Petition for Writ of Certiorari — Triangle Industries, Inc. v. Liberty Mutual Insurance

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FILED

JUN 1 1992

IN THE OFFICE OF THE CLERK

SUPREME COURT OF THE UNITED STATES”

9 49600

October Term, 1991

TRIANGLE INDUSTRIES, INC..,

a/k/a ANC HOLDINGS, INC.:

TRIANGLE PWC, INC..,

Petitioners,

Vv. o-

LIBERTY MUTUAL INSURANCE Co..,

NEW JERSEY PROPERTY/LIABILITY INSURANCE

GUARANTY ASSOCIATION, on behalf of

IDEAL MUTUAL INSURANCE COMPANY, in liquidation,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

STEPHEN M. ORLOFSKY

BLANK, ROME, COMISKY

& MCCAULEY

New Jersey Resident Partner

Woodland Falls Corporate Park

210 Lake Drive East, Suite 200

Cherry Hill, New Jersey 08002

(609) 779-3600

Counsel for Petitioners

PACKARD PRESS / LEGAL DIVISION, 1617 JFK BOULEVARD, PHILA, PA 19103 (215) 563-9000

QUESTIONS PRESENTED

1. Whether the United States Court of Appeals for

the Fourth Circuit erred in deciding an issue of New

Jersey law unaddressed by, but currently pending be-

fore, the Supreme Court of New Jersey in Morton

International, Inc. v. General Accident Insurance Co. of

America No. 34,341, (N.J. Sup.Ct. certif. granted,

March 2, 1992), involving the interpretation of the

pollution exclusion clause of a Comprehensive General

Liability (“CGL”) policy, in a manner which is diamet-

rically opposed to the decision of the United States Court

of Appeals for the First Circuit, CPC International, Inc.

v. Northbrook Excess and Surplus Insurance Co., Nos.

91-1580 and 91-1734, 1992 U.S. App. LEXIS 5342 (1st

Cir. March 24, 1992), thereby creating an inter-circuit

conflict which requires this Court to accept jurisdiction

and then stay all further proceedings pending the deci-

sion of the New Jersey Supreme Court in Morton?

2. Whether the United States Court of Appeals for

the Fourth Circuit incorrectly predicted that the New

Jersey Supreme Court would hold that the sudden and

accidental exception to the pollution exclusion clause in

a CGL policy applies to the “discharge” of contaminants,

as opposed to the “pollution damage,” as interpreted by

New Jersey’s trial and intermediate appellate courts in

accordance with the standards announced by this Court

in the cases of Salve Regina College v. Russell, __ U.S.

—, 111 S.Ct. 1217, 1222, 113 L.E.2d 190 (1991) and

C.I.R. v. Bosch’s Estate, 387 U.S. 456, 87 S.Ct. 1776, 18

L.E.2d 886 (1967)?

ie |

TABLE OF CONTENTS

Page

QUESTIONS PIE ED once ccceesssevesaces i

ey et tt PTT TTT TT TERT TT TOT TT ii

SARs GR AAT ERE ARE 0 ob oc sac censdvescens vi

BOT IT ETE T TET T TT CCE T TTT 1

FNS 6.5.6 4004. 60a STR EATER ER RES TREO 2

SEAT EIMEECS OR Times CABS oc ccccesscscecesas 2

REASONS FOR GRANTING RELIEF........... 10

I. IN LIGHT OF THE INTER-CIRCUIT CON-

FLICT CREATED BY THE DECISION OF

THE UNITED STATES COURT OF AP- -

PEALS FOR THE FOURTH CIRCUIT IN

THIS CASE AND THE DECISION OF THE

FIRST CIRCUIT IN CPC INTERNATIONAL,

INC. v. NORTHBROOK EXCESS AND SUR-

PLUS INSURANCE CO., AS WELL AS THE

DECISION OF THE NEW JERSEY SU-

PREME COURT IN MORTON INTERNA-

TIONAL, INC. v. GENERAL ACCIDENT IN-

SURANCE COMPANY OF AMERICA, TO

DECIDE THE IDENTICAL STATE LAW

QUESTION ADDRESSED BY THE

FOURTH AND FIRST CIRCUITS, THIS

COURT SHOULD GRANT THE PETITION

FOR CERTIORARI AND STAY THE PRO-

CEEDINGS IN THIS MATTER PENDING

THE DECISION OF NEW JERSEY’S HIGH-

BST COMI cco ncnn dee eee ene weeeeee acne 10

A. PRIOR DECISIONS OF THIS COURT

DICTATE THAT, UNDER THESE CIR-

CUMSTANCES, THE PETITION FOR

THE WRIT OF CERTIORARI SHOULD

Bas GRATES 06 0c sccecknyseeewaus akan 10

TABLE OF CONTENTS — (Continued)

Page

B. IN THIS CASE, THE UNITED STATES

COURT OF APPEALS FOR THE

FOURTH *CIRCUIT DECIDED THE

IDENTICAL: ISSUE OF NEW JERSEY

LAW IN A MANNER DIAMETRICALLY

OPPOSED TO THE DECISION OF THE

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT, THEREBY

CREATING AN INTER-CIRCUIT CON-

FLICT WHICH CAN BE RESOLVED BY

GRANTING THIS PETITION FOR CER-

ro | PTT T TTT eT CITT TT Tee 12

C. THE NEW JERSEY SUPREME

COURT'S DECISION IN MORTON IN-

TERNATIONAL, INC. V. GENERAL AC-

CIDENT INSURANCE CO. OF AMERICA,

WILL ONCE AND FOR ALL, RESOLVE

THE INTER-CIRCUIT CONFLICT BE-

TWEEN THE FOURTH AND FIRST

CIRCUITS. ACCORDINGLY, THIS

COURT SHOULD GRANT THE PETI-

TION, STAY ALL FURTHER PRO-

CEEDINGS IN THIS CASE, AND

AWAIT THE NEW JERSEY SUPREME

COURT’S DECISION IN MORTON..... 14

II. UNDER NEW JERSEY LAW, THE SUD-

DEN AND ACCIDENTAL EXCEPTION TO

THE POLLUTION EXCLUSION CLAUSE

IN A COMPREHENSIVE GENERAL LIA-

BILITY (“CGL”) POLICY APPLIES TO THE

“POLLUTION DAMAGE,” RATHER THAN

TO THE “DISCHARGE” OF THE CON-

TAMINANTS. THEREFORE, THE

UNITED STATES COURT OF APPEALS

ili

TABLE OF CONTENTS — (Continued)

Page

FOR THE FOURTH CIRCUIT MISAP-

PLIED THE STANDARDS ANNOUNCED

BY THIS COURT IN SALVE REGINA COL-

LEGE V. RUSSELL, AND C.I.R. V. BOSCH’S

ESTATE, THEREBY RESULTING IN AN

ERRONEOUS PREDICTION AS TO HOW

THE NEW JERSEY SUPREME COURT,

THE FINAL ARBITER OF NEW JERSEY

STATE LAW, WOULD DECIDE THIS

CFREEUEIEs Shh oa nevus deecapenesivaveces 18

A. FEDERAL COURTS ARE BOUND BY

THE DECISIONS OF NEW JERSEY’S

TRIAL AND INTERMEDIATE APPEL-

LATE COURTS WHICH HAVE PREVI-

OUSLY ADDRESSED THIS ISSUE OF

INSURANCE COVERAGE FOR ENVI-

RONMENTAL CLAIMS UNDER NEW

po MOTT TT TTT TT Cer ee TeTe 18 .

B. THE DECISIONS OF NEW JERSEY’S

TRIAL AND INTERMEDIATE APPEL-

LATE COURTS REQUIRE THAT THE

COVERAGE ISSUE IN THE INSTANT

CASE MUST BE RESOLVED IN FAVOR

OF THE PETTTIONERS. ............... 21

C. UNDER NEW JERSEY LAW, THE POL-

LUTION EXCLUSION CLAUSE’S EX-

CEPTION FOR “SUDDEN AND ACCTI-

DENTAL” POLLUTION HAS BEEN

INTERPRETED TO BE A RESTATE-

MENT OF THE DEFINITION OF “OC-

CURRENCE” AND TO PROVIDE IN-

SURANCE COVERAGE FOR THE

UNINTENDED RESULTS OF INTEN-

BOS PURPEU 6 60 ce Ne ccceecéesnewence 24

(SiC 5 5600 e nbd en biinseansavenvsvans 30

TABLE OF CONTENTS — (Continued)

APPENDIX: Page

Liberty Mutual Insurance Co. v. Triangle Indus- :

tries, Inc., 957 F.2d 1153 (4th Cir. 1992).... A-1

Liberty Mutual Insurance Company v. Triangle

Industries, Inc., 765 F.Supp. 881 (N.D.W.Va.

oo) ee ee ee er ry or rie te A-17

Final Order of the United States District Court for

the Northern District of West Virginia, filed

Te rere err rrr ere re re ren A-26

Liberty Mutual Insurance Co. v. Triangle Indus-

tries, Inc., 390 S.E.2d 562 (W.Va. 1990) .... A-28

Mandate from the United States Court of Appeals

for the Fourth Circuit, filed March 23,

Order of The United States Court of Appeals for the

Fourth Circuit Denying Appellant’s Motion to

Recall and Stay the Mandate, filed April 24,

ROO da vind deéees 640400 A-40

Letter from Triangle to Cravat Coal Co., dated May

BG See wine see a4beneeta keane A-42

Excerpts from Petition for Certification and Appen-

dix in Morton International, Inc. v. General

Accident Insurance Co. of America, Docket No.

34,341, (N.J. Sup.Ct. certif: granted, March 2,

OUD ses 0000 beeen e eee A-43

Order of the Supreme Court of New Jersey granting

the Petition for Certification in Morton Interna-

tional, Inc. v. Gen val Accident Insurance Co.

of America, Docket No. 34,341, (N.J. Sup.Ct.

certif. granted, March 2, 1992)............. A-49

cain iia eae

TABLE OF CONTENTS — (Continued)

Page

Excerpts from Cross-Petition for Certification in

Morton International, Inc. v. General Accident

Insurance Co. of America, Docket No. 34,341,

(N.J. Sup.Ct. certif. granted, March 2,

SOUR A cc ks 0b cedanneba ve Cigksnesueeeeaes A-50

Order of the Supreme Court of New Jersey Granting

the Cross-Petition for Certification in Morton

International, Inc. v. General Accident Insur-

ance Co. of America, Docket No. 34,341, (N.J.

Sup.Ct. certif. granted, March 2, 1992) ..... A-54

Excerpts from Liberty Mutual Insurance Com-

pany’s Opposition to Third-Party Plaintiffs/Ap-

pellants’ Motion to Recall and Stay the

DED cnc ncceccccsunavdeusucbaveseseees A-56

TABLE OF AUTHORITIES

Cases: Page

Allen v. Metropolitan Life Ins. Co., 44 N.J. 294, 305,

yeh errr rer eee aa, 22

Ambassador Insurance Company v. Montes, 76 N.J.

kee Fee, | ower rere 28

Broadwell Realty Services, Inc. v. Fidelity and

Casualty Co., 218 N.J. Super. 516, 524, 528

A.2d 76 (App. Div. 1987) ............. 23, 24, 29

C.I.R. v. Bosch’s Estate, 387 U.S. 456, 463, 87 S.Ct.

ye, Be Pee Fe. ys Perrone re 21

CPC International, Inc. v. Northbrook Excess and

Surplus Insurance Co., Nos. 91-1580 and 91-

1734, 1992 U.S. App. LEXIS 5342 (1st Cir.

EEE By BD s cncanVeseiscencesa 9, 12, 13, 17

CPS Chemical Co. v. Continental Ins. Co., 199 N.J.

Super. at 552 (Law Div. 1984), rev'd on other

grounds, 203 N.J. Super. 15 (App. Div.

EY aS eas CAA eee a eek ee eee ees 25, 29

Diamond Shamrock Chemical Co. v. Aetna Casualty

& Surety Co., No. A-694-89T1, 1992 WL 89112

(N.J. Super. App. Div., Apr. 6, 1992) ...... 16, 17

Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817,

Se Ree BO CRO 68 6 bir kee se deane das 19

Grantham and Mann, Inc. v. American Safety Prod-

ucts, Inc., 831 F.2d 596, 608 (6th Cir. 1987) 19

Gruber v. Owens-Illinois Inc., 899 F.2d 1366 (3rd

ae Dr usve Sis eb UbeeeetecesaeNéukueses 20

Hanna v. Plumer, 380 U.S. 460, 468, 85 S.Ct. 1136,

REGay BS Rae CE) 0 6nd oes e cb cen Kenn 20

Hupman v. Cook, 640 F.2d 497 (4th Cir. 1981)... 21

TABLE OF AUTHORITIES — (Continued)

Cases: Page

Jackson Township Municipal Utilities Authority v.

Hartford Acc. & Indem. & Co., 186 N.J. Super.

156, 164, 451 A.2d 990 (Law Div. 1982). 24, 25, 29

Kievit v. Loyal Protective Life Ins. Co., 34 N.J. 475,

ee ee ee eS eee 22

Kline v. Wheels by Kinney, Inc., 464 F.2d 184 (4th

RE ren 0b ce cu vane none tA ne keee dics 20

Lansco, Inc. v. Department of Environmental Pro-

tection, 138 N.J. Super. 275, 350 A.2d 520 (Ch.

Div. 1975), affd, 145 N.J. Super. 433, 368 A.2d

363 (App. Div. 1976), certif. denied, 73 N.J. 57,

372 A.2d 322 (1977) ........ee cece eee 26, 27, 29

Lehman Bros. v. Schein, 416 U.S. 386, 94 S.Ct.

1741, 40 L.Ed.2d 215 (1974)............00.. 13

Liberty Mutual Insurance Co. v. Triangle Indus-

tries, Inc., 390 S.E.2d 562 (W.Va. 1990).. 1, 7, 20

Liberty Mutual Insurance Co. v. Triangle Industries,

Inc., 957 F.2d 1153 (4th Cir. 1992)........ i, 2, 3, 9

Liberty Mutual Insurance Company v. Triangle

Industries, Inc., 765 F.Supp. 881 (N.D.W.Va.

eee eT Tee ee TTT eer eT Te Tee 2,8

Lowe's North Wilkesboro Hardware, Inc. v. Fidelity

Mut. Life Ins. Co., 319 F.2d 469 (4t® Cir. 1963) 20

Mazzilli v. Accident & Cas. Ins. Co. of Winterthur,

oe INS. 1, B70 A.B GOO (1961)... ccc sccesss 23

Meier v. New Jersey Life Ins. Co. 101 N.J. 597, 503

Se TS 6 ved hea see caeesnwasen vee a2, 23

Morton International, Inc. v. General Accident In-

surance Co. of America, Docket No. 34,341

(N.J. Sup.Ct. certif: granted, March 2,

SE Lc ehecan ceed cae eee week 9, 14, 15, 28, 30

TABLE OF AUTHORITIES — (Continued)

Statutes and Rules: Page

Morton International, Inc. v. General Accidental

Insurance Co. of America, No. A-895-89T3

(App. Div. October 2, 1991) ........--.--.-+- 15

Ruhlin v. New York Life Ins. Co., 304 U.S. 202, 58

tee Fe. | eeeerrrrrrr re errr 10, 11

Rylands v. Fletcher, L.R. Ex. 265 (1866), affd L.R.

3 BLL. BOD (AGBB). 2.5 cc ccc cece s ev eacseces 27

Salve Regina College v. Russeil, _ us. gs Ree

S.Ct. 1217, 113 L.Ed.2d 190 (1991). 19, 20, 21, 30

SL Industries v. American Motorists, 248 N.J.

Super. 458, 591 A.2d 677 (App. Div. 1991)... 28

State Department of Environmental Protection v.

Ventron Corp., 94 N.J. 473, 468 A.2d 150

¢: ) Serer error er rer re etre tee eee 27

Vantage Dev. Corp., Inc. v. American Env. Tech.

Corp., 251 N.J. Super. 516, 598 A.2d 948 (Law

TOE, WA Baa i vos Sanna erence resend ss seuss 17

Werner Industries, Inc. v. First State Ins. Co., 112

N.J. 30, 35-36, 548 A.2d 188 (1988) ......... 23

Statutes and Rules:

40 CPR. DEL. SEMA) . «wc cece wesc sesccns 4

y Bek Toke Ey. 5) err eee 2

, gh te 2). ere re ieee 8

- Le Fo E+ a ee ern ers er eared ee 19

» Lek Telf Ey > .. i ees ge. ees 19

ee ag woes coc ewceneetsneeanwee een a

fork Tae fare rr anPe eater Sir a 2,4

46 Fed.Reg. 17,202 .........ceeecccccccevees ‘passim

TABLE OF AUTHORITIES — (Continued)

Cases: Page

48 Fed. Reg. 40658-40682 (1983) ................ 6

ee a 6 nso bon OO nd 60 0540048 46460848 3

N.J.Stat.Ann. § 17:30A-12 (West 1985) .......... 4

Pe EE eh aNhuGs Ras aw Rha dseenensecees 10

re SA a od ce eS knccecsntcccnescans 7

No.

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1991

TRIANGLE INDUSTRIES, INC.,

a/k/a ANC HOLDINGS, INC.;

TRIANGLE PWC, INC.,

Petitioners,

LIBERTY MUTUAL INSURANCE CoO.,

NEW JERSEY PROPERTY/LIABILITY INSURANCE

GUARANTY ASSOCIATION, on behalf of

IDEAL MUTUAL INSURANCE COMPANY, in liquidation,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Petitioners, Triangle Industries, Inc. and Triangle

PWC, Inc. (collectively, “Triangle” or “Petitioners”),

respectfully request that a Writ of Certiorari be issued to

review the Judgment and Opinion of the United States

Court of Appeals for the Fourth Circuit, entered in the

above-captioned proceeding on March 2, 1992.

OPINIONS BELOW ~—

1. The Opinion of the United States Court of Ap-

peals for the Fourth Circuit, Liberty Mutual Insurance

Company v. Triangle Industries, Inc., 957 F.2d 1153

(4th Cir. 1992), is reprinted in the Appendix hereto at

A-1.

2. The Opinion of the United States District Court

for the Northern District of West Virginia, Liberty

Mutual Insurance Company v. Triangle Industries,

Inc., 765 F.Supp. 881 (N.D.W.Va. 1991), is reprinted in

the Appendix hereto at A-17.

3. The Opinion of the West Virginia Supreme Court

of Appeals deciding that New Jersey substantive law

applies in this matter, Liberty Mutual Insurance Co. v.

Triangle Industries, Inc., 390 S.E.2d 562 (W.Va. 1990),

is reprinted in the Appendix hereto at A-28.

