Case Decisions

Atlantic Disposal Service v. The Federal Insurance Company



Defendant-Third Party Plaintiff-Respondent-Cross-Appellant,

Argued March 29, 2004 – Decided

Before Judges Petrella, Fuentes and Bilder.

on appeal from Superior Court of New Jersey, Law Division, Burlington County, BUR-C-9199.

Sanford F. Schmidt argued the cause for appellants-cross-respondents Atlantic Disposal Service, Inc., A.C. Realty, Alvin White and Anthony Carite, Jr. (Schmidt & Tomlinson, attorneys; Mr. Schmidt and Eileen K. Fahey, on the joint brief).

John B. Kearney argued the cause for appellants-cross-respondents Ave Marie Carite and Stephen Miner as Executors of the Estate of Carite (Kenney & Kearney, attorneys; Mr. Kearney on the joint brief).

Lance J. Kalik argued the cause for respondent-cross-appellant Harleysville Mutual Insurance Company (Riker, Danzig, Scherer, Hyland & Perretti, attorneys; Glenn A. Clark, of counsel; Mr. Kalik and Ronald Z. Ahrens, on the brief).

Michael F. O'Neill and Stephen Gimigliano argued the cause for respondent-crossappellant First State Insurance Company (Purcell, Ries, Shannon, Mulcahy & O'Neill, and Graham, Curtin & Sheridan, attorneys; John M. Bowens on the brief).

Antonio D. Favetta argued the cause for respondent Pennsylvania Manufacturers' Association Insurance Company (Garrity, Graham, Favetta & Flinn, attorneys; Mr. Favetta of counsel; Mr. Favetta and Monica E. de los Rios, on the brief).

William P. Shelley argued the cause for respondent-cross-appellant Federal Insurance Company (Cozen O'Connor, attorneys; Mr. Shelley and Daniel L. Bessel, on the brief).

William S. Wachenfeld argued the cause for respondent Safety Mutual Casualty Co. (Mendes & Mount, attorneys; Mr. Wachenfeld and Shari R. Marko, of counsel and on the brief).

Peter A. Olsen argued the cause for respondent New Jersey Property-Liability Insurance Guaranty Association (Francis & O'Farrell, attorneys; Mr. Olsen on the brief).

Brian R. Ade argued the cause for respondent-cross-appellant Interstate Fire and Casualty (Bonner, Kiernan, Trebach & Crociata, attorneys; Mr. Ade and Anthony J. LaPorta, on the brief).


This is a declaratory judgment action for indemnification and defense costs arising from state and federal environmental actions. Plaintiffs, Atlantic Disposal Service, Inc. (ADS), a former South Jersey trash removal service, its principals Alvin White, Anthony Carite, Jr. and related concerns1 appeal from various summary judgments and trial determinations that denied their claims for indemnification and defense costs against the defendant carriers who insured plaintiffs for varying levels of liability during the years at issue. Defendants cross-appeal from certain trial determinations regarding defenses and evidential rulings. The underlying cleanup actions involved plaintiffs' disposal activities at various state-licensed non-hazardous waste dump sites and a tract of undeveloped farmland in Tabernacle Township in Burlington County.2


We affirm the decisions denying coverage for the Tabernacle site and dismissing plaintiffs' bad faith complaints against the carriers, reject the contentions asserted on defendants' cross-appeal, reverse on the issue of the duty to defend for the landfill sites, and remand on the issue of counsel fees.

Specifically, plaintiffs argue3 that the trial court erred in (1) denying ADS coverage for the landfill sites and declaring there was no duty to defend and indemnify on these claims; (2) declaring that the insurers did not act in bad faith in handling the landfill claims; (3) denying coverage for ADS for the Tabernacle site; (4) denying coverage for the plaintiffs on the Tabernacle site after February 1984 on the basis of the known loss doctrine; (5) denying the plaintiffs coverage on the Tabernacle site on the basis of the owned property exclusion; (6) finding that defendant insurers owed no duty to defend or indemnify White or the Estate of Carite with regard to the Tabernacle site; (7) finding that defendant insurers owed no duty to White or the Estate of Carite to defend and indemnify them in regard to the Tabernacle site on the basis of the Know Loss Doctrine; (8) finding that White and Carite spoliated evidence with regard to the Tabernacle site; (9) finding that defendants' insurance policies should be rescinded as to plaintiff Alvin White with regard to the Tabernacle site; (10) denying plaintiffs' in limine motion to prohibit defendants from challenging the settlement in the underlying federal court litigation regarding the Tabernacle site and limiting the admissibility of certain sections of the consent order from the underlying litigation; and (11) finding that defendants had not acted in bad faith in denying coverage for ADS, White and the Estate of Carite on the Tabernacle site.

