1995 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

9-8-1995

NL Industries v Comm Union

Precedential or Non-Precedential:

Docket 94-5470

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Recommended Citation

"NL Industries v Comm Union" (1995). 1995 Decisions. Paper 249.

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1 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

 

NO. 94-5470 

 

NL INDUSTRIES, INC. 

v. 

COMMERCIAL UNION INSURANCE COMPANY 

 Defendant/Third-Party Plaintiff 

v. 

CERTAIN UNDERWRITERS AT LLOYD'S; 

INSURANCE COMPANY OF NORTH AMERICA; 

NORTHBROOK EXCESS AND SURPLUS INSURANCE COMPANY 

 Third-Party Defendants 

Commercial Union Insurance Companies, 

 Appellant

On Appeal from the United States District Court 

for the District of New Jersey 

(D.C. Civ. No. 90-cv-02124) 

Argued: March 7, 1995 

Before: BECKER, SCIRICA and WOOD,0 Circuit Judges. 

(Filed September 8, 1995) 

 STEVEN R. BROCK, ESQUIRE (ARGUED) 

 Rivkin, Radler & Kremer 

 EAB Plaza, West Tower 

 Uniondale, NY 11556-0111 

 Counsel for Appellant, Commercial

 Union Insurance Companies

 

0Honorable Harlington Wood, Jr., United States Circuit Judge for 

the Seventh Circuit, sitting by designation. 
2 

 SAMUEL A. HAUBOLD, ESQUIRE 

(ARGUED) 

 Kirkland & Ellis 

 200 East Randolph Drive 

 Chicago, IL 60601 

 Counsel for Appellee,

 NL Industries, Inc.

 TERRY M. COSGROVE, ESQUIRE 

(ARGUED) 

 Peterson & Ross 

 200 East Randolph, Suite 7300 

 Chicago, IL 60601-6969 

 Counsel for Appellee, Certain

 Underwriters at Lloyd's of London

 PAUL R. KOEPFF, ESQUIRE (ARGUED) 

 O'Melveny & Myers 

 153 East 53rd Street 

 Citicorp Center 

 New York, NY 10022 

 Counsel for Appellee, Insurance

 Company of North America

 

OPINION OF THE COURT 

 

BECKER, Circuit Judge. 

 This appeal by defendant/third party plaintiff Commercial Union Insurance Company ("CU") arises out of a suit brought 

by plaintiff/appellee NL Industries ("NL") seeking a declaration 

that it is entitled to product liability insurance coverage for a 

large number of lawsuits alleging lead paint exposure. Jurisdiction is based on diversity of citizenship. CU appeals from the 

grant of summary judgment against it in order to contest: (1) the 
3 

district court's choice of New Jersey law and its apparently 

consequent summary judgment requiring CU to fund NL's defense in 

the underlying tort actions; (2) the court's refusal to apportion 

the defense costs incurred in the underlying litigation between 

covered and non-covered claims; and (3) its denial of CU's claim 

for contribution against third party defendants/appellees 

Insurance Company of North America ("INA"), Northbrook Insurance 

Company, and certain underwriters at Lloyd's of London, (the 

"London Insurers"). 

 We hold that the district court erred in applying New 

Jersey substantive law. Under New Jersey choice of law rules, 

which are applicable since the case was litigated in the District 

Court for the District of New Jersey, see Klaxon Co. v. Stentor 

Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020 (1941), 

the law of the place of contracting applies unless some other 

state has a "dominant significant relationship" to the 

transaction. The policy was negotiated and signed in New York, 

and thus the parties reasonably expected, as the district court 

recognized, that New York law would govern the interpretation of 

the contract. Moreover, at all relevant times, the parties each 

had their principal places of business in New York, the premiums 

were paid in New York, and New York taxes were paid on the 

policies. 

 In contrast, it is patent that New Jersey has none of 

the contacts with or interests in the litigation that could give 

rise to the requisite relationship. Significantly, none of the 

underlying tort claims involved New Jersey plaintiffs. Because 
4 

the lead paint coverage actions had been joined with certain 

environmental coverage actions (seeking coverage for claims that 

NL was responsible for environmental harms at sites in New Jersey 

and elsewhere), the district court relied upon Gilbert Spruance 

Co. v. Pennsylvania Mfrs. Ass'n Ins. Co., 629 A.2d 885 (N.J. 

1993), as a basis for applying New Jersey law. But since that 

case has no application to tort-related cases, we conclude that 

the court was incorrect in applying it here. And while it is 

arguable that the states where the lead paint claims arose had a 

relationship to the transaction, we do not believe that they have 

the "dominant and significant relationship" necessary to displace 

the law of New York, which is the law of the place of contracting, of performance, and of the tort. 

 Because the district court's application of New Jersey 

instead of New York law to the coverage issues was legally 

erroneous, we must reverse the grant of summary judgment. In 

view of this result, we do not reach the substantive questions of 

CU's duty to defend, its right to allocation, or the availability 

of a contribution claim against INA, for on remand these must be 

reconsidered pursuant to New York law. 

I. Facts and Procedural History

 This is one of two separate declaratory judgment 

actions brought by NL, a New Jersey corporation with its 

principal place of business in New York, against CU for insurance 

coverage under contracts negotiated and performed in New York. 

NL first sought a declaration that CU was obligated to defend it 

in product liability lawsuits in Massachusetts, New York, and 
5 

Louisiana arising out of NL's manufacture of lead paint pigment. 

NL later added claims for coverage for four additional lead paint 

suits. The various plaintiffs in the underlying lawsuits alleged 

personal injuries as the result of lead paint exposure. NL did 

not, however, seek a declaration of CU's obligation to indemnify 

it with respect to the first three lead paint actions in this 

lawsuit; instead, NL included that issue in a separate lawsuit, 

the so-called "environmental action." See NL Industries, Inc. v. 