JURISDICTION

The Judgment and Order of the United States Court

of Appeals for the Fourth Circuit, filed on March 2,

1992, affirmed the Judgment of the United States Dis-

trict Court for the Northern District of West Virginia,

which held that under New Jersey law, CGL insurance

policies which contain “original” pollution exclusion

clauses do not provide coverage for “unintended envi-

ronmental damage which allegedly continues to arise

from past regular surface disposal in a landfill of the

waste products of a standard manufacturing process,”

Liberty Mutual Insurance Co. v. Triangle Industries,

Inc., 957 F.2d 1153 (4th Cir. 1992), A-3. The Mandate of

the United States Court of Appeals for the Fourth

Circuit took effect on March 23, 1992. Petitioners’

Motion to Recall and Stay the Mandate of the United

States Court of Appeals for the Fourth Circuit was filed

on—April -7, 1992. The Fourth Circuit’s Order denying

Petitioners’ Motion was filed on April 24, 1992. The

jurisdiction of this court is invoked under 28 U.S.C.

§1254(1).

STATEMENT OF THE CASE

The outcome of this case will determine whether

policy holders are entitled to insurance coverage under

New Jersey law for the costs of cleaning up a superfund

site located in Ohio, when the waste disposed of was

declared by the federal government to be non-hazardous

under the Resource Conservation and Recovery Act of

1976, 42 U.S.C. §§6901, et seg. (“RCRA”), but which is

currently regulated under the Comprehensive Environ-

mental Response, Compensation and Liability Act, 42

U.S.C. §§9601, et seg. (“CERCLA”) (effective Decem-

ber 1980), a federal law which did not become effective

until after the disposal activities by Triangle had ceased.

Triangle was a company engaged in the fabrication

of wire and cable line and owned a processing plant in

Glen Dale, West Virginia. Triangle used a process of

“pickling” the steel, which generated a waste product

known as “lime-stabilized waste pickle liquor sludge”

(“sludge” or “waste”). Liberty Mutual Insurance Co. v.

Triangle Industries, Inc., 957 F.2d 1153 (4th Cir. 1992),

A-16, A-3; See also 46 Fed. Reg. 17,202.

Between November, 1977 and October, 1980, the

sludge was shipped to the Buckeye Landfill located

outside St. Clairsville, Belmont County, Ohio, for dis-

posal. A-3. Triangle engaged the services of independent

contractors to transport the sludge to the landfill. A-3.

Triangle itself did not dispose of the waste at the site.

The sludge was delisted from regulation under

RCRA as being non-hazardous. See 46 Fed. Reg. 17,202

(temporary exclusion from regulation) and 49 Fed. Reg.

23,287 (adopting final rule). An analysis of Triangle’s

waste generated at its Glen Dale, West Virginia, facility

found that:

The constituents of concern in the waste are chro-

mium and lead. EP extracts from sludge samples

analyzed by [Triangle] show lead and chromium

consistently well below the maximum EP toxicity

levels. These low leakage levels indicate that the

constituents are present in essentially an immobile

form.

See 46 Fed. Reg. 17,202 (emphasis and brackets added).

The analysis of the waste showed that chromium

and lead were immobile and would not leak out. Triangle

had petitioned the United States Environmental Protec-

tion Agency (“U.S. EPA”) to delist its sludge because the

“sludge is environmentally stable and non-hazardous,

and specifically that the sludge does not contain hazard-

ous levels of chromium and lead, the constituents of

concern, for which spent pickle liquor waste (K 062)

was listed.” Jd. Accordingly, Petitioner believed its waste

was safe for disposal in landfills. The U.S. EPA agreed

and removed the sludge from regulation under RCRA.

40 C.F.R. 261.3(c)(2)(I]). The sludge contained trace

amounts of chemicals, however, which were regulated

under CERCLA, 42 U.S.C. §§9601, et seg., which

became effective on December 11, 1980, after Triangle’s

disposal of the sludge at the Buckeye landfill had ceased.

The eight policies of insurance under which Trian-

gle originally sought coverage included?: (1) one com-

prehensive general liability (““CGL”) policy issued by

Ideal Mutual Insurance Company (“Ideal Mutual”) cov-

ering the period from January 1, 1981 to January 1,

1982; (2) two CGL policies issued by Liberty Mutual

Insurance Company (“Liberty Mutual’) covering the

period from January 1, 1982 to January 1, 1984; (3) four

CGL policies issued by Zurich Insurance Company

(“Zurich”) covering the period from January 1, 1984 to

April 1, 1987; and (4) one claims-made policy issued by

Zurich covering the period from May 15, 1984 to May

15, 1985.

Ideal Mutual was placed in liquidation on February

7, 1985. In accordance with N.J.Stat.Ann. §17:30A-12

(West 1985), the New Jersey Property Liability Insur-

ance Guaranty Association (“NJPLIGA”) is the primary

insurance guaranty association against which Triangle

has made claims.

Each of the relevant CGL policies contaired both

the broad general covenant to pay “all sums” for which

Triangle may become legally obligated to pay, and the

covenant to provide Triangle with a defense to any suit

brought against it. The standardized policy language

reads as follows:

The company will pay on behalf of the insured all

sums which the insured shall become legally obli-

gated to pay as damages because of

1. Only the policies described in categories one (1) and two (2)

are the subject of this Petition. The policies issued by Zurich did not

contain the “original” pollution exclusion clauses. Accordingly, the

issues raised by this Petition do not involve the contracts of

insurance issued by Zurich.

Coverage A: bodily injury, or

Coverage B: property damage,

to which this insurance applies, caused by an occur-

rence, and the company shall have the right and

duty to defend any suit against the insured seeking

damages on account of such bodily injury or prop-

erty damage, even if any of the allegations of the suit

are groundless, false or fraudulent, and may make

such investigation and settlement of any claim or

suit as it deems expedient, but the company shall

not be obligated to pay any claim or judgment or to

defend any suit after the applicable limit of the

company’s liability has been exhausted by payment

of judgments or settlements.

A-34. (emphasis in original).

The term “occurrence” is defined under each of the

CGL policies in the relevant part as follows:

“Occurrence” means an accident, including contin-

uous or repeated exposure to conditions, which

results in bodily injury or property damage neither

expected nor intended from the standpoint of the

insured.

A-6-7. (emphasis in original).

The pollution exclusion clauses contained in the

policies issued by Ideal Mutual and Liberty Mutual

provide as follows:

This insurance does not apply ... to ... property

damage arising out of the discharge, dispersal, re-

lease or escape of smoke, vapors, soot, fumes, acid,

alkalis, toxic chemicals, liquids or gases, waste

materials or other irritants, contaminants or pollut-

ants 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.

A-7. (emphasis added).

On or about October 15, 1980, the Ohio EPA con-

ducted sampling of sludge located at the Buckeye Land-

fill and determined that the sludge was “toxic.” A-17.

ieee

Triangle ceased its disposal activities on or about Octo-

ber 6, 1980. A-16.

The only evidence of record regarding Triangle’s

knowledge of the alleged hazardous nature of the waste

indicates that Triangle thought the waste was not haz-

ardous and, accordingly, believed that the waste would

neither leach chemicals into the land, nor change from

its essential earth-like composition:

Based on the above analysis, this material may be

classified as non-toxic, nonhazardous, non-liquid

which could be classified as a solid, suitable for

disposal in your landfill operations.

See A-42, Letter dated May 14, 1979, from Triangle to

Cravat Coal Company; and 46 Fed. Reg. 17,202 (RCRA

delisting petition showing Triangle considered the waste

environmentally stable).

On or about December 7, 1984, Triangle was noti-

fied by the U.S. EPA that it was being designated a

“potentially responsible party” (“PRP”) pursuant to

CERCLA in connection with the alleged environmental

contamination of the Buckeye Landfill. A-17. On or

about October 3, 1985, Triangle, along with other PRPs,

executed an administrative consent order as required by

the U.S. EPA and Ohio EPA for the cleanup of the

landfill. A-17 and 33.

On or about September 8, 1983, the Buckeye Land-

fill was listed on the National Priorities List (“NPL”)

pursuant to Section 105 (8)(b) of CERCLA by publica-

tion in the Federal Register, at 48 Fed. Reg. 40658-40682

(1983). A-17. On or about March 7, 1985, counsel for

Triangle placed all of Triangle’s insurance carriers on

notice of the claims asserted by the U.S. EPA arising out

of the enforcement actions at the Buckeye landfill. A-4

and 18.

On April 13, 1988, Liberty Mutual filed the under-

lying action in the United States District Court for the

Northern District of West Virginia seeking a declaratory

judgment that it owed no duty to defend or indemnify

Triangle2. Triangle filed an answer, affirmative defenses

and counterclaims on June 10, 1988. Liberty Mutual

filed 2 reply to the counterclaim on July 27, 1988. See

A-5.

On June 20, 1988, Triangle filed a third-party com-

plaint against Employers Insurance of Wausau, a Mu-

tual Company (“Wausau”), The New Jersey Property-

Liability Insurance Guaranty Insurance Association, on

behalf of Ideal Mutual Insurance Company, in liquida-

tion (““NJPLIGA”), and Zurich Insurance Company

(“Zurich”). Answers to the Third Party Complaint were

filed by these parties on August 1, July 26, and August 4,

1988, respectively. From January 17, 1989 to May 19,

1989, the parties filed and exhaustively briefed cross-

motions for summary judgment on the Complaint and

the Third Party Complaint.

By Order dated July 5, 1989, the United States

District Court for the Northern District of West Virginia

certified the following two questions of law to the West

Virginia Supreme Court of Appeals pursuant to W.Va.

Code §§51-1A-1, et seq.: (1) Does West Virginia’s sub-

stantive law apply to the interpretation of the insurance

policies at issue; and (2) if so, do the insurance policies

at issue give rise to a duty to defend and indemnify the

insured by the respective insurers. The Supreme Court

of West Virginia filed an opinion on February 21, 1990,

holding that New Jersey law governed the interpretation

of the insurance contracts at issue and remanded the

matter to the United States District Court for the North-

ern District of West Virginia. Liberty Mutual Insurance

Co. v. Triangle Industries, Inc., 390 S.E.2d 562 (W.Va.

1990).

Thereafter, Triangle renewed its motions for sum-

mary judgment on the Complaint and the Third Party

Complaint in the District Court. The insurers filed

cross-motions for summary judgment. On March 12,

2. Jurisdiction was conferred on the District Court by 28

U.S.C. $1332.

1991, the Honorable William Kidd, U.S.D.J., filed a

Memorandum Opinion and Order granting summary

judgment to Liberty Mutual, to Zurich and to NJPLIGA

(on behalf of Ideal Mutual). Liberty Mutual Insurance

Company v. Triangle Industries, Inc., 765 F.Supp. 881

(N.D.W.Va. 1991), reprinted at A-15. This Order was

made final by an Order dated July 5, 1991, from which

Triangle appealed. A-26. The July 5, 1991, Order dis-

missed Wausau from the case following a settlement

reached between Wausau and Triangle.

The District Court determined that Petitioners did

not “intend or expect” to cause property damage, that

there was an “occurrence” within the meaning of the

insurance policies in question, that “property damage”

had occurred during that period and that clean up costs

are “damages” — all within the meaning and within the

policy periods of the CGL policies. Jd., reprinted at

A-20-21. Although the District Court decided that Tri-

angle did not intend or expect the damage, it neverthe-

less denied coverage because it found that Triangle both

intended and expected to have the materials transported

to and deposited in the Buckeye Landfill. Jd., at A-22.

On July 31, 1991, Triangle filed a notice of appeal to

the United States Court of Appeals for the Fourth

Circuit, which appeal was argued before the Fourth

Circuit on December 3, 1991. A-2. The principal issue

on Appeal was whether the “sudden and accidental”

exception to the pollution exclusion clause applied to the

“damages” caused by the release, or to the discharge of

the pollutants. Respondents did not cross-appeal from

the decision of the District Court. Jurisdiction in the

United States Court of Appeals for the Fourth Circuit

was conferred by 28 U.S.C. §1291.

On March 2, 1992, the United States Court of

Appeals for the Fourth Circuit affirmed the judgment of

the United States District Court for the Northern

District for West Virginia and held that under New

Jersey law, the CGL policies which contain “original”

pollution exclusion clauses do not provide coverage for

J encsieciiiaiaieliieas

“unintended environmental damage which allegedly

continues to arise from past regular surface disposal in

the landfill of the waste products of a standard manu-

facturing process.” Liberty Mutual Insurance Co. v.

Triangle Industries, Inc., 957 F.2d 1153 (4th Cir. 1992),

reprinted at A-1. Coincidentally, on March 2, 1992, the

same day of the filing of the Fourth Circuit’s opinion, the

New Jersey Supreme Court granted Certification to

decide the identical issue of New Jersey law in the case

of Morton International, Inc. v. General Accident Insur-

ance Co. of America, Docket No. 34,341 (N.J. Sup.Ct.

certif. granted, March 2, 1992).

On March 23, 1992, the United States Court of

Appeals for the Fourth Circuit filed its Mandate effectu-

ating its Opinion and Order of March 2, 1992. A-39. On

March 24, 1992, the United States Court of Appeals for

the First Circuit decided the case of CPC International,

Inc. v. Northbrook Excess and Surplus Insurance Co.,

Nos. 91-1580 and 91-1734, 1992 U.S. App. LEXIS 5342

(1st Cir. Mar. 24, 1992), which involved an appeal from

an Order of a Rhode Island District Court granting

summary judgment in favor of an insurance company,

based upon the application of New Jersey law to the

identical pollution exclusion clause analyzed by the

Fourth Circuit in this case. Contrary to the Fourth

Circuit’s Opinion and Order, however, the First Circuit

reversed the District Court and held that the sudden and

accidental exception to the pollution exclusion clause

did not bar coverage for the insured.

Petitioners filed a Motion to Recall and Stay the

Mandate with the Fourth Circuit on April 7, 1992, on the

grounds that there existed an inter-circuit conflict be-

tween the First and the Fourth Circuit on an identical

issue of New Jersey state law, which would be resolved

by the New Jersey Supreme Court’s decision in Morton,

supra. The Motion was denied by Order of the United

States Court of Appeals for the Fourth Circuit, without

opinion, on April 24, 1992, A-40, leaving Petitioners no

recourse other than to seek review in this Court, a

course of action which Respondent, Liberty Mutual,

suggested Triangle should follow in its Opposition to

Petitioners’ Motion to Recall and Stay the Fourth Cir-

cuit’s Mandate. A-57.

REASONS FOR GRANTING RELIEF

I. IN LIGHT OF THE INTER-CIRCUIT CONFLICT

CREATED BY THE DECISION OF THE UNITED

STATES COURT OF APPEALS FOR THE FOURTH

CIRCUIT IN THIS CASE AND THE DECISION OF

THE FIRST CIRCUIT IN CPC INTERNATIONAL,

INC. v. NORTHBROOK EXCESS AND SURPLUS IN-

SURANCE CO0., AS WELL AS THE DECISION OF

THE NEW JERSEY SUPREME COURT IN MORTON

INTERNATIONAL, INC. v. GENERAL ACCIDENT IN-

SURANCE COMPANY OF AMERICA, TO DECIDE

THE IDENTICAL STATE LAW QUESTION AD-

DRESSED BY THE FOURTH AND FIRST CIRCUITS,

THIS COURT SHOULD GRANT THE PETITION FOR

CERTIORARI AND STAY THE PROCEEDINGS IN

THIS MATTER PENDING THE DECISION OF NEW

JERSEY’S HIGHEST COURT

A. PRIOR DECISIONS OF THIS COURT DICTATE

THAT, UNDER THESE CIRCUMSTANCES, THE

PETITION FOR THE WRIT OF CERTIORARI

SHOULD BE GRANTED.

Review by this Court on writ of certiorari is not a

matter of right, but of judicial discretion. Sup. Cr. R.

10.1. A petition for a writ of certiorari will be granted

only when there are special and important reasons

therefor. Jd. The Rules of this Court set forth the factors

that will be considered in deciding whether or not to

grant a petition for certiorari, including, but not limited

to, “When a United States court of appeals has rendered

a decision in conflict with the decision of another United

States court of appeals on the same matter.“ Sup. Ct. R.

10.1(a). The decision of this Court in the case of Ruhlin

v. New York Life Ins. Co., 304 U.S. 202, 58 S.Ct. 860

(1938), which interprets this rule, held that:

| scsceiaesaciiasaiaiaiaiailiiia

Since jurisdiction to bring up cases by certiorari

from the Circuit Courts of Appeals was given to this

Court in order “to secure uniformity of decision,” a

showing of a conflict of circuits on a matter concern-

ing which the federal courts had never denied their

right to independent judgment prompted this Court

to grant the writ. As to questions controlled by state

law, however, conflict among circuits is not of itself

a reason for granting a writ of certiorari. The conflict

may be merely a corollary to a permissible difference

of opinion in the state courts. The rules indicate that

the Court will be persuaded to grant certiorari where

a Circuit Court of Appeals “has decided an impor-

tant question of local law in a way probably in

conflict with applicable local decisions.”

Id. at 861 (citations omitted). Ruhlin involved a suit by

New York Life Insurance Company against John G.

Ruhlin and others, to rescind the disability and double

indemnity provisions of life insurance policies, requiring

the court to engage in insurance contract interpretation

under applicable state law. Id. at 860.

Although this Court declined to address the issue of

state law presented in Ruhlin, it remanded the cause to

the District Court, so that it might decide the relevant

issues of state law, stating that “no decision at the

present time could reconcile any ‘conflict of circuits,’ or

do more than enunciate a tentative rule to guide partic-

ular federal courts.” Jd. at 861. Unlike Ruhlin, a decision

by this Court in the instant case to grant the Petition for

a Writ of Certiorari to the United States Court of

Appeals for the Fourth Circuit and stay the proceedings

pending the decision of the New Jersey Supreme Court

in Morton interpreting the “sudden and accidental”

exception to the pollution exclusion clause in CGL

policies would not only reconcile the conflict between

the First and Fourth Circuits, it would facilitate a fair

and equitable resolution of this important issue of state

law for the parties to this action.

Moreover, it would be anomalous and unfair were

Liberty Mutual to prevail in this case on this issue and

lose in Morton based upon the fortitutous circumstance

that the Fourth Circuit rendered its opinion in this case

before the New Jersey Supreme Court decided the

identical issue in Morton. Such a result would fly in the

face of the governing principle that like cases should be

decided based upon a uniform principle of law.

Accordingly, we respectfully request that this Court

grant the Petition for a Writ of Certiorari and stay these

proceedings, pending the New Jersey Supreme Court’s

decision on this issue, or, in the alternative, to recall and

stay the Mandate of the United States Court of Appeals

for the Fourth Circuit, pending the New Jersey Supreme

Court’s decision in Morton, so that an appropriate mo-

tion to reconsider, modify or amend the Order can be

filed with the Fourth Circuit.

B. IN THIS CASE, THE UNITED STATES COURT OF

APPEALS FOR THE FOURTH CIRCUIT DE-

CIDED THE IDENTICAL ISSUE OF NEW JERSEY

LAW IN A MANNER DIAMETRICALLY OPPOSED

TO THE DECISION OF THE UNITED STATES

COURT OF APPEALS FOR THE FIRST CIRCUIT,

THEREBY CREATING AN INTER-CIRCUIT CON-

FLICT WHICH CAN BE RESOLVED BY GRANT-

ING THIS PETITION FOR CERTIORARI.