Plaintiffs also assert they are entitled to attorneys' fees for bringing this action, relying on R. 4:42-9(a)(6) and Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437, 478 (1994).

In order to understand the legal issues in this voluminous appeal we set forth the salient facts. ADS was a New Jersey corporation operating as a waste disposal service.` ADS was licensed to transport non-hazardous municipal, non-chemical industrial, bulky, and commercial waste to state-licensed landfill sites. According to White, ADS was a "containerized" operation, which did not pick up liquid wastes in the usual course. ADS typically serviced what white referred to as "small, dry waste material companies," and when it acquired a new or potential customer he and his sales staff inquired whether the customer had "liquid-type material" in its "waste stream." Their general policy was not to accept liquid wastes, materials that were "too heavy," or those items that could not be successfully compacted by ADS's equipment.

According to defendants, however, in 1974 ADS filed a registration certification with DEP indicating that ADS was "hauling liquid hazardous waste." Plaintiffs acknowledged that during that period ADS hauled limited amounts of "drummed liquid waste" and "liquid chemical waste," but not hazardous liquid wastes. In any event, statements White filed with the DEP from 1975 to 1979 indicated that ADS did not haul liquid hazardous waste. Rather, registration statements ADS routinely filed with the Bureau of Solid Waste Management identified the solid wastes ADS hauled as: municipal household and commercial, institutional, bulky waste, construction, demolition, dry-non hazardous chemical waste, tires, leaves, chopped tree waste, tree stumps, food processing wastes and non-chemical industrial.

ADS did not acknowledge on those filings that it hauled pesticides, hazardous waste containers, dry hazardous waste, "oil spill clean-up wastes," or liquid wastes. However, White admitted that ADS did haul liquid wastes for certain customers, including U.S. Steel (USX). White added that ADS hauled such drums only after issuing a proviso to its customers that whatever the liquid material. ADS would pick it up so long as it "doesn't hurt the man." White said they did not want such material spilling on the truck, and if the drums were leaking ADS could get a ticket. Sometimes, too, ADS rejected a customer's drum.

Nonetheless, white reasoned that his trucks were expensive, about $125,000 each by the early 1990s, and not ordinarily configured to accept liquid wastes, so that it would have been poor business and harmful to their equipment if they had routinely accepted such liquids. Although he could not remember the particular dates or years when ADS accepted such drums of liquid, he asserted that ADS did so only during the period before it was illegal to transport and dispose of any such drums routinely at the landfills. He implied that customers might have unilaterally disposed of hazardous liquids with their regular solid wastes.

Between 1973 and 1988, the period during which ADS allegedly dumped hazardous wastes at all the relevant sites, defendants issued primary, umbrella or excess comprehensive general and commercial liability policies to ADS in varying amounts ranging annually from $100,000 in 1973 to $10.5 million in 1988. Plaintiffs total all insurance for the coverage years at over $100 million.

Although the policies were not always identical, for the most part they were substantially similar. The typical coverage, as illustrated by Utica's policy, states that the carrier agreed to pay:


all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence and arising out of the ownership, maintenance or use of the insured premises and all operations necessary or incidental to the business of the named insured conducted at or from the insured premises 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 . . . .

An "occurrence" is "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured."5 Exclusions included those for damages to property "owned, occupied by or rented" to the insured, or for property "used" by the insured. For purposes of determining the company's liability limit all property damage "arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as one occurrence." All the policies in question were occurrence based. All ADS policies also insured any officer, director or stockholder for actions within the scope of their duties.



In the course of its business, ADS delivered wastes to the Gloucester Environmental Services, Inc. Industrial Landfill (GEMS), the Buzby landfill, the Kramer landfill, and the Cinnaminson landfill.6 Hazardous materials were discovered at all these sites. The parties' dispute involves whether ADS intentionally dumped the hazardous materials found at those sites.

ADS began depositing wastes at these sites at least since the 1970s and was one of numerous disposal companies that utilized these locations.' When hazardous materials were found at those sites and state and federal environmental actions were instituted against ADS on the basis of its hauling activities, ADS gave notice of the claims to its carriers. All claims were denied by the carriers. However, when all these actions settled the carriers funded the settlements under reservations of rights. In the declaratory action, ADS sought its litigation costs in connection with its defense of these environmental actions.

