Intent to Cause Environmental Harm of One Kind Does Not Preclude Liability Coverage for Other Kinds of Harm Under Known Loss Doctrine
In November 1998, the New Jersey Appellate Division held in CPC International, Inc. v. Hartford Accident and Indemnity Co., that an insured's intent to cause environmental harm of one sort will not preclude liability coverage for other kinds of unintended or unexpected environmental harm.
In this case, CPC filed a complaint for a declaratory judgment seeking indemnification from its primary and excess insurers for remediation costs incurred at several chemical manufacturing sites. CPC and its insurers filed cross-motions for summary judgment. The Law Division granted the insurers' motions and denied CPC's motion because the Court found that CPC intended to harm the soil and groundwater at the sites. The Court concluded, therefore, that CPC was aware of the harm caused by the pollution before entering the relevant insuring agreements and was precluded from recovering under the known loss doctrine.
The Appellate Division reversed the Law Division's decision, reasoning that the proper focus of any inquiry should be whether "the insured intended or expected to cause environmental harm comparable both as to severity and type with that for which indemnification is sought." The Court also noted that it is not sufficient for an insurer to prove that the insured expected or intended any injury to the environment. Instead an "insurer must prove that the environmental injury expected or intended by the insured was qualitatively comparable in terms of severity and type with the environmental injury that is being remediated." Therefore, to deny coverage, an insurer must now persuade the trier of fact that the insured expected or intended to cause qualitatively comparable environmental injury to that being remediated in order to avail itself of the known loss doctrine. CPC International, Inc. v. Hartford Accident and Indemnity Co., 316 N.J. Super. 351 (App. Div. 1998).