On March 24, 1992, the United States Court of

Appeals for the First Circuit applied and interpreted

New Jersey law involving the identical “sudden and

accidental” exception to the pollution exclusion clause

in CGL policies, in the case of CPC International, Inc. v.

Northbrook Excess and Surplus Insurance Co., Nos.

91-1580 and 91-1734, 1992 U.S. App. LEXIS 5342 (1st

Cir. March 24, 1992). As was required of the United

States Court of Appeals for the Fourth Circuit in the case

below, the First Circuit was forced to decide the same

issue of New Jersey state law involving the interpreta-

tion of the “sudden and accidental” exception to the

pollution exclusion clause, with no guidance from New

Jersey’s highest court. In CPC International, however,

the First Circuit reached a conclusion that was directly

at odds with the Fourth Circuit’s holding in this case.

The “inter-circuit” conflict that was created by the

Fourth Circuit’s decision in this case and the First

Circuit’s decision in CPC International involves a criti-

cal issue of contract interpretation and insurance cover-

age in the environmental context which should be

resolved by the New Jersey Supreme Court so that all

parties similarly situated receive fair and uniform treat-

ment. As Judge Campbell, in his concurring opinion in

CPC International, stated:

This case clearly demonstrates how unfortunate it is

that New Jersey lacks a certification law or rule. It

should be, but alas is not, possible for us to certify

this important question to the State’s highest Court.

If we could do so, all guesswork would be elimi-

nated. As the United States Supreme Court has

noted, certification “saves time, energy, and re-

sources and helps build a cooperative judicial feder-

alism.”

Id. (citing Lehman Bros. v. Schein, 416 U.S. 386, 391,

94 S.Ct. 1741, 40 L.Ed.2d 215 (1974)). Li order to

effectuate the policy behind this Court’s holding in

Lelunan Bros. v. Schein, supra, this Court should seize

the opportunity to allow the highest Court of New Jersey

to decide this important issue of insurance coverage

under New Jersey law and have the issue resolved as if

a certification procedure had been available.

It would be unjust to deprive Petitioners of the

benefit of the New Jersey Supreme Court’s interpreta-

tion and application of its own law. In Morton, the New

Jersey Supreme Court will be deciding this critical issue

in the near future. Accordingly, this Court should grant

Triangle’s Petition for a Writ of Certiorari to the United

States Court of Appeals for the Fourth Circuit, and then

stay further proceedings pending the New Jersey Su-

preme Court’s decision in Morton.

In CPC International, 1992 U.S. App. LEXIS 5342

at 16, the First Circuit held that the “sudden and

accidental” exception to the pollution exclusion clause

in the CGL policy means “unexpected and unintended,”

and thus concluded that under New Jersey law, given

facts identical to the instant case, the coverage issue

should be resolved in the favor of the insured. In this

case, the Fourth Circuit denied coverage on the identical

facts and policy language. Respondent, Liberty Mutual,

in Liberty Mutual Insurance Co.’s Opposition to Peti-

tioners’ Motion to Recall and Stay the Mandate of the

United States Court of Appeals for the Fourth Circuit

stated that:

To the extent that there is any inconsistency be-

tween the CPC International decision and this

Court’s March 2, 1992 judgment, it is the role of the

United States Supreme Court to determine which

decision is correct. Pursuant to Supreme Court Rule

13, the period for Triangle to petition for certiorari

has not expired. Triangle will thus not suffer injus-

tice if this Court’s mandate remains in place.

A-57. Thus, Petitioners and Respondent, Liberty Mu-

tual, are in agreement that the resolution of this “inter-

circuit” conflict is within the province of this Court and,

hence, the Petition for a Writ of Certiorari to the United

States Court of Appeals for the Fourth Circuit should be

granted.

C. THE NEW JERSEY SUPREME COURT'S DECI-

SION IN MORTON INTERNATIONAL, INC. v.

GENERAL ACCIDENT INSURANCE CO. OF

AMERICA, WILL ONCE AND FOR ALL, RE-

SOLVE THE INTERCIRCUIT CONFLICT BE-

TWEEN THE FOURTH AND FIRST CIRCUITS.

ACCORDINGLY, THIS COURT SHOULD GRANT

THE PETITION, STAY ALL FURTHER PRO-

CEEDINGS IN THIS CASE, AND AWAIT THE

NEW JERSEY SUPREME COURT'S DECISION IN

MORTON.

On March 2, 1992, the Supreme Court of New

Jersey granted Morton International’s Petition for Certi-

fication, A-43, in the case of Morton International, Inc.

v. General Accident Insurance Co. of America, No. 34,

341, on appeal from the decision of the Appellate Divi-

sion of the Superior Court of New Jersey in Morton

International, Inc. v. General Accident Insurance Co. of

America, No. A-895-89T3 (App. Div. October 2, 1991),

decided October 2, 1991, which contained a number of

insurance coverage issues.

The Cross-Petition for Certification of Defendants-

Respondents, Insurance Company of North America,

American Home Assurance Co., Liberty Mutual Insur-

ance Company, Underwriters at Lloyd’s London, and

London Markets Insurance Companies, A-50, was also

granted by Order of the New Jersey Supreme Court,

dated March 2, 1992. A-53. The Cross-Petition, in which

Respondent, Liberty Mutual, joined, specifically re-

quested that the issue of the interpretation of the

“sudden and accidental” language in the exception to

the pollution exclusion clause of the CGL policies be

reviewed and decided. A-50.

In fact, the Cross-Petitioners in Morton, including

Liberty Mutual, Respondent in this case, specifically

emphasized the need for the New Jersey Supreme Court

to address the identical issue raised in this case, relating

to the pollution exclusion clause and its sudden and

accidental exception, the resolution of which would

concomitantly settle the question which created the

intercircuit conflict between the Fourth and First Cir-

cuits. In asking the New Jersey Supreme Court to

review the pollution exclusion and affirm the Appellate

Division’s holding in Morton, Liberty Mutual and its

co-cross-petitioners stated:

At the outset, Respondents emphasize that the

Appellate Division correctly decided that there was

not coverage for the underlying claims because

there was no accident or occurrence. However, in

doing so, the Appellate Decision declined to correct

its prior erroneous decisions with respect to the

pollution exclusion, and indeed, the Appellate Divi-

sion reaffirmed its prior rulings on this exclusion.

These prior erroneous decisions need to be corrected

by this Court.

Respondents [Liberty Mutual] ask this Court to

address the “pollution exclusion” and, in particular,

to rule that the pollution exclusion applies to the

discharge of pollutants and not to the damage that

results from a discharge.

se ee

Notwithstanding, lower courts of this state have

continued to follow the outmoded precedent of the

Appellate Division with respect to the pollution

exclusion, which precedent is contrary to the view of

the substantial majority of jurisdictions to have

addressed the issue. In fact, the Respondents in this

appeal asked the Appellate Division to correct these

prior rulings; the Appellate Division declined to do

so, but expressly left it for this Court to clarify the

law.

Cross-Petition for Certification to the New Jersey Su-

preme Court of Liberty Mutual, A-50. (emphasis and

brackets added).

Petitioners argued before the Fourth Circuit that the

decisions of New Jersey’s trial and intermediate appel-

late courts necessitated the reading of the “sudden and

accidental” language such that it would be applied to the

“damage” caused by the pollution, and not to the

“discharge.” Conversely, Liberty Mutual and its Co-

Cross-Petitioners in Morton have asked the New Jersey

Supreme Court “to rule that the pollution exclusion

clause-applies to the discharge of pollutants and not to

the damage that resulted from the discharge:” A-50.

Hence, Liberty Mutual Insurance Company, Respon-

dent in this case and Cross-Petitioner in Morton, admits

and acknowledges that the very same issue is critical in

both cases and is of great significance for insurers and

insureds alike throughout the United States.

As recently noted by the Appellate Division in the

case of Diamond Shamrock Chemical Co. v. Aetna Ca-

sualty & Surety Co., No. A-694-89T1, 1992 WL 89112

(N.J. App. Div. Apr. 6, 1992), there is a considerable

“degree of disarray in the decisional treatment”? of this

question throughout the Nation‘, but concluded that

“other than noting the litigation explosion that has been

generated by the ambiguous wording of the pollution

exclusion, we need not further address the issue.” Jd. at

45.

It is logical that a decision by the New Jersey

Supreme Court construing the pollution exclusion

clause should be applicable to both the instant case, as

well as Morton. It would be anomalous ané unfair if

Liberty Mutual and Triangle were deprived of the New

Jersey Supreme Court’s guidance in this case when

Liberty Mutual has sought such guidance directly from

the Supreme Court of New Jersey in the Morton case.

Accordingly, this Court should grant the Petition for a

Writ of Certiorari and allow the final determination of

the issue by the New Jersey Supreme Court in Morton to

settle this important environmental insurance coverage

dispute between Triangle and its insurers in the instant

case. To do otherwise, we respectfully submit, would be

manifestly unjust. In light of the granting of the Cross-

Petition for Certification by the New Jersey Supreme

Court in Morton, the First Circuit’s decision in CPC

International, Inc. and prior rulings of New Jersey's

lower courts, it is critical that this Court accept jurisdic-

tion over this matter.

Indeed, the First Circuit’s decision of March 24,

1992 in the case of CPC International, Inc. v. North-

brook Excess and Surplus Insurance Co., Nos. 91-1580

and 91-1734, which involved an appeal from an Order of

a Rhode Island District Court granting summary judg-

ment in favor of an insurance company, based upon the

application of New Jersey law to the identical pollution

3. Id. at 38 (quoting Vantage Dev. Corp., Inc. v. American

Env. Tech. Corp., 251 N.J. Super 516, 531 (Law Div. 1991))

4. Indeed, one of the many cases noted by the Appellate

Division was this very case. Diamond Shamrock at 41.

exclusion clause addressed by the Fourth Circuit in this

case, compels this Court to accept jurisdiction. The First

Circuit, in reversing the district court and deciding in

favor of coverage for the insured, relied upon many of

the same cases upon which Petitioners rely and estab-

lishes that reasonable minds can differ as to the resolu-

tion of the coverage issue. Regardless of whether the

decision of the New Jersey Supreme Court in Morton

determines that the Fourth Circuit, or the First Circuit,

correctly predicted what the New Jersey Supreme

Court’s determination of this insurance issue would be,

it is in the interest of justice, fairness and equity for this

Court to accept jurisdiction, grant the Petition for a Writ

of Certiorari to the United States Court of Appeals for

the Fourth Circuit, and ultimately stay all further pro-

ceedings pending the decision of the New Jersey Su-

preme Court in Morton.

II. UNDER NEW JERSEY LAW, THE SUDDEN AND

ACCIDENTAL EXCEPTION TO THE POLLUTION

EXCLUSION CLAUSE IN A COMPREHENSIVE

GENERAL LIABILITY (“CGL”) POLICY APPLIES

TO THE “POLLUTION DAMAGE,” RATHER THAN

TO THE “DISCHARGE” OF THE CONTAMINANTS.

THEREFORE, THE UNITED STATES COURT OF

APPEALS FOR THE FOURTH CIRCUIT MISAP-

PLIED THE STANDARDS ANNOUNCED BY THIS

COURT IN SALVE REGINA COLLEGE V. RUSSELL,

AND C.IR. V. BOSCH’S ESTATE, THEREBY RE-

SULTING IN AN ERRONEOUS PREDICTION AS TO

HOW THE NEW JERSEY SUPREME COURT, THE

FINAL ARBITER OF NEW JERSEY STATE LAW,

WOULD DECIDE THIS QUESTION.

A. FEDERAL COURTS ARE BOUND BY THE DE-

CISIONS OF NEW JERSEY’S TRIAL AND IN-

TERMEDIATE APPELLATE COURTS WHICH

HAVE PREVIOUSLY ADDRESSED THIS ISSUE

OF INSURANCE COVERAGE FOR ENVIRON-

MENTAL CLAIMS UNDER NEW JERSEY LAW.

1c iiiaaallailiaia iia

This case is to be decided based upon New Jersey's

substantive law. Petitioners contend that there is no

doubt that the New Jersey Supreme Court, when faced

with the issues raised in this case, will hold that Peti-

tioners are entitled to coverage under each of the insur-

ance policies at issue.

In the case of Erie R. Co. v. Tompkins, 304 U.S. 64,

71 (1938), this Court made it clear that the federal

courts must predict how the New Jersey Supreme Court

would decide this case, not how the highest courts of the

states or other federal courts might decide this case.

Salve Regina College v. Russell, __. U.S. __, 111 S.Ct.

1217, 1226, 113 L.Ed.2d 190 (1991). GJ. Rehnquist

dissenting on other issues.) Both Evie and Salve Regina

interpret 28 U.S.C. §1652, which provides:

The laws of the several states, except where the

Constitution or treaties of the United States or acts

of Congress otherwise require or provide, shall be

regarded as rules of decision in civil actions in the

courts of the United States, in cases where they

apply.

This statute was formerly codified at 28 U.S.C. §1725.

In predicting how New Jersey's Supreme Court

would decide this case, a federal court should examine

the following factors: (1) decisions of the New Jersey

Supreme Court in related areas of law; (2) decisions of

intermediate and lower courts of the State of New

Jersey; (3) decisions of the federal courts interpreting

New Jersey law; (4) decisions of other jurisdictions on

the “majority” rule; (5) law review commentaries and

restatements of law; and (6) other relevant data. See

Grantham and Mann, Inc. v. American Safety Products,

5. The West Virginia Supreme Court of Appeals, in respond-

ing to certified questions from Judge Kidd of the United States

District Court for the Northern District of West Virginia in this case,

concluded that under West Virginia’s conflict of law rules, New

Jersey law would govern the interpretation of these insurance

contracts. Liberty Mutual Insurance Co. v. Triangle Industries,

Inc., 380 S.E.2d 562 (W.Va. 1990).

Inc., 831 F.2d 596, 608 (6th Cir. 1987); Gruber v.

Owens-Illinois Inc., 899 F.2d 1366 (3d Cir. 1990).

It would be inappropriate for a federal court to fail to

apply New Jersey law as it finds it, even if the federal

court might consider a contrary ruling to be a better

resolution of the issues presented:

[O]ur Judicial chore is to “determine the rule that

the North Carolina Supreme Court would probably

follow, not fashion a rule which we, as an indepen-

dent federal court, might consider best.”

Kline v. Wheels by Kinney, Inc., 464 F.2d 184 (4th Cir.

1972), quoting from Lowe’s North Wilkesboro Hard-

ware, Inc. v. Fidelity Mut. Life Ins. Co., 319 F.2d 469,

472 (4th Cir. 1963).

The Evie doctrine of applying state law in diversity

cases furthers the twin aims of: (1) discouraging forum-

shopping and (2) avoiding the inequitable administra-

tion of the laws. Salve Regina College v. Russell, __. US.

—, 111 S.Ct. 1217, 1222, 113 L.Ed.2d 190 (1991)

quoting Hanna v. Plumer, 380 U.S. 460, 468, 85 S.Ct.

1136, 1142, 14 L.Ed.2d 8 (1965). The Supreme Court of

Appeals of West Virginia has previously determined, in

answering certified questions posed by Judge Kidd, that

New Jersey law should be applied. Liberty Mutual

Insurance Co. v. Triangle Industries, Inc., 390 S.E.2d

562 (1990). Accordingly, a federal court deciding the

relevant coverage issue should be deciding that issue no

differently than if it were pending in the state courts of

New Jersey. Any contrary result would reward forum

shopping and undermine the integrity of the concurrent

jurisdiction of the federal and state systems.

To effectuate the twin goals of the Evie doctrine, the

Fourth Circuit was required to review the District

Court’s determination of New Jersey state law, de novo,

and without giving deference to the District Court’s

conclusions regarding New Jersey state law. Salve Re-

gina College v. Russell, __. U.S. __, 111 S.Ct. 1217,

1222, 113 L.Ed.2d 190 (1991). There should not be a

“dual system of enforcement of state-created rights in

which the substantive rule applied to a dispute may

depend on the choice of forum.” Jd. at __, 111 S.Ct. at

1222.

It is important to note that in the absence of persua-

sive evidence to the contrary, the federal courts are

bound by decisions of the lower courts of a state which

have addressed the matters in question. C.I.R. v. Bosch’s

Estate, 387 U.S. 456, 463, 87 S.Ct. 1776, 18 L.Ed.2d

886 (1967). In fact, the Fourth Circuit’s own decision in

Hupman v. Cook, 640 F.2d 497 (4th Cir. 1981) made it

clear that in evaluating state law:

[I]t is well to remember that, in this diversity action,

the expressions of the Virginia courts are due great

deference. If we can discover the answer they would

give to the questions, it must control, regardless of

our personal predilections for a contrary concept.

Id. at 497. (emphasis added).

Accordingly, this Court and the federal courts below

are bound by the decisions of the New Jersey courts

regarding the interpretation of the sudden and acciden-

tal exception to the pollution exclusion clause in a

Comprehensive General Liability (“CGL”) policy and its

application to the “discharge of’ contaminants, as Op-

posed to the “pollution damage.” Neither the United

States Court of Appeals for the Fourth Circuit, nor the

United States District Court for the Northern District of

West Virginia, analyzed New Jersey State law in accor-

dance with the standards set forth in the cases of Salve

Regina and Bosch. Had the District Court and the Court

of Appeals properly applied the rules of these cases, they

would have decided in favor of Petitioners.

B. THE DECISIONS OF NEW JERSEY’S TRIAL AND

INTERMEDIATE APPELLATE COURTS’ RE-

QUIRE THAT THE COVERAGE ISSUE IN THE

INSTANT CASE MUST BE RESOLVED IN FAVOR

OF THE PETITIONERS.

The District Court in this case properly concluded

that Petitioners: (1) did not “intend or expect” to cause

property damage; (2) that there was an “occurrence”

within the meaning of the policies in question; (3) that

“property damage” had occurred during that period; and

(4) that the clean-up costs were “damages” — all within

the meaning and within the policy periods of the Com-

prehensive General Liability (“CGL”) policies issued by

Ideal Mutual and Liberty Mutual. Neither Petitioners

nor Respondents sought review of these issues decided

by the District Court. The error of the courts below

involves the application of the relevant New Jersey law

to the interpretation of the standard pollution exclusion

clause. The policy provision to be interpreted in the

relevant CGL policies states that:

This insurance does not apply ... to ... property

damage arising out of the discharge, dispersal, re-

lease or escape of smoke, vapors, soot, fumes, acids,

alkalis, toxic chemicals, liquids or gases, waste

materials or other irritants, contaminants or pollut-

ants 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.

A-31. (emphasis added).

New Jersey law, as expressed by the New Jersey

Supreme Court, is well settled regarding the general

standards of interpreting insurance policies. The pole-

star of insurance contract interpretation under New

Jersey law is the effectuation of the reasonable expecta-

tions of the policyholders. Meier v. New Jersey Life Ins.

