds that claims for equitable relief are not claims for ‘damages’ under liability insurance contracts.”
[842
F.2d
at 985-86 (quoting
Maryland Casualty Co. v. Armco, Inc.,
643
F.Supp.
430, at 432 (D.Md.1986)).]
The clear weight of authority, however, among both federal and state courts adopts the view that the undefined term “damages” in CGL policies should be accorded its plain, non-technical meaning, thereby encompassing response costs imposed to remediate environmental damage.
Aetna Casualty & Sur. Co. v. Pintlar Corp.,
948 P.2d 1507 , 1513 (9th Cir.1991) (applying Idaho law);
Gerrish Corp. v. Universal Underwriters Ins. Co.,
947 P.2d 1023 , 1030 (2d Cir.1991) (applying Vermont law),
cert, denied,
—
U.S.
-, 112
S.Ct.
2939 , 119 L.Ed.2d 564 (1992);
Independent Petrochemical Corp. v. Aetna Casualty & Sur. Co.,
944 P.2d 940 , 947 (D.C.Cir.1991) (applying Missouri law),
cert, denied sub nom. Certain Underwriters at Lloyds, London v. Independent Petrochemical Corp.,
—
U.S.
-, 112
S.Ct.
1777 , 118 L.Ed.2d 435 (1992);
New Castle County v. Hartford Accident & Indem. Co.,
933 P.2d 1162, 1184-91 (3d Cir.1991) (applying Delaware law),
on remand,
778
F.Supp.
812 (D.Del.1991),
rev’d on other grounds,
970 P.2d 1267 (3d Cir.1992),
cert, denied,
— U.S. -, 113
S.Ct.
1846 , 123
L.Ed.2d
470 (1993);
Avondale Indus., Inc. v. Travelers Indem. Co.,
887
F.2d
1200 , 1207 (2d Cir.1989) (applying New York law),
cert, denied,
496
U.S.
906 , 110
S.Ct.
2588 , 110
L.Ed.2d
269 (1990);
Township of Gloucester v. Maryland Casualty Co.,
668
F.Supp.
394, 400 (D.N.J.1987) (applying New Jersey law);
AIU Ins. Co. v. Superior Court,
51 Cal.3d 807 , 274
Cal.Rptr.
820, 834-45 , 799 P.2d 1253, 1267-78 (1990);
Aerojet-General Corp. v. Superior Court,
211
Cal.App.3d
216 , 257
Cal.Rptr.
621, 628 (1989);
AY. McDonald Indus, v. Insurance Co. of North America,
475 N.W.2d 607, 615-22 (Iowa 1991);
Hazen Paper Co. v. United States Fidelity & Guar. Co.,
407
Mass.
689 , 555
N.E.2d
576, 582-84 (1990);
United States Aviex Co. v. Travelers Ins. Co.,
125
Mich.App.
579 , 336
*26
N.W.2d 838, 842-43 (1983);
Minnesota Mining & Mfg. Co. v. Travelers Indem. Co., 457 N.W.2d
175, 179-84 (Minn.1990);
C.D. Spangler Constr. Co. v. Industrial Crankshaft & Eng’g Co.,
326
N.C.
133 , 388 S.E.2d 557, 565-69 (1990);
Boeing Co. v. Aetna Casualty & Sur. Co.,
113 Wash.2d 869 , 784 P.2d 507, 510-15 (1990);
Compass Ins. Co. v. Cravens, Dargan & Co.,
748 P.2d 724, 729-30 (Wyo.1988).
In adopting the view that “damages” includes environmental remediation costs, the Washington Supreme Court observed:
These cases have found that cleanup costs are essentially compensatory damages for injury to property, even though these costs may be characterized as seeking “equitable relief.” Or put another way, “coverage does not hinge on the form of action taken or the nature of relief sought, but on an actual or threatened use of legal process to coerce payment or conduct by a policyholder.” In
United States Fidelity & Guar. Co.,
the court found that once property damage is found as a result of environmental contamination, cleanup costs should be recoverable as sums that the insured was liable to pay. According to an earlier case,
United States Aviex Co. v. Travelers Ins. Co.,
125
MichApp.
579, 589-90, 336 N.W.2d 838 (1983), the environmental cleanup costs are covered because they are equivalent to “damages” under state law:
If the state were to sue in court to recover in traditional “damages”, including the state’s costs incurred in cleaning up the contamination, for the injury to the ground water, defendant’s obligation to defend against the lawsuit and to pay damages would be clear. It is merely fortuitous from the standpoint of either plaintiff or defendant that the state has chosen to have plaintiff remedy the contamination problem, rather than choosing to incur the costs of clean-up itself and then suing plaintiff to recover those costs. The damage to the natural resources is simply measured in the cost to restore the water to its original state.
[Boeing, supra,
784 P.2d at 511-12 (citations omitted).]
The Third Circuit, applying Delaware law, reached the same conclusion:
The competing lines of cases relied upon by CNA and the County demonstrate ’ that resolution of this issue turns on whether the word “damages” should be given its legal, technical meaning or its plain, ordinary meaning. Given the precepts of Delaware law and the absence of a definition limiting the meaning of “damages” in CNA’s policies, we think that to state the question is virtually to answer it. In our view, the ordinary, usual meaning of “damages,” which we are bound to apply under Delaware law unless the policy clearly directs us to another meaning, does not convey the limitations suggested by CNA In short, we believe that the Delaware Supreme Court would find the
Avondale-Boeing-Spangler
line of cases to be the better reasoned. We thus conclude that the term “damages,” in the
*27
context of a standard CGL policy, should be interpreted broadly to encompass response costs and other equitable relief.
[New Castle, supra,
933
F.
2d at 1188 .]
Although this Court declined to address the issue in
New Jersey Department of Environmental Protection v. Signo Trading International, Inc.,
130
N.J.
51, 67 , 612 A.2d 932 (1992), Justice O’Hern, dissenting on other grounds, concluded that “environmental-response costs are covered damages under a CGL policy.”
Id.
at 74 , 612 A.2d 932 . We find his analysis of the issue to be thoroughly persuasive:
“Damages” means money to most people. Money is what DEP wants from Springer. One United States District Court in New Jersey has perhaps stated it best: In assessing what an insured would reasonably expect from a CGL policy, it reasoned that “[t]he average person would not engage in a complex comparison of legal and equitable remedies in order to define * * * ‘damages’, but would conclude based on the plain meaning of words that the cleanup costs imposed on [the insured] * * * would constitute an obligation to pay damages.”
American Motorists Ins. Co. v. Levelor Lorentzen, Inc.,
No. 88-1994, 1988 WL 112142 at 3 (D.N. J. Oct. 14, 1988);
see also Avondale Indus., Inc. v. Travelers Indemn. Co.,
697
F.Supp.
1314, 1319 (S.D.N.Y.1988) (“The average businessman does not differentiate between ‘damages’ and ‘restitution;’ in either case, money comes from his pocket and goes to third parties. * * * The average businessman would consider himself covered for cleanup expenditures applicable to others’ properties.”),
aff'd,
887 F.2d 1200 (2d Cir.1989).
[Id.
at 75-76, 612 A.2d 932 .]
We are fully in accord with the views expressed by Justice O’Hem in
Signo Trading
and adopted by the majority of federal and state courts that have addressed the issue. Accordingly, we hold that the environmental-response costs and remediation expenses imposed on Morton’s predecessors in the
Ventrón
litigation constitute sums that Morton will have to pay “as damages” because of property damage, within the meaning of the CGL policies at issue. Although the “owned-property” exclusion, which generally bars coverage for “property damage to property owned or occupied [by] or rented to the insured,” is asserted as a defense by some insurers, we imply no view concerning the effect of that
*28
exclusion on the coverage issues before us, that issue not having been raised, briefed, or argued by the parties.
B.
The Pollution-Exclusion Clause
We next address the arguments against coverage based on the so-called pollution-exclusion clause. Several insurers contend that irrespective of our conclusion about whether the property damage requiring remediation was caused by an “occurrence,” no coverage exists under policies containing the standard pollution-exclusion clause, which, as noted above,
supra
at 11-12, 629 A.2d at 836 provides:
This insurance does not apply * * * (f) to bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fames, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.
Although the record reveals that some of the excess carriers had issued policies with non-standard pollution-exclusion clauses, we confine our analysis to the standard clause, on which the extensive briefs of the parties and
amici
have also focused. To facilitate our discussion of the issues, we first summarize our holding with respect to the interpretation that we shall apply to the standard pollution-exclusion clause, and then set forth in detail the factual and legal foundation for our conclusion.