For purposes of the declaratory judgment action, plaintiffs' expert, Clarke, was of the opinion that ADS transported waste to Kramer from 1976 to 1981, to GEMS from 1974 to 1980, to Buzby from 1973 to 1978 and to Cinnaminson from 1974 to 1980. He concluded that the contamination that resulted at each site was neither "expected" nor "intended" by ADS because DEP had licensed the landfills during the periods ADS disposed of waste there. Although he did not specify the constituents of the waste and whether they were harmful, Clarke said whenever any hazardous wastes were released "their transport through the environment was and continues to be a continuous process" unless modified by remediation. There is otherwise no evidence, direct or circumstantial, that showed ADS's intent in transporting hazardous wastes to these locations. The Pennsauken landfill was not discussed in Clarke's report.



USX operated a plant in Delair, New Jersey, and was an ADS customer for whom ADS removed drummed liquid waste or sludge and solid plant trash from approximately 1974 to 1979. ADS would receive annual purchase orders from USX, which listed the rates for each drum of liquid waste and described the contents of the drums as "waste paints and thinners," "solvents," "caustic solutions," "zinc phosphate sludge," and "flammable waste."

In 1977, ADS informed USX that "disposal of this material has become increasingly difficult . . . (in as much as] there is no certified landfill in the State of New Jersey that will accept this material," and that ADS was accordingly raising the removal price. ADS further informed USX that "[w]aste material must not be hazardous/caustic, flammable or considered to be dangerous to handle in any way." At oral argument, ADS's counsel asserted that liquid wastes at that time could only be stored in drums or in tanker trucks and that the landfills would accept neither. Nevertheless, the 1977 purchase order to ADS prepared by USX set forth, among other things, the following:


Blanket Order

1. Furnish services, as required for the removal and disposal of waste paints and thinners; solvents, caustic solutions, and zinc phospate sludge etc. and flammable waste removal, in drums, 22 drums being the minimum quantity. $12.00/drum.

2. Furnish services, as required, for the removal and . . . (sic] sludge, etc. in pails and 30 gallon drums. Pails .90 each, 30 gallon drums: 4.95 each.

2A. Pails, Flammable Materials, 1.00 each.

The USX plant that ADS serviced generated about eighteen to twenty such drums per month. When enough drums had accumulated, ADS would be contacted and would arrive the next day to remove the drums. USX prepared bills of lading and receiving reports to confirm that drums were actually removed.

At one point, according to ADS's former chief financial officer, he was told by Tony Carite of ADS that they had attempted to negotiate with USX not to haul the drums, but U.S. Steel gave them an ultimatum that ADS had to keep handling the drums or lose its contract. At that point ADS continued taking the drums, storing them in a yard at its office headquarters.

At the same time that ADS was accepting these drums from USX, Robert Ware was a truck mechanic for ADS and lived on a rural fifteen-acre tract in Tabernacle with his wife and children. According to Ware there were a number of drums being stored in front of the ADS shop garage at that time. At some point a manager approached him about ADS transporting the drums to Ware's property because ADS no longer had room to store them. Ware's understanding was that he would merely have to store the drums, and that, eventually, ADS would take them back. However, there was no mention of when ADS would take the drums back, and according to Ware the deal he struck included the possibility that Ware might actually sell the drums. Ware stated that ADS agreed to pay him between $2 and $5 per drum, and ware received a check from ADS. The exact date of this check is unclear. According to Edith Ruhl Ware, Ware's wife at the time, the check was made payable to Ware for "a couple hundred dollars." The Wares received the check before the drums arrived on their property. ADS's chief financial officer in 1982 and 1983 acknowledged the existence of the check, but it was never produced at trial and it was ADS's usual policy to destroy these records after seven years.

According to Edith, in 1976, three ADS trucks delivered drums to their property. The trucks deposited the barrels by raising their beds and "roll[ing] [them] off onto the ground." Edith said some of the barrels were full and some were empty, and as she and her children watched the dumping, she witnessed the following:


When the last truck dumped, one of the barrels split open, and that's -- gray paint -- that's what I thought it was, gray paint. It looked like that decking paint [sic] went everywhere, and then when I looked around, there was [sic] some other barrels that were -- you know, had these rings on the top. They were sealed, and I thought, "oh my gosh, don't tell me that's what [sic] in these things" and then I went livid after that because I can't have that on my property.

As soon as Edith realized some of the barrels were "full of liquid," she climbed onto the truck and spoke to the driver, whom she identified as Larsen, an ADS employee she knew, and told him "I don't want this. They've got to come out here." The driver called on his radio and explained that Edith was “upset" and that she did not want "these barrels here." Edith overheard the transmission and the person on the other end stated "there was nothing that they could do about it because we had already received the payment for the barrels."