Co. 101 N.J. 597, 612, 503 A.2d 862 (1986); Allen v.

Metropolitan Life Ins. Co., 44 N.J. 294, 305, 208 A.2d

638 (1965) (holding that insurance policy language

should be interpreted strictly against the insurer and

where several interpretations are permissible, the New

Jersey Supreme Court has chosen the one most favor-

able to the policyholder); Kievit v. Loyal Protective Life

Ins. Co., 34 N.J. 475, 482, 170 A.2d 22 (1961) (holding

that the New Jersey Supreme Court will not allow

technical encumbrances or hidden pitfalls from provid-

ing coverage and that policyholders should be afforded

coverage to the full extent that any fair interpretation

will allow); Broadwell Realty Services, Inc. v. Fidelity

and Casualty Co., 218 N.J. Super. 516, 524, 528 A.2d 76

(App. Div. 1987). Insurance contracts are considered

“contracts of adhesion” because they are prepared by the

company’s experts who are learned in the law of insur-

ance. Meier, supra, 101 N.J. at 611-612; Mazzilli v.

Accident & Cas. Ins. Co. of Winterthur, 35 N.J. 1, 7, 170

A.2d 800 (1961) (holding that where the controlling

language of an insurance policy will support two mean-

ings, one favorable to the insurer and the other favorable

to the insured, the interpretation sustaining coverage

must be applied); Broadwell Realty, supra, 218 N.J.

Super. at 523-524.

The New Jersey Supreme Court has declared that

the interpretation of insurance contracts be guided by

the principle that “doubts as to the existence or extent of

coverage must generally be resolved in favor of the

insured.” Mazzilli, supra, 35 N.J. at 8; Broadwell Re-

alty, supra, 218 N.J. Super. at 524 (emphasis added).

Where several interpretations of policy language are

permissible, New Jersey courts have chosen the one

most favorable to the policyholder. Allen, 44 N.J. at 305;

Broadwell Realty, supra, 218 N.J. Super. at 525. The

New Jersey Supreme Court has even gone so far as to

declare that unambiguous policy language may be inter-

preted contrary to its plain meaning if this would fulfill

the reasonable expectations of a policyholder in purchas-

ing such insurance. See Werner Industries, Inc. v. First

State Ins. Co., 112 N.J. 30, 35-36, 548 A.2d 188 (1988).

————

C. UNDER NEW JERSEY LAW, THE POLLUTION

EXCLUSION CLAUSE’S EXCEPTION FOR

“SUDDEN AND ACCIDENTAL” POLLUTION HAS

BEEN INTERPRETED TO BE A RESTATEMENT

OF THE DEFINITION OF “OCCURRENCE” AND

TO PROVIDE INSURANCE COVERAGE FOR THE

UNINTENDED RESULTS OF INTENTIONAL

ACTS.

New Jersey’s trial and intermediate appellate courts

have interpreted the “sudden and accidental” language

contained in the pollution exclusion clause to apply to

the pollution damage, rather than to the discharge,

dispersal, release or escape of a contaminant. Broadwell

Realty Services, Inc. v. Fidelitv and Casualty Co., 218

N.J. Super. 516, 524, 528 A.2d 76 (App. Div. 1987). New

Jersey’s Appellate Division has interpreted the pollution

exclusion’s exception for “sudden and accidental” pol-

lution to provide coverage for the intentional disposal of

waste that resulted in unintended and unexpected pol-

lution. Only an active and deliberate polluter who knew

its waste was hazardous and would leak or leach out of

a landfill will be denied coverage. This reading of the

sudden and accidental exception to the pollution exclu-

sion clause is confirmed by the decision of New Jersey’s

Appellate Division in Broadwell Realty:

[D]ecisional law in New Jersey and elsewhere has

tended to interpret the pollution exclusion .and,

more particularly, the “sudden and accidental” ex-

ception 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.’” It is a reaffirmation that coverage will

not be provided for expected and hence avoidable

results.

We agree with this analysis.

Broadwell Realty at 534-535, quoting Jackson Township

Municipal Utilities Authority v. Hartford Acc. & Indem.

& Co., 186 N.J. Super. 156, 164, 451 A.2d 990 (Law Div.

1982). (Other citations omitted). The trial court in

Jackson Township held that:

Viewed from the standpoint of the Municipal Utili-

ties Authority, the function of depositing the waste

may have been intentional but it was never expected

or intended that the waste would seep into the

aquifer resulting in damage and injury to others. An

ambiguity thus exists. Alternative language in the

clause to indicate that the act of depositing, if

intentional, would exclude coverage regardless of

whether the pollution is expected or intended,

would have put the matter beyond reasonable ques-

tion.

186 N.J. Super. 156, 164-5 (Law Div. 1982). Merely

causing waste to be deposited off-site does not place a

generator of waste in the class of those who expect or

intend that the disposal of their waste will result in

injury or damage. Given that Petitioners thought the

wastes were non-toxic as reflected in Petitioners’ letter

of May 14, 1979, A-42, it is clear that Petitioners never

expected or intended the shipment of its waste sludge to

the Buckeye Landfill to cause any damage.

Disposing of waste through independent waste

haulers further removes a company from expecting or

intending injury or damages to occur. In CPS Chemical

Co. v. Continental Ins. Co., 199 N.J. Super. at 558 (Law

Div. 1984), rev’d on other grounds, 203 N.J. Super. 15

(App. Div. 1985), the insured sought coverage under its

insurance policies for claims made against it by the City

of Philadelphia for the allegedly illegal dumping of toxic

waste at a City dump. Jd. at 562. CPS had turned over its

waste to a hauler called “ABM” which proceeded to

dispose of the waste at a dump in Philadelphia. Jd.

Among the claims asserted against CPS Chemical were

violations of CERCLA. Jd. These facts are essentially the

same as those in the present case in which the Petition-

ers turned waste over to hauling companies. See A-3.

The Law Division Judge in CPS Chemical concluded

that there would be coverage for the unintended results

tila iil

of intentional acts, but there would not be coverage for

the intended results of intentional acts. Jd. at 565. In

other words, if a hauler improperly disposed of waste

such that a release of toxic chemicals resulted and the

release of the toxic chemicals was not intended by the

insured, there would be coverage. Jd.

Although the District Judge in this case concluded

that Petitioners intentionally disposed of the waste in the

sense that they knowingly sent the sludge to the Buck-

eye Landfill, he recognized that Petitioners did not

expect or intend that its waste would cause pollution.

A-22.

One of the earliest New Jersey cases which ad-

dressed the issue of insurance coverage for environmen-

tal claims was Lansco, Inc. v. Department of Environ-

mental Protection, 138 N.J. Super. 275, 350 A.2d 520

(Ch. Div. 1975), aff'd, 145 N.J. Super. 433, 368 A.2d 363

(App. Div. 1976), certif. denied, 73 N.J.57, 372 A.2d 322

(1977). Lansco was the law in New Jersey at the time

these policies of insurance were issued, a factor which

bears emphasis. Indeed, at the time that Triangle

shipped the sludge to the landfill in this case, November,

1977 to October, 1980, Lansco was the law in New

Jersey. Moreover, when each of the subject policies was

issued containing the standard pollution exclusion

clause that “sudden and accidental” releases were cov-

ered by CGL insurance, the law of New Jersey, which is

to be used to interpret the meaning of the policies in

question, required that the phrase “sudden and acciden-

tal” be interpreted to mean “unexpected and unin-

tended” from the standpoint of the insured. Accordingly,

Triangle’s reasonable expectations, the polestar of insur-

ance policy interpretation under New Jersey law®, were

certainly that such claims would be covered by these

insurance policies as interpreted by the Court in Lansco.

The Lansco Court found specifically that the words of

6. Meier v. New Jersey Life Insur. Co., 101 N.J. 597, 612, 503

A.2d 862 (1986).

the policy must be interpreted in accordance with their

plain, ordinary meaning - not in any technical or spe-

cialized way:

Words used by the insurer must be interpreted in

accordance with the plain, ordinary and commonly

understood meaning of the language employed.

Id. at 281-282. The Lansco Court went on to find the

terms “sudden” and “accidental” meant “unexpected”

and “unintended.” Jd. at 282. The Court went further to

conclude that the spill of the oil, which was not expected

or intended by the insured, was covered:

Further, under the definition of “occurrence” con-

taineg in the policy whether the occurrence is

accidental must be viewed from the standpoint of

the insured, and since the oil spill was neither

expected nor intended by Lansco, it follows that the

spill was sudden and accidental under the exclusion

clause even if caused by the deliberate act of a third

party.

Id. at 282. Lansco would clearly inform a prospective

purchaser of insurance that under New Jersey law,

“sudden and accidental” means “unexpected and unin-

tended.” Therefore, under the uncontroverted facts of

this case, Petitioners neither expected nor intended any

environmental damage, and thus should be afforded

coverage under the CGL policies.

That this reading of the sudden and accidental

exclusion to the pollution exclusion clause of the CGL

policies would be endorsed by the New Jersey Supreme

Court is indicated by that Court’s reliance upon Lansco

in State Dept. of Environmental Protection v. Ventron

Corp., 94 N.J. 473, 468 A.2d 150 (1983), in which the

court held that strict liability under Rylands v. Fletcher,

L.R. Ex. 265 (1866), affd L.R. 3 H.L. 330 (1888),

applied in toxic tort cases in New Jersey. See State

Department of Environmental Protection v. Ventron

Corp., 94 N.J. 473, 494, 495, 468 A.2d 150 (1983)

(citing Lansco for support). Numerous other court deci-

sions and law review articles have cited Lansco in

support of finding “sudden and accidental” to mean

“unexpected, and unintended.” See SL Industries v.

American Motorists, 248 N.J. Super. 458, 465, 591 A.2d

677 (App. Div. 1991), holding that “coverage will not be

provided for intended results, but will be provided for the

unintended and unforeseen results of an intentional

act,” citing Ambassador Insurance Company v. Montes,

76 N.J. 477, 388 A.2d 603 (1978), in which the Supreme

Court of New Jersey found coverage under the language

of a CGL policy where the insured had been convicted of

arson.

The “sudden and accidental” language means “un-

expected and unintended” under New Jersey case law.

Petitioners allegedly intentionally disposed of the sludge

by means of hiring a waste handler to transport it to a

landfill, but, as was found by the District Court and

affirmed by the Court of Appeals, Petitioners neither

expected nor intended that the waste would cause

pollution. Thus, under the current law in New Jersey,

the Fourth Circuit should have found that Petitioners

had insurance coverage under the CGL policies in issue.

It is probable that the New Jersey Supreme Court will

adopt the Lansco analysis and interpret the language to

apply to the facts of this matter. At present, Lamsco is the

law of New Jersey.

Ironically, on March 2, 1992, the day on which the

United States Court of Appeals for the Fourth Circuit

filed its decision and order in this case, the New Jersey

Supreme Court granted certification on this exact issue

of New Jersey law, involving the interpretation and

application of the “sudden and accidental” exception to

the original pollution exclusion clause contained in CGL

policies in the case of Morton International, Inc. v.

General Accidental Insurance Co. of America, No.

34,341, (N.J. Sup.Ct. certif. granted, March 2, 1992).

Another irony is that Respondent, Liberty Mutual, was

among the parties i. Morton, who sought review of this

issue by the New Jersey Supreme Court.

The decision of the New Jersey Supreme Court in

Morton will finally establish the rule of law which is

controlling in this case. This Court has the power to give

the parties to this action the benefit of the New Jersey

Supreme Court’s decision, by accepting jurisdiction,

granting this Petition for Writ of Certiorari to the United

States Court of Appeals for the Fourth Circuit and

Staying these proceedings pending the decision in the

Morton case.

The insurers in the present case have been hard

pressed to find even one New Jersey Supreme Court or

Appellate Division case on point contrary to the ciear

decisions of Broadwell Realty, Jackson Township, CPS

Chemical and Lansco. New Jersey’s appellate courts

have established a substantial body of precedent on

questions relating to insurance coverage in the context

of environmental claims. In fact, no state has more

decisions on point in this area of the law than New

Jersey. For the insurance companies in this case to

ultimately prevail on the merits, they must persuade this

Court, as they did the United States Court of Appeals for

the Fourth Circuit, to ignore not just one, two or a few

significant decisions of the lower courts in New Jersey

(all of which are based on clear precedent as announced

by the New Jersey Supreme Court in earlier cases of a

similar nature), but must persuade this Court that New

Jersey’s Supreme Court will ignore the substantial body

of existing New Jersey law and rule directly to the

contrary when it renders its decision in Morton. It is

unlikely that the New Jersey Supreme Court will ignore

the decisions of Broadwell Realty, Jackson Township,

CPS Chemical, Lansco and others when it decides this

issue.

Respondent, Liberty Mutual, which specifically re-

quested that this issue be resolved by the New Jersey

Supreme Court in its cross-petition for certification in

Morton, will suffer no prejudice or detriment of any kind

whatsoever if this Petition for a Writ of Certiorari is

granted and these proceedings stayed pending the deci-

sion of the New Jersey Supreme Court in Morton.

Indeed, the fact that Liberty Mutual cross-petitioned in

Morton to have this issue finally resolved by the New

Jersey Supreme Court reflects its desire to have this

troublesome question settled.

CONCLUSION

For the reasons specified above, a Writ of Certiorari

should be issued to the United States Court of Appeals

for the Fourth Circuit in this matter, and the proceed-

ings of this Court stayed, pending the decision of the

New Jersey Supreme Court in Morton.

In the alternative, the Writ should be issued and the

decision of the Fourth Circuit reversed because it erro-

neously predicted how the New Jersey Supreme Court

would decide this issue of New Jersey law under the

standards announced by this Court in Salve Regina.

Respectfully submitted,

a. Vie“

STEPHEN M. Cearany dD

New Jersey Resident Partrie

BLANK, ROME, COMISKY

& MCCAULEY

Woodland Falls Corporate Park

210 Lake Drive East, Suite 200

Cherry Hill, New Jersey 08002

(609) 779-3600

Counsel for Petitioners

Dated: sh 4142

APPENDIX

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Liserty Mutua INsuRANCE Company,

Plaintiff-Appellee,

Vv.

TRIANGLE INDusTRIES, INCORPORATED, a/k/a

ANC Holdings, Incorporated; TriaNcLe

PWC, INcorPorRaTED,

Defendent & Third Party Plaintiffs-

Appellants,

New Jersey Property-Liasitiry GUARANTY

AssociaTIon, on behalf of Ideal Mutual

Insurance Company, in liquidation;

ZURICH-AMERICAN INSURANCE CoMPANIES;

ZuRICH INSURANCE CoMPANY, D No. 91-1685

Third Party Defendants-Appellees,

and

Wausau INsuRANCE CompPaNtes; EMPLOYERS

INSURANCE OF Wausau,

Third Party Defendants.

WESTINGHOUSE ELEctTRIC CorPoRATION;

INTERNATIONAL Business MACHINES

CorPoRATION; OLIN CorPoRATION; AMERICAN

FiseR MANUFACTURERS ASSOCIATION;

AMERICAN PETROLEUM INsTITUTE; CHEMICAL

MANUFACTURERS ASSOCIATION; INSURANCE

ENVIRONMENTAL LiTIGATION ASSOCIATION,

Amici Curiae.

A-2

Appeal from the United States District Court

for the Northern District of West Virginia, at Wheeling.

William M. Kidd, Senior District Judge.

(CA-88-41-W-K)

Argued: December 3, 1991

Decided: March 2, 1992

Before ERVIN, Chief Judge, NIEMEYER, Circuit

Judge, and SHEDD, United States District Judge for the

District of South Carolina, sitting by designation.

Affirmed by published opinion. Judge Niemeyer wrote

the opinion, in which Chief Judge Ervin and Judge

Shedd joined.

COUNSEL

ARGUED: Stephen M. Orlofsky, BLANK, ROME,

COMISKY & MCCAULEY, Cherry Hill, New Jersey, for

Appellants. Lee Hadas Glickenhaus, MINTZ, LEVIN,

COHN, FERRIS, GLOVSKY & POPEO, P.C., Boston,

Massachusetts, for Appellees. ON BRIEF: Carlo Scara-

mella, BLANK, ROME, COMISKY & MCCAULEY,

Cherry Hill, New Jersey, for Appellants. William F.

Greaney, COVINGTON & BURLING, Washington,

D.C. for Amici Curiae American Petroleum Institute and

Chemical Manufacturers Association; H. Woodruff

Turner, Peter J. Kalis, David M. Aceto, Thomas M.

Reiter, William J. Pohlman, KIRKPATRICK & LOCK-

HART, Pittsburgh, Pennsylvania, for Amici Curiae

Westinghouse Electric Corporation, American Fiber

Manufacturers Association, International Business Ma-

chines Corporation, and Olin Corporation.

A-3

OPINION

NIEMEYER, Circuit Judge:

The question of whether insurance provides coverage

for pollution damage is currently an important one that

has far-reaching financial implications.! The answer de-

termines who in the first instance bears the cost of

pollution cleanup, although we recognize that it does not

ultimately relieve the entire economy of the financial

burden. In this case we conclude that certain insurance

policies, interpreted in accordance with the law of New

Jersey, do not provide coverage for the unintended envi-

ronmental damage which allegedly continues to arise

from the past regular surface disposal in a landfill of the

waste products of a standard manufacturing process. We

therefore affirm the judgment of the district court.

Triangle Industries, Inc., and its subsidiary, Trian-

gle PWC, Inc., (collectively referred to as “Triangle”)

were involved in the fabrication of wire and cable at a

processing plant in Glen Dale, West Virginia. As part of

the fabrication process, Triangle utilized a method of

“pickling” the steel used to make its wires and cables

which produced a waste product known as “lime-

stabilized waste pickle liquor sludge.” Between Novem-

ber 1977 and October 1980, this lime-stabilized waste

pickle liquor sludge was trucked by an independent

contractor from the Triangle plant in West Virginia to a

landfill near St. Clairsville, Ohio, where it was poured

onto the ground.? Shortly after Triangle ceased dispos-

1. In this regard, we received amicus curiae briefs from

Insurance Environmental Litigation Association on behalf of 19

insurance companies and from Westinghouse Electric Corporation,

International Business Machines Corporation, Olin Corporation,

American Fiber Manufacturers Association, American Petroleum

Institute, and Chemical Manufacturers Association.

2. We can suppose that in that lime-stabilized waste pickle

liquor sludge “the slithy toves [dJid gyre and gimble.” See Lewis

Carroll, “Jabberwocky,” from Through the Looking Glass, Ch. 1 (1872).

A-4

ing of the sludge at the site, the Ohio Environmental

Protection Agency conducted tests and discovered that

hazardous materials were leaking from the landfill.

After conducting some of its own tests; on Decem-

ber 7, 1984, the United States Environmental Protection

Agency notified Triangle, as well as other companies,

that it considered them “potentially responsible parties”

under the Comprehensive Environmental Response,

Compensation, and Liability Act (CERCLA), 42 U.S.C.