We overrule the Appellate Division’s decision in
Broadwell, supra,
to the extent that it holds that the standard pollution-exclusion clause should be understood merely to impose the same conditions on coverage as are imposed by the definition of “occurrence,” which focuses on whether the ultimate damage was expected or intended from the standpoint of the insured. 218
N.J.Super.
516, 534-36 , 528 A.2d 76 . As is evident from the text of the standard clause, the phrase “sudden and accidental” does not characterize or relate to the
damage
caused by pollution but instead narrowly limits the kind of “discharge, dispersal, release or escape” of pollutants for which coverage is provided. Although the word “sudden” is hardly susceptible of precise definition, and
*29
is undefined in those CGL policies that include the standard pollution-exclusion clause, we are persuaded that “sudden” possesses a temporal element, generally connoting an event that begins abruptly or without prior notice or warning, but the duration of the event — whether it lasts an instant, a week, or a month — is not necessarily relevant to whether the inception of the event is sudden. The meaning of the term “accidental” being generally understood, we discern that the phrase “sudden and accidental” in the standard pollution-exclusion clause describes only those discharges, dispersals, releases, and escapes of pollutants that occur abruptly or unexpectedly and are unintended. If applied as written, although interpretative questions undoubtedly would require resolution, the clause sharply and dramatically would restrict the coverage that previously had been provided under CGL policies for property damage caused by accidental pollution, which included coverage for continuous or repeated exposure to conditions, provided that the property
damage
— not the discharge — was “neither expected nor intended from the standpoint of the insured.” We are fully satisfied that if given literal effect, the standard clause’s widespread inclusion in CGL policies would limit coverage for pollution damage to so great an extent that the industry’s representation of the standard clause’s effect, in its presentation to New Jersey and other state insurance regulatory agencies, would have been grossly misleading. Proffered to regulators merely as a clarification of existing coverage “so as to avoid any question of intent,” and as a continuation of coverage for pollution-caused “injuries that result[ ] from an accident,” the industry’s understatement of the clause’s actual effect on coverage for pollution damage is both apparent and unjustifiable. Although the insurers urge that we not consider the regulatory history of the standard clause without a fuller record, we are persuaded that a remand would be redundant, and that this record together with the reported cases that address the regulatory history and the abundant independent commentary on the subject affords an accurate and comprehensive basis for our determination.
*30
The industry’s presentation and characterization of the standard pollution-exclusion clause to state regulators constituted virtually the only opportunity for arms-length bargaining by interests adverse to the industry, insureds having virtually no choice at all but to purchase the industry-wide standard CGL policy. Accordingly, we deem appropriate construing the pollution-exclusion clause in a
maimer
consistent with the objectively-reasonable expectations of the New Jersey and other state regulatory authorities, because only those regulatory authorities were presented with an opportunity to disapprove the clause. As presented, the regulatory authorities would not readily have understood that the pollution-exclusion clause eliminated
all
coverage for pollution-related claims except in cases of abrupt and accidental discharges. Rather than “clarify” the scope of coverage, the clause virtually eliminated pollution-caused property-damage coverage, without any suggestion by the industry that the change in coverage was so sweeping or that rates should be reduced. For those reasons, we decline to enforce the standard pollution-exclusion clause as written. To do so would contravene this State’s public policy requiring regulatory approval of standard industry-wide policy forms to assure fairness in rates and in policy content, and would condone the industry’s misrepresentation to regulators in New Jersey and other states concerning the effect of the clause.
To the extent that an interpretation of the pollution-exclusion clause less sweeping than that required by its literal terms was fairly inferable from the industry’s explanatory statements to regulators, we perceive that regulators would reasonably have understood the effect of the clause to have denied coverage for the intentional discharge, dispersal, release, or escape of known pollutants, whether or not the eventual damage was intended or expected from the standpoint of the insured. The industry’s presentation of the clause to regulators described it as a clarification of the “intended and expected” clause of the basic “occurrence” definition “so as to avoid any question of intent,” and could fairly be understood as an attempt to override the issue whether damage was intended by excluding coverage for intentional dis
*31
charges of known pollutants. Accordingly, we construe and give effect to the standard pollution-exclusion clause only to the extent that it shall preclude coverage for pollution-caused property damage caused by an “occurrence” if the
insured
intentionally discharged, dispersed, released, or caused the escape of a known pollutant.
1. Adoption and Approval of the Standard Pollution-Exclusion Clause.
The background events that led the insurance industry to adopt the standard pollution-exclusion clause are well-documented and relatively uncontroverted.
See
Nancy Ballard and Peter Manus,
Clearing Muddy Waters: Anatomy of the Comprehensive General Liability Pollution Exclusion,
75
Cornell L.Rev.
610, 622-27 (1990); Robert Chesler et al.,
Patterns of Judicial Interpretation of Insurance Coverage for Hazardous Waste Site Liability,
18
Rutgers L.J.
9 , 31-38 (1986); Richard Hunter,
The Pollution Exclusion in the Comprehensive General Liability Insurance Policy,
1986
U. of Ill.L.Rev.
897, 903-06; Thomas Reiter et al.,
The Pollution Exclusion Under Ohio Law: Staying the Course,
59
U.Cin.L.Rev.
1165, 1187-1203 (1991); E. Joshua Rosenkranz, Note,
The Pollution Exclusion Through the Looking Glass,
74
Geo.L.J.
1237, 1241-63 (1986). A number of courts have also reviewed the events leading to the adoption of the pollution-exclusion clause.
See New Castle County, supra,
933 F.2d at 1196-98 ;
Broadwell, supra,
218
N.J.Super.
at 532-34 , 528 A.2d 76 ;
Just v. Land Reclamation Ltd.,
155 Wis.2d 737 , 456 N.W.2d 570, 573-75 (1990).
As both the cases and commentators acknowledge, CGL policies prior to 1966 afforded liability coverage for bodily injury and property damage “caused by accident,” the term “accident” being undefined in the standard policy. Courts generally construed the term “accident” to encompass ongoing events that inflicted injury over an extended period provided that the injury was unexpected and unintended from the insured’s standpoint.
See, e.g., Anchor
*32
Casualty Co. v. McCaleb,
178 F.2d 322 (5th Cir.1949) (imposing coverage for damage to adjacent properties from oil flow over two-day period);
Employers Ins. Co. v. Rives,
264
Ala.
310 , 87 So.2d 653 (1955) (holding property damage from gradual leakage of gasoline into well covered as accident),
on remand,
38
Ala.App.
411 , 87 So.2d 646 ,
cert, denied,
264
Ala.
696 , 87 So.2d 658 (1956);
McGroarty v. Great Am. Ins. Co.,
36
N.Y.2d
358 , 368 N.Y.S.2d 172 , 329 N.E.2d 172 (1975) (imposing liability for damage caused by excavation and construction on adjacent property over several months); Ballard & Manus,
supra,
75
Cornell L.Rev.
at 623-24; Reiter et al.,
supra,
59
U.Cin.L.Rev.
at 1187-88; Rosenkranz,
supra,
74
Geo.L.J.
at 1241-46.
In 1966 the insurance industry revised its standard-form CGL policy to afford coverage based on an “occurrence,” which the policy defined as “an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage that was neither expected nor intended from the standpoint of the insured.” Ballard & Manus,
supra,
75
Cornell L.Rev.
at 624; Reiter et al.,
supra,
59
U.Cin.L.Rev.
at 1190. (The 1973 version of the standard CGL policy promulgated by the ISO re-defined “occurrence” as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.” Robert Tyler, Jr. and Todd Wilcox,
Pollution Exclusion Clauses: Problems in Interpretation and Application Under the Comprehensive General Liability Policy,
17
Idaho L.Rev.
497, 499 (1981)). The 1966 revision of the CGL policy was generally understood “to cover pollution liability that arose from gradual losses,” Rosenkranz,
supra,
74
Geo.L.J.
at 1247, and was acknowledged as having been “intended to broaden coverage * * * by avoiding an implication that there was no coverage for a continuing condition as distinguished from a sudden event.” Robert Keeton,
Basic Text on Insurance Law,
§ 5.4c, at 300 (1971). Those courts that have attempted to trace the events leading to adoption of the pollution-exclusion clause confirm the uniform understanding of the broadened coverage afforded under
*33
the 1966 revision of the CGL policy.