Commercial Union Ins. Co., No. 90-2125 (D.N.J.). In that action, 

NL also seeks a declaration that CU is obligated to defend and 

indemnify NL in connection with approximately 385 environmental 

claims arising from numerous sites throughout the United States. 

 The lead paint cases underlying this coverage suit 

arise from the use of lead paint or paint containing lead pigment 

manufactured by NL. The underlying complaints allege that NL 

knew since the early 1900's of the dangers posed by lead paints, 

and charge that NL "affirmatively misrepresented the safety, 

suitability and qualities of lead paint through [its] 

advertisements and promotional activities." (JA 21 at 1890-92; 

1824-26; 1737-38; 1702-04.) They contain allegations of negligence, fraud, civil conspiracy, and other intentional torts. 

The plaintiffs also allege that NL organized the Lead Industries 

Association ("the LIA") to respond to the negative information 

being revealed about lead paint, and that NL's high-level 

executives played an active role in the LIA, which led an effort 

to discredit adverse medical evidence about the hazards of lead 

paint in order to ward off any additional government regulation. 
6 

Documentary evidence submitted by CU supports these allegations 

of fraud and other intentional torts. Many of the meetings 

organizing these activities allegedly occurred in New York. 

 The district court found that New York was the place of 

contracting for all of the policies issued to NL by CU. NL had 

used a New York-based insurance broker to negotiate these contracts. The contracts were countersigned in CU's New York 

office. During the time that the relevant CU policies were in 

effect, NL maintained its national headquarters and principal 

place of business in New York. Both NL and CU's original 

objectively reasonable expectations were that New York law would 

control any disputes involving these contracts. See 7/11/91 Op. 

at 10.0 CU coded these policies as New York contracts, and 

premium taxes on the policies were paid in New York. 

 The CU policies at issue were effective from February 

1, 1966 to January 1, 1978. Some policies covered the period 

from February 1, 1966 to February 1, 1970 and provided coverage 

for bodily injury only. Other policies were effective from 

February 1, 1970 to January 1, 1978 and covered both bodily 

injury and property damage claims. The insuring agreements 

typically state: 

The company will pay on behalf of the insured all sums 

which the insured shall become legally obligated to pay 

as damages because of 

 Coverage A bodily injury or 

 Coverage B property damage 

 

0In adopting the district court's finding about the parties' 

expectations, we do not consider the affidavits submitted by CU 

in the litigation of these four new suits, for the district court 

properly noted that "[t]he time for the presentation of such 

evidence has long passed." 5/26/94 Op. at 11. 
7 

to which this insurance applies, caused by an 

occurrence, and the company shall have the right and 

duty to defend any suit against the insured seeking 

damages on account of such bodily injury or property 

damage, even if any of the allegations of the suit are 

groundless, false or fraudulent. . . . 

 

The policies typically define "occurrence" as follows: 

an accident, including injurious exposure to 

conditions, which results, during the policy period, in 

bodily injury or property damage neither expected nor 

intended from the standpoint of the Insured. 

 

The policies provided by INA similarly specify that INA has the 

right and duty to defend bodily injury or property damage suits 

caused by an "occurrence," defined as an event that was "neither 

expected nor intended from the standpoint of the Insured." 

 In both cases involving the CU coverage, the 

allegations of intentional conduct would appear to put coverage 

at issue. In contrast, the London policies in effect from 

November 19, 1949 to May 1, 1970 provide for (even broader) 

coverage of property damage in the following terms: 

COVERAGE. From and against all loss, costs, damages, 

attorney fees and expenses of whatever kind and nature 

which the Assured may sustain or incur by reason of or 

in consequence of: 

(a) Any and all liability imposed by law against the 

Assured for damage to or destruction of property 

of others . . . sustained or alleged to have been 

sustained, arising from any cause whatsoever . . . 

. 

 Despite the fact that NL was also covered by other 

primary insurers during the relevant period, NL named only CU as 

a defendant in this action. Accordingly, CU filed a third-party 

complaint against those others -- the London Insurers, INA, and 
8 

Northbrook Insurance Company -- seeking a declaration that any 

obligation owed NL with respect to the underlying actions was 

subject to and limited by the obligations of the third-party 

defendants. 

 NL moved for partial summary judgment against CU 

seeking a declaration that New Jersey law would govern the 

interpretation of its contracts with CU and that CU was obligated 

to fund NL's defense in the three original lead paint actions. 

In a July 11, 1991 opinion, the district court purported to 

address the choice of law issue for both the lead paint and 

environmental coverage actions. (The environmental coverage 

dispute, NL Industries, Inc. v. Commercial Union Ins. Co., No. 

90-2125, was also pending in the District Court for the District 

of New Jersey.) The court apparently was under the impression 

that it had to interpret a given insurance policy uniformly as to 

both the environmental and the lead paint coverage claims. The 

court decided that New Jersey law was applicable and, applying 

it, granted NL's motion for defense costs of the three original 

lead paint claims. 

 The case was then referred to a magistrate judge for a 

hearing on the amount of defense costs. On March 20, 1992, CU 

and NL entered into a stipulation and settlement agreement with 

respect to the payment of NL's defense costs incurred prior to 

March 1, 1992, in the three original lead paint actions. The 

settlement agreement was intended by the parties to be a final, 

binding resolution of that issue. Coverage for these three 

actions, dealt with in the settlement agreement, is therefore not 
9 

at issue here. After the settlement agreement was finalized, NL 

moved to amend its complaint to add the four new lead paint 

lawsuits, which form the basis for this appeal. 

 These new lead paint actions arose in Pennsylvania and 

Louisiana after the settlement of the coverage issues for the 

original three lead paint actions.0 NL then moved for summary 

judgment against CU alleging a duty to defend with respect to the 

four new actions. CU followed with a motion for summary judgment 

against INA and the London Insurers on its claim for contribution 

for a portion of the more than $4 million CU paid to NL to 

reimburse NL's defense costs in the three original actions. CU 

also sought allocation of defense costs among CU, INA, the London 

Insurers, and NL. 

