Under a new ruling by the New Jersey Supreme Court, an owner whose property becomes contaminated as a result of the migration of hazardous substances from a neighboring property will need to pursue uncharted theories of recovery if he or she seeks compensation for the economic loss caused by that migration. (Ross v. Lowitz, decided on August 6, 2015). In Ross, two spouses claimed that the use, enjoyment and value of their home had been diminished by a heating oil discharge that flowed from their neighbor’s underground storage tank onto their property. Although the migration was detected in 2006, the insurance companies providing liability coverage to the neighbor for the discharge did not begin the cleanup until 2010. Shortly after learning of the contamination on their property, these apparently innocent owners lost a sale of their home and said that they were unable to sell it for years while the contamination remained. When the remediation finally commenced, large volumes of soil were excavated and removed from their property over a period of months.
Mr. and Mrs. Ross sued the owners of the property where the tank had been located under common law theories of nuisance and trespass, and also sued their neighbor’s insurance companies on the theory that they, the Ross’s, were third party beneficiaries of the coverage provided under those policies. They claimed that as a result of the delay in the cleanup, the insurance companies had breached their obligation of good faith and fair dealing, thereby allowing them to recover damages from the carriers. Despite the apparently sympathetic nature of the plaintiff’s complaints, the Supreme Court rejected both of those arguments.
With respect to common law theories, a bare four member majority of the Court ruled that in the absence of any evidence of negligence or other wrongdoing by the owner of the property with the leaking heating oil tank, trespass and nuisance were unavailable to help the Plaintiff’s cause. This was significant because under New Jersey’s main environmental statute, the Spill Compensation and Control Act, a plaintiff can force a cleanup, but cannot recover economic damages such as loss of use, enjoyment, or diminution of value. Three of the seven justices joined in an opinion stating that they would expand the common law to give greater rights to owners to obtain recovery for economic loss in this situation. What was not mentioned in either opinion was that there are ways to prod administrative agencies to require more prompt action to remediate and there are provisions of law and regulations setting deadlines for the commencement and completion of a remediation.
Concerning the claim by the adjacent owner against their neighbor’s insurance companies, the Court was,surprisingly, unanimous, in holding that in the absence of a policy assignment by the insured to a third party or an agreement by the insurance company to recognize a third party as having rights under the policy, the adjacent owner had no recourse under the neighbor’s policies. This was unfortunate because the carriers largely controlled when and how to accomplish the remediation and took four years to begin the work. The concept of giving injured victims third party beneficiary status in the liability policy of another is not an unheard of concept, and in other limited circumstances, the Court and the Legislature have given injured parties direct rights in a wrongdoer’s liability policy. For example, under a still valid New Jersey statute enacted early in the 20th century, an injured party can proceed directly against the liability insurance policy of another in instances where the insured is either defunct or insolvent. The circumstances present here may well similarly justify legislative intervention to expand the rights of injured victims to obtain payment from the insurance company of another.
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.
If bad faith is established, an insured can recover consequential damages from an insurance company that extend beyond what the policy may provide, and can also recover punitive damages. These consequential damages can include interest payments on loans taken by insureds to pay bills that should have been paid by the insurance company with the policy proceeds and even damages caused by the insured’s inability to operate its business because timely payment of benefits under the policy had not been made.
Commercial general liability policies typically exclude injury or damage arising from mold. As a result, insurers often deny coverage whenever an alleged injury is caused in whole, or in part, by mold. Without insurance, the cost of defending the case and paying an ensuing settlement or judgment can be crippling. It is important, therefore, for a close analysis to be made of the allegations made by the claimant before any denial of coverage is accepted by the policyholders.
New Jersey Environmental Law Blog 