See, e.g., New Castle County, supra,
933 F.2d at 1197 (“The standard, occurrence-based policy thus covered property damage resulting from gradual pollution. So long as the ultimate loss was neither expected nor intended, courts generally extended coverage to all pollution-related damage, even if it arose from the intentional discharge of pollutants.”);
United States Fidelity & Guar. Co. v. Specialty Coatings Co.,
180
Ill.App.3d
378 , 129
Ill.Dec.
306, 312 , 535 N.E.2d 1071, 1077 (Ct.) (“Prior to the insertion of the pollution-exclusion in the 1970s, ‘occurrence-based’ coverage embraced not only the usual accident, but also exposure to conditions which continued for an unmeasured period of time.”),
appeal denied,
127
Ill.2d
643 , 136
Ill.Dec.
609 , 545
N.E.2d
133 (1989);
see also
Chesler et al.,
supra,
18
Rutgers L.J.
at 31 (“[T]he inclusion of ‘injurious exposure to conditions’ as part of the definition of accident indicated that injury resulting from a continuing process was covered under the policy.”); Reiter et al.,
supra,
59
U.Cin.L.Rev.
at 1191 (“Indeed, gradual pollution was a paradigm example of what
was
a covered ‘occurrence,’ a feature of the CGL policy that the insurance industry aggressively marketed and routinely emphasized.”).
Foreseeing an impending increase in claims for environmentally-related losses, and cognizant of the broadened coverage for pollution damage provided by the occurrence-based, CGL policy, the insurance industry drafting organizations began in 1970 the process of drafting and securing regulatory approval for the standard pollution-exclusion clause. “The insurer’s primary concern was that the occurrence-based policies, drafted before large scale industrial pollution attracted wide public attention, seemed tailor-made to extend coverage to most pollution situations.” Rosenkranz,
supra,
74
Geo.L.J.
at 1251. Commentators attribute the insurance industry’s increased concern about pollution claims to environmental catastrophes that occurred during the 1960s. “Pollution claims burst on the insurance scene following the Torrey Canyon disaster and the Santa Barbara off-shore drilling oil spills in 1969.” Hourihan,
Insurance Coverage for Environmental Damage Claims,
15
Forum
551, 533 (1980). Other commentators
*34
observe that the insurance industry, concerned about public reaction to environmental pollution, desired to clarify and publicize its position that CGL policies did not indemnify knowing polluters. Reiter et al.,
supra,
59
U.Cin.L.Rev.
at 1195-56. Consistent with that objective, the President of INA announced his company’s intention to adopt the pollution-exclusion endorsement with these comments:
INA will continue to cover pollution which results from an accidental discharge of effluents — the sort of thing that can occur when equipment breaks down.
We will no longer insure the company which knowingly dumps its wastes. In our opinion, such repeated actions — especially in violation of specific laws — are not insurable exposures. Moreover, we are inclined to think that any attempt to provide such insurance might well be contrary to public policy. We at INA hope that our anti-pollution exclusion may help encourage many companies to take the first, crucial steps toward improving their manufacturing processes — the steps that will lead eventually to a cleaner, healthier and, we hope,- happier life for all. [Charles K. Cox,
Liability Insurance in the Era of the Consumer,
Address Before the Annual Conference of the American Society of Insurance Management (Apr. 9, 1970),
quoted in
Robert S. Soderstrom,
The Role of Insurance in Environmental Litigation,
11
Forum
762, 767 (1976).]
Whatever may have been the industry’s motivation, the General Liability Governing Committee of the Insurance Rating Board (IRB) (successor to the National Bureau of Casualty Underwriters) authorized its drafting committee
to consider the question and determine the propriety of an exclusion, having in mind that pollutant-caused injuries were envisioned to some extent in the adoption of the current “occurrence” basis of coverage, and some protection is afforded by way of the definition of this term.
[Reiter et al., 59
U.Cin.L.Rev.
at 1197 (footnote omitted).]
The end-product of the IRB’s drafting effort was the standard pollution-exclusion clause,
supra
at 11, 629 A.2d at 836 , which became known as exclusion “f ’ of the standard form CGL policy. According to one member of the drafting committee, the pollution-exclusion clause allowed the underwriters “to perform their traditional function as insurers of the unexpected event or happening and yet * * * [did] not allow an insured to seek protection from his liability insurers if he knowingly pollute[d].” Francis X. Bruton,
Historical Liability and Insurance Aspects of Pollution Claims, Proceedings of Insurance, Negligence and Compensation
*35
Law Section, ABA,
1971, at 311,
quoted in
Soderstrom,
swpra,
11
Forum
at 768. Other commentators have expressed similar conclusions about the central purpose of the pollution-exclusion clause.
See, e.g.,
Soderstrom,
supra,
11
Forum
at 767 (“By the use of the pollution-exclusion endorsement * * * [c]overage for willful, intentional or expected violations was to be excluded.”); S. Hollis M. Greenlaw,
The CGL Policy to the Pollution Exclusion Clause: Using the Drafting History to Raise the Interpretation Out of the Quagmire,
23
ColumJ.L. & Soc.Probs.
233, 246 (1990) (“Yet although the language of the pollution-exclusion clause is ambiguous, intra industry statements made contemporaneously with the drafting of the clause and representations made by the industry to various state insurance commissioners * * * reveal that the industry clearly intended to preclude coverage of the
reckless
polluter as well as the
intentional
polluter.”). The New York State legislature apparently shared that view of the pollution-exclusion clause’s purpose, enacting in 1971 a statute requiring policies issued to commercial or industrial enterprises to include the standard form pollution-exclusion clause,
N.Y.Ins.Law
§ 46(13)-(14) (McKinney 1972), and offering this explanation for its adoption:
For example, a polluting corporation might continue to pollute the environment if it could buy protection from potential liability for only the small cost of an annual insurance premium, whereas, it might stop polluting, if it had to risk bearing itself the full penalty for violating the law.
[New York Legis.Ann.
353-54 (1971).]
As a New York appellate court explained, “The conclusion thus becomes compelling that the pollution exclusion clause, mandated by statute, was intended to apply only to actual polluters.”
Niagara County v. Utica Mut. Ins. Co.,
80
A.D.2d
415 , 439 N.Y.S.2d 538, 540 (1981).
After industry approval, the IRB and the Mutual Insurance Rating Bureau (MIRB) sought state regulatory approval to add the pollution-exclusion clause as an endorsement to standard CGL policies, apparently submitting to most if not all states in which
*36
approval was sought a standard explanatory memorandum that read in part as follows:
Coverage for pollution or contamination is not provided in most cases under present policies because the damages can be said to be expected or intended and thus are excluded by the definition of occurrence. The above exclusion clarifies this situation so as to avoid any question of intent. Coverage is continued for pollution or contamination caused injuries when the pollution or contamination results from an accident * * *.
[Reprinted in
Ballard and Manus,
supra,
75
Cornell L.Rev.
at 625-26.]
As the record indicates, the identical explanatory memorandum was filed by the IRB with the New Jersey Department of Insurance in May 1970. The Attorney General’s
amicus
brief observes that the industry’s submission of the pollution-exclusion clause and its approval by the Department of Insurance were specifically required by New Jersey’s statutory provisions regulating rates for insurance coverage,
N.J.S.A.
17:29A-1 to -28, although no rate change was sought with respect to the pollution-exclusion clause. We take note of other provisions of the insurance statutes that require approval of commercial-insurance policy provisions in order to prevent the issuance of policy forms that are inequitable or misleading.
See N.J.S.A.
17:29AA-11. We assume that most states had in effect comparable regulatory provisions that mandated the submission of the pollution-exclusion clause for state approval.
In considering the IRB’s explanatory memorandum concerning the effect of the pollution-exclusion clause — which the record suggests was the only explanation offered to New Jersey insurance officials — we accord special significance to the process by which that clause gained approval in New Jersey and other states. Realistically, once the clause gained regulatory approval, it was uniformly adopted as an endorsement to the standard-form CGL policies that were issued to innumerable commercial enterprises and governmental agencies for more than a decade. The abundant case law called to our attention by counsel for all parties may be regarded merely as an illustrative sample of the virtually universal inclusion of the standard clause, or one of its derivatives, in CGL policies issued throughout the United States. Of course,
*37
after regulatory approval the specific provisions of the pollutionexelusion clause ordinarily were not negotiable by purchasers of CGL policies. As some commentators observe, the typical commercial insured rarely sees the policy form until after the premium has been paid.' Ballard and Manus,
supra,
75
Cornell L.Rev.
at 621; W. David Slawson,
Mass Contracts: Lawful Fraud in California, 48 S.Cal.L.Rev.