§§ 9601 et seq. (1988). On October 3, 1985, Triangle

and the other potentially responsible parties entered into

an administrative consent agreement with the federal:

agency, in which the companies agreed to begin clean-

ing up the site.

From January 1, 1981, to April 4, 1987, Triangle

maintained a number of insurance policies with three

different insurers. All of the policies include covenants

to defend and indemnify Triangle against covered prop-

erty damage, but each policy also expressly excludes

coverage for certain categories of pollution damage.

While the particular language of spcific policies will

be discussed later in some detail, it is useful to note at

this point that this case involves, generally, three cate-

gories of insurance coverage. First, there are compre-

hensive general liability policies which contain what will

be termed the “original” pollution exclusion clause. One

of these policies, issued by Ideal Mutual Insurance

Company, covered the years 1981 and 1982. The other,

issued by Liberty Mutual Insurance Company, covered

the period from January 1, 1982, to July 1, 1982. Second,

there are comprehensive general liability policies with a

“modified” pollution exclusion clause. Liberty Mutual

issued policies of this type to Triangle, covering the

period from July 1, 1982, to January 1, 1984. Afterwards,

Zurich Insurance Company issued such policies cover-

ing the period from January 1, 1984, to April 1, 1987.

Third, Zurich issued to Triangle a “claims-made” pollu-

tion liability insurance policy with a clause excluding

‘eas

A-5

certain sites, which covered the period from May 15,

1984, to May 15, 1985.

On March 7, 1985, Triangle notified all of its insur-

ers that it had been named a potentially responsible

party and asked that they bear Triangle’s investigatory

and legal expenses, furnish Triangle a defense in its

attempt to avoid or minimize, through litigation, the

requirement of paying for the extensive enviornmental

cleanup, and indemnify Triangle for actual cleanup

costs. Of course, Triangle conceded “a reservation of

rights by the carriers as to their ultimate responsibilities

for indemnification.” Because Ideal Mutual was in re-

ceivership, the receiver, New Jersey Property-Liability

Guaranty Association, responded to Triangle, denying

coverage under the policy with Ideal Mutual. Zurich

responded on April 1, 1985, explaining that it questioned

whether the pollution damage in Ohio was covered by its

policies, but would handle “this matter under a full and

complete reservation of rights.” However, on August 28,

1985, Zurich withdrew its participation in Triangle’s

defense, effective October 1, 1985. Liberty Mutual re-

sponded on February 27, 1986, after Triangle sent them

a second letter, agreeing to participate in Triangle’s

defense despite reservations regarding indemnity. Lib-

erty Mutual continued to assist in Triangle’s defense

until February 1, 1988, when Liberty Mutual concluded |

that Triangle was not covered by any of its policies and

so too withdrew its defense.

Shortly thereafter, Liberty Mutual brought this di-

versity action, asking for a declaratory judgment that it

owes no duty to defend Triangle. Triangle asserted

counterclaims and third-party claims against the other

insurers, seeking a declaration that a defense is owed.

The district court certified legal questions to the

West Virginia Supreme Court of Appeals, which replied

that, under West Virginia’s choice-of-law rules, New

Jersey law governs the interpretation of all of the insur- -

ance contracts. Subsequently, on cross motions for

A-6

summary judgment, the district court held that al-

though the environmental damage allegedly caused by

dumping Triangle’s sludge into the Ohio landfill was

neither intended nor expected by Triangle, none of the

insurance policies covered such damages by reascn of .

pollution exclusions. This appeal followed.

Before beginning our analysis of the various insur-

ance policies which are at issue in this appeal, we note

that a federal court sitting in diversity has a duty to apply

the operative state law as would the highest court of the

state in which the suit was brought. Having certified the .

question to the highest court of West Virginia and

thereby determined that the law of New Jersey governs

the construction of each of Triangle’s insurance con-

tracts, it was the duty of the district court, as it is ours,

to interpret these instruments as would the New Jersey

Supreme Court. See Brendle v. General Tire & Rubber

Co., 505 F.2d 243, 245 (4th Cir. 1974).

The best evidence to this effect would be, of course,

a decision by the highest court of New Jersey which

addresses the contract interpretation issues now before

us, but that court has not spoken to many of these

questions. In such circumstances, the state’s intermedi-

ate appellate court decisions “constitute the next best

indicia of what state law is,” although such decisions

“may be disregarded if the federal court is convinced by

other persuasive data that the highest court of the state

would decide otherwise.” 19 Charles A. Wright, Arthur

R. Miller & Edward H. Cooper Federal Practice &

Procedure § 4507, at 94-95 (1982). See also West v.

American Tel. & Tel. Co., 311 U.S. 223, 237 (1940). In

predicting a decision of the state’s highest court we can

further consider, among other things, canons of con-

struction, restatements of the law and treatises that are

regularly applied by the courts of the state and whose

use for a particular purpose is approved by the state’s

highest court, see Fried v. North River Ins. Ce., 710 F.2d

A-7

1022, 1025 (4th Cir. 1983), and General Elec. Co. v.

Sargent & Lundy, 916 F.2d 1119, 1125 (6th Cir. 1990),

recent pronouncements of general rules or policies by

the state’s highest court, see Woodruff v. Tomlin, 616

F.2d 924, 930 (6th Cir.), cert. denied, 449 U.S. 888

(1980), or even that court’s well considered dicta, see 19

Wright, Miller & Cooper, supra, at 97. Decisions of the

State’s trial courts may also be considered to provide

some light upon the subject. See id. at 96. :

Finally, we note that the determination of state law

by the district court is to be reviewed by us de novo. See

Salve Regina College v. Russell, 111 S.Ct. 1217, 1221

(1991).

III

We begin our analysis of the insurance contracts at

issue in this case with the comprehensive liability poli-

cies which include what we term the “original” pollution

exclusion. Under these policies, which were issued to

Triangle in 1981 and 1982 by Ideal Mutual and Liberty

Mutual, insurance coverage is predicated upon the

happening of an “occurrence,” defined as an accident,

including continuous or repeated exposure to condi-

tions, which results in . . . property damage neither

expected nor intended from the standpoint of the in-

sured.

(Emphasis added.) The district court found, and neither

party disputes, that the environmental damage allegedly

caused by the disposal of Triangle’s waste materials was

unexpected. Thus the case is placed within the basic

coverage of the comprehensive liability policies.

However, these comprehensive liability policies in-

clude a standard exclusion for damage caused by certain

forms of pollution. This “original” pollution exclusion

removes from coverage

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 irri-

tants, contaminants or pollutants into or upon

A-8

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.

(Emphasis added.) Once again, for purposes of this

appeal there is no dispute that the environmental dam-

age in this case arose from the discharge of pollutants

upon the land, bringing this case within the initial

precepts of the exclusion. The critical issue before us

thus is whether the exception to the exclusion also

applies, i.e., was “such discharge . . . sudden and

accidental”?

Triangle argues that the New Jersey lower court

opinions require us to read the “sudden and accidental”

language in the exclusion as applying to the pollution

damage rather than to the discharge, dispersal, release

or escape of the contaminant. While there are appellate

court decisions in New Jersey that support such a view,

see, e.g., Broadwell Realty Servs., Inc. v. Fidelity &

Casualty Co., 528 A.2d 76, 85 (N.J. Super. Ct. App. Div.

1987), we are firmly persuaded that the highest court of

New Jersey would not concur with these opinions. First,

the plain language of the policy makes clear that the.

“exclusion does not apply if such discharge, dispersal,

release or escape [as distinct from the damage caused] is

sudden and accidental.” While New Jersey law reads

ambiguities in favor of the insured, it does not “write for

the insured a better policy of insurance than the one

purchased.” Walker Rogge, Inc. v. Chelsea Title & Guar.

Co., 562 A.2d 208, 214 (N.J. 1989). Furthermore, given

that the basic coverage of these policies is afforded for an

occurrence defined as a condition giving rise to unin-

tended damages, a reading of the subsequent language

which excludes from the basis coverage ali releases of

pollution except those which cause unintended damages

simply restates the basic coverage and writes the pollu-

tion exclusion completely out of the contract. See Jack-

son Township Mun. Utils. Auth. v. Hartford Accident &

Indem. Co., 451 A.2d 990, 994 (N.J. Super. Ct. Law Div.

A-9

1982) (“[T]he clause can be interpreted as simply a

restatement of the definition of ‘occurrence’”). This

construction violates a fundamental and long-standing

principle that, where possible, meaning will be given to

all of the clauses of an insurance policy. See Smith v.

Fidelity & Deposit Co., 120 A. 322, 323 (N.J. 1923). As

New Jersey’s highest court stated in Prather v. Ameri-

can Motorists Ins. Co., 67 A.2d 135, 138 (N.J. 1949),

“Effect, if possible, will be given to all parts of the

instrument, and the construction which gives a reason-

able meaning to all its provisions will be preferred to one

which leaves a portion of the writing useless or inexpli-

cable.”

Finally, at least one opinion on which the Broadwell

court appears to have relied in making its conclusion

that the “sudden and accidental” language refers to the

damages rather than the discharge of pollutants, see

Broadwell, 528 A.2d at 83, in fact focused on whether

the discharge of the pollutant was intended, rather than

on the injury resulting from the discharge. See Lansco,

Inc. v. Dep’t. of Envtl. Protection, 350 A.2d 520, 524

(N.J. Ch. 1975) (“[S]ince the spill was neither expected -

nor intended... it follows that the oil spill was sudden

and accidental under the exclusion clause... .”), aff'd

368 A.2d 363 (N.J. Super. Ct. App. Div. 1976) (per.

curiam). Thus we believe that the Supreme Court of

New Jersey would conclude from the language of these

policies that (1) basic coverage arises from the occur-

rence of unintended damages; but (2) such damages as

arise from the discharge of various pollutants are ex-

cluded from this basic coverage; except that (3) dam-

ages arising from the discharge of these pollutants will

fall within the coverage of these policies where such

discharge is sudden and accidental.

To apply this construction to the facts of this case,

we ask initially whether the discharge of the toxic sludge

upon the ground at the landfill in St. Clairsville, Ohio,

was an act expected or intended by Triangle. If so, the

discharge could not be “accidental,” and the resulting

A-10

damage, even though unintended, would be excluded

from coverage under the language of the pollution

exclusion.

While Triangle points to a substantial quantity of

evidence which tends to support the fact that Triangle

did not know of the harm that would be caused by

dumping its waste products at the Ohio landfill, no

evidence was presented to the court below to demon-

strate that Triangle did not expect and intend its sludge

to be dumped upon the ground at the landfill. The

sludge was a normal by-product of Triangle’s manufac-

turing operation. The company hired trucks to haul the

waste to the Ohio landfill. And Triangle corresponded

with persons at the landfill, discussing the liquidity of

the semi-solid sludge being dumped at the fill. Given

this, we agree with the district court that the open

dumping of a sludge onto the ground, particularly when

performed as part of a regular business activity, cannot

be considered an accidental discharge of the contami-

nant. Under the law of New Jersey, we therefore con-

clude that the losses sustained by reason of such an

operation are not covered by the Liberty Mutual and

Ideal Mutual comprehensive general liability policies

containing the original pollution exclusion (with the

“sudden and accidental” language).

We next address the comprehensive general liability

policies, issued by Liberty Mutual and Zurich, which

contain what we term the “modified” pollution exclusion

language. As was the case with the policies containing

the “original” pollution exclusion, basic coverage under

the policies with the “modified” pollution exclusion is

not questioned. As before, the issue on appeal is whether

the pollution exclusion language removes the damages

arising in this case from the coverage of these policies.

The modified language excludes coverage for

property damage arising out of the discharge,

A-11

dispersal, release or escape of smoke, vapors,

soot, fumes, acids, alkalis, toxic chemicals,

liquids or gases, waste materials or other irri-

tants, contaminants or pollutants into or upon

land, the atmosphere or any water course or

body of water; but this exclusion does not apply

to bodily injury or property damage included

within the product hazard or the completed

operations hazard if the discharge, dispersal,

release, or escape originates away from pre-

mises owned by, rented or loaned to a named

insured.

(Emphases added.) These terms make clear that ail

releases of pollutants are excluded from the coverage of

these policies unless such releases are included within

the “product hazard” or the “completed operations haz-

ard” which is covered by the policy.

The term “product hazard” is a standard one in the

insurance industry. Liability insurance policies are often

issued “to protect the producer or manufacturer of goods

against loss or injury to the person or property of others

caused by the use of his products.” 11 Couch on Insur-

ance, 2d § 44:387 (2d ed. 1982). The “product hazard”

language reflects an attempt to describe that protection.

See CPS Chem. Co. v. Continental Ins. Co., 489 A.2d

1265, 1270 (N.J. Super. Ct. Law Div. 1984), rev'd on

other grounds, 495 A.2d 886 (N.J. Super. Ct. App. Div.

1985). Likewise, the term “completed operations haz-

ard” refers to an analogous form of protection offered for

the benefit of those policyholders who provide a service

in addition to or instead of a particular product. See id.

(“Commentators are in complete agreement that this

exclusion refers to accidents caused by defective work-

manship which arise after completion of work by the

insured on construction or service contracts.”) (citing 58

A.L.R.3d § 2(a)).

The district court had little trouble concluding that

the property damage in this case, which allegedly re-

sulted from the disposal of a manufacturing waste

A-12

product, involved neither a service operation nor a

product of Triangle. We agree. The court noted in CPS

Chem. Co. that “[the disposal of manufacturing wastes]

does not involve construction or service operations” and

“TiJndustrial wastes not intended for consumption, sale,

or use by others are not ‘products.’ ” 489 A.2d at 1270.

We find this reasoning to be sound and so conclude that

the pollution damages which arose in this case also are

not covered by the language of these policies containing

the modified pollution exclusion.

Zurich also issued to Triangle, in May 1984, a third

type of insurance policy, a “claims-made” pollution

liability insurance policy which contained a clause ex-

cluding the pollution arising from certain physical sites.

These policies obligate Zurich to indemnify Triangle for

property damage claims made during the policy period

which result from the

emision, discharge, release, or escape of any

solid, liquid, gaseous, or thermal contaminants,

irritants, or pollutants directly from the insured

site into or upon the land.

The policy goes further to define the term “insured site”

1) the specific location or part thereof specified

as such in the declarations of this policy, or 2)

any site to which waste materials were legally

consigned or delivered by a named insured for

storage, disposal, processing, or treatment, pro-

vided that the site . . . was duly authorized for

such storage, disposal, p:ocessing, or treatment

under a permit issued by sate or federal au-

thority and in force at the time of all such

consignment or delivery.

(Emphasis changed.) No contention is made in this case

that the Ohie—landfill was specifically identified as an

insured site in the Zurich policies. Thus, the alleged

damages resulting from the release of pollutants from

A-13

the landfill can only be covered by the policy if “the site

. .. was duly authorized for such storage, disposal, pro-

cessing, or treatment under a permit issued by state or

federal authority.”

Triangle does not seriously argue that is presented

to the district court any evidence upon which a reason-

able fact finder could conclude that the Ohio landfill was

authorized to store its sludge by the state of Ohio or the

federal government. Indeed the record reflects that in

1979 the Ohio Environmental Protection Agency ex-

pressly denied requests to allow the dumping of any

sludge at the landfill, such requests having been made

by the county in which the landfill was located. The

state agency concluded:

No liquids, semi-solids (sludges) or hazardous

waste can be approved for landfilling or dis-

posal . . . . The site is considered very perme-

able and would not secure fluids contained in

the waste.

In an effort to avoid the inevitable conclusion that

the state of Ohio did not approve the landfill for storage

of Triangle’s sludge, Triangle now argues that the state

was preempted by federal environmental regulations

from regulating the disposal of nontoxic wastes at the

state’s landfills. That the Supreme Court has declared

that a state “has every right to [protect its residents’

pocketbooks as well as their environment] by slowing

the flow of all waste into the State’s remaining landfills”

so long as it does not specifically discriminate against

articles of commerce from outside the state, readily

disposes of this argument as well. See City of Philadel-

phia v. New Jersey, 437 U.S. 617, 626-27 (1978).

Because the landfill was not approved for storage or

disposal of Triangle’s waste, we conclude that the dis-

trict court was also correct in denying coverage under

the Zurich claims-made policy.

A-14

Finally, we address the argument by Triangle that

Liberty Mutual and Zurich should be estopped from

denying their duty to defend Triangle in this toxic waste

litigation. Triangle relies primarily upon the holdings of

Battista v. Western World Ins. Co., Ins., 545 A.2d 841

(N.J. Super. Law Div. 1988), affd in part and rev'd in

part on other grounds sub. nom., Battista v. Olson, 594

A.2d 260 (N.J. Super. Ct. App. Div. 1991), and Mer-

chants Indem. Corp. v. Eggleston, 179 A.2d 505 (N.J.

1962). However, neither of these cases substantially

supports Triangle’s contention.

In Battista the court concluded that a defense by an

insurance company with a reservation of right to dis-

claim coverage for general damages precluded the in-

surance company from disclaiming coverage for puri-

tive damages after a loss at trial. Battista, 545 A.2d at

845-46. Likewise, in Eggleston, the New Jersey Su-

preme Court stated that an insurer can be estopped from

raising its defense to indemnification by conducting the

insured’s legal defense. Eggleston, 179 A.2d at 512-13

(dictum).

Unlike the cases upon which Triangle attempts to

rely, neither Zurich nor Liberty Mutual defended Trian-

gle until its liability was conclusively established at trial.

On the contrary, both insurance companies agreed

initially to defend Triangle (with a complete reservation

or rights under the policies) because the policies, as

interpreted by New Jersey law, require them to do so.

See Mt. Hope Inn v. The Travelers Indem. Co., 384 A.2d

1159, 1162, 1164 (N.J. Super. Ct. Law Div. 1978). After

further review of the situation and their policies (and

well before any trial on the issue or Triangle’s liability)

the insurance companies concluded that they had no

duty to indemnify Triangle for the damage resulting

from the sludge dumped at the Ohio landfill. Because

“the duty to defend extends only to claims on which

there would be a duty to indemnify in the event of a

judgment adverse to the insured,” see Hartford Accident

A-15

& Indem. Co. v. Aetna Life & Casualty Ins. Co., 483 A.2d

402, 405 (N.J. 1984) (per curiam), Zurich and Liberty

Mutual withdrew their defense of Triangle. See also

Burd v. Sussex Mutual Ins. Co., 267 A.2d 7, 10 (N.J.

1970) (noting that a covenant to defend does not oblige

a carrier to “defend claims which would be beyond the

covenant to pay if the claimant prevailed”).

There may exist a point before the actual rendering

of a verdict against the insured at which the New Jersey

courts will consider that, despite a prior reservation as to

coverage, the withdrawal from the defense of the in-

sured (because of a determination that coverage does

not exist or for other reasons) causes such harm to the

insured that the insurer will be estopped from doing so.