 In opinions and orders dated August 6, 1993 and 

September 9, 1993, the magistrate judge granted NL summary 

judgment on the duty to defend the four new claims and denied 

CU's motion for contribution and allocation.0 CU filed a motion 

to vacate the judgment pursuant to Fed. R. Civ.P. 59(e), which 

the Magistrate recommended be granted, deeming his opinions to be 

 

0The additional suits were: City of Philadelphia v. Lead 

Industries Ass'n, No. 90-7064 (E.D. Pa.); Hurt v. Philadelphia 

Housing Authority, No. 91-4746 (E.D. Pa.); Swartzbauer v. Lead 

Industries Ass'n, No. 91-CV-3948 (E.D. Pa.); Orleans Parish 

School Board v. Apex Sales Co., No. 91-6014 (La. Dist. Ct.). 

0The parties had originally consented to the jurisdiction of the 

magistrate judge to determine damages and all further proceedings 

after the district court's 7/11/91 opinion. After the magistrate 

judge entered final judgment on the four new claims on November 

15, 1993, CU contested the magistrate's jurisdiction, leading to 

its Rule 59(e) motion. 
10 

reports and recommendations to the district court pursuant to 28 

U.S.C. §636(b). 

 On May 26, 1994, the district court filed an opinion 

adopting the magistrate judge's findings, granting summary 

judgment in favor of NL on the issue of CU's duty to defend the 

four new actions, and denying CU's motion for contribution and/or 

allocation. The district court adhered to its previous determination that New Jersey law governed the interpretation of the 

contracts, relying in part on the law of the case doctrine (based 

on its disposition in the 7/11/91 opinion) and on concerns that 

applying different states' laws to the various claims would be 

unmanageable. The court denied CU's motion for contribution from 

INA and the London Insurers on the basis that it was premature. 

The court also declined to allocate defense costs between 

negligence and intentional tort claims on the grounds that there 

was no "substantial issue" as to coverage, and, consequently, 

that all claims were potentially covered. This appeal followed. 

 Since choice of law analysis involves a purely legal 

question, we exercise plenary review. Armotek Industries, Inc. 

v. Employers Ins. of Wausau, 952 F.2d 756, 760 n.5, 762 n. 8 (3d 

Cir. 1991). Moreover, the district court's grant of summary 

judgment is also subject to plenary review. Public Interest 

Research of N.J. v. Powell Duffryn Terminals, Inc., 913 F.2d 64, 

71 (3d Cir. 1990), cert. denied, 498 U.S. 1109 (1991). 

II. New Jersey Choice of Law Principles

A. General Considerations 
11 

 At the outset, we must carefully distinguish between 

the environmental coverage disputes, which are not at issue in 

this appeal, and the (new) lead paint coverage actions, which 

are. We must also keep conceptually separate the underlying 

merits actions (certainly not at issue here) from their 

corresponding coverage litigation. This distinction is not only 

important for limiting our decision to what is properly at issue 

in this appeal; it also reflects a crucial distinction in New 

Jersey's choice of law jurisprudence. 

 In many areas of the law, New Jersey "has eschewed 

slavish devotion to rigid principles." See Diamond Shamrock 

Chems. Co. v. Aetna Casualty & Sur. Co., 609 A.2d 440, 465 (N.J. 

App. Div. 1992), certif. denied, 634 A.2d 528 (1993); Bell v. 

Merchants & Businessmen's Mut. Ins. Co., 575 A.2d 878, 880 (N.J. 

App. Div.), certif. denied, 585 A.2d 395 (1990); State v. Curry, 

532 A.2d 721 (N.J. 1987); Veazey v. Doremus, 510 A.2d 1187 (N.J. 

1986). Choice of law is no exception. Although the law of the 

place of contracting has historically governed the choice of law 

in insurance contract interpretation cases, see, e.g., Buzzone v. 

Hartford Ac. and Indem. Co., 129 A.2d 561 (1957), in keeping with 

the general trend the New Jersey courts have moved away from the 

mechanical application of this rule in favor of a more flexible 

approach focused on determining which state has the most 

meaningful connections with and interests in the transaction and 

the parties. See State Farm Mut. Auto Ins. Co. v. Simmons' 

Estate, 417 A.2d 488 (N.J. 1980); Gilbert Spruance Co. v. 

Pennsylvania Mfrs. Ass'n Ins. Co., 629 A.2d 885, 888 (N.J. 1993) 
12 

(reaffirming and applying Simmons); Colonial Penn Ins. Co. v. 

Gibson, 552 A.2d 644, 646-47 (N.J. App. Div. 1989) (applying the 

law of the place of contract unless the Restatement Conflict of 

Laws (Second) § 6 factors "compel a contrary result"). 

 Nonetheless, the factors that formerly controlled the 

choice of law analysis remain important considerations in the 

modern, more flexible approach embraced by the New Jersey courts. 

Thus, under New Jersey choice of law rules, the law of the place 

of contracting should ordinarily be applied unless some other 

state has the "dominant relationship" with the parties and 

issues. 

[T]he law of the place of the contract will govern the 

determination of the rights and liabilities of the 

parties under the insurance policy. This rule is to be 

applied unless the dominant and significant 

relationship of another state to the parties and the 

underlying issue dictates that this basic rule should 

yield. 

State Farm Mut. Auto. Ins. Co. v. Estate of Simmons, 417 A.2d 

488, 493 (N.J. 1980). The presumption in favor of the place of 

contracting serves two objectives: (1) protecting the "reasonable 

expectations of the parties as to their insured risks," and (2) 

advancing "certainty, predictability and uniformity." Id. at 496; 

see also Gilbert Spruance, 629 A.2d at 888 (reaffirming general 

approach and motivating policies); Gibson, 552 A.2d at 646-47.0

 

0For these purposes, the place of contracting is the place where 

the parties executed and delivered the insurance policy. See, 

e.g., Nelson v. Insurance Co. of North America, 264 F. Supp. 501, 

503 (D.N.J. 1967); Empire Mut. Ins. Co. v. Melburg, 336 A.2d 483, 

484 (N.J. 1975); Melick v. Stanley, 416 A.2d 415, 417 (N.J. App. 