According to Edith, there were about "a hundred or so" barrels, and "[s]ome of them looked petty decent, and others were rusty." The barrels "were not organized" but rather after they were dumped from the trucks "wherever they landed that's where they stayed." when Ware got home that evening he inspected the area. The drums "were distributed all over the place," which was not how Ware thought they would be left. He saw the one barrel from which "the lid had popped off and some stuff oozed out," and he and his son righted the drum and "pushed the stuff back in." Some of the other barrels did not have tops and inside those Ware saw "hardened paint and rags and scraps and maybe some wood." According to the Wares, other than the barrels dumped by ADS there were no drums placed by any other person or source on their property.

ADS's version of the events was that Ware had been taking empty drums to sell and that it never paid Ware to take the drums. Instead, it claimed that Ware transported the drums on his personal pick-up truck. Ware denied having had such a vehicle. Nonetheless, ADS admitted that it had possession of drums of liquid waste because the landfill stopped taking them and it continued to receive drums from customers. According to White he did not have any knowledge of any drums in Tabernacle until December 1983.

Larsen stated that he drove ADS trucks from a out 1969 to 1980. He testified that he did not know either of the Wares, that he never drove a truck "out to a property in Tabernacle and [left] drums there," and that while he worked at ADS he operated a "front loader" type truck as opposed to the "roll off" type that Edith ware had described. The ADS truck dispatcher stated also that he never received a call in connection with the Tabernacle dumping.

On August 5, 1982, the Burlington County Health Department received a citizens' complaint about the site and referred it to the DEP. The next day the county health department and the DEP investigated the site, and found about 120 fifty-five-gallon drums "randomly dumped along the side of the [access] road near a slope to a small marsh." They reported what they found as follows:


Upon close inspection of the drums, it appears the waste can be categorized as paint waste, solvents, epoxy waste and some galvanized steel drums with corrosive labels. The majority of the drums either contain solidified material or are rusted through and have released there (sic] contents. There were several drums still containing liquid and some of these were presently leaking. The only odors that were detected were among one section of leaking forty cubic yards of solid waste. The contents liquid drums. These odors resembled Acetone. There was considerable ground staining among the drums.

They concluded from the condition of the site, the road leading to it and the drums that the dumping occurred "several years ago." The investigation noted that some of the drums had USX markings and contained USX paperwork. Thereafter the Burlington County Prosecutor's Office participated in the investigation, but by April 1983 the matter was referred to the DEP for enforcement and remediation action.

On February 17, 1984, the EPA issued an administrative order to ADS under CERCLA requiring that it remove the drums, remove the contaminated soils, conduct soil sampling and install four groundwater-monitoring wells at the site. ADS numbered and logged 193 drums, thirty-one of which were empty. The remaining drums contained approximately 3000 gallons of liquid wastes and chromium, lead and 1.1.1 trichloroethane (TCA), all hazardous substances under CERCLA. After removing the drums about eight truckloads of contaminated soil were excavated.

Subsequently, ADS notified Harleysville, First State and Utica that it had been named a responsible party under CERCLA for the Tabernacle site. Among the information ADS disclosed to the carriers was that in the EPA's administrative order ADS was a responsible party and had dumped drums of hazardous materials on the lands of one of its employees. On April 13, 1984, Harleysville responded by denying coverage, relying upon the information received from ADS, the pollution exclusion language in its policy and the timing of the damage, which it claimed, was prior to the date of coverage. First State responded by indicating it had begun to conduct an investigation.

First State's investigation revealed that Ware did in fact obtain the drums from ADS, and it in turn had received them from a customer. Nevertheless, the report found "no clear-cut indication of a sudden or accidental discharge." Periodic contact between ADS and First State nonetheless continued, with ADS providing updates and additional demands and First State at times indicating it might be interested in some sort of settlement but also continuing to assert defenses.

On July 10, 1987, EPA and ADS entered a consent decree whereby ADS paid $115,000 in return for a release of EPA's investigative and oversight costs at Tabernacle to date in relation to the administrative order. So far as we are aware, this payment was not funded by the carriers.

In February 1988 EPA completed the final remedial investigation and feasibility study for the site. According to the EPA, ADS failed to follow-up the earlier administrative order by installing monitoring wells which had been recommended given the "evidence of drum deterioration, coupled with the sandy nature of the site soil" and thus the strong potential for groundwater contamination. Among the report's conclusions were that the groundwater was contaminated with TCA and that the contamination was migrating from the site toward the southeast, to reach a down gradient residential well by 2001. Chromium cyanide and lead were also found in the soil at elevated levels.

On June 30, 1988, EPA issued its record of decision directing further remedial action. USX agreed to implement a pump-and-treat system, but ADS refused because it felt it had already paid its share to clean up the property and because it was generally dissatisfied with the treatment it had received from EPA.