1, 12 (1974). Accordingly, to the extent that the pollution-exclusion clause ever was subjected to arms-length evaluation by interests adverse to the insurance industry, that evaluation occurred only when the clause was submitted to and reviewed by state regulatory authorities.
In considering the accuracy of the IRB’s explanatory memorandum, we note that the insurance companies in this litigation, and in general, assert the position that the pollution-exclusion clause precludes coverage for all pollution damage, whether or not intended, unless the
discharge
of pollutants was “sudden” (meaning abrupt) and “accidental,” or a so-called “boom” event. That being the industry’s understanding of the effect of the pollution-exclusion clause, the first two sentences of the explanatory memorandum to state regulators are, to say the least, paradigms of understatement:
Coverage for pollution or contamination is not provided in most cases under present policies because the damages can be said to be expected or intended and thus are excluded by the definition of occurrence. The above exclusion clarifies this situation so as to avoid any question of intent.
The first sentence is simply untrue. As discussed,
supra
at 32-33, 629 A.2d at 849-850 , the 1966 version of the CGL policy covered property damage from gradual pollution and imposed no restriction on the “suddenness” of the pollutant discharge. We repeat the Third Circuit’s observation in
New Castle, supra:
The standard, occurrence-based policy thus covered property damage resulting from gradual pollution. So long as the ultimate loss was neither expected nor intended, courts generally extended coverage to all pollution-related damage, even if it arose from the intentional discharge of pollutants.
*38
For that matter, the appendix filed by the Attorney General contains the MIRB’s Explanatory Memorandum of Changes submitted to the New Jersey Department of Banking & Insurance in support of the 1966 revision of the CGL policy. That memorandum stated:
Coverage has been broadened to an “occurrence” basis which is defined in the jacket. The definition reinforces the intent that the injury be fortuitous from the insured’s standpoint and
by the addition of coverage for “injurious exposure to conditions’’ eliminates the connotation of suddenness previously intended as respects coverage on an “accident” basis.
[Emphasis added.]
In the context of the generally-recognized broad coverage afforded by the pre-existing “occurrence” policies for property damage caused by pollution, the industry’s statement that “such coverage is not provided in most cases under present policies” is not only astonishing but inaccurate and misleading as well. As is widely acknowledged, even by commentators sympathetic to the insurers’ position, the industry’s primary concern in 1970 was that the occurrence-based policies “seemed tailor made to extend coverage to most pollution situations.” Rosenkranz,
supra,
74
Geo. L.J.
at 1251.
See supra
at 33-35, 629 A.2d at 849-850 .
The second sentence is even more misleading than the first. It states that “[t]he above exclusion clarifies this situation so as to avoid any question of intent,” undoubtedly referring back to the immediately preceding clause that reads “because the damages can be said to be expected or intended and thus are excluded by the definition of occurrence.” Undeniably, the pollution-exclusion clause does “avoid any question of intent” because the clause excludes
all
coverage for unintentional pollution damage except for that caused by sudden and accidental discharges. But to characterize so monumental a reduction in coverage as one that “clarifies this situation” simply is indefensible. Stated accurately, the pollution-exclusion clause, as construed today by the industry, eliminates
all
coverage for unintended pollution-caused damage
*39
that the occurrence-based policy had provided, except for the unusual “boom-event” type case in which the
discharge
of the pollutants was both sudden — meaning abrupt — and accidental. To describe a reduction in coverage of that magnitude as a “clarification” not only is misleading, but comes perilously close to deception. Moreover, had the industry acknowledged the true scope of the proposed reduction in coverage, regulators would have been obligated to consider imposing a correlative reduction in rates.
The succeeding sentence of the explanatory memorandum continued to camouflage the literal effect of the pollution-exclusion clause: “Coverage is continued for pollution or contamination caused injuries when the pollution or contamination results from an accident * * *.” In asserting that coverage for pollution-caused injuries is “continued,” the statement does not alert regulators to the critical change effected by the clause: under the occurrence-based policy, coverage was afforded if the
property damage
was accidental; under the pollution-exclusion clause, even if the property damage is accidental, no coverage is afforded unless the
discharge of pollutants
is both sudden and accidental. The memorandum utterly obscures that distinction, and the conclusion is virtually inescapable that the memorandum’s lack of clarity was deliberate.
Supplemental explanations submitted by the IRB to state regulatory agencies were similarly lacking in candor. As noted by a Georgia federal court, the IRB informed the Georgia Insurance Department by letter of June 10, 1970, that
“the impact of the [pollution exclusion clause] on the vast majority of risks would be no change. It is rather a situation of clarification * * *. Coverage for expected or intended pollution and contamination is not now present as it is excluded by the definition of occurrence. Coverage for accidental mishaps is continued [except for the risks described in the filing].”
[Claussen v. Aetna Casualty & Sur. Co.,
676
F.Supp.
1571, 1573 (S.D.Ga.1987) (quoting letter from R. Stanley Smith, Manager of the Insurance Rating Board, to the Georgia Insurance Department, June 10, 1970),
question certified by
865 F.2d 1217 (11th Cir.),
certified question answered by
259
Go.
333, 380 S.E.2d 686 ,
*40
answer to certified question conformed to
888 , F.2d 747 (11th Cir.1989),
on remand,
754
F.Supp.
1576 (S.D.Ga.1990).]
That letter prompted the Court to observe:
The Court does not wish to condone the conduct of the insurance industry that plaintiff has exposed. The statements made by the Insurance Rating Board to the Georgia Insurance Department, if not fraudulent, certainly were not straightforward. The Rating Board downplayed the substantial effect the pollution exclusion clause would have on existing coverage in an effort to obtain approval for the clause’s insertion into insurance policies.
[Ibid,]
Similarly, in the course of regulatory proceedings before the West Virginia Commissioner of Insurance, the MIRB submitted a supplemental memorandum to explain the purpose of the exclusion: “This endorsement is actually a clarification of the original intent, in that the definition of occurrence excludes damages that can be said to be expected or intended.” George Pendygraft et al.,
Who Pays for Environmental Damage: Recent Developments in CERCLA Liability and Insurance Coverage Litigation,
21
Ind.L.Rev.
117, 154 (1988). In reliance on the industry’s submissions, the West Virginia Insurance Commissioner approved the pollution-exclusion in a written order that stated in part:
The said companies and rating organizations have represented to the Insurance Commissioner, orally and in writing, that the proposed exclusions * * * are merely clarifications of existing coverage as defined and limited in the definitions of the term “occurrence”, contained in the respective policies to which said exclusions would be attached;
(2) To the extent that said exclusions are mere clarifications of existing coverages, the Insurance Commissioner finds that there is no objection to the approval of such exclusions!.]
[Reprinted in Joy Technologies v. Liberty Mut. Ins. Co.,
[ 187
W.Va.
742 ], 421 S.E.2d 493, 499 (1992).]
Insurance departments in at least two other states expressed concern over the industry’s submission of the pollution-exclusion clause. In. June 1970, the Kansas Commissioner of Insurance addressed several questions to the IRB. One question reflected the Commissioner’s assumption that the current definition of occurrence provided coverage for property damage caused by pollution. He wrote: “It appears that the General-Automobile Liability policy now provides coverage for contamination and
*41
pollution. Please confirm.” The IRB’s response to the Commissioner’s inquiry was inaccurate and misleading. It tracked the language of the explanatory memorandum submitted to state regulators, and did not attempt to explain or to disclose the full intended impact of the pollution-exclusion clause:
It is our opinion that coverage for pollution or contamination is not provided under the present General-Automobile Liability policy because the damages can be said to be expected or intended, and thus are excluded by the definition of occurrence. It should be noted that the proposed endorsements will definitely clarify the situation.