Div. 1980). If a company from another state uses an insurance 

broker to negotiate and purchase its insurance policies, then the 
13 

 Factors and contacts set forth in the Restatement 

Conflict of Laws (Second) §§ 6 and 188 determine whether or not 

the place of contracting should in fact govern. See Gilbert 

Spruance, 629 A.2d at 888; Simmons, 417 A.2d at 491-92. The 

Restatement lists the following factors and contacts for a court 

to consider in determining whether the law of a state other than 

that of contracting has the requisite "dominant relationship." 

(a) the needs of the interstate and international systems, 

(b) the relevant policies of the forum, 

(c) the relevant policies of other interested 

states and the relative interests of those 

states in the determination of the particular 

issue, 

(d) the protection of justified expectations, 

(e) the basic policies underlying the 

particular field of law, 

(f) certainty, predictability and uniformity 

of result, and 

(g) ease in the determination and application 

of the law to be applied. 

 

Restatement Conflict of Laws (Second) § 6(2) (1988). 

 For contract actions in particular, § 188 of the 

Restatement contains the general rule that the law of the state 

with the most significant relationship to the transaction and the 

parties should apply. See Gilbert Spruance, 629 A.2d at 888; 

Simmons, 417 A.2d at 491-92. Section 188 also provides an 

enumeration of contacts -- such as the domicile, residence, 

nationality, place of incorporation and place of business of the 

parties, and the places of contracting and performance -- to 

 

place of contracting is the place where the broker negotiated the 

policies. See Diamond Shamrock Chems. Co., 609 A.2d at 465. 
14 

guide the identification of the state with the most significant 

relationship. Id. 

 One additional Restatement section is implicated here -

-§ 193 of the Restatement. That section explains that, in the 

context of casualty insurance contracts, the application of the 

contacts articulated in § 188 and the concerns of § 6 should 

focus on determining which state "the parties understood . . . to 

be the principal location of the insured risk during the term of 

the policy unless with respect to the particular issue, some 

other state has a more significant relationship . . . to the 

transaction and the parties. . . ." Gilbert Spruance, 629 A.2d 

at 889 (citation omitted, final ellipsis in original). This 

focus on the parties' understanding of the principal location of 

the risk serves to protect both the parties' expectations as to 

which law would apply and the interests of the state where the 

risk is principally located in determining the extent of coverage 

under the insurance contract. See Restatement of Conflicts 

(Second) § 193 cmt. c; Gilbert Spruance, 629 A.2d at 889. 

 B. Environmental Coverage Cases and the 

Inappositeness of Gilbert Spruance to Product 

Liability Cases 

 Until fairly recently, New Jersey choice of law principles did not treat environmental coverage actions differently 

from other insurance coverage disputes. Courts applied the 

analysis described above in environmental coverage cases as well 

as other insurance disputes to select a single state's law to 
15 

apply to all the related claims, irrespective of where the claims 

arose. As the appellate division explained: 

[W]hen comprehensive nationwide coverage is purchased, 

it is surely the expectation of both insured and 

insurer that what the insured has bought and insurer 

has sold is a single protection from liability 

irrespective of the particular state law under which 

that liability is determined . . . . [T]he notion that 

the insured's rights under a single policy vary from 

state to state depending on the state in which the 

claim invoking the coverage arose contradicts not only 

the reasonable expectation of the parties but also the 

common understanding of the commercial community. 

See Westinghouse Electric Corp. v. Liberty Mutual Insurance Co., 

559 A.2d 435, 442 (N.J. App. Div. 1989). 

 In Westinghouse, the plaintiff insured had sought 

coverage from 144 insurers for thousands of toxic tort claims and 

numerous site-remediation (environmental) claims arising from 

eighty-one sites in twenty-three states. Id. at 436. The trial 

court severed and dismissed all claims for coverage arising 

outside of New Jersey on forum non conveniens grounds. The 

Appellate Division reversed, explaining that the plaintiff was 

"entitled to a single, consistent and final resolution of the 

choice of law question in a single comprehensive action which 

will bind it and all its insurers." Id. at 442. Although it 

specifically declined to reach the choice of law issue, the 

Westinghouse court reasoned that the combined adjudication of 

these multitudinous claims would be "manageable if the law of 

only one state is required to be restated." Id. at 443. 

 Concerned by the possibility that resolution of 

coverage issues under one state's laws might deny coverage to 
16 

claims involving sites in another state whose laws applied to the 

underlying action -- thus frustrating the vindication of the site 

state's environmental policies by rendering many of the judgments 

uncollectible -- the New Jersey Supreme Court developed a 

specialized analysis for environmental coverage actions. 

Although Simmons, 417 A.2d 488 (N.J. 1980), remains the 

definitive case on the proper choice of law analysis for product 

liability insurance controversies, see Diamond Shamrock 

Chemicals, 609 A.2d at 465, a different analysis now governs 

environmental insurance controversies. In Gilbert Spruance, the 

New Jersey Supreme Court applied the site-specific rule 

enunciated in Johnson Matthey Inc. v. Pennsylvania Manufacturers 

Ass'n Insurance Co., 593 A.2d 367 (N.J. App. Div. 1991), for 

cases involving policies that did not contemplate a New Jersey 

risk and waste that, while predictably "coming to rest" in New 

Jersey, was generated out of state. See Gilbert Spruance Co., 

629 A.2d at 892. 

 Gilbert Spruance involved the interpretation of a 

pollution exclusion clause contained in a comprehensive general 

liability policy issued by a Pennsylvania carrier to a defendant 

incorporated in Pennsylvania. The insurance contracts were 

negotiated and countersigned in Pennsylvania, and the premiums 

were paid there. Although the waste was generated by the 

defendant in Philadelphia, the location of the company's paint 

manufacturing business, the New Jersey Supreme Court was 

convinced that the parties could "reasonably foresee that a New 

Jersey waste site would receive the insured's waste products," 
17 

thus rendering the application of New Jersey law equitable. See

629 A.2d at 886. The state's "compelling interest" in assuring 

the financing of a clean up of the New Jersey waste site played a 

very substantial role in the court's conclusion that New Jersey 

had the "dominant significant relationship" necessary to overcome 

the substantial contacts with Pennsylvania. See id. at 894. 

