In April 2005, the New Jersey Supreme Court decided a case interpreting the standard pollution exclusion in a commercial general liability policy. In Nav-Its v. Selective Insurance, 183 N.J. 110 (2005), Nav-Its was a contractor constructing a shopping center in Allentown, Pennsylvania. Nav-Its subcontracted out the work to apply sealant and coating to the floor surfaces throughout the center. A doctor’s office was up and running during the time of the of application of the sealant, and the physician claimed personal injury as a result of exposure to the sealant. The doctor stated in his claim that he was exposed to the sealant’s odors between July 27 and July 31, and then
again from August 3 through August 5 of 1998. The contractor was insured by Selective Insurance. The Selective CGL policy contained a pollution exclusion and stated that coverage would not be provided for bodily injury or property damage arising out of the pollution hazard as that was defined within the policy. The policy also contained an exception to the exclusion which, in effect, provided coverage for bodily injury on the pollution hazard if the injury took place “inside a building within a single 48 hour period and the exposure occurs within the same 48-hour period.”  At the trial level, both parties filed for summary judgment on the issue of whether or not the exclusion and its exception applied. The trial court ruled in favor of the insured finding coverage, but at the appellate level in an unpublished opinion, the decision of the trial court was reversed in favor of Selective. The insured filed for certification which was granted, and the New Jersey Supreme Court reversed the Appellate Division decision and declared that the exclusion did not apply at all. In coming to its decision, the New Jersey Supreme Court  considered a commentator’s review of the transcripts from New Jersey Department of Insurance hearings from 1985 as well as compiling a number of cases purporting to be the chronological evolution of the pollution exclusion endorsement. In the end the Supreme Court held, based upon the aforementioned material, that the absolute pollution endorsement still provides coverage. The Court held that the exclusion’s purpose was to exclude from coverage the “intentional” polluters and the large scale clean ups like those that made the headlines for many years in the 1970’s and 1980’s. These the Court labeled as “traditional environmental pollution” claims. Of immediate concern to coverage counsel is the import of the decision on the depth of materials reviewed by the Court. The exercise that the Court went through to find coverage on the Selective policy may well have a substantial impact in future litigation. The decision is also likely to affect coverage counsel’s ability to provide an accurate opinion before litigation. The impact on discovery may be that every declaratory judgment case will subject coverage counsel to a demand for documents such as industry conference reports, ISO rate filing forms, individual carrier filing forms and transcripts of regulatory agency hearings. It is already becoming common practice, in coverage cases, for attorneys to request all information provided to state regulatory agencies for particular policy forms. This poses a number of practical problems that will need to be addressed in the form of record keeping by carriers and ready access to those records for coverage counsel. Take, for example, a coverage case over the “other insurance” clause standard in most general liability and umbrella policies. If a carrier uses a proprietary form for its umbrella policies, the policy is actually very similar to what ISO may recommend for use because it was modeled after it. Then add the fact, a common one, that the form used by the carrier has been modified four or five times since inception twenty years ago and that the ISO form it is modeled after has been modified six or seven times since its inception twenty five years ago. A demand on a carrier for all documents comprising the rate filing for a particular policy form will undoubtedly require that substantial energy and resources be devoted to investigating. Obviously the task is daunting and the import serious. If only the most recent filing information is readily available and it doesn’t happen to explain the “other insurance” clause does the clause automatically become ambiguous to be construed against the carrier? Just how far would counsel need to dig to simply provide a coverage opinion? The ramification of the
archeological dig performed by the Supreme Court in Nav-Its will be seen in the change of coverage counsel’s approach to a request for an opinion. The days of reviewing the plain policy language in light of the facts and case law may fast be approaching an end.

– David D. Blake, Esq.