New Jersey's Appellate Division finally addressed the issue of whether the costs of investigating, monitoring and cleaning up contaminated groundwater beneath an insured's own property are covered by the typical comprehensive general liability insurance policy. Ruling in favor of policyholders in a series of eight cases decided on July 22, 1996, the Appellate Division concluded that the 'owned property' exclusion does not per se act to bar claims arising out of contaminated groundwater that has not migrated beyond the boundaries of the insured's property.
The leading decision in this series of cases is Reliance Insurance Co. v. Armstrong World Industries.
Further enhancing the victory for insureds, in F.L. Smidth & Co. v. The Travelers Insurance Co., one of the eight cases, the appellate court ruled that the costs of remediating those soils 'reasonably associated' with the impacted groundwater are also covered, notwithstanding that such soils are clearly located upon the insured's own property. And, as the final icing on the cake, in Ohaus v. Continental Casualty Insurance Co., the court declared that all response costs are covered, including the 'monitoring, investigating and testing expenses which are necessary in determining the existence of contamination, the extent of contamination, and the success of any cleanup.'
While two of the eight decisions have been appealed to the New Jersey Supreme Court (Kentopp v. Franklin Mutual Insurance Co. and United Mobile Homes v. Foremost Insurance Co.), the principles announced in all of the cases remain the law in New Jersey for now. Therefore, those companies that have submitted contamination claims to their insurance carriers and have been denied coverage should take this opportunity to revisit the grounds for the denial of those claims. There is a strong likelihood that groundwater and even soil claims rejected on the basis of the 'owned property' exclusion can now be reversed.