 Gilbert Spruance thus altered the balance of 

Restatement § 6 factors in environmental coverage cases. See 629 

A.2d at 894. While it rejected a categorical approach selecting 

the state of either generation or disposal in favor of a "more 

extended analysis pursuant to § 6(2)," the Gilbert Spruance court 

explained that "when applying the principles enunciated in 

Restatement section 6 to a case in which out-of state generated 

waste foreseeably comes to rest in New Jersey, New Jersey has the 

dominant significant relationship." See 629 A.2d at 894; see 

also National Starch & Chem. v. Great American Ins. Cos., 743 F. 

Supp. 318 (D.N.J. 1990) (earlier case finding that the location 

of the waste sites is of "paramount concern", although not 

irrebuttable). Gilbert Spruance thus establishes that, in 

environmental cases, the location of the site carries very 

substantial weight in the "significant relationship" analysis, 

typically adequate to overcome the contacts of the place of 

contracting.0

 

0One might argue that Gilbert Spruance establishes the rule that 

the law of the state where toxic waste comes to rest will apply, 

if it was reasonably foreseeable that the waste would end up 

there, obviating the need for the § 6 analysis. At most, the 

court left the question open. See 629 A.2d at 894 ("[W]e express 

no view on the proposition stated in J. Josephson, Inc, [626 A.3d 
18 

 NL contends that Gilbert Spruance reduces the 

importance of the place of contracting in all New Jersey choice 

of law analyses, even outside of environmental claims. Although 

the appellate division had left open the possibility that the 

site-specific approach it adopted could apply outside the 

environmental coverage context it was considering, Johnson 

Matthey, 593 A.2d at 373, the policies driving the adoption of 

the site-specific rule are inapposite in product liability 

coverage actions. In particular, the adoption of the sitespecific approach rested heavily on the compelling (for § 6 

purposes) interest that a waste-site state has in "determining 

the availability of funds for the cleanup of hazardous substances 

located within its boundaries." Leksi Inc. v. Federal Ins. Co., 

736 F.Supp. 1331, 1335 (D.N.J. 1990). But the state's interest 

in determining coverage for product liability actions is more 

amorphous and therefore less compelling than its interests in 

environmental cleanup. 

 

81 (N.J. Law Div. 1993),] that when another state is the 

foreseeable location of the waste-site, the court must engage in 

a section 6 analysis to determine if that state has the most 

significant relationship with the parties, the transaction, and 

the outcome of the controversy . . . ."). In passing on the case 

before it, however, the Gilbert Spruance court incorporated the 

interests of the waste site state into the customary § 6 

analysis. Id. at 894. The court also endorsed the approach of 

allowing resolution of issues "by the courts of the states whose 

interests are immediately affected during the course of 

litigation which can be effectively managed.". See Gilbert 

Spruance, 629 A.2d at 895 (emphasis added). We believe that the 

New Jersey Supreme Court's inclusion of the manageability caveat 

further signals its intent to preserve a balancing analysis 

rather than to discard it in favor of an inflexible rule. 
19 

 There is also less predictability concerning the situs 

of product liability claims, and a manageability problem in light 

of the potentially far larger number of product liability claims 

(relative to environmental sites in any given insurance coverage 

action.) Thus, because the benefits of the site-specific 

approach are reduced while the problems associated with its 

implementation are magnified outside the environmental coverage 

context, we believe that the New Jersey Supreme Court would not 

extend the site-specific approach to the product liability 

coverage area.0

 There is precedent for our differential treatment of 

the choice of law question in the product liability coverage 

situation relative to the environmental coverage situation. In 

Diamond Shamrock Chemicals Co. v. Aetna Casualty & Surety Co., 

609 A.2d at 465, which preceded but foreshadowed Gilbert 

Spruance, the Appellate Division addressed a case involving both 

Agent Orange product liability claims and environmental claims 

stemming from the defendant's manufacture of dioxin. For the 

Agent Orange toxic tort claims, the court relied on the fact that 

 

0In applying the new standard to environmental choice of law 

questions, the New Jersey courts will have to conduct separate 

choice of law analyses for environmental coverage claims and for 

mass tort coverage claims even when they arise in a single case. 

There is nothing anomalous about this result, since § 145 of the 

Restatement Conflicts of Laws explains that, even within a single 

action, the choice of law analysis applies to particular issues, 

not to the case monolithically. Moreover, in repudiating the 

uniform contract approach, see Gilbert Spruance, 629 A.2d at 892, 

the New Jersey Supreme Court has demonstrated a willingness to 

countenance the application of different state laws even to a 

single issue of coverage. This may of course be quite difficult 

and time-consuming, and result in serious management problems for 

the courts applying this rule. 
20 

the New York was the place of contracting to apply New York law 

to all of the Agent Orange coverage actions irrespective of where 

the claims arose. 

 Diamond Shamrock, incorporated and located in Ohio, had 

used a New York broker to purchase the policies. The court found 

that the facts that Agent Orange was manufactured in Newark, New 

Jersey, that it was sold to the government in New Jersey, that 

some of the claimants were New Jersey veterans, that some of the 

underlying suits were filed in New Jersey, and that the coverage 

action was pending in New Jersey did not establish the dominant 

relationship necessary to override the preference for New York as 

the place of contracting. 