We are not convinced, however, that such a point arises

in this case. The district court noted that “there is no

evidence that the actions of Liberty or Zurich prejudiced

Triangle by leaving it defenseless or seriously hampered

its ability to protect itself so as to warrant estoppel.” And

Triangle admitted as much at oral argument when it

conceded that the only prejudice to Triangle resulting

from Liberty Mutual and Zurich’s withdrawal from its

defense was the loss of their assistance in the on-going

litigation. That being the case, there are no grounds for

estoppel, see Eggleston, 179 A.2d at 512 (“undoubtedly

prejudice is an essential ingredient”) (dictum), and in

light of our decision with regard to the coverage of the

insurance policies in question, Liberty Mutual and Zu-

rich had every right to withdraw their legal assistance.

VII

In summary, because the discharge of sludge upon

the ground at the Ohio landfill was intended as the

standard course of Triangle’s business and was not

“accidental,” policies containing the “original” pollution

exclusion for “sudden and accidental” releases of pollut-

ants do not provide coverage, even though the damage

caused by the discharge was unintended. Also, because

A-16

the damage arising from wastes produced in a manufac-

turing process are included in neither a “product haz-

ard” nor a “completed operations hazard” under New

Jersey law, policies containing the “modified” pollution

exclusion do not provide coverage. Finally, because

Triangle produced no evidence that the landfill in which

its sludge was placed was approved for the storage of

such sludge by the state of Ohio or the federal govern-

ment, the “claims made” policy does not provide cover-

age for damage caused by the sludge. Triangle’s alter-

native argument that there is coverage-by-estoppel is

also rejected in the circumstances of this case, and

accordingly the decision of the district court is affirmed.

AFFIRMED

A-17

| UNITED STATES DISTRICT COURT

91 MAR 12 AM 9:17

NORTHERN DISTRICT OF WEST VIRGINIA

LIBERTY MUTUAL INSURANCE )

COMPANY,

Plaintiff,

Vs.

TRIANGLE INDUSTRIES, INC.

(now Trian Holdings, Inc.) and

TRIANGLE PWC, INC.,

Defendants and Third-

Party Plaintiffs,

. , CIVIL ACTION NO.

” 88-0041-W(K)

q WAUSAU INSURANCE COMPANIES

and EMPLOYERS INSURANCE OF

WAUSAU, NEW JERSEY

PROPERTY-LIABILITY GUARANTY

ASSOCIATION, on behalf of IDEAL

MUTUAL INSURANCE COMPANY .

in liquidation, and ZURICH-

AMERICAN INSURANCE

COMPANY, severally and in the

alternative,

Third-Party Defendants. /

MEMORANDUM OPINION AND ORDER

Currently pending are the parties, cross-motions for

summary judgment in this declaratory action, invoking

the Court’s diversity jurisdiction. Said motions, having

been fully briefed, are ripe for disposition.

The defendants, Trian Holdings, Inc. (formerly Tri-

angle Industries, Inc.), and Triangle PWC, Inc. (“Tri-

angle”), seek a declaration that the plaintiff, Liberty

Mutual Insurance Company (“Liberty”), and third-party

A-18

defendants, Wausau Insurance Companies and Employ-

ers Insurance of Wausau (“Wausau”)!, New Jersey

Property-Liability Guaranty Association, on behalf of

Ideal Mutual Insurance Company, in_ liquidation

(“NJPLIGA”), and Zurich-American Insurance Com-

pany (“Zurich”), owe a duty to defend and indemnify

Triangle for governmental demands for clean-up of a

hazardous waste facility. All of the insurers deny cover-

age under their respective insurance policies with Tri-

angle.

The facts underlying this action are basically undis-

puted. Triangle, a New Jersey Corporation, owned and

operated a steel “pickling, plant in Glen Dale, West

Virginia. Triangle’s operations at this plant generated a

waste product known as “lime stabilized waste pickle

liquor sludge” (“sludge”).

Between November 1977 and October 1980, the

sludge was shipped for disposal to the Buckeye Recla-

mation Landfill, located in St. Clairsville, Ohio. Triangle

engaged the services of an independent contractor to

transport the sludge to the landfill site.

On October 15, 1980, the Ohio EPA conducted

sampling of the sludge located at the Buckeye Landfill,

and determined that the sludge was “toxic” according to

its criteria. In December 1980, the Ohio EPA conducted

further sampling of surface water from a stream near the

Buckeye Landfill. Analysis of these water samples indi-

cated that contaminated materials were escaping from

the landfill.

On September 8, 1983, the Buckeye Landfill was

listed on the National Priority’s List pursuant to

1. By letter dated January 28, 1991, counsel for Wausau has

informed the Court that it is currently negotiating a settlement with

Triangle and requested that the Court defer ruling on Triangle’s

summary judgment motion as it pertains to Wausau. The Clerk is

directed to file said letter. Accordingly, ruling herein is deferred for

a period of thirty (30) days from entry of this Opinion, at which time

Triangle and Wausau will submit an Order dismissing their claims

as settled or Wausau will file its brief in opposition.

aye ie Be!

A-19

§ 105(8)(b) of the Comprehensive Environmental Re-

sponse, Compensation, and Liability Act, 42 U.S.C.

§ 9601 et seq. (“CERCLA”). Based upon tests conducted

at the site, the Ohio EPA and the United States EPA

(“USEPA”) concluded that the Buckeye Landfill had

been releasing and was continuing to release hazardous

substances which posed an imminent and substantial

danger to the public health, welfare, and the environ-

ment.

On December 7, 1984, Triangle was notified by the

USEPA that it was being designated a “potentially

responsible party” pursuant to CERCLA, in connection

with the environmental contamination at the Buckeye

Landfill. On October 3, 1985, Triangle, along with other

potentially responsible parties, executed an administra-

tive order, known as a consent decree, as required by

Ohio EPA and USEPA, for the cleanup of the Buckeye

Landfill.

NJPLIGA issued a one year comprehensive general

liability insurance (“CGL”) policy to Triangle, effective

January 1, 1981 to January 1, 1982. Liberty issued two

CGL policies covering the periods January 1, 1982 to

January 1, 1983, and January 1, 1983 to January 1,

1984, as well as a “claims-made” policy that covered the

period July 1, 1982 to May 15, 1984 .2 Zurich issued four

CGL policies to Triangle, from January 1, 1984 to

January 1, 1985, from January 1, 1985 to January 1,

1986, from January 1, 1986 to January 1, 1987, and from

January 1, 1987 to April 1, 1987. Zurich also issued two

claims-made Pollution Liability Insurance (“PLI’”) poli-

cies to Triangle which were in effect from May 15, 1984

to November 8, 1985.

By letter dated March 7, 1985, Triangle’s counsel

notified all of its insurance carriers of the claims asserted

by the USEPA rising out of the enforcement actions at

2. Because Triangle’s claims were not made within the appli-

cable dates on Liberty’s “claims-made” policy, there are no bona fide

disputes concerning coverage under this policy.

A-20

the Buckeye Landfill, requested that the carriers provide

a defense, and agreed that any defense would be under

a reservation of rights by the carriers. By letter (lated

November 19, 1986, NJPLIGA denied coverage. By

letters dated October 30, 1985, January 23, 1986, Feb-

ruary 27, 1986, May 21, 1986, July 8, 1986, August 19,

1986, August 27, 1986, and December 9, 1986, Liberty

initially agreed to participate in the defense of Triangle

by paying a portion of the fees of Triangle’s retained

counsel, believing it, as well as the other carriers, had a

duty to defend Triangle pending further investigation.

However, by letters dated June 1, 1987 and February 1,

1988, Liberty determined that the policies provided no

coverage and, therefore, ceased its defense of Triangle.

By letter dated April 1, 1985, Zurich also initially agreed

to participate in the defense of Triangle under a reser-

vation of rights. By letter dated August 28, 1985, Zurich

informed Triangle that it denied coverage and would no

longer participate in the defense of Triangle.

All of the insurance policies involved in this action

were entered into by the parties in New Jersey. In

answering a certified question by the Court, the West

Virginia Supreme Court of Appeals held that New Jersey

law controls the interpretation of the insurance policies

in questions. Liberty Mut. Ins. Co. v Triangle Indus-

tries, Inc., 390 S.E.2d 562 (W.Va. 1990). The Court will

now proceed to rule on the questions of law involved

herein.

Since the CGL policies contain identical language,

the Court will proceed with questions of law common to

all insurers. The first question is whether an “occur-

rence” has transpired which would precipitate coverage

under the general conditions of the policies. An occur-

rence, is defined as:

an accident, including continuous or repeated expo-

sure to conditions, which results in bodily injury or

property damage neither expected nor intended

from the standpoint of the insured.

eens

Peake inearigans *

A-21

“Property damage” is defined as:

(1) physical injury to or destruction of tangible

property which occurs during the policy period,

including the loss of use thereof at any time result-

ing therefrom, or

(2) loss of use of tangible property which has not

been physically injured or destroyed provided such

loss of use is caused by an occurrence during the

policy period.

The first issue to determine, therefore, is whether

“property damage” occurred during the policy period.

New Jersey has adopted the “continuous trigger” theory

which “holds that where an injury process is not a

definite, discrete event, the date of the occurrence

should be the continuous period from exposure to the

manifestation of damages.” Gottlieb v. Newark Ins. Co.,

238 N.J. Super 531, 535, 570 A.2d 443 (App.Div. 1990);

Lac D’Amiante du Ouebec Ltee. v. American Home

Assur. Co., 613 F.Supp. 1549 (D.N.J. 1985). The insur-

ers argue that the manifestation of harm occurred when

Ohio EPA detected the contamination at the Buckeye

Landfill before January 1, 1981. On the other hand,

Triangle argues that since the site has not yet been

cleaned up, property damage is still occurring.

The Court believes that under New Jersey law the

manifestation of harm occurs when the insured is dam-

aged. Hartford Acci. & Indem. Co. v. Aetna Life & Cas.

Ins. Co., 98 N.J. 18, 27, 483 A.2d 402 (1984). As such,

the Court finds that the manifestation of harm occurred

on December 7, 1984, when Triangle was notified by the

USEPA that it was being designated a “potentially

responsible party” pursuant to CERCLA. Accordingly,

the Court holds that the property damage at the Buckeye

Landfill occurred from 1978 until December 7, 1984.

Therefore, property damage occurred during all of the

CGL policies, periods.

A-22

Since property damage occurred during the respec-

tive policy periods, the Court now must determine

whether the property damage resulted from an accident

which was “neither expected nor intended from the

standpoint of the insured.” In regard to the definition of

“occurrence,” the focus is on whether the property

damage was unexpected and unintended by Triangle.

The Court has no doubt that Triangle neither expected

nor intended that the sludge deposited at the Buckeye

Landfill would give rise to a claim by Ohio EPA and

USEPA that Triangle would be responsible for clean-up

costs at the Buckeye Landfill. Therefore, the Court finds

that an “occurrence” has transpired giving rise to cov-

erage under the CGL policies.

The next question of law, is whether the pollution

exclusion clause found in the CGL policies of Liberty

and NJPLIGA exclude coverage herein. The pollution

exclusion clause provided that the policies do not apply:

To bodily injury property damage arising out of

pollution or contamination due to the discharge,

dispersal, release or escape of smoke, vapors, soot,

fumes, acids, alkalis, toxic chemicals, liquids or

gases, waste materials or other irritants, contami-

nants or pollutants into or upon land, the atmo-

sphere or any water course or body of water; but this

exclusion does not apply if such discharge, dis-

persal, release or escape is sudden and accidental.

Triangle argues that the pollution exclusion clause does

not apply so long as the “discharge, dispersal, release or

escape” was unexpected and unintended. Lower court

decisicns in New Jersey do support Triangle’s argument

that “sudden and accidental” means “unexpected and

unintended.” Lansco, Inc. v. Department of Environ-

mental Protection, 138 N.J.Super. 275, 350 A.2d 520

(Ch.Div. 1975), affd, 145 N.J.Super. 433, 368 A.2d 363

(App.Div. 1976), certif. den., 73 N.J. 57, 372 A.2d

322(1977). However, the New Jersey Supreme Court

has never addressed this issue. The Court need not

A-23

decide this issue because the Court finds that Triangle

expected and intended that the sludge be deposited at

the Buckeye Landfill.

Triangle’s argument that it did not expect nor intend

the property damage at the Buckeye Landfill does not

relieve it from the pollution exclusion clause of the CGL

policies. Unlike the definition of “occurrence,” which

focuses on the property damage, the pollution exclusion

clause language focuses on the discharge, dispersal,

release or escape of the pollutants. See Claussen v. Aetna

Cas. & Sur. Co., 259 Ga. 333, 380 S.E.2d 686

(1989)(“The pollution exclusion clause focuses on

whether the ‘discharge, dispersal or release’ of the

pollutants is unexpected and unintended; the definition

of occurrence focuses on whether the property damage

is unexpected and unintended. The pollution exclusion

clause therefore has the effect of eliminating coverage

for damage resulting from the intentional discharge of

pollutants.”). To hold otherwise would eviscerate the

pollution exclusion clause.

Therefore, since Triangle intentionally had the

sludge disposed of at the Buckeye Landfill, the pollution

exclusion clause excluded coverage under the CGL

policy. There is no coverage under the CGL policies

issued by Liberty and NJPLIGA.

Another pollution exclusion clause found in the

CGL policies issued by Zurich and in Endorsement 10 of

the Liberty policy provides that no coverage exists for

pollution damage unless the pollution damage arises out

of “products hazard” or the “completed operations

hazard.” Triangle’s claim does not arise out of the

“products hazard,” since the sludge was clearly a waste

product, nor out of the “completed operations hazard”

since the sludge was hauled away and dumped off the

premises of Triangle by an independent contractor.

Therefore, there is no coverage of Triangle under the

CGL issued by Zurich nor under Endorsement 10 of the

CGL issued by Liberty.

A-24

The remaining insurance policy upon which Trian-

gle seeks coverage is Zurich’s PLI policy. Zurich argues

that there is no coverage because the Buckeye Landfill

was not an insured site. “Insured site” is defined as:

any site to which waste materials were legally con-

signed or delivered by a mamed insured for storage,

disposal, processing, or treatment, provided that the

site

(a) is not and was never owned by, operated by,

rented or loaned to a mamed insured; and

(b) was duly authorized for such storage, dis-

posal, processing, or treatment under a permit

issued by state or federal authority and in force

at the time of all such consignment or deliver.

Zurich asserts that the Buckeye Landfill was not an

insured site because it was not licensed to accept the

sludge from Triangle. The facts clearly show that the

Buckeye Landfill was not licensed by Ohio EPA to

receive the sludge from Triangle. Triangle, however,

argues that any Ohio regulation prohibiting the disposal

of the sludge is preempted by federal law. Triangle’s

argument is without merit. There is no preemption of

Ohio’s right to regulate its landfills. Therefore, since the

Buckeye Landfill was not authorized to accept the

disposal of the sludge from Triangle, the Buckeye Land-

fill was not an insured site. Accordingly, there exists no

coverage under the PLI issued by Zurich.

The final issue to determine is whether Liberty and

Zurich are estopped from denying coverage due to the

actions they took after being notified by Triangle of the

claim made by USEPA. In its notice of claim, Triangle

specifically informed the insurers that it would honor a

reservation of rights by the carriers. Both Liberty and

Zurich agreed to partially reimburse Triangle’s retained

counsel until a determination of coverage was made.

Subsequently, both carriers determined that no cover-

age existed and, therefore, there was no duty to defend.

A-25

Furthermore, there is no evidence that the actions of

Liberty or Zurich prejudiced Triangle by leaving it

defenseless or seriously hampered in its ability to protect

itself so as to warrant estoppel. As such, neither Liberty

nor Zurich are estopped from denying coverage. Griggs

v. Bertram, 88 N.J. 347, 443 A.2d 163 (1982).

It is therefore ORDERED that the respective mo-

tions for summary judgment by Liberty, NJPLIGA, and

Zurich should be, and the same are hereby, GRANTED,

and the respective cross-motions for summary judgment

by Triangle are DENIED.

The Clerk is directed to transmit certified copies of

this Memorandum Opinion and Order to counsel of

record herein.

ENTER:

/s/_ William M. Kidd

WILLIAM M. KIDD

UNITED STATES DISTRICT JUDGE

I hereby certify that the annexed instrument

is a true and correct copy of the original filed

in my office

ATTEST: Dr. Wally Edgell

Clerk, U.S. District Court

Northern District of West Virginia

By: /s/_ Sheree N. Thompson

Deputy Clerk

A-26

UNITED STATES DISTRICT COURT

91 JUL-5 AM 9: 19

FOR THE NORTHERN DISTRICT OF WEST VIRGINIA

LIBERTY MUTUAL INSURANCE CoO., +

Plaintiff/Counterdefendant,

TRIANGLE INDUSTRIES, INC.

(now TRIAN HOLDINGS, INC.) and

TRIANGLE PWC, INC.,

Defendants/Counterplaintiffs/

Third-Party Plaintiffs,

Vv.

WAUSAU INSURANCE COMPANIES and

EMPLOYERS INSURANCE OF WAUSAU,

NEW JERSEY PROPERTY-LIABILITY

INSURANCE GUARANTY ASSOCIATION, on

behalf of IDEAL MUTUAL INSURANCE

COMPANY, in liquidation,

ZURICH-AMERICAN INSURANCE COMPANY

and ZURICH INSURANCE COMPANY,

jointly, severally and in the alternative,

Third-Party Defendants. y,

On remand from

the Supreme Court

of Appeals of West

Virginia

Civil Action No.

88-0041-W(K)

A-27

FINAL ORDER DISMISSING THIRD-PARTY

DEFENDANT, EMPLOYERS’ INSURANCE OF

WAUSAU, AND ENTERING FINAL JUDGMENT

IN FAVOR OF PLAINTIFF, LIBERTY MUTUAL

INSURANCE COMPANY, AND THIRD-PARTY

DEFENDANTS, ZURICH INSURANCE COMPANY

AND NEW JERSEY PROPERTY LIABILITY

INSURANCE GUARANTY ASSOCIATION ON BEHALF

OF IDEAL MUTUAL INSURANCE COMPANY

It being reported to the Court that the Defend-

ants/Third-Party Plaintiffs, Triangle Industries, Inc. and

Triangle PWC, Inc. (“Triangle”) and Third-Party Defen-

dant, Employers Insurance of Wausau (“Wausau”) hav-

ing reached an amicable resolution to the claims asserted

by and against them, it is accordingly

ORDERED that the claims asserted by Triangle

against Wausau and the claims asserted by Wausau

against Triangle are hereby dismissed pursuant to Fed. R.

Civ. P. 41 (a)(2) with prejudice and without costs; and

IT IS FURTHER ORDERED that the Court’s

March 12, 1991 Memorandum and Opinion Order

granting summary judgment in favor of Plaintiff, Liberty

Mutual Insurance Company, and Third-Party Defen-

dants, Zurich Insurance Company and New ‘Jersey

Property Liability Insurance Guaranty Association on

behalf of Ideal Mutual Insurance Company, shall and is

hereby declared final pursuant to 28 U.S.C. § 1291.

