On January 24, 1996, in a case of first impression, a New Jersey state court ruled that an insured's Environmental Cleanup Responsibility Act (ECRA) compliance costs are covered under a standard comprehensive general liability (CGL) policy. More specifically, the court in Crest-Foam Corp. v. Hartford Accident and Indemnity Company held in favor of Crest-Foam that its ECRA liability constituted a "legal obligation to pay damages," and as such, Hartford was required to indemnify Crest-Foam for the costs associated with ECRA under the CGL policies that Hartford had issued to Crest-Foam. In a position rejected by the court, Hartford had argued that Crest-Foam had assumed the ECRA costs voluntarily, and, hence, they were excluded from coverage. The facts in Crest-Foam are typical of those found in numerous cases around the state. Crest-Foam had operated a manufacturing facility in New Jersey for many years. In 1986, it decided to sell all of its stock to an unrelated company. The plan to transfer ownership imposed certain duties upon Crest-Foam pursuant to ECRA (now known as the Industrial Site Recovery Act (ISRA)). Accordingly, Crest-Foam notified the New Jersey Department of Environmental Protection (NJDEP) of the transfer and conducted an environmental investigation of the site. The investigation revealed soil and groundwater contamination. In order to allow the transfer to proceed prior to cleanup, Crest-Foam entered into an Administrative Consent Order (ACO) with NJDEP, obligating Crest-Foam to remedy the contamination after closing. Crest-Foam then began the remediation and sought coverage for the remedial costs from its insurers. While several of Crest-Foam's other insurers agreed to share in the ECRA costs, Hartford denied the claim, and Crest-Foam brought suit. Although the Crest-Foam opinion has not yet been published, and thus its precedential value remains uncertain, the case is nonetheless important because it extends a ruling that had already been applied in the context of the New Jersey Spill Act: namely, that when a statute like ECRA or the Spill Act mandates a cleanup, the ensuing costs are damages that the insured is legally obligated to pay and, accordingly, the costs are indemnifiable under a CGL policy.
