Policyholders facing environmental cleanup claims should be aware that commercial general liability (CGL) policies and excess liability policies issued before approximately 1986 provide a recognized source of payment for environmental remediation costs in New Jersey. Until 1985-1986, these policies, although purporting to contain a pollution exclusion, actually did, under rulings of the New Jersey Supreme Court and the Appellate
Division of the New Jersey Superior Court, provide coverage for pollution claims. It was not until various dates in 1985 and in 1986 that these liability policies began to include what was or is known as the “absolute” or” total” pollution exclusion, which ended coverage for the cleanup of discharges that began after policies with this exclusion were issued.

If an owner, operator or supplier is alleged to be responsible for the cleanup of a contaminated site and the discharge can be shown to have first occurred before the absolute pollution exclusion went into effect, there may continue to be insurance for the cleanup. Because discharges that cause contamination may have occurred long ago, even though the existen of the pollution may not be noticed or discovered until decades later, and because these policies were “occurrence” based, which means that the coverage applies if the contamination occurred prior to or during the coverage period of the policy, these policies can provide protection even now. The key, however, is being able to prove that the coverage existed and applies to the contamination in question.

One key to establishing overage is to locate the policies in question, or to find other evidence of the policies, such as invoices or certificates of insurance. Secondly, there must be scientific testing or eyewitness testimony, and preferably both, to establish that the release of contaminants into the environment began prior or during the last policy located that provides coverage for pollution. While insurance companies will typically deny pollution claims when first made, they ultimately would be forced to pay these claims if properly established. In fact under the New Jersey Rules of Court, the insurance company will usually be required to reimburse the policyholder for its legal fees if the policyholder prevails in a suit to establish coverage.

Questions? Let Mitchell know.

Mitchell Kizner is a New Jersey focused attorney in Flaster Greenberg PC’s Litigation and Environmental Law departments. He represents clients in insurance, environmental, construction and other commercial matters as part of his active litigation and commercial law practice. He is also General Counsel to the firm. He can be reached at mitchell.kizner@flastergreenberg.com or 856.382.2247.