DATED: 7/3/91 (Signed) William M. Kidd

Honorable William M. Kidd

United States District Judge

I hereby certify that the annexed in-

strument is a true and correct copy of

the original filed in my office.

ATTEST: Dr. Wally Edgell

Clerk, U. S. District Court

Northern District of West Virginia

By:/s/ Sheree N. Thompson

Deputy Clerk

FILED

FEB 21 1990

NO. CC999

LIBERTY MUTUAL INSURANCE COMPANY

Vv.

TRIANGLE INDUSTRIES, INC., AND TRIANGLE PWC, INC.

WAUSAU INSURANCE COMPANIES AND

EMPLOYERS INSURANCE OF WAUSAU; NEW JERSEY

PROPERTY-LIABILITY GUARANTY ASSOCIATION,

ON BEHALF OF IDEAL MUTUAL INSURANCE COMPANY,

IN LIQUIDATION, AND ZURICH-AMERICAN INSURANCE COMPANY,

SEVERALLY AND IN THE ALTERNATIVE

Certified Question Certified question answered;

case remanded.

Brotherton, Justice

Syllabus

In a case involving the interpretation of an insur-

ance policy, made in one state to be performed in

another, the law of the state of the formation of the

contract shall govern, unless another state has a more

significant relationship to the transaction and the par-

ties, or the law of the other state is contrary, to the public

policy of this state.

Brotherton, Justice:

This case involves two questions certified to this

Court from the United States District Court for the

Northern District of West Virginia. The district court

asks that we answer the following:

1. Does West Virginia’s substantive law apply to the

interpretation of the insurance policies at issue?

2. If so, do the insurance policies at issue give rise

to a duty to defend and indemnify the insured by

the respective insurers?

_— sl

A-29

Triangle Industries (alternately known as Trian

Holdings, Inc. and Triangle PWC, hereinafter referred

to as Triangle) is a company that was headquartered in

New Jersey at the time the insurance coverage at issue

was sought. Triangle owned and operated a processing

plant in Glen Dale, West Virginia. The Glen Dale plant

was engaged in the business of steel “pickling” which

generated a waste product known as “lime stabilized

waste pickle liquor sludge” (sludge).

Between November, 1977, and October, 1980, the

sludge was shipped for disposal to the Buckeye Landfill

outside St. Clairsville, Ohio. Triangle engaged the ser-

vices of an independent contractor to transport the

sludge to the landfill.

On October 15, 1980, the Ohio EPA conducted

sampling of the sludge located at the Buckeye Landfill

site and determined that the sludge was “toxic.” In

December, 1980, the Ohio EPA conducted further sam-

plings of surface water from a stream near the Buckeye

Landfill. The water analysis indicated that contaminated

materials were escaping from the landfill.

On September 8, 1983, the Buckeye Landfill was

listed on the National Priorities List pursuant to

§ 105(8)(b) of the Comprehensive Environmental Re-

sponse, Compensation, and Liability Act, 42 U.S.C.A.

§ 9601 et seq. (West 1983) (CERCLA). Based upon

tests conducted at the site, the Ohio EPA and the

Federal EPA concluded that the Buckeye Landfill had

been releasing and was continuing to release hazard-

ous substances which posed an imminent and substan-

tial danger to the public health, welfare, and the

environment.

On December 7, 1984, Triangle was notified by the

Federal EPA that it was being designated a “potentially

responsible party” pursuant to CERCLA, in connection

with the environmental contamination at the landfill.

A-30

On March 7, 1985, Triangle’s counsel placed all of

Trian and PWC’s insurance carriers on notice of the

claims asserted by the Federal EPA arising out of the

enforcement actions at the Buckeye Landfill. In re-

sponse, the plaintiff, Liberty Mutual, acknowledged its

duty to defend Triangle. In a February 27, 1986, letter

from James M. Shaw, Examiner, Special Claims Divi-

sion, Liberty Mutual Insurance Company, Mr. Shaw

stated, “We do, however, agree to participate in the

defense of Triangle with other insurers that owe a duty

to defend.”

On October 3, 1985, Triangle, along with other

potentially responsible parties, executed an administra-

tive order, known as a consent decree, as required by

the Federal and Ohio EPA, for the cleanup of the

landfill.?

By letter dated February 1, 1988, Donald Nelson,

Technical Claims Specialist at Liberty Mutual Insur-

ance Company, denied coverage under each of Liberty

Mutual’s insurance policies and declared that Liberty

Mutual would not provide indemnification for this claim

and would not pay for defense costs beyond February 1,

1988.2

By letter dated March 25, 1988, defense counsel

wrote to Liberty Mutual to clarify Triangle’s position

regarding the insurance coverage. In this letter, counsel

for Triangle stated that coverage should be afforded

under the comprehensive general liability policy (CGL)

1. The Buckeye Landfill, also known as the Belmont County

Landfill, is located in Ohio on approximately 50 acres of a 650-acre

tract of land owned by the Ohio Resources Corporation. The

property is located approximately four miles southeast of St. Clairs-

ville, Ohio. The landfill has been in operation since 1971.

2. In its brief, Liberty Mutual defends its actions in initially

defending the claim by pointing out that it had a duty to investigate

the claim to determine whether they did owe a duty to defend.

Liberty Mutual denied coverage once they determined they no

longer had a duty to defend.

A-31

because there had been an “occurrence,” as defined by

the policy, during the policy period.?

3. The CGL policy contained standard policy language, which

provided that:

The company will pay on behalf of the insured all sums which

the insured shall become legally obligated to pay as damages

because of

Coverage A: Bodily injury or

Coverage B: Property damage,

to which this insurance applies, caused by an occurrence, and

the company shall have the right and duty to defend any suit

against the insured seeking damages on account of such bodily

injury or property damage, even if any of the allegations of the

Suit are groundless, false or fraudulent, and may make such

investigation and settlement of any claim or suit as it deems

expedient, but the company shall not be obligated to pay any

claim or judgment or to defend any suit after the applicable

limit of the company’s liability has been exhausted by payment

or judgment or settlement.

The policy also contains a pollution liability exclusion at

subsection (f). It provides that this policy does not apply:

to bodily injury or property damage arising out of the discharge,

dispersal, release or escape of smoke, vapors, soot, fumes, acid,

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.

Liberty Mutual supplied Triangle with a pollution liability

policy (PLP), with an effective or “retroactive” date of July 1, 1982.

The policy was renewed to run for an additional year from July 1,

1983, to July 1, 1984. The policy appears to have been cancelled in

May, 1984. The PLP provides that

The company [Liberty Mutual] will pay on behalf of the insured

all sums which the insured shall become legally obligated to

pay as compensatory damages because of bodily injury or

property damage to which this insurance applies, provided

that: (1) such bodily injury »r property damage is caused by a

pollution incident which commences subsequent to the retro-

active date shown in the declaration of this policy, and (2) the

claim for such damages is first made against the insured during

the policy period and reported to the company during the policy

period or within fifteen days after its termination.

A-32

Finally, Triangle advised Liberty Mutual that if it

continued to decline coverage, Triangle would initiate a

declaratory judgment action. However, three weeks

later, Liberty Mutual filed suit in United States District

Court for the Northern District of West Virginia request-

ing a declaratory judgment, stating that it owed no duty

to defend or indemnify Triangle.

On June 20, 1988, the defendants filed a third party

complaint against third party defendants, Wausau In-

surance Companies, Zurich American Insurance Com-

pany, and New Jersey Property Liability Insurance

Guarantee Association on behalf of Ideal Mutual Insur-

ance Company, in liquidation (NJPLIGA), who also held

CGL and other insurance policies for the defendants.

On January 17, 1989, the plaintiff, Liberty Mutual,

filed a motion for summary judgment against the defen-

dants. on March 1, 1989, the defendants filed a cross

motion for summary judgment. Similar motions were

filed by the other third party defendants. By order dated

July 5, 1989, the United States District Court for the

Northern District of West Virginia certified the two

questions listed above to this Court.

4. The defendant contends that it is entitled to coverage under

eleven separate policies of insurance, running collectively, from

January 1, 1977, to April 1, 1987.

1/1/77 — 1/1/81 Wausau Insurance Co.

1/1/81 — 1/1/82 Ideal Mutual (in liquidation NJPLIGA)

1/1/82 — 1/1/84 Liberty Mutual

1/1/84 — 4/1/87 Zurich Insurance Co.

A-33

II.

The first certified question asks that we determine

whether West Virginia substantive law applies to the

interpretation of the insurance policies at issue in this

case. We must first identify the type of issue involved in

order to determine what conflict of law rule to apply.’

This Court has held that the interpretation of insurance

policy coverage, rather than liability, is treated as a

contract question for purposes of conflicts analysis. Lee

v. Saliga, __W.Va. __, 373 S.E.2d 345, 350 (1988). As

the issue presented in the case before us involves a

question of the interpretation of the terms of an insur-

ance policy, we must therefore focus our analysis on

the conflicts of law rule applicable to a contract issue.

West Virginia law has not yet dealt with the precise

issue of the applicable choice of law when an insurance

policy is executed in one state for coverage in another

state, and damage takes place in a third. The general

issue of choice of law was examined in General Electric

Co. v. Keyser, 166 W.Va. 456, 275 S.E.2d 289 (1981), in

which this Court invalidated a choice of law provision

contained in a contract after examining § 187(2) of the

Restatement (2d) of Conflict of Laws (Restatement). At

syllabus point 2, the Court concluded that:

“The law of the state in which a contract is made

and to be performed governs the construction of a

contract when it is involved in litigation in the courts

of this state.” Syl. pt. 1 (in part) Michigan National

Bank v. Mattingly, W.Va., 212 S.E.2d 754 (1975).

5S. In Paul v. National Life, __ W.Va. ___, 352 S.E.2d 550

(1986), this Court upheld the lex loci delicti theory of conflicts of

law when a tort is involved. In Paul, the court found that “/lJex loci

delicti has long been the cornerstone of our conflict of laws

doctrine. The consistency, predictability, and ease of application

provided by the traditional doctrine are not to be discarded lightly

re | + -.o

A-34

More recently, in Lee v. Saliga, __W.Va. __, 373

S.E.2d 345 (1988), this Court examined insurance con-

tracts under a conflicts of law analysis. Saliga involved a

question of coverage under an uninsured motorist policy

issued in Pennsylvania, where the accident in question

occurred in West Virginia. Under West Virginia law, a

requirement of physical contact is directly incorporated

into the uninsured motorist statute. By contrast, Penn-

sylvania did not require physical contact under its unin-

sured motorist act, as the physical contact requirement

was held void as contrary to public policy.

After reviewing the West Virginia choice of law

cases and the Restatement, Justice Miller determined

that:

our traditional contract conflict rule gives substan-

tial deference to the state where the contract is

made and where it is to be performed, assuming

both incidents occur in the same state. This rule is

subject to two qualifications: (1) that the parties

have not made a choice of applicable law in the

contract itself; and (2) the law of the other state does

not offend our public policy.

Id. at 351. Applying that rule to the facts in Saliga, the

Court determined that “[t]he provisions of a motor

vehicle liability policy will ordinarily be construed ac-

cording to the laws of the state where the policy was

issued and the risk insured was principally located,

unless another state has a more significant relationship

to the transaction and the parties.” Jd. at 353.

Both cases, however, fail to contemplate a situation

in which the contract is made in one state to be

performed in another state.* In the case now before us,

6. This Court addressed a similar situation in New v. Tac & C

Energy, Inc., _W.Va. ___, 355 S.E.2d 629 (1987), which in-

volved an employment contract for a company based in West

Virginia concerning its mine site in Kentucky. A review of § 196 of

the Restatement revealed that when a contract to render services

was involved, the Restatement gives preference to the law of the

A-35

we find that the policy was issued in New Jersey, while

the insured risk was located in West Virginia and the

damage occurred in Ohio. Further, as Triangle points

out, the insurance policies insured risks in numerous

other locations besides the Glen Dale, West Virginia,

site. Obviously, these facts differ sufficiently from pre-

vious case law so as to require an independent analysis

under the Restatement.

Section 193 of the Restatement concerns what law

to apply when the “validity of a contract of fire, surety or

casualty insurance and the rights created thereby” are

questioned. Specifically, Section 193 provides that the

validity of such a contract is determined:

by the local law of the state which the parties

understood was to be the principal location of the

insured risk during the term of the policy, unless

with respect to the particular issue, some other state -

has a more significant relationship under the prin-

ciples stated in § 6 to the transaction and the parties,

in which event the local law of the other state will be

applied.

state where the services are to be performed, subject to the

contracting parties’ choice of law and the theory that the preference

for the law of the place of rendition of the services can be altered to

a state that has a more significant relationship to the parties and the

transaction. Jd. at 631. The Court found that since West Virginia

had more substantial contact with the transaction, its law should

apply. Id.

We believe the reasoning in Tac & C Energy is unique to that

particular situation. The Restatement’s preference for the place of”

rendition of the services can be distinguished from the instant case

by the nature of the contract in question. An employment contract

centers around the specific services which are to be performed at a

place of business. Absent a state with a more significant connection,

the state where the services are to be performed is the most likely

candidate to govern that contract. That reasoning does not exist in

the present situation involving insurance policy interpretation, and

thus, does not govern our choice of law analysis.

A-36

Commentary B to the Restatement explains the

language of § 193, noting that normally, the policy will

be solicited, delivered, and executed in the same state

where the insured is domiciled and the insured risk

located. In the present case, however, not only are there

multiple states identified where the risks insured under

the policy are located, but the place of contract and the

place of the insured risk are different. Thus, we turn to

§ 6 of the Restatement for guidance.

Section 6 of the Restatement sets forth the following

factors to consider, specifically providing that:

(1) A court, subject to constitutional restric-

tions, will follow a statutory directive of its own state

on choice of law.

(2) When there is no such directive, the factors

relevant to the choice of the applicable rule of law

include

(a) the needs of the interstate and interna-

tional systems,

(b) the relevant policies of the forum,

states and the relative interests of those states in

the determination of the particular issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the partic-

ular field of law,

(f) certainty, predictability and uniformity of

result, and

(g) ease in the determination and applica-

tion of the law to be applied.

After reviewing the factors found in §6 of the

Restatement, we are of the opinion that the law of the

state of the contract should apply. We believe that

“certainty, predictability and uniformity of result,” as

A-37

well as “ease in the determination and application of the

law to be applied” is essential to the interpretation of an

insurance policy when the law is not otherwise chosen

by the parties. Given the increasingly complex nature of

the insurance industry, we believe that the needs of the

“interstate” system of insurance require that law be

applied in the most uniform and predictable manner

possible.” Although we recognize that, in this case, both

West Virginia and Ohio have significant relationships to

the transaction, the policy was bargained for, created,

and agreed to in New Jersey by both parties. We do not

believe the insurance company demonstrated any rea-

sonable expectation at the time the contracts were

entered into that any litigation over the policy would be

based upon West Virginia law.

Quite simply, we believe that, absent specific provi-

sions to the contrary, it is infinitely more practicable to

permit one policy to cover the numerous contracts rather

than to require both Triangle and the insurance compa-

nies to negotiate individual policies based upon each

state where an insured risk is located. When carefully

weighed, we conclude that the factors tilt in favor of the

law of the place of contract.

Consequently, in a case involving the interpretation

of an insurance policy, made in one state to be per-

formed in another, the law of the state of the formation

of the contract shall govern, unless another state has a

more significant relationship to the transaction and the

7. See generally, Note, The Applicability of General Liability

Insurance to Hazardous Waste Disposal, 57 S.Cal.L.Rev. 745

(1984); Tyler & Wilcox, Pollution Exclusion Clauses: Problems in

Interpretation and Application Under the Comprehensive General

Liability Policy, 17 Idaho L. Rev. 497 (1981).

8. See Independent PetroChemical Corp. v. Aetna Casualty &

Surety Co., 674 F.Supp. 354, 356-57 (D.D.C. 1987), in which the

district court held that the state in which negotiation and formation

occurred has the most substantial interest in seeing its laws applied’

to the conduct of the parties negotiating for insurance in its

jurisdiction. :

A-38

parties, or the law of the other state is contrary to the

public policy of this state.®

Because the first certified question has been an-

swered in the negative, the second certified question

shall not be addressed. The case is remanded to the

Federal District Court for the Northern District of West

Virginia.

Certified question answered;

case remanded.

9. See Paul v. National Life Insurance Co., ___.W.Va. ___., 352

S.E.2d 550, 556 (1986).

A-39

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

FILED

March 23, 1992

No. 91-1685

CA-88-41-W-K

Liberty Mutual Ins v. Triangle Industries

MANDATE

The judgment of this Court dated 3/2/92 takes effect

today.

JOHN M. GREACEN

CLERK

A-40

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

FILED

April 24, 1992

CA-88-W-K

Liserty Mutuat INsuRANCE COMPANY,

Plaintiff-Appellee

Vv.

TRIANGLE INDusTRIES, INCORPORATED, a/k/a

ANC Holdings, Incorporated; TRIANGLE

PWC, INcorRPORATED

Defendent & Third Party

Plaintiffs-Appellants

Vv.

New Jersey Property-Liasitrry GUARANTY

AssociaTIon, on behalf of Ideal Mutual

Insurance Company, in liquidation;

ZURICH-AMERICAN INSURANCE COMPANIES;

ZuRICH INSURANCE CoMPANY > No. 91-1685

Third Party Defendants-Appellees

and

Wausau INsuRANCE CoMPANIES; EMPLOYERS

INSURANCE OF WAUSAU

Third Party Defendants

WESTINGHOUSE ELEcTRIC CoRPORATION;

INTERNATIONAL BusINESS MACHINES

CorPORATION; OLIN CoRPORATION; AMERICAN

FirpeER MANUFACTURERS ASSOCIATION;

AMERICAN PETROLEUM INSTITUTE; CHEMICAL

MANUFACTURERS ASSOCIATION; INSURANCE

ENVIRONMENTAL LITIGATION ASSOCIATION

~ Amici Curiae

A-41

ORDER

Appellants have filed a motion to recall and stay the

mandate, appellees filed responses in opposition to the

motion and appellants filed a reply in support of the

motion.

The Court denies the motion.

Entered at the direction of Judge Niemeyer, with

the concurrence of Chief Judge Ervin and Judge Shedd,

{ United States District Judge, sitting by designation.

For the Court,

/s/_ Bert M. Montague

ACTING CLERK

- A-42

[Triangle PWC, Inc.]

New Brunswick, New Jersey 08903

May 14, 1979

Reply To:

1701 Wheeling Avenue

Glen Dale, West Virginia

Jim Carnes

Cravat Coal Company, Inc,

Box 157

Holloway, Ohio 43985

Subject: Buckeye Reclamation Company

Sludge Disposal

Jim,

The following is a typical analysis presented to us by

Lancy — ERC Labs Inc., on our neutralized sludge,

which is considered, non-toxic, inert metallic oxides and

hydroxides and essentially similar to earth in composi-

tion.