The Insurance Commissioner of Puerto Rico apparently disapproved the pollution-exclusion clause when it initially was filed, prompting a supplemental letter from the IRB to the Commissioner. The IRB’s letter sheds no light whatsoever on the restriction of coverage that the industry intended to achieve through the pollution-exclusion clause:
We certainly appreciate that where an insured acts in violation of the law, the policy does not provide coverage for the consequences of such acts. The exclusion is not aimed at taking care of such a situation. Rather, it is designed to clarify the policy as respects other situations where questions of intent might arise. Such questions usually arise when, with respect to a particular situation, the policy does not clearly spell out what is and is not covered in terms clearly understood by the insured or his representative. Relying solely upon the policy definition of occurrence which requires that the act causing damage must not be expected nor intended by the insured, might well cause dispute as to whether in fact the act was unexpected or unintended particularly in a fact situation involving a continuous course of action. This kind of situation is often very costly to both insureds and companies since many of them are brought into court to be resolved. All too often, the courts have been deciding such questions in favor of insureds, while strongly criticizing companies for not clearly spelling out intent in the policy. The courts are insisting that policies should clearly set forth intent. When, in the courts opinion, the policy does not, companies usually end up paying out large sums of money for damages resulting from situations wherein no coverage was ever intended and for which no premium was ever charged. Under such circumstances, we strongly believe that it is both necessary and desirable to clarify as many situations as possible so as to avoid any question of intent. This is precisely what our Contamination or Pollution Exclusion is designed to do.
As noted, the response to the Insurance Commissioner of Puerto Rico contains no disclosure about how the specific wording of the pollution-exclusion clause would operate to reduce substantially coverage that previously had been provided for pollution
*42
occurring over a sustained period. The conclusion is inescapable that the IRB intentionally avoided any discussion that would illuminate the magnitude of the intended restriction in coverage.
Because of the regulatory history leading to approval by the various state regulatory authorities, a number of State Attorneys General, including the New Jersey Attorney General in the
amicus
brief filed with this Court, have urged that the pollution-exclusion clause be interpreted in a manner consistent with the industry’s representations to regulatory authorities in 1970.
See, e.g.,
Brief of
Amici Curiae
State of Delaware and Commonwealth of Pennsylvania,
New Castle County, supra,
933
F.2A
1162; Brief of
Amicus Curlew
Insurance Commissioner of West Virginia,
Liberty Mut. Ins. Co. v. Triangle Indus., Inc.,
182
W.Va.
580 , 390
S.E.2A
562 (1990); Memorandum of
Amicus Curiae
State of Indiana, in Support of Plaintiffs Motion for Partial Summary Judgment,
Ulrich Chem., Inc. v. American States Ins. Co.,
1990 WL 484974 (Ind.Cir.Ct.1990) (No. 73C 01-8901-CP 016). Although the interests of states in insurance-coverage litigation are generally consistent with the interests of insureds, the assertion by several State Attorneys General of estoppel-type arguments, based on a generalized recognition that the industry’s presentation of the pollution-exclusion clause to regulators was misleading, strongly suggests that the issue warrants careful and comprehensive consideration.
Responding to assertions that the IRB’s representations to state regulators concerning the effect of the pollution-exclusion clause were misleading,
amicus curiae
Aetna Casualty & Surety Co. (Aetna) argues that “regulatory history” should not be confused with “drafting history.” Referring to an affidavit submitted in the
New Castle
litigation by one of the drafters of the pollution-exclusion clause, Aetna contends that the intent of the drafters of the clause was to restrict pollution coverage to the classical “accident” or “boom” event, and to exclude coverage for gradual pollution. That argument was addressed directly in deposition testimony by Richard E. Stewart, Superintendent of the New
*43
York State Department of Insurance from January 1967 to December 1970 and President of the National Association of Insurance Commissioners, 1970-71 (testifying in
J.T. Baker, Inc. v. Aetna Casualty & Surety Co.,
No. CV-4794-SSB (D.N.J.1990)):
“[T]he drafting documents,
the internal documents,
speak of sudden in its temporal sense, and as accomplishing a serious cutback in coverage. Granted. I am not questioning the accuracy of anything in Mr. Bruton’s affidavit as to what was going on.
The filings with the states are completely inconsistent with that. And
* * *
do not disclose it, do not develop it, and in fact affirmatively maintain that we’re just dealing with a clarification of the occurrence definition.
Now, to me, and I think to other insurance people, what goes in a state filing is of much greater probative power than what is in an internal and unreleased series of memoranda And since the
— the
internal communications, the drafting history documents that use temporal were not communicated outside the company bureau world, either to insureds and brokers, but only the filing documents and something like the Aetna bulletins to the field were communicated, but the filing documents are the ones that really matter, and they to me, in terms of what [a] company should be held to, contain the version of this ambiguous term which the industry should be held to. It’s as simple as that, and I think it’s a very straightforward answer * *
[Deposition Testimony of Richard Stewart,
quoted in
Robert Sayler,
The Emper- or’s Newest Clothes, Revisionism and Retreat: The Insurer’s Last Word on the Pollution Exclusion,
5
Medley’s Litig. Reps., Insurance
at 27, 46 (1991).]
2. Judicial Treatment of the Pollution-Exclusion Clause.
The abundance of federal- and state-court decisions addressing the pollution-exclusion clause confirms that an enormous outpouring of judicial energy already has been expended in attempting to fathom how this exclusion should be interpreted. Although categorizing the various judicial approaches may appear superficially to be helpful, caution is essential because the factual circumstances often diminish the significance of a court’s ruling. A Florida federal judge made the point colorfully:
This court recognizes that there is a plethora of authority from jurisdictions throughout the United States which, depending on the facts presented and the allegations of the underlying complaints, go “both ways” on the issues presented today. The cases swim the reporters like fish in a lake. The Defendants would have this Court pull up its line with a trout on the hook, and argue that the lake is full of trout only, when in fact the water is full of bass, salmon and sunfish too.
*44
[Pepper’s Steel & Alloys v. United States Fidelity & Guar, Co.,
668
F.Supp.
1541, 1549-50 (S.D.Fla.l987)J
Nevertheless, the divergent judicial approaches to the issue inform our own evaluation concerning the manner in which the pollution-exclusion clause should be construed.
We first survey the New Jersey decisions. Next, we review the extensive federal and state case law that has construed “sudden” to have a temporal meaning or has concluded that coverage under the pollution-exclusion clause is not provided for discharges of pollutants over a sustained period. Finally, we consider the substantial number of federal and state decisions that construe “sudden” to have a non-temporal meaning or that determine “sudden and accidental” to be ambiguous and to be construed against the insurer.
a.
New Jersey Case Law.
The earliest New Jersey case to address the pollution-exclusion clause was
Lansco, Inc. v. Department of Environmental Protection,
138
N.J.Super.
275 , 350 A.2d 520 (Law Div.1975),
aff'd o.b.,
145
N.J.Super.
433 , 368 A.2d 363 (App.Div.1976),
certif. denied,
73
N.J.
57 , 372 A.2d 322 (1977), in which the insured sought declaratory relief to establish coverage under a CGL policy for the cost of cleaning up an oil spill. Apparently, vandals had opened the valves on oil storage tanks causing some 14,000 gallons of oil to leak from the tanks into the Hackensack River. The carrier resisted coverage for the cost of cleanup, relying on the pollution-exclusion clause. The Chancery Division held, however, that the term “sudden” meant “happening without previous notice or on very brief notice; unforeseen; unexpected; unprepared for,” and that because the oil spill had been neither expected nor intended by Lansco, it qualified as a sudden and accidental discharge, thereby qualifying for coverage. 138
N.J.Super.
at 282 , 350 A.2d 520 .
Seven years later, in
Jackson Township Municipal Utilities Authority v. Hartford Accident & Indemnity Co.,
186
N.J.Super.
*45
156, 451 A.2d 990 (Law Div.1982), a local utility authority instituted suit to compel its carriers to defend and indemnify it from claims asserted by residents that the Authority negligently operated its landfill, causing pollutants to seep into a nearby aquifer and contaminate the water supply. The carriers disclaimed coverage, citing the pollution-exclusion clause. The Law Division, relying on out-of-state cases, concluded that the clause was ambiguous and that it could be “interpreted as simply a restatement of the definition of “occurrence” — that is, that the policy will cover claims where the injury was “neither expected nor intended.”
Id.
at 164, 451 A.2d 990 . Observing that the clause intended to bar coverage for the knowing polluter, the court determined that the Authority “never expected or intended that the waste would seep into the aquifer resulting in damage and injury to others.”
Ibid.
Accordingly, the court ordered the carriers to provide a defense, reserving decision on their duty to indemnify.
Id.
at 165-66, 451 A.2d 990 . Similarly, in
CPS Chemical Co. v. Continental Insurance Co.,
199
N.J.Super.
558 , 489 A.2d 1265 (Law Div.1984),
rev’d on other grounds,
203
N.J.Super.