 However, in determining which law to apply in the 

dioxin environmental coverage actions, the Diamond Shamrock court 

correctly anticipated the New Jersey Supreme Court by using the 

site-specific analysis enunciated by the Appellate Division's 

opinion in Gilbert Spruance. The court determined that the law 

of New Jersey, the state where toxic wastes predictably came to 

rest (dioxin was manufactured in Newark), should apply to the 

environmental coverage claims involving New Jersey sites. See

609 A.2d at 455. While this case predated Gilbert Spruance, it 

presaged the principles announced in that decision, and therefore 

effectively demonstrates how a court confronting environmental 

coverage claims and other coverage claims in the same suit must 

perform distinct choice of law analyses for each. 

 In summary, fundamental choice of law principles 

require that courts consider different issues separately; a 
21 

single analysis does not typically resolve the choice of law 

question for all claims in a suit. After Gilbert Spruance, New 

Jersey's choice of law rules require not only that environmental 

coverage claims be considered separately from other claims (such 

as for product liability), but also that they be considered in 

the site-specific framework, which is distinct from the 

customary, modified contacts analysis still applicable in other 

coverage contexts. 

 C. The District Court's Approach 

 After re-examining the choice of law issue, the 

district court essentially adopted its July 11, 1991 choice of 

law decision in disposing of these four new lead paint coverage 

claims. The 1991 decision purported to analyze the question for 

both the environmental coverage action and the lead paint 

coverage action, (as the combined caption and conflated discussion of the two actions suggest). The district court apparently 

believed that a single choice had to be made for both. Although 

it acknowledged that the lead paint cases were the subject of an 

action separate from the environmental coverage action, it 

stated: 

[P]laintiff seeks a declaratory judgment of defendant's 

liability for those three particular [lead paint] 

claims in the "environmental action" as well. Thus, 

the court must apply the same substantive law in both 

the "lead paint" and "environmental" actions, or else 

the parties rights and obligations under the policy as 

it applies to the "lead paint" claims would be 

interpreted according to two states' substantive laws. 

7/11/91 Op. at 8 n.3. 
22 

 The court also relied on the uniform contract approach 

articulated in Westinghouse Electric Corp. v. Liberty Mutual 

Insurance Co., 559 A.2d 435 (N.J. App. Div. 1989), to support its 

choice of New Jersey law for all the environmental and product 

liability claims notwithstanding the fact that only some of the 

waste sites and none of the lead paint actions were located in 

New Jersey. (7/11/91 Op. at 10). In reaffirming its 1991 choice 

of law decision, the district court applied the law of the case 

doctrine and rejected CU's argument that an intervening change in 

the law wrought by Gilbert Spruance required a different 

resolution. The court also cited its concerns about the manageability of the site-specific choice of law approach in refusing 

to apply Gilbert Spruance.

0

 In its initial (1991) decision, the district court 

acknowledged the presumption in contract actions in favor of the 

law of the place of contracting (here, New York). (7/11/91 Op. at 

5). Nevertheless, the court relied on the "strong public 

interest in insuring that environmental contamination within the 

state will be remedied," id. at 8, to find the "significant 

relationship" necessary to select New Jersey law instead. 

Indeed, the court conceded that the other considerations in the 

contractual "significant relationship" inquiry, such as the 

 

0Although the district court was aware of the site-specific test 

announced by Gilbert Spruance after its original choice of law 

decision in 1991, it declined to apply the test because its 

application in the environmental case would result in the choice 

of 34 different state laws, a result it regarded as so 

unmanageable that the New Jersey Supreme Court could not have 

intended it. 
23 

reasonable expectations of the parties and the need for certainty 

and legal uniformity, actually favored the choice of New York law 

as the place of contract and would have resulted in that choice 

were it not for the significant relationship supposedly 

established by the presence of some New Jersey waste sites. See

7/11/91 Op. at 10. 

 In sum, the choice of law analysis for the lead paint 

claim coverage dispute is separate and distinct under New Jersey 

law from that for the environmental claims, and yet the district 

court appears to have combined the claims for this purpose in 

both the original 1991 opinion and its May 26, 1994 opinion. See

7/11/91 Op. at 7-8 and 5/26/94 Op. at 10.0 This was error. 

 

0While the court seemed to accept the magistrate's conclusion 

that the law of the case doctrine obviated any need for the court 

to reconsider the original choice of law decision for the four 

new lead paint actions, see 4/26/94 Op. at 6, it conceded that 

Gilbert Spruance's rejection of the uniform contract approach 

"might require the court to re-examine its choice of law decision." Id. at 9. The court did re-examine its 1991 decision, see

Id. at 9, but abided by it both because of manageability concerns 

and because of the court's conviction that New Jersey, where a 

number of the environmental claims arose, had the "dominant 

significant relationship" to the transaction. Notwithstanding 

the fact that Gilbert Spruance pertained solely to environmental 

coverage actions, we agree that it precluded application of the 

law of the case doctrine here. Although federal courts always 

retain the discretion to reconsider issues already decided in the 

same proceeding, see Deisler v. McCormack Aggregates Co., 54 F.3d 

1074, 1086 n.20 (3d Cir. 1995); Charles A. Wright, Arthur R. 

Miller & Edward H. Cooper, Federal Practice and Procedure: 

Jurisdiction, §4478 at 789-90, courts will reconsider an issue 

when there has been an intervening change in the controlling law, 

when new evidence has become available, or when there is a need 

to correct a clear error or prevent manifest injustice. Wright, 

Miller & Kane, § 4478 at 790. We believe reconsideration was 

warranted here for two reasons. First, the district court's 

failure to perform a separate choice of law analysis for the 

environmental coverage action and for the lead paint coverage 

action constituted a clear error. Second, to the extent that the 
24 

III. Discussion

 CU argues that the district court compounded this error 

by considering the (social) policies implicated by the underlying 

actions, rather than limiting its focus to the policies of 

insurance law. We must address this contention before proceeding 

to the appropriate choice of law framework applicable to the lead 

paint coverage actions. 

