In First Morris Bank v. Commercial Insurance Company of Newark, the Appellate Division affirmed a trial judge's finding that a bank was not entitled to insurance coverage for its remediation costs on foreclosed property. The bank foreclosed on its mortgage and subsequently purchased the subject property at a sheriff's sale in 1991. In 1992, the bank removed an underground storage tank from the property and discovered that the tank had leaked. NJDEP held the bank responsible for the contamination; thus, the bank began remedial work. The bank then sought to recover its remediation costs from its insurance carrier. The carrier disclaimed coverage on the basis that the policies, through endorsements, contained the absolute pollution exclusion, which bars coverage for costs associated with environmental contamination.
The bank argued that, under the terms of the policy endorsement, which stated that the endorsement did not apply to any site not owned, rented or occupied by the insured where the insured was performing operations other than an environmental cleanup, it was entitled to coverage because its losses arose out of its "operations" as a lender foreclosing on a mortgage lien. The Court rejected that argument, stating that the bank did own the property. Moreover, the Court found that the bank had no "operations" at the site, other than conducting an environmental cleanup at the request of NJDEP.
Finally, the bank argued that under New Jersey's application of the continuous trigger theory, coverage was triggered from the time the tank began to leak until it was discovered in 1991. The Court declined to consider this argument because the bank failed to produce any evidence regarding when the tank began to leak or, in addition, any evidence of earlier insurance policies. First Morris Bank v. Commercial Ins. Co. of Newark, Docket No. A-6875-97T1 (App. Div. Oct. 5, 1999).