15 , 495 A.2d 886 (App.Div.1985), the plaintiff instituted suit to compel a defense to an action instituted by the City of Philadelphia, alleging that the plaintiffs waste hauler had removed hazardous waste from its premises and, without the plaintiffs knowledge, had dumped the waste without authorization in a Philadelphia garbage dump. The carriers disclaimed coverage, relying in part on the pollution-exclusion clause. The Law Division, citing
Jackson Township, supra,
186
N.J.Super.
at 164 , 451 A.2d 990 , observed that the clause had been construed simply as a restatement of the definition of “occurrence.”
CPS Chemical, supra,
199
N.J.Super.
at 569 , 489 A.2d 1265 . Concluding that the clause was ambiguous, the court construed the terms “sudden and accidental” as including unexpected and unintended events, and ordered the carriers to provide a defense.
Ibid.
By far the most widely-cited New Jersey decision is
Broadwell, supra,
218
N.J.Super.
516 , 528 A.2d 76 , involving a claim for damages against a carrier that refused to indemnify the insured
*46
for the costs of remediating a gasoline leak that was migrating into telephone-company cable vaults located underground on adjacent property. The carrier denied liability, contending that the pollution-exclusion clause restricted coverage to damage caused by an “unexpected and instantaneous catastrophe.”
Id.
at 530 , 528 A.2d 76 . Tracing the history of the adoption of the clause, the Appellate Division observed that its purpose was to encourage industry to improve its manufacturing and disposal practices, imposing a bar to coverage for pollution damage resulting from “knowing” pollution of the environment.
Id.
at 533 , 528 A.2d 76 . The court determined that the coverage provided by the pollution-exclusion clause was intended to be coextensive with the coverage provided by the definition of occurrence,
ibid.,
observing that any ambiguity and confusion inherent in the drafting of the clause should be resolved against the insurer.
Id.
at 536 , 528 A.2d 76 . It construed the term “sudden” to mean unexpected and unintended, without resolving whether the focus of the exclusion clause was on the discharge of pollutants or the damage to the environment.
Id.
at 535 , 528 A.2d 76 . Because it concluded that the record presented a factual issue on whether Broadwell had expected or intended environmental damage, the court reversed the Law Division’s grant of summary judgment.
b.
Cases Holding That “Sudden” has a “Temporal” Meaning or, Alternatively, That Discharges of Pollutants Over a Sustained Period are not “Sudden.”
Our discussion of federal and out-of-state cases construing the pollution-exclusion clause is necessarily extensive, in view of the remarkable number of reported decisions within the last decade or so. In addition, we perceive that so significant a connection exists between the decisions and the factual context in which the issue is posed that we have supplemented our citation of authorities with brief summaries of both the holdings and the factual settings, in order that the apparent divergence in judicial treatment of the pollution-exclusion clause may be better understood.
*47
A significant number of federal and state courts, without adverting to the regulatory history or the background of the pollution-exclusion clause, have held that the clause excludes coverage for property damage resulting from the discharge of pollutants over a sustained period, although in several such cases the polluting activity was so flagrant that coverage might have been denied on the basis that the damage was not unexpected or unintended. Those courts bar coverage either on the basis that “sudden” has a temporal connotation, meaning abrupt or instantaneous, or else conclude simply that discharges of pollutants over an extended period cannot be deemed “sudden and accidental,” without defining precisely the limits of those terms. A number of federal courts of appeal, applying state law, have adopted that approach.
See Aetna Casualty & Sur. Co. v. General Dynamics Corp.,
968 F.2d 707, 710-11 (8th Cir.1992) (holding that because “accidental” means “unexpected,” “sudden” would be redundant if not held to mean abrupt, and hence damage caused by discharges over several months of 300,000 gallons of bilge water by insured’s waste hauler at city landfill and discharges of toxic wastes from trucks and deteriorating tanks at haulers disposal site were barred from coverage by pollution-exclusion clause);
Hartford Accident & Indem. Co. v. United States Fidelity & Guar. Co.,
962 F.2d 1484 , 1487-92 (1992) (holding that “sudden” has temporal element suggesting immediacy, abruptness, and quickness, and barring coverage under pollution-exclusion clause for environmental damage caused by regular, intentional discharges over fifteen years of liquid wastes containing PCBs even though insured was unaware that wastes included PCBs),
cert, denied sub nom. El Paso Natural Gas Co. v. Hartford Accident & Indem. Co.,
—
U.S.
-, 113
S.Ct.
411 , 121
L.Ed.2d
335 (1992);
Northern Ins. Co. v. Aardvark
Assocs., 942 F.2d 189, 193-95 (3d Cir.1991) (applying Pennsylvania law, concluding that “sudden and accidental” describes unexpected discharges that are abrupt and last short time, and barring coverage for property damage caused by waste hauler’s discharges of hazardous waste at disposal sites over several years);
Lumbermens Mut. Ins. Co. v. Belleville Indus., Inc.,
938
*48
F.2d 1423, 1425, 1427 (1st Cir.1991) (applying Massachusetts law, construing “sudden” to mean abrupt, and holding that where insured engaged in continuous, long-term discharge of known pollutants, coverage was not provided for isolated instances in which rainstorm and fire had caused specific discharges of pollutants),
cert, denied,
— U.S. -, 112
S.Ct.
969 , 117 L.Ed.2d 134 (1992);
A Johnson & Co. v. Aetna Casualty & Sur. Co.,
933 F.2d 66, 72-76 (1st Cir.1991) (applying Maine law, construing “sudden” to mean temporally abrupt, and holding that pollution-exelusion clause bars coverage for insured’s share of cleanup cost at waste-disposal facility that received hazardous-waste shipments from insured and others over thirteen years; record demonstrated that contamination of disposal site and adjacent property had occurred over extended period and not because of “sudden and accidental” discharges);
Ogden Corp. v. Travelers Indem. Co.,
924 F.2d 39 , 42-43 (2d Cir.1991) (applying New York law, construing “sudden” to describe discharges occurring over short period of time, and holding pollution-exclusion clause bars carrier’s obligation to defend or indemnify insured in underlying litigation alleging that insured had engaged in continuous discharge of pollutants over period of thirty-three years);
Grant-Southern Iron & Metal Co. v. CNA Ins. Co.,
905 F.2d 954, 956-58 (6th Cir.1990) (applying Michigan law, construing pollution-exclusion clause as barring coverage for continuous or ongoing occurrences of pollution, but reversing summary judgment for insurer and remanding for factual determination of whether polluting events had been accidental and short in duration);
EAD Metallurgical, Inc. v. Aetna Casualty & Sur. Co.,
905 F.2d 8 , 10-11 (2d Cir.1990) (holding that pollution-exclusion clause barred insurer’s duty to provide coverage in underlying litigation that alleged insured willfully had discharged radioactive substances into environment over six-year period);
FL Aerospace v. Aetna Casualty & Sur. Co.,
897 F.2d 214, 219-20 (6th Cir.) (determining that under Michigan law sudden and accidental event occurs quickly, without warning and unintentionally, and holding that pollution-exclusion clause barred insured’s claim for reimbursement of assessed cost of cleanup of
*49
industrial-waste site in absence of proof that damage had been caused by sudden and accidental discharges of hazardous waste),
cert, denied,
498
U.S.
911 , 111
S.Ct.
284 , 112
L.Ed.2d
238 (1990);
United States Fidelity & Guar. Co. v. Star Fire Coals, Inc.,
856
F.
2d 31, 34-35 (6th Cir.1988) (applying Kentucky law to define “sudden” by reference to temporal element that includes immediate and unexpected, and holding that property damage caused by regular and continuing discharges of coal dust over seven to eight years for which Kentucky air-pollution authorities had issued series of citations did not qualify for coverage under “sudden and accidental” exception to pollution-exclusion clause);
Great Lakes Container Corp. v. National Union Fire Ins.,
727
F.
2d 30, 33-34 (1st Cir.1984) (applying New Hampshire law and holding that regular and continuous discharge of hazardous waste in ordinary course of drum- and barrel-reconditioning business was neither “occurrence” nor sudden and accidental discharge of pollutants under CGL policy).
Numerous federal district court decisions reflect a similar approach to the interpretation of the pollution-exclusion clause.
See Anaconda Minerals Co. v. Stoller Chem. Inc.,
773
F.Supp.