 In coverage cases, New Jersey courts have elected to 

analyze not only the policies involved in interpreting insurance 

law but also those policies underlying their environmental and 

tort laws. See Diamond Shamrock Chemicals, 609 A.2d at 455 

("Since New Jersey has a paramount interest in the remediation of 

such waste sites, and in the fair compensation of its victims, 

this State's urgent concern for the health and safety of its 

citizens 'extends to assuring that casualty insurance companies 

fairly recognize the legal liabilities of their insureds.'") 

(citing Johnson Matthey Inc. v. Pennsylvania Mfrs. Ass'n Ins. 

Co., 593 A.2d 367, 370 (App. Div. 1991)). Therefore, a court 

would not err by considering the interests implicated by the 

underlying litigation in deciding the choice of law issue in an 

insurance coverage action (to the extent that the underlying 

litigation affects the interests of one of the states whose law 

arguably applies). These underlying policy interests are 

 

court conflated the environmental coverage action with this lead 

paint coverage action, the change announced by Gilbert Spruance -

- creating a unique analysis for environmental coverage cases -- 

constituted an intervening change in the controlling law. 
25 

especially important in environmental coverage cases. See supra

at 18. 

 But the analysis of the various states' policies and 

interests implicated in the environmental coverage litigation 

does not track the analysis of the interests implicated by the 

tort cases underlying this coverage dispute. Cf. Diamond 

Shamrock, 609 A.2d at 455, 465 (applying New Jersey law to dioxin 

environmental suits and New York law to Agent Orange claims). 

Unlike some of the underlying environmental claims which must be 

decided under New Jersey law, Pennsylvania or Louisiana law 

governed the four new (underlying) lead paint actions. See

Appellant's Br. at 17. Thus, although New Jersey may have an 

interest in applying its laws to coverage disputes involving 

actions whose underlying merits were adjudicated under New Jersey 

law (in order to assure that the state's tort policies are not 

frustrated by a lack of insurance coverage), that interest is 

simply inapposite to these new lead paint actions arising in 

Pennsylvania and Louisiana. There is no indication, moreover, 

that the district court applied New Jersey law to the coverage 

dispute in an effort to protect New Jersey's tort (as opposed to 

environmental) policies. 

 While CU's contention that the court should not have 

considered the policies implicated in the underlying litigation 

has no merit, the district court did, as we have stated, err by 

considering policies implicated in the related but separate 

environmental actions rather than those involved in the lead 

paint actions. See 5/26/94 Op. at 10 (reaffirming July 1991 
26 

decision and explaining, "[t]hat decision was based in part on 

the number of environmental claims in the companion action 

arising in New Jersey, and admittedly on the need for uniformity 

in the interpretation of the insurance contracts at issue in both 

suits."). Even before Westinghouse was overruled by Gilbert 

Spruance, the uniform contract approach should have been applied 

separately to aggregate the environmental claims, which turned on 

the interpretation of one clause in the insurance contract, and 

to the product liability claims, which involved a different 

clause of the policy and deserved, under the principles of 

Restatement § 145, a separate choice of law analysis. 

 The court found that New Jersey had "the dominant 

relationship to the parties and the underlying insurance transaction" even though New Jersey's only connection to the case is its 

incorporation of the defendant. To so find in spite of the facts 

that the harms occurred in Pennsylvania and Louisiana and that 

the insurance contracts were negotiated and executed in New York 

-- so that the parties must have reasonably expected, as even the 

district court recognized, New York law to apply -- manifests the 

court's conflation of the relevant interests in this case with 

those relevant in the environmental action. As we have 

discussed, even if the environmental coverage claims and the lead 

paint coverage claims were brought in a single action, § 145 

required the court to conduct a separate choice of law analysis 

for each of the two types of claims. 

 The choice of law for this non-environmental insurance 

coverage action is still governed by State Farm Mut. Auto Ins. 
27 

Co. v. Estate of Simmons, 417 A.2d 488 (N.J. 1980), and thus, 

unless a "dominant and significant relationship" mandates the 

application of another state's law, the law of the place of 

contract will apply. Given that the contract was negotiated, 

executed and performed in New York, the district court correctly 

concluded that New York was the place of contracting. We now 

examine the contacts and interests relevant under Restatement §§ 

6 and 188 to determine whether New Jersey had a "dominant and 

significant relationship" to the lead paint coverage action. See

Gilbert Spruance, 629 A.2d at 888; Simmons, 417 A.2d at 491-92.0

 Section 188 lists as the contacts to be considered in 

applying the interests analysis: (1) the place of contracting, 

(2) the place of negotiation of the contract, (3) the place of 

performance, (4) the location of the subject matter of the 

contract, and (5) the domicile, residence, nationality, place of 

incorporation, and place of business of the parties. Restatement 

Conflicts (Second) § 188(2). These contacts overwhelmingly favor 

New York in this case. As we stated earlier, NL retained a New 

York insurance broker to negotiate the policies; the policies 

were signed in New York by representatives from each parties' New 

York office; CU coded the NL policies and premiums as New York 

policies and premium taxes on these policies were paid in New 

York; NL's headquarters as well as its principal business 

operations were located in New York; and CU executed this 

 

0None of the parties argued that either Pennsylvania's or 

Louisiana's law should apply to this action. 
28 

transaction out of its New York office. Only NL's place of 

incorporation favored New Jersey law. 

 Even though the subject-matter-of-the-contract factor 

(liability for property damage and bodily injury) does not 

necessarily favor New York law, it certainly does not favor New 

Jersey law. Because these contacts so clearly favor the application of New York law, it should apply unless the interests 

described by § 6 of the Restatement, see supra at 11-12, 

establish a dominant and significant relationship with New 

Jersey. We take these factors up seriatim. 