Total

oe eer 0.01 %

CE 1.26 %

EES a 3.80 %

Cadmium Cd .......... 0.001%

CM GO oc cennncesen 0.001%

REE 0s 6 dk 66000 4.05 %

CU GA nich awccsace 0.001%

eo |). Bere rr 0.004%

Based on the above analysis this material may be

classilied, as non toxic, non hazardous, non liquid which

could be classified as a solid, suitable for disposal in your

landfill operation.

Sincerely,

/si/ Kenneth E. Pickett

Kenneth E. Pickett

Enyr. Control Manager

ce: P. Sidhu

R. Nelson

D. Springfield

A SUBSIDIARY OF TRIANGLE INDUSTRIES, INC.

A-43

SUPREME COURT OF NEW JERSEY

DOCKET NO. 34,341

MORTON INTERNATIONAL, INC.,

successor to Morton Thiokol Inc.,

now named Thiokol Corporation, CIVIL ACTION

Plaintiff-Petitioner, :

" : ON PETITION FOR

: CERTIFICATION

GENERAL ACCIDENT INSURANCE : FROM THE FINAL

COMPANY OF AMERICA, : JUDGEMENT OF NEW

Defendant-Respondent : JERSEY SUPERIOR

and : COURT, APPELLATE

LIBERTY MUTUAL INSURANCE : DIVISION

COMPANY, AFFILIATED FM :

INSURANCE COMPANY, AMERICAN _ : Sat. Below:

HOME ASSURANCE COMPANY, : Superior Court,

CONTINENTAL CASUALTY COMPANY,

FIRST STATE INSURANCE COMPANY,

INSURANCE COMPANY OF NORTH

AMERICA, UNDERWRITERS AT

LLOYDS, LONDON,

Defendants-Respondents,

and

AETNA CASUALTY & SURETY

COMPANY, ET. AL,

Defendants.

: Appellate Division

: Judges King, Cohen

: and Stern, J.A.D.

PETITION FOR CERTIFICATION AND APPENDIX

OF MORTON INTERNATIONAL, INC.

Of Counsel: ARCHER & GREINER

Thomas C. Hill - A Professional Corporation

TAFT, STETTINIUS & HOLLISTER One Centennial Square

-1800 Star Bank Center Haddonfield, NJ 08033

Cincinnati, Ohio 45202 (609) 795-2121

Attorneys for Petitioner

Morton International, Inc.

By: George F. Kugler, Jr.

Edward C. Laird

A-44

I. STATEMENT OF THE MATTER INVOLVED

Eight years ago, this Court provided New Jersey’s

seminal guidance on environmental law in its decision

in DEP v. Ventron Corp., 94 N.J. 473 (1983). This is the

insurancé case arising out of Ventron and presents the

Court with a similar opportunity to issue critical guid-

ance in the field of environmental insurance law.}

Twelve years ago, Judge Lester, after fifty-five (55)

trial days over a seven (7) month period, held in the

underlying Ventron case that “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.” (Pa 0465).

Four years ago, in 1987, Judge Huot, on the same

record, held on summary judgment in this insurance

coverage action, that “[t]his Court disagrees with Judge

Lester’s findings in the above quoted passage with

respect to intent. . . . The damage was expected and

intended. . . .” (Pa 0041-0042). The Appellate Division

affirmed Judge Huot by erroneously evaluating the

insured’s waste disposal practices against a standard

used for determining intent in child molestation cases.

Thus, the insured was summarily dismissed on the issue

of intent by the Courts of this State without ore day of

trial even though it has succeeded in the underlying

action on the same issue after 55 days of trial. The

Appellate Division’s decision revolutionizes the determi-

nation of coverage disputes in New Jersey and threatens

to emasculate comprehensive general liability coverage

for insureds throughout the State.

Petitioner, Morton, Ventron’s successor in interest,

brought this suit in 1985 against the insurers that

covered Ventron from 1960 to 1976, seeking indemnity

and defense costs. The defendant insurers then moved

1. Estimated final costs for the Berry’s Creek clean-up are

projected to be in the millions of dollars.

2. The record references are to plaintiffs appendix submitted

to the Appellate Division on the appeal below.

A-45

for summary judgment against Morton on the issues of

both indemnity and duty to defend?. Judge Huot heard

that motion, and despite his reliance on the record of the

underlying trial, rejected Judge Lester’s findings and

concluded as a matter of law that Ventron and its

predecessors were substantially certain that their mer-

cury processing operations would cause harmful mer-

cury pollution of Berry’s Creek and the surrounding

area.* He thereby foreclosed Morton from obtaining the

benefits of insurance coverage for which Ventron and its

predecessors had paid substantial premiums for many

years.

Morton also sought summary judgment on defense

costs on the ground that the DEP’s complaint clearly

included on its face claims that fell within the four

corners of the applicable insurance policies. Judge Huot,

recognizing that at least a part of the complaint fell

_within the applicable General Accident policies, partially

granted Morton’s summary judgment motion and ruled

that General Accident had a duty to defend the DEP’s

claims in the underlying suit. As a result of this ruling,

a damage trial was held to quantify General Accident’s

liability. This trial resulted in a judgment on behalf of

Morton and against General Accident for $100,429.07

3. The motion for summary judgment made by the carriers

required the trial court to construe, among other things, policy

language which, depending on the policy period in question,

expressed coverage as a function of “accident” or in the terms of an

“occurrence” (i.e., whether injury was expected or intended from

the insured’s standpoint). The Appellate Division construed the

term “accident” in accordance with its decision in Broadwell Realty

Servs. Inc. v. Fidelity & Casualty Co., 218 N.J. Super 516 (App. Div.

1987).

4. In its own cross-motion for summary judgment seeking

indemnity Morton asserted that Judge Lester’s findings in the

underlying action eliminated any genuine issue of fact and com-

pelled judgment in plaintiffs favor. The Appellate Division, contrary

to Morton’s intention and existing precedent, took Morton’s cross-

motion as an indication that the parties had stipulated all the

material facts of this dispute.

A-46

(for early defense of the DEP claim) and $40,000 in

attorneys’ fees incurred in prosecuting the present ac-

tion.

In affirming Judge Huot’s ruling on indemnity, the

Appellate Division stated that the precise controlling

theory for ascertaining intent was “obscure, if not un-

certain,” but nonetheless applied on objective standard.

It then concluded that the insured intended the conse-

quences of its disposal activities because it “must have

been substantially certain” that its disposal activities

would cause the consequences that followed. (Slip. Op.

at 46). In reaching that conclusion, the Appellate Divi-

sion inferred intentional consequences from the inten-

tional character of the acts of disposal. This panel thus

placed itself in direct conflict with other Appellate Divi-

sion precedent,> as well as the views of at least two

Justices of the New Jersey Superme Court and the

weight of authority throughout the country.® This anal-

ysis took the Appellate Division so far that it equated the

nen-assaultive business behavior of Ventron and its

predecessors with the intentional sexual molestation of

children.

The Appellate Division also found that, despite the

unquestioned existence of claims that fell within the

four corners of the insurance policies, no carrier was

obligated to defend any of the claims brought in the

underlying action or reimburse Morton for the costs

incurred. Although recognizing the oft-repeated New

5. See SL Indus. v. American Motorists Ins. Co., 248 N.J.

Super. 458 (App. Div. 1991), certif. granted, NJ.

: (Sept. 16, 1991) (No. 33,848) and Allstate Ins. Co. v.

Schmitt, 238 N.J. Super. 619 (App. Div.), certif. denied, 122 N.J.

395 (1990).

6. See Ambassador Ins. Co. v. Montes, 76 N.J. 477, 486-492

(1978) (Pashman, J. and Handler, J., concurring). See also id. at

494 (Clifford, J., dissenting). The concurring opinion expressed the

appropriate standard as follows: “[An insured] should be charged

with intent to injure. . . only if that was his subjective desire.” 76

N.J., at 489.

A-47

Jersey law that the duty to defend is broader than the

duty to pay, the Appellate Division concluded that when-

ever the carrier disputes the existence of an occurrence,

it is entitled to sit on the sidelines, force the insured to

incur the huge financial burden of defending the under-

lying litigation, compel the insured to spend more

money to try to establish coverage, and reimburse the

insured, if at all, only if the coverage action is resolved

favorably to the insured. This, for all intents and pur-

poses, deprives the insured of a defense under its policy

and clearly is contrary to its reasonable expectations.

This decision thus strikes at the very heart of two of

the most critical issues in environmental insurance law;

namely, the issue of intent and the duty to defend. Left

standing, this decision portends ominous consequences

for insureds throughout the State of New Jersey

whether they be business entities, private individuals, or

governmental bodies. Therefore, on October 22, 1991,

Morton filed its Notice of Petition for Certification from

the Appellate Division’s judgment.

II. QUESTIONS PRESENTED

1. In an insurance coverage action where intention

of the insured is a critical issue to be decided, did the

trial court and the Appellate Division erroneously en-

gage in fact-finding on a summary judgment motion?

2. Was it proper for the Appellate Division to equate

the standard for determining intent in an environmental

insurance case involving non-assaultive business behav-

ior (waste disposal) with the standard used in child

molestation cases?

3. Is the insured’s duty to defend an environmental

claim under a comprehensive general liability policy

only triggered at the time a duty to indemnify is estab-

lished in a subsequent coverage action?

4. In insurance coverage litigation, is the carrier

estopped from challenging the results of the underlying

case where: first, it had notice of the matter; second, it

A-48

had opportunity to defend; and third, the underlying

case decided the same factual issue (intent) that is

central to the insurance coverage action?

Depending upon how the Court answers the forego-

ing questions, the following additional issues may need

to be addressed:

5. When does a liability carrier’s duty to defend

terminate?

6. Is the insured entitled to recover its full counsel

fees expended in the action establishing the duty to

defend?

7. In the event a liability carrier is obligated to

defend only a portion of a complaint, does the burden of

allocation of defense costs rest on the carrier?

8. Did Judge Huot and the Appellate Division err in

preventing Morton from pursuing discovery of policy

drafting history?

A-49

SUPREME COURT OF NEW JERSEY

C-629 September Term 1991

34,341

MORTON INTERNATIONAL,

INC., etc.,

Plaintiff-Petitioner,

GENERAL ACCIDENT

INSURANCE.COMPANY OF

AMERICA, av

Defendant-Respondent Filed March 8, 1992

and

LIBERTY MUTUAL

INSURANCE COMPANY et al., CLERK

Defendants-Respondents,

and

AETNA CASUALTY & SURETY

COMPANY et al.,

Defendants.

To the Appellate Division, Superior Court:

A petition for certification of the judgment in A-895-

89T3 having been submitted to this Court, and the

Court having considered the same;

It is ORDERED that the petition for certification is

granted.

WITNESS, the Honorable Robert N. Wilentz, Chief

Justice, at Trenton, this 2nd day of March, 1992.

ON PETITION FOR

CERTIFICATION

I hereby certify that the

foregoing is a true copy of

the original on file in my

office.

/s/ /s/

CLERK OF THE SUPREME COURT CLERK OF THE SIJPREME COURT

OF NEW JERSEY

A-50

SUPREME COURT OF NEW JERSEY

Docket No. 34,341

Civil Action

MORTON INTERNATIONAL, INC., suc- : CROSS PETITION FOR

cessor to Morton-Thiokol, Inc., now : CERTIFICATION

named Thickol Corporation, : FROM JUDGMENT OF

Plaintiff-Appellant, : | APPELLATE DIVISION

ae Div. Docket No.

VS. : A-895-89T3

: SAT BELOW:

GENERAL ACCIDENT INSURANCE : Honorable Michael P.

COMPANY OF AMERICA, ef al, : King

Defendants- Respondents : Honorable Richard S.

: Cohen

Honorable Edwin H.

Stern

CROSS PETITION FOR CERTIFICATION OF

DEFENDANTS-RESPONDENTS INSURANCE

COMPANY OF NORTH AMERICA, AMERICAN HOME

ASSURANCE CO., LIBERTY MUTUAL INSURANCE

COMPANY, UNDERWRITERS AT LLOYD’S LONDON,

AND LONDON MARKETS INSURANCE COMPANIES

A-SI

RONCA, MCDONALD & MUDGE ROSE GUTHRIE

HANLEY ALEXANDER & FERDON

600 S. Livingston Avenue Morris Corporate Center Two

Livingston, New Jersey 07039 One Upper Pond Road —

(201) 994-2030 Bldg. D

Of Counsel: ple ov New Jersey 07054

MENDES & MOUNT (201) 335-0008

Three Park Avenue 180 Maiden Lane

New York, New York 10016 New York, New York 10038

(212) 951-2200 (212) 510-7000

Attorneys for Attorneys for

Defendants-Respondents Defendant-Respondent

Underwriters at Lloyd’s Insurance Company of North

London, and London Markets America

Insurance Companies Of Counsel:

_ Of Counsel: ce ———

. Robert J. Kovacs re ny? J

John G. McAndrews ree none oes

[Listing of Counsel Continued

November 11, 1991 on Back of Cover]

PRELIMINARY STATEMENT

In the event that this Court denies petitioner's

request for certification, this cross petition will be moot.

However, if this Court grants certification, the respon-

dents respectfully urge the Court to address the follow-

ing issues of importance to both insurers and insureds in

this State: (1) the “pollution exclusion”; (2) “late

notice”; (3) “pre-existing loss”; and (4) “as damages”.?

1. Respondent American Home Assurance Company joins in

this cross petition only as to the pollution exclusion. Respondents

- Liberty Mutual Insurance Company, Underwriters at Lloyd’s Lon-

don and the London Markets Insurance Companies do not join in

the cross petition as to late notice.

A-52

Across the country, Supreme Courts of other states

have addressed and are addressing the issues presented

in this appeal. These decisions, however, have applied

the law of their particular jurisdiction. Respondents

respectfully submit that it is important for the New

Jersey Supreme Court to address these same issues,

since this Court has yet to do so.

At the outset, respondents emphasize that the Ap-

: pellate Division correctly decided that there was no

, coverage for the underlying claims because there was no

accident or occurrence. However, in doing so, the Ap-

pellate Division declined to correct its prior erroneous

decisions with respect to the pollution exclusion, and

indeed, the Appellate Division reaffirmed its prior rul-

ings on this exclusion. These prior erroneous decisions

need to be corrected by this Court.

Respondents ask this Court to address the “pollution

exclusion,” and in particular, to rule that the pollution

exclusion applies to the discharge of pollutants and not

to the damage that results from a discharge. Another

important issue is whether the term “sudden,” which is

contained in the pollution exclusion has a temporal

meaning. To date, the vast majority of courts from other

jurisdictions and the clear trend of decisions across the

country apply the pollution exclusion to the discharge

and construe the word “sudden” as having a temporal

element that precludes coverage for discharges of pol-

lutants that take place over a gradual period of time.

Notwithstanding, lower courts of this state have

continued to follow the outmoded precedent of the

Appellate Division with respect to the pollution exclu-

sion, which precedent is contrary to the view of the

substantial majority of jurisdictions that have addressed

the issue. In fact, the respondents in this appeal asked

the Appellate Division to correct these prior rulings; the

Appellate Division declined to do so, but expressly left it

for this Court to clarify the law. (Opinion at 49, fn1)

Apart from the foregoing, certain petitioners also

respectfully request, should this Court take this appeal,

A-53

that the Court address the issues of “late notice”, “pre-

existing loss” and “as damages”.

Respondents note that the case at bar is but one of a

large number of environmental coverage actions pend-

ing in the courts of this State. The decision of this Court

on the foregoing issues will settle the law in New Jersey

as to these crucial legal questions and will undoubtly

assist both the courts below and the litigants in clearing

many pending matters from the dockets.

A-54

SUPREME COURT OF NEW JERSEY

C-630 September Term 1991

34,341

MORTON INTERNATIONAL, INC., etc., ON

Plaintiff-Cross-Respondent, _CROSS-PETITION

FOR

v. CERTIFICATION

GENERAL ACCIDENT INSURANCE COMPANY

OF AMERICA, et al., FILED

Defendants-Respondents. MAR 3 1992

and

LIBERTY MUTUAL INSURANCE COMPANY, CLERK

et al.,

Defendants-Cross-Petitioners,

and

AETNA CASUALTY & SURETY

COMPANY, et al.,

Defendants.

To the Appellate Division, Superior Court:

A cross-petition for certification of the judgment in

A-895-89T3 having been submitted to this Court, and

the Court having considered the same;

It is ORDERED that the cross-petition for certifica-

tion is granted.

WITNESS, the Honorable Robert N. Wilentz, Chief

Justice, at Trenton, this 2nd day of March, 1992.

/s/

CLERK OF THE SUPREME COURT

A-55

I hereby certify that the foregoing is a true copy of

the original on file in my office.

/s/

CLERK OF THE SUPREME COURT

OF NEW JERSEY

A-56

No. 91-1685

IN THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

LIBERTY MUTUAL INSURANCE

COMPANY, :

PlaintiffiAppellee, : On Appeal from the

: Final Judgment of

VS. : the United States

: District Court for

TRIANGLE INDUSTRIES, INC. : the Northern

AND TRIANGLE PWC, INC., : District of West

Defendants/Appellants, : Virginia in Civil

: Action No.**-

VS. >: 88-41-W-K

WAUSAU INSURANCE COMPANY, et al,

Third-party Defendants/Appellees

LIBERTY MUTUAL INSURANCE COMPANY’S,

OPPOSITION TO THIRD-PARTY PLANTIFFS/

APPELLANTS’ MOTION TO RECALL AND STAY

THE MANDATE

PRELIMINARY STATEMENT

On March 23, 1992, this Court issued a Mandate

effectuating its March 2, 1992 judgment in this matter.

In its March 2, 1992 Opinion, this Court affirmed the

judgment of the United States District Court fof the

Northern District of West Virginia, and held that under

New Jersey law the “original” pollution exclusion clause

in some of the insurance policies issued by Liberty

Mutual Insurance Company, Zurich Insurance Com-

pany and Ideal Mutual Insurance Company (the “In-

surers”) to Triangle Industries, Inc. and Triangle PWC,

Inc. (“Triangle”) barred coverage for environmental

damage alleged to arise from regular disposal in a landfill

A-57

of the waste products of a standard manufacturing

process. Liberty Mutual Ins. Co. v. Triangle Ind. et al.,

No.

In addition, to the extent that there is any inconsis-

tency between the CPC International decision and this

Court’s March 2, 1992 judgment, it is the role of the

U.S. Supreme Court to determine which decision is

correct. Pursuant to Supreme Court Rule 13, the period

for Triangle to petition for Certiorari has not yet expired.

Triangle will thus not suffer injustice if this Court’s

Mandate remains in place.

CONCLUSION

For the foregoing reasons, Insurers respectfully

request that this Court deny Triangle’s Motion to Recall

and Stay the Mandate in this case.

Respectfully submitted,

~ /s/ LEE H. GLICKENHAUS

Lee H. Glickenhaus

Mintz, Levin, Cohn, Ferris,

Glovsky and Popeo, P.C.

One Financial Cener

Boston, Massachusetts 02111

(617) 542-6000

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.