While the New Jersey Supreme Court recently has resolved many issues in the environmental insurance coverage context, the choice of law battle rages on. On April 3, 1997, the Appellate Division issued a ruling in Permacel v. American Ins. Co., which, at first blush, seems to contradict its earlier ruling in J. Josephson v. Crum & Foster, and the Third Circuit opinion upon which J. Josephson was based, General Ceramics v. Fireman's Fund. In J. Josephson and General Ceramics, the courts held that the pro-coverage law of New Jersey would be applied to resolve an insurance coverage dispute where a New Jersey insured disposed of waste in a Pennsylvania landfill. In Permacel, on the other hand, the court held that the less favorable laws of New York, Maryland and Connecticut would be appropriately applied to construe the insurance policies at issue, because the insured generated the waste at its New Jersey facility and disposed of the waste at dump sites in those three states.
The courts in all three cases applied the same analysis to the choice of law question. That is, they followed the reasoning applied by the New Jersey Supreme Court in Gilbert Spruance v. Pennsylvania Mfrs. Ass'n. Ins. Co. In Gilbert Spruance, the high court was faced with a situation where the insured was a Pennsylvania corporation that produced paint in Pennsylvania and hauled its waste to New Jersey for disposal. The high court analyzed several sections of New Jersey's Restatement (Second) of Conflicts and concluded that the law of the state which the parties understood would be the principal location of the risk during the policy term should be applied unless another state has a more significant relationship to the parties and the transaction. Furthermore, the Gilbert Spruance Court suggested that the location of the insured risk is less significant when the policy covers a group of risks that are scattered throughout two or more states. Accordingly, the Gilbert Spruance Court applied New Jersey law to the dispute, ruling that when waste that is generated outside of New Jersey comes to rest in New Jersey, New Jersey has the dominant significant relationship to the parties and the transaction.
General Ceramics and Josephson both involved policies of insurance that were issued by out-of-state insurers directly to New Jersey insureds. The insureds generated their waste in New Jersey and disposed of it in Pennsylvania. When deciding whether to apply the law of New Jersey or Pennsylvania, these courts evaluated the competing rules of law and the interests of each r espective state in having its particular rules apply. The courts both found that New Jersey's interest in protecting its insured by giving an expansive meaning to the "sudden and accidental" pollution exclusion clause in the insurance policy outweighed Pennsylvania's interest in upholding a narrow interpretation of that clause, since neither party to the lawsuit was a citizen of Pennsylvania. Hence, New Jersey law was applied despite the fact that the waste site was located in Pennsylvania.
In Permacel, the court again weighed the relevant policies of New Jersey against the relevant policies of the other interested states, New York, Connecticut and Maryland. Acknow-ledging that Gilbert Spruance did not create a bright line rule that the law of the state where the waste comes to rest should be the law that applies, nonetheless, the Permacel court stressed that the location of the waste site carries substantial weight in the "significant relationship" analysis set forth in Gilbert Spruance. Therefore, the Permacel court ruled that absent some dominant or compelling need to protect the interests of the transporting state (i.e., New Jersey), the laws of the states where the hazardous waste comes to rest should apply.
The Permacel court found no compelling need to apply New Jersey law. Rather, it observed that it was foreseeable that Permacel would transport its waste from New Jersey to New York, Maryland and Connecticut; hence, it was predictable that Permacel would incur liability in those states. Also, the court noted that the goal of facilitating commerce among the states would be best satisfied by applying the laws of the host states, New York, Connecticut and Maryland. Finally, it was influenced by the fact that, unlike the situation in J. Josephson and General Ceramics, the relevant insurance policies were issued to Permacel's parent corporation in California, and Permacel merely was named on the policies as an additional insured. Thus, the parties never had any expectation that New Jersey law would be applied to this coverage dispute.
In trying to glean a lesson from these divergent outcomes, one can only conclude that where the New Jersey Supreme Court leaves an issue to be resolved on a case-by-case basis, as it did in Gilbert Spruance, the parties to these high stakes coverage disputes will continue to assert their respective positions, notwithstanding the fact that the identical issue appeared to have been addressed and resolved by the Appellate Division.