1498, 1505-06 (D.Utah 1991) (applying Utah law as defining “sudden” to mean abrupt or instantaneous, and holding property damage caused by intentional discharges of thousands of tons of flue dust containing hazardous materials and discharges of other hazardous waste stored in drums and above-ground tanks ineligible for coverage under “sudden and accidental” exception to pollution-exclusion clause);
United States Fidelity & Guar. Co. v. Morrison Grain Co., supra,
734
F.Supp.
at 446-49 (applying Kansas law to define “sudden” as combining elements of quickness and without warning, and holding that property damage caused by deteriorating drums containing chemicals and pesticides improperly stored at one site and improperly buried at second site ineligible for coverage under pollution-exclusion clause, notwithstanding insured’s lack of subjective knowledge that management of enterprise operated as joint venture improperly had disposed of hazardous waste);
Ray Indus., Inc. v. Liberty Mut. Ins. Co.,
728
F.Supp.
*50
1310, 1319 (E.D.Mich.1989) (applying Michigan law as construing “sudden and accidental” exception not to apply when discharges occurred regularly or continuously in course of insured’s business, and holding property damage caused in part by insured’s regular and continuous practice over thirteen years of depositing contaminated barrels and drums containing hazardous waste in landfill ineligible for coverage under “sudden and accidental” exception to pollution-exclusion clause),
aff'd in part, rev’d in part,
974 F.2d 754 (6th Cir.1992);
Federal Ins. Co. v. Susquehanna Broadcasting Co.,
727
F.Supp.
169, 177 (M.D.Pa.1989) (applying Pennsylvania law as construing pollution-exclusion clause to bar coverage for all damage caused by gradual pollution irrespective of whether insured had knowledge or participated in discharges, and denying coverage to insured for property damage caused over several years by improper hazardous waste disposal practices engaged in by hauler hired by insured),
amended in part on other grounds,
738
F.Supp.
896 (M.D.Pa.1990),
aff'd,
928 F.2d 1131 (3d Cir.),
cert. denied,
— U.S. -, 112
S.Ct.
86 , 116 L.Ed.2d 58 (1991);
C.L. Hathaway Sons v. American Motorists Ins.,
712
F.Supp.
2ll65, 267-69 (D.Mass.1989) (applying Massachusetts law as construing “sudden” to have temporal aspect and holding that property damage caused by gradual escape of toluene from underground pipe at slow rate over lengthy period ineligible for coverage under “sudden and accidental” exception to pollution-exclusion clause);
Fireman’s Fund Ins. Cos. v. Ex-Cell-O Corp.,
702
F.Supp.
1317, 1326 (E.D.Mich.1988) (applying Michigan law to construe “sudden” as meaning “brief, momentary or lasting only a short time” but without resolving coverage questions and ultimately concluding after trial that insurers not obligated to indemnify insured for cost of cleanup of property damage resulting from chemical contamination in view of finding that
damage
had been expected or intended from standpoint of insured, 750
F.Supp.
1340, 1350 (E.D.Mich. 1990));
State of New York v. Amro Realty Corp.,
697
F.Supp.
99, 110 (N.D.N.Y.1988) (applying New York law as defining “sudden” to mean happening without previous notice or on very brief notice, unforeseen, unexpected, unprepared for, and holding that property
*51
damage caused by intentional discharges of chemical solvents into drains and septic systems by insured’s lessee over twenty-year period ineligible for coverage under “sudden and accidental” exception to pollution-exclusion clause),
aff'd in part, rev’d in part,
936 F.2d 1420 (2d Cir.1991);
United States Fidelity & Guar. Co. v. The Murray Ohio Mfg. Co.,
693
F.Supp.
617, 620-22 (M.D.Tenn. 1988) (applying Tennessee law as defining “sudden” to have temporal meaning combining “unexpected” with “quick,” and holding that property damage resulting from insured’s delivery of hazardous waste over six-year-period to hauler for disposal at hauler’s site ineligible for coverage under “sudden and accidental” exception to pollution-exclusion clause),
aff'd
875 F.2d 868 (6th Cir.1989);
Hayes v. Maryland Casualty Co.,
688
F.Supp.
1513, 1515 (N.D.Fla.1988) (applying Florida law to construe pollution-exclusion clause to bar. coverage for property damage caused by pollution extending over substantial period of time and holding property damage caused by intentional deposits on insured’s property of filtration material from dry-cleaning fluid over extended period ineligible for coverage under pollution-exclusion clause whether or not insured had expected or intended damage to occur);
Borden, Inc. v. Affiliated FM Ins.,
682
F.Supp.
927, 930 (S.D.Ohio 1987) (applying Ohio law as defining “sudden” to mean “happening without previous notice or with very brief notice” and holding property damage resulting from regular and intentional deposits of radioactive and hazardous wastes over six years, creating thirty-five-foot pile covering thirty-five to forty acres, ineligible for coverage under “sudden and accidental” exception to pollution-exclusion clause),
aff'd,
865 F.2d 1267 (6th Cir.),
cert, denied,
493
U.S.
817 , 110
S.Ct.
68 , 107 L.Ed.2d 35 (1989);
Centennial Ins. Co. v. Lumbermens Mut. Casualty Co.,
677
F.Supp.
342, 348-49 (E.D.Pa.1987) (applying Pennsylvania law as defining “sudden” to exclude discharges occurring continuously or even sporadically over period of time and holding that property damage resulting from improper disposal by insured’s hauler of waste shipments containing over 79,000 gallons of hazardous waste delivered to hauler over thirteen-month period ineligible for coverage
*52
under “sudden and accidental” exception to pollution-exclusion clause);
American Motorists Ins. Co. v. General Host Corp.,
667
F.Supp.
1423, 1428-31 (D.Kan.1987) (construing “sudden” to mean unexpected and happening on brief notice, and holding that property damage arising from pollution of aquifer caused by discharges of salt brine in course of regular operation of salt plant over seventy-five years ineligible for coverage under “sudden and accidental” exception to pollution-exclusion clause);
aff'd,
946 F.2d 1482 ,
remanded after reh’g,
946
F.2d
1489 (10th Cir.1991);
Fischer & Porter Co. v. Liberty Mutual Ins. Co.,
656
F.Supp.
132, 140 (E.D.Pa.1986) (applying Pennsylvania law as defining “sudden” to mean abrupt, without warning, and holding that property damage including contamination of wells and aquifers resulting from continuous dumping of toxic chemicals into drains that discharged on ground ineligible for coverage under “sudden and accidental” exception to pollution-exclusion clause).
Some state courts have adopted a similar interpretation of the pollution-exclusion clause.
See Shell Oil Co. v. Winterthur Swiss Ins. Co.,
12 Cal.App.4th 715 , 15 Cal.Rptr.2d 815, 841-42 (1993) (construing “sudden and accidental” as conveying sense of unexpected event that is abrupt or immediate but not requiring that polluting event necessarily terminate quickly or have brief duration);
Dimmitt Chevrolet, Inc. v. Southeastern Fidelity Ins. Corp.,
No. 78293, 1993 WL 241520, at 5 ,- So.2d -, -(Fla. July 1, 1993)
1
(construing “sudden and accidental” to be unambiguous and to include sense of immediacy or abruptness, and holding that pollution-exclusion clause barred coverage for property damage caused by discharges of oil at plant site in regular course of
*53
business by company to which insured had sold used crankcase oil generated by insured’s business);
International Minerals & Chem. Carp. v. Liberty Mut. Ins. Co.,
168
Ill.App.3d
361 , 119
Ill.Dec.
96, 106-08 , 522
N.E.2d
758, 768-70 (1988) (construing “sudden” to mean “without or on brief notice, abruptly or hastily” and holding that property damage caused by insurer’s activities in regular course of business including emptying used barrels of chemicals and toxic wastes on grounds of insured’s premises ineligible for coverage under “sudden and accidental” exception to pollution-exelusion clause);
Polaroid Corp. v. Travelers Indent. Co.,
414
Mass.
747 , 610
N.E.2d
912 (1993) (construing “sudden” to be without ambiguity and to have temporal meaning, observing that whether discharge of pollutants is “sudden and accidental” is determined from perspective of discharger rather than from perspective of insured, and holding insured’s claims for indemnity for cost of remediating property damage caused by intentional discharges of pollutants by insured’s waste processor ineligible for coverage under pollution-exclusion clause);
Liberty Mut. Ins. Co. v. SCA Servs., Inc.,
412
Mass.