In August 1990, EPA filed the underlying federal environmental action against USX and ADS demanding approximately $1.1 million in unreimbursed response costs for the site connected with the investigation and oversight, administration, inspection and enforcement expenses.. USX denied additional liability, filing a cross-claim against ADS. When ADS filed its amended cross-claim and third party complaint in July 1992 it named its various carriers, including Chubb, First State, Harleysville, Interstate, Pennsylvania Manufacturers' and Safety National as third-party defendants. The carriers denied coverage.

In July 1992, USX filed third party claims against Carite's estate against Ave Maria Carite and Stephen Miner as executors, A.C. Realty and Anthony Carite, Jr.8 In October 1992, plaintiffs filed an amended third party complaint against the insurers after the carriers had refused to defend those additional parties as insureds.

Meanwhile, USX continued remediating the site, installing additional monitoring wells and then, beginning in early 1994, pumping the contaminated groundwater. USX's groundwater pumping and treatment program at the site continued until 1997, at which point the remediation goals were determined to have been met.

In June 1994, the federal EPA action against USX was settled, and in November 1994 the court entered a consent order joined by plaintiffs here, which provided, among other things, for payment to USX from plaintiffs of $2 million. ADS's carriers did not offer to participate in that settlement. Plaintiffs say they spent $1,028,815.61 to defend the federal litigation without any carrier contribution to the costs of their defense.

In this declaratory judgment action, plaintiffs seek, in part, indemnification of its settlement amounts and defense costs relating to Tabernacle. Coverage as to ADS was dismissed on summary judgment, leaving only the issue of coverage for the individual plaintiffs. At trial, plaintiffs offered the expert testimony of Clarke as to the contamination of the Tabernacle site. He stated that TCA was a substance primarily used in manufacturing facilities for degreasing, but it was not used as a paint thinner per se. Paint wastes and thinners had been found at the Tabernacle site originally but not in the soil, though there were some trace amounts of some chemicals in the soil which "could have been associated with paints perhaps." Clarke believed that the amount USX spent to remediate the site was reasonable, including sums spent on studies and monitoring. As far as he knew, no money was spent "on the Ware property itself."


According to Clarke, until the mid- or late 1970s the scientific community believed that the soil would filter the kinds of chemicals found at the Tabernacle site before they contaminated the groundwater. "My position is that nobody knew that aquifers could be contaminated by the chemicals that drove the remediation at Tabernacle until the later '70s." Rather, the original environmental regulations focused on air and surface-water pollution, and the analytical model used to determine whether such chemicals were even present in groundwater was not developed until 1974. TCA was one such chemical, and according to Clarke "the groundwater treatment and remediation wouldn't have been necessary at Tabernacle without the presence of TCA." Clarke believed that the TCA contamination found at the Tabernacle site came from the barrels dumped there. He also believed the settlement ADS made at the site was reasonable in light of the potential liabilities.

Dr. Marwan Sadat, the defendants' expert, agreed that the TCA originated from ADS's dumping. However, his position was that the scientific community was aware of the dangers of liquid waste, especially in the sandy soil found at Tabernacle. By 1976 there was only one landfill which was permitted to accept liquid waste, Kimbuc, and that was closed in mid-1976. At approximately that same time (and in some cases even before) new incinerator and chemical-processing plants were handling such materials. Sadat stated that by 1976, TCA was considered to be a threat to groundwater and public health, and TCA was known "to have contaminated wells from septic tank usage."

After the trial, the judge concluded that the individual plaintiffs were not covered on the basis of their knowledge that environmental damage would result from their actions at Tabernacle, and hence not entitled to indemnification for reasonable defense costs. The trial judge issued supplemental written findings April 11, 2003, which detailed Carite and White's expertise in the business, their relationship with USX, and the manner in which the barrels were kept on the ADS property.



Plaintiffs assert that the trial court improperly denied their summary judgment motion for defense costs regarding the policies, the carrier's duties to defend are implicated in the case of an "occurrence," that is, "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." While the trial judge correctly noted that ADS's intent was dispositive of its entitlement to a defense, he also wrote "issues hinging upon a party's mental state generally are not appropriate for resolution by way of summary judgment," relying on CPC Int'l, Inc. v. Hartford Accident & Indem. Co., 316 N.J. Super. 351 (App. Div. 1998), certif. denied, 158 N.J. 74 (1999). Therefore, the judge denied summary judgment for plaintiffs because he believed there was a genuine issue as to intent. We disagree and now reverse and grant summary judgment for plaintiffs.