 1. The Needs of the Interstate System 

 The Restatement explains that this factor is intended 

to "further harmonious relations between states and to facilitate 

commercial intercourse." Restatement Conflicts § 6 cmt. d. The 

consistency and predictability which emanate from a clear rule 

foster commerce and harmonious interstate relations by reducing 

the uncertainty associated with entering into commercial transactions. Relative to the multifactored interest analysis, the lex 

loci contractus rule typically better protects both the parties' 

reasonable expectations and the consistency and predictability of 

contractual adjudications. See Simmons, 417 A.2d at 496. As the 

§ 188 analysis demonstrates, this factor clearly favors New York 

law. Moreover, the district court acknowledged that the parties 

must have reasonably expected New York law to apply. Thus, both 

generally and under the specific facts of this case, the needs of 

the interstate system would be best served by the choice of New 

York law. 
29 

 2. Relevant Policies of Other Interested States 

 State statutes which require or prohibit particular 

clauses in insurance agreements evidence a state's policy in the 

insurance area. See Belle v. Merchants & Businessmen's Mutual 

Ins. Co., 575 A.2d 878, 881-82 (App. Div.), cert. denied, 585 

A.2d 395 (N.J. 1990). But states' interests in insurance policy 

interpretation are not limited to those explicitly articulated in 

these sorts of statutes. As we have explained, New Jersey courts 

seek to avoid the frustration of the interests and policies 

expressed in their substantive laws that could occur through 

narrow interpretations of the coverage available under the 

applicable insurance contracts. See Diamond Shamrock Chem. v. 

Aetna, 609 A.2d 440 (N.J. App. Div. 1992) ("Since New Jersey has 

a paramount interest in the remediation of such waste sites, and 

in the fair compensation of its victims, this State's urgent 

concern for the health and safety of its citizens 'extends to 

assuring that casualty insurance companies fairly recognize the 

legal liabilities of their insureds.'") (citing Johnson Matthey 

Inc. v. Pennsylvania Mfrs. Ass'n Ins. Co., 593 A.2d 367, 370 

(N.J. App. Div. 1991)). Thus, a state's interest in determining 

the scope of liability in the underlying lead paint claims does 

bear on the scope of coverage. 

 The lead paint claims whose coverage is at issue here 

will be decided under Pennsylvania and Louisiana law. New York 

pursues a policy of deterring the sort of conspiratorial activity 

alleged to have occurred in New York by assuring that the 

penalties imposed through tort awards actually impact on the 
30 

alleged perpetrators rather than on their insurance carriers. 

See Technicon Electronics Corp. v. American Home Assur. Co., 533 

N.Y.S.2d 91, 102 (App. Div. 1988), aff'd, 544 N.Y.S.2d 531 (1989) 

(noting New York's policy of "assur[ing] that corporate polluters 

bear the full burden of their own actions spoiling the environment" by giving pollution exclusion clauses broad effect). See

also National Starch & Chem. v. Great Am. Ins. Co., 743 F.Supp. 

318, 319 n. 1 (D.N.J. 1990) (observing that relative to New 

Jersey law, New York law was less favorable to insureds in 

disputes involving the pollution exclusion clauses of insurance 

contracts). Although the parties did not brief the nature of 

Louisiana's or Pennsylvania's tort policies, i.e., whether they 

favor compensation and deterrence over fostering a hospitable 

business environment, it is clear that New Jersey has no interest 

in interpreting the insurance contracts that could vindicate 

those other states' policies. In any event, it seems unlikely 

that Pennsylvania's or Louisiana's interest standing alone could 

overcome the very substantial contacts and interests of New York. 

 3. Relevant Policies of the Forum 

 For a state's policies to be relevant in a choice of 

law analysis, the law embodying the policy must relate to a 

contact. See Veazey v. Doremus, 510 A.2d 1187, 1189-90 (N.J. 

1986) ("If a state's contacts are not related to the policies 

underlying its law, then that state does not possess an interest 

in having its law apply."). The district court relied on the 

number of environmental claims arising in New Jersey for its 

conclusion that New Jersey had the dominant and significant 
31 

relationship necessary for the application of New Jersey law in 

this case. 5/26/94 Op. at 10. Two errors render this analysis 

flawed. First, this lead paint coverage case did not properly 

implicate any of New Jersey's environmental policies. Second, 

even if New Jersey's environmental policies were at all pertinent 

in these lead paint cases, they bear no relation to New Jersey's 

contacts. New Jersey's only connection to this litigation is 

that NL was incorporated and had some operations there. 

 While these contacts might justify consideration of New 

Jersey's policies in corporate governance or tax cases, they do 

not justify considering New Jersey's tort policies or the related 

insurance coverage policies. The district court did recognize 

New Jersey's interest to "see[] that harms caused by its 

corporations are properly redressed." See 5/26/94 Op. at 11. 

Cf. Restatement Conflicts of Laws (Second) § 145 cmt. c ("If the 

primary purpose of the tort rule involved is to deter or punish 

misconduct, . . . the state where the conduct took place may be 

the state of dominant interest . . . ."). However, given that 

the activities complained of here (the alleged conspiracy of NL 

and the Lead Industries Association to conceal the dangers of 

lead paint) primarily occurred in New York, New Jersey's 

disciplinary interests are attenuated. Moreover, expressions of 

New Jersey's policies seem to reflect a greater emphasis on 

compensation, which would favor the law of the state where the 

injury occurred, than on deterrence, which would favor the law of 

the state where the conduct occurred. See Diamond Shamrock, 609 

A.2d at 455 (emphasizing New Jersey's "paramount interest" in 
32 

remediation and compensation); Leksi, 736 F.Supp. at 1334-36; 

National Starch, 743 F.Supp. at 326. Thus, we find that New 

Jersey's interests were either inapposite or quite small compared 

to New York's. 

 4. Protection of Justified Expectations 

 Like the first factor, this factor seeks to promote 

commercial transactions. By enforcing the parties' expectations, 

courts interpreting contracts assure the consistency and