330 , 588
N.E.2d
1346, 1349-50 (1992) (construing “sudden” as having temporal element suggesting abruptness and holding that property damage resulting from routine business activity over several months during which barrels containing hazardous waste had been emptied into open trenches or dumped into trenches and flattened with bulldozer ineligible for coverage under “sudden and accidental” exception to pollution-exclusion clause);
Lumbermens Mut. Casualty Co. v. Belleville Indus., Inc.,
407
Mass.
675 , 555
N.E.2d
568, 572 (1990) (deciding only legal issues certified by federal district court in
In re Acushnet River & New Bedford Harbor: Proceedings Re Alleged PCB Pollution,
725
F.Supp.
1264 (D.Mass.1989),
answer conformed to
938
F.
2d 1423 (1st Cir.1991),
cert, denied,
— U.S. -, 112
S.Ct.
969 , 117
L.Ed.2d
134 (1992), and holding that in context of pollution-exclusion clause “sudden” is unambiguous, has temporal quality, and abruptness of commencement of pollutant’s discharge is crucial element);
Upjohn Co. v. New Hampshire Ins. Co.,
438
Mich.
197 , 476
N.W.2d
392, 397-401 (1991) (concluding
*54
that “sudden” is defined with “a temporal element that joins together conceptually the immediate and the unexpected,” and holding that where tank-level measurements of storage tank with toxic by-product dropped from 475 gallons to 80 gallons on day 1700 gallons of by-product was added, and continued to show low-level readings over ensuing three weeks while 13,600 additional gallons of by-product were added, property damage caused by leakage of 12,000 to 18,000 gallons of toxic by-product was ineligible for coverage under “sudden and accidental” exception to pollution-exclusion clause);
Waste Management of Carolinas, Inc. v. Peerless Ins. Co.,
315
N.C.
688 , 340 S.E.2d 374, 382-83 (1986) (defining “sudden” as describing an abrupt or precipitant event, and holding that cleanup cost of contaminated groundwater resulting from insured’s disposal over six-year period of solid wastes at landfill that leached into contaminated adjacent property ineligible for coverage under “sudden and accidental” exception to pollution-exclusion clause);
Transamerica Ins. Co. v. Sunnes,
77
Or.App.
136 , 711 P.2d 212, 214 (1985) (holding property damage caused by intentional discharges in regular course of business of acid and caustic wastes into city sewer line ineligible for coverage under “sudden and accidental” exception to pollution-exclusion clause even if damage had been unintended),
cert, denied,
301
Or.
76 , 717 P.2d 631 (1986);
Technicon Elecs. Corp. v. American Home Assurance Co.,
74
N.Y.2d
66 , 544
N.Y.S.2d
531 , 542
N.E.2d
1048, 1050-51 (1989) (holding property damage caused by intentional discharges of toxic wastes into waterway ineligible for coverage under “sudden and accidental” exception to pollution-exclusion clause);
Lower Paxton Township v. United States Fidelity & Guar. Co.,
383
Pa.Super.
558 , 557 A.2d 393, 402-04 (concluding that although “sudden” can include element of “unexpectedness,” its use in conjunction with “accidental” reflects additional element of abruptness and brevity, and holding that evidence that methane-gas discharges from Township’s landfill, which had been detected and monitored for approximately eighteen months, had penetrated into basement of residence of plaintiff in underlying litigation insufficient to support jury verdict requiring insurer to
*55
indemnify Township pursuant to “sudden and accidental” exception to pollution-exclusion clause),
appeal denied,
523
Pa.
649 , 567 A.2d 653 (1989);
Techalloy Co. v. Reliance Ins. Co.,
338
Pa.Super.
1 , 487 A.2d 820, 826-28 (1984) (holding that claim for personal injuries asserted against insured seeking damages for injuries caused by intentional dumping of toxic waste over twenty-five years ineligible for coverage under “sudden and accidental” exception to pollution-exelusion clause).
As noted, those decisions turn primarily on the literal language of the pollution-exclusion clause, and typically make no reference to its derivation or regulatory history. We infer from their factual context that many of those cases, particularly those in which the polluting activity was intentional or continued over a period of years, could have been decided on the basis that no covered “occurrence” had been proved because the eventual damage had been intended or expected. Because the underlying facts in many of those cases reflect irresponsible waste-disposal practices on the part of insureds, the determination denying coverage would probably have been unaffected even if “sudden” had been construed to mean unexpected rather than abrupt, the purposeful and routine characteristic of the discharges rather than the temporal quality of “sudden” being decisive in most instances.
c.
Cases Holding that the Meaning of Sudden is “Unexpected” and not Necessarily Temporal or Concluding that “Sudden and Accidental” Exception is Ambiguous and to be Construed Against Insurer.
In addition to the New Jersey lower court cases,
supra
at 44-46, 629 A.2d at 856-857 , a significant number of federal and state courts have declined to construe “sudden” as necessarily conveying a temporal meaning akin to abrupt, or have determined that either the word “sudden” or the “sudden and accidental” exception to the pollution-exclusion clause is ambiguous and to be construed against the insurer. A common characteristic of those cases is that the conduct of the insureds is generally less culpable than
*56
that reflected in cases construing “sudden” to have a temporal meaning, relatively few of these
insureds
having regularly engaged in willful or knowing pollution. To the extent that some cases conclude that the “sudden and accidental” exception to the pollution-exclusion clause is ambiguous, those courts have identified three alternative justifications for that conclusion: (1) the background and regulatory history of the pollution-exclusion clause, see
supra
at 31-3, 629 A.2d at 848-856 ; (2) the variations found in standard dictionary definitions of “sudden”; or (3) the antecedent judicial interpretation of the “sudden and accidental” clause as it had been used in so-called “boiler and machinery” policies. As background, we briefly elaborate on tfte latter two grounds advanced by some courts to support the conclusion that “sudden and accidental” is ambiguous.
Because the words “sudden” and “accidental” in the standard CGL policy are undefined, courts often resort to the general rule that the terms in an insurance policy should be interpreted in accordance with their plain and commonly-understood meaning.
Lansco, supra,
138
N.J.Super.
at 281-82 , 350 A.2d 520 . In
Hecla Mining Co. v. New Hampshire Insurance Co.,
811 P.2d 1083 (1991), the Colorado Supreme Court turned to dictionary definitions to inform its interpretation of the word “sudden”:
[W]e find that a number of recognized dictionaries differ on the meaning of the term “sudden.” Webster’s Third New International Dictionary 2284 (1986) attaches a number of definitions to “sudden.” Webster’s first defines “sudden” as “happening without previous notice ... occurring unexpectedly ... not foreseen.” Webster’s then lists synonyms for “sudden” that include “prompt” and “immediate.” Random House Dictionary of the English Language 1900 (2 ed. 1987) defines the word “sudden” in a temporal sense as “happening, coming, made, or done quickly.” Black’s Law Dictionary 1284 (5th ed. 1979) defines “sudden” as “[h]appening without previous notice or with very brief notice; coming or occurring unexpectedly; unforeseen; unprepared for.”
Although “sudden” can reasonably be defined to mean abrupt or immediate, it can also reasonably be defined to mean unexpected and unintended. Since the term “sudden” is susceptible to more than one reasonable definition, the term is ambiguous, and we therefore construe the phrase “sudden and accidental” against the insurer to mean unexpected and unintended.
*57
[Id.
at 1091-92.]
Similarly, the Georgia Supreme Court’s frequently-quoted analysis of the meaning of “sudden” also relies on dictionary meanings and usages to support its conclusion that the primary sense of “sudden” is “unexpected”:
The primary dictionary definition of the word is “happening without previous notice or with very brief notice; coming or occurring unexpectedly; not foreseen or prepared for.” Webster’s Third New International Dictionary, at 2284 (1986).
See also
Punk and Wagnalls Standard Dictionary, at 808 (1980); Black’s Law Dictionary, at 1284 (1979). The definition of the word “sudden” as “abrupt” is also recognized in several dictionaries and is common in the vernacular. Perhaps, the secondary meaning is so common in the vernacular that it is, indeed, .difficult to think of “sudden” without a temporal connotation: a sudden flash, a sudden burst of speed, a sudden bang. But, on reflection one realizes that, even in its popular usage, “sudden” does not usually describe the duration of an event, but rather its unexpectedness: a sudden storm, a sudden turn in the road, sudden death. Even when used to describe the onset of an event, the word has an elastic temporal connotation that varies wi

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/2062885. Public record. Not legal advice.