Based on the voluminous record, we find it useful to set forth the issues that are not addressed for the landfill sites. Most importantly, we are not asked to determine issues of coverage for those sites. So far as we are aware, the carriers have contributed to the settlement of those litigations under reservations of rights, and have not sought reimbursement from ADS for those amounts. Nor is the specific source of the hazardous materials found at the landfills at issue. Moreover, there was no question that ADS's activities, as alleged in the state and federal environmental complaints, were temporally and geographically covered under the policies. Thus, the only issues before us regarding the landfill sites are whether the judge properly denied plaintiffs summary judgment on the issue of the carrier's duty to defend based on an intent of ADS to pollute and whether the carriers exhibited good faith in denying ADS's claims.

In addressing the first of these two issues, we begin with the standard for summary judgment as set forth in Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520 (1995), where the Court stated:


a determination whether there exists a "genuine issue" of material fact that precludes summary judgment requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party. The "judge's function is not himself (or herself] to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." [Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct., 2505, 2511, 91 L. Ed. 2d 202, 212 (1986).] Credibility determinations will continue to be made by a jury and not the judge. If there exists a single, unavoidable resolution of the alleged disputed issue of fact, that issue should be considered insufficient to constitute a "genuine" issue of material fact for purposes of Rule 4:46-2. Liberty Lobby, supra, 477 U.S. at 250, 106 S. Ct., at 2511, 91 L. Ed. 2d at 213. The import of our holding is that when the evidence "is so one-sided that one party must prevail as a matter of law," Liberty Lobby, supra, 477 U.S. at 252, 106 S. Ct. at 2512, 91 L. Ed. 2d at 214, the trial court should not hesitate to grant summary judgment.
[Id. at 540.]

Moreover, if the issue of fact only exists as to an "insubstantial nature," summary judgment is permitted. Id. at 529 (citing Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 75 (1954)).

We are satisfied that after considering all the materials submitted in this voluminous appeal, that defendants never met their burden of showing any evidence of intent by plaintiffs to pollute the landfill sites. No evidence was presented which would create a genuine issue of fact or allow a rational fact finder to determine that the plaintiffs intentionally deposited hazardous wastes at the various landfills. Since our supreme Court has stated "an insurer must bear the burden of proving that an insured intended or expected environmental damage," Carter-Wallace, Inc. v. Admiral Ins. Co., 154 N.J. 312, 330 (1998), the defendants could not rely on the plaintiffs' inability to show their lack of intent, i.e., to prove a negative. Accordingly, summary judgment was improperly denied to plaintiffs because the defendants presented no materials of evidential weight as to plaintiffs' intent.

Similarly, the judge's reliance on CPC Int'l, was misplaced. In that case, the plaintiff-insured operated three industrial facilities that ultimately polluted the surrounding areas. CPC Int'l, supra, (316 N.J. Super. at 356). After the plaintiff sued its insurers to recover remediation costs, the insurers presented testimony of several of the plaintiff's former employees regarding its knowledge and intent to pollute. Id. at 374. Relying on this evidence, the Law Division granted summary judgment for the insurers. However, in reversing the grant of summary judgment, we stated:


The simple and overriding fact is that these witnesses exhibited immense hostility toward CPC. We do not think that their testimony should go untested. "A case may present credibility issues requiring resolution by a trier of fact even though a party's allegations are uncontradicted." D'Amato by McPherson v. D'Amato, 305 N.J. Super. 109, 115 (App. Div. 1997). As Chief Justice Vanderbilt observed in Ferdinand v. Agricultural Ins. Co. of Watertown, N.Y., 22 N.J. 482 (1956), "[w)here [persons] of reason and fairness may entertain differing views as to the truth of testimony, whether it be uncontradicted, uncontroverted or even undisputed, evidence of such character is for the jury." Id. at 494; see also Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 415 (1997).
[CPC Int'l, supra (316 N.J. Super. at 375).]

Here, unlike CPC Int'l, no evidence was ever presented that plaintiffs intended or expected to pollute. Plaintiffs did not utilize hazardous materials in the course of their business. Plaintiffs were not obligated to inspect in detail all the materials they transported to the landfills. Plaintiffs also deposited the materials at state-licensed landfills. Under these circumstances, defendants failed to establish that the plaintiffs' dumping activities constituted intentional or expected acts of pollution. Therefore, what this all amounted to was that there was no issue of intent to be resolved by a trier of fact.

Although there was some amount of contention regarding whether ADS in fact hauled hazardous substances to the landfill sites that issue was largely irrelevant and was of "insubstantial nature." Plaintiffs were entitled to a defense so long as they did not intend to cause environmental damage. Whether or not plaintiffs actually transported the materials had no bearing on the duty to defend. Indeed, an insured is entitled to a defense even if the complaint against it was meritless or frivolous. Burd v. Sussex Mut. Ins. Co., 56 N.J. 383, 388-389 (1970); Muralo Co., Inc. v. Employers Ins. of Wausau, 334 N.J. Super. 282, (App. Div.), certif. denied, 167 N.J. 632 (2000). Based on our reading of Muralo, if ADS never hauled hazardous wastes to the landfills, the complaint against it would have been meritless, yet it still would have been entitled to a defense from its carriers. If ADS did haul such waste, it is still entitled to a defense insofar as it may have done so unintentionally.

While the issue is not before us, we note that the position of the insurers, as expressed at oral argument, was to disclaim responsibility for litigation expenses unless there was a showing of an act of pollution during the covered period. Thus, they stated, if the insurer does not undertake a defense and the

insured wages a successful defense so that it is found not to have been guilty of an act of pollution, then there has not been a showing of an "occurrence" and the insured is not entitled to a defense in any form, including a reimbursement of its litigation expenses. On the other hand, the defendants continued, if the insured is unsuccessful in defending the case,an "occurrence" would have been found and the insured would be entitled to a defense and reimbursement of its litigation expenses.

This argument defies logic and common sense. It also defies the normal expectations of a policyholder. The rule must be that the duty to defend arises from the claims made in the complaint. if the complaint alleges an act or acts of pollution during a stated period of time, any insurer whose policy covered any of the period encompassed in the complaint has a duty to defend with respect to the acts alleged during the covered period unless and until the insurer establishes non-coverage. As a practical matter, how multiple insurers and the insured deal with the defense and litigation expenses is a matter of negotiation.

When its assured is sued on an occurrence on claims which on its face falls within the policy coverage, and the period covered by the policy, the insurer must provide a defense subject to the constraints of Burd (56 N.J. 383), unless and until a pollution exclusion or non-coverage is competent proofs. Otherwise, the insurers can continue to sell policies to haulers purporting to afford coverage and collect premiums while never having to pay a cent for either defense or indemnification. These maneuverings described by the defendants follow the "unholy mantra" of the insurance industry, as characterized by Judge Baime, that "we collect premiums; we do not pay claims." Owens-Illinois, Inc. v. United Ins. Co., 264 N. J. Super. 460, 491 (App. Div. 1993), aff'd in part, rev 'd and rem'd in part, 138 N.J. 437 (1994).



Plaintiffs also argue that the Law Division Judge erred in granting defendants summary judgment on plaintiffs' claims of bad faith in the manner in which they handled plaintiffs' demands for coverage for the landfill sites. Plaintiffs do not raise this issue as to the Tabernacle site. Among their arguments are that the carriers wrongly denied coverage, took too long to issue their coverage decisions and performed inadequate investigations into the claims before issuing denials.9

An insured cannot claim that the insurer's denial of coverage was in bad faith if coverage is "fairly debatable." Pickett v. Lloyd's, 131 N.J. 457, 473 (1993). In other words, "a plaintiff must show the absence of a reasonable basis for denying benefits of the policy and [the insurer's] knowledge or reckless disregard of the lack of a reasonable basis for denying the claim." Ibid., (citations omitted).

We are satisfied the Law Division Judge's decision on plaintiffs' bad faith claims was correct. The carrier's obligation to defend was "fairly debatable" because of the question of whether there had been an "occurrence" under the various policies. At that time, this was a reasonable basis to deny the claim where the carriers attempted to operate, although erroneously, within the framework of Burd, supra (56 N.J. 283) and Muralo, supra (334 N.J. Super. 282). At the very least, plaintiffs failed to show the defendants had knowledge or reckless disregard of a lack of reasonable basis.

Incidentally, plaintiffs also fault all the "ADS insurers" for dragging their feet in investigating the landfill claims and issuing their denials. We disagree and point out that "the insurer has no duty to investigate possible ramifications of the underlying suit that could trigger coverage." SL Indus., Inc. v. American Motorists Ins. Co., 128 N.J.



Plaintiffs contend that the judge erred in granting defendants summary judgment respecting coverage and duty to defend for the Tabernacle site. Although they raise numerous claims they cite two overall reasons why the judge erred: (1) there was no evidence plaintiffs intentionally discharged known hazardous substances or intended or expected the type and severity of harm that occurred; and (2) there was a fact question presented, given the state of scientific knowledge at the time, as to whether plaintiffs could have known the materials in question might cause the damage resulting.

An "occurrence" in the pollution exclusion clause should be "interpreted to preclude coverage in cases in which the insured intentionally discharges a known pollutant, irrespective of whether the resulting property damage was intended or expected." Morton int'l, Inc. v. General Accident Ins. Co. of Am., 134 N.J. 1, 78 (1993). Because in environmental cases insureds held responsible for remediation of pollution nonetheless "vary significantly in their degree of culpability for the harm caused by pollutant discharges," a general rule cannot be fashioned simply based on knowingly discharging pollutants. Id. at 86. Rather:


in environmental-coverage litigation a case-by-case analysis is required in order to determine whether, in the context of all the available evidence, "exceptional circumstances [exist] that objectively establish the insured's intent to injure." Voorhees, [v. Preferred Mut. Ins. Co., 128 N.J. 165, 185 (1992)]. Those circumstances include the duration of the discharges, whether the discharges occurred intentionally, negligently, or innocently, the quality of the insured's knowledge concerning the harmful propensities of the pollutants, whether regulatory authorities attempted to discourage or prevent the insured's conduct, and the existence of subjective knowledge concerning the possibility or likelihood of harm.
[Id. at 86-87.]

We affirm the judge's application of the Morton factors and his grant of summary judgment after finding that ADS knowingly discharged the pollutants at Tabernacle. The facts supporting his finding included the duration of the discharge as determined by the prior USX federal lawsuit, the length of time ADS allowed the drums to remain on the property, the reckless manner in which ADS deposited the barrels and allowed one barrel to break open in the process, ADS 's careful actions when storing the barrels on its own property, ADS's failure to quickly remediate the damage, ADS's specific knowledge that the barrels contained liquid waste from USX's shipping papers, and ADS's general knowledge that other landfills did not accept such wastes due to their hazardous nature.

We agree with the trial judge that these facts "[lead] to the inescapable inference that ADS knew that environmental damage would result when it dumped the drums of waste at the Tabernacle site."

Similarly, in light of the judge's additional findings submitted on April 11, 2003, plaintiffs' contentions that the judge erred in ruling that White and Carite intentionally discharged the pollutants are without merit. R. 2:11-3(e)(1)(A). We add that regardless of the state of scientific knowledge at the time regarding TCA and groundwater contamination, the plaintiffs at least knew that the dumping of these chemicals would enter the soil. Indeed, plaintiffs' expert stated "the scientific community believed that the soil would filter the chemicals." Also, Dr. Sadat stated that the chemical class in which TCA belonged was identified as a "bad actor" in 1972 and was adopted by the EPA on its pollutants list in 1976, the same year that ADS disposed of the drums at Tabernacle. Where our Supreme Court has stated "we do not consider that differences in harm relating to the severity of environmental damage give rise to a finding of 'improbability' of harm that invokes the need for evidence of subjective intent," Morton, supra, (134 N.J. at 90-91), it must be concluded that the plaintiffs' knowledge of certain environmental harm precluded them from coverage.



Based on the prior discussion, plaintiffs' remaining claims are moot, as well as the cross-appeals. However, in accordance with this opinion, a remand is required on the issue of counsel fees. See R. 4:42-9(a)(6).

Affirmed in part and reversed and remanded in part for further proceedings consistent with this opinion. The cross-appeals are dismissed. No costs to any party.





1. A.C. Realty was one of White and Carite's corporations involved with the running of ADS, and it and other related White and Carite concerns were named insureds on some of the policies. Carite's estate was named in place of Carite, who died in the interim. Anthony Carite, Jr. was Carite's brother and involved in ADS's operations and management.

2. All plaintiffs sought coverage and indemnity for the Tabernacle site because they were all defendants in that underlying action. Only ADS was a named defendant in the landfill cases.

3 Numerous issues are raised based on the voluminous record with over 13,000 pages of appendices and twenty-eight transcripts.

4. The principals eventually sold ADS, which became known as ACR of South Jersey, Inc.

5. This definition is from the 1976 Utica policy inasmuch as the definition sections of the earlier Utica CGL policies are not in the record. Nonetheless, no one asserts that the definition differed in earlier policies, or was different in the other carriers' policies.

6. ADS also utilized a fifth landfill site, Pennsauken, but did not appeal the judge's denial of indemnification related to that site. Therefore, that issue is not before us.

7. For example, some 300 companies used the Kramer landfill.

8. Carite had died earlier in October 1991 in a plane accident

9. Although plaintiffs generalize these claims against their "carriers" or "insurers" or "defendants," the only specific claims of bad faith they address are directed against their primary insurers such as Harleysville, First State and Pennsylvania Manufacturers' and do not expressly include arguments about the excess carriers' bad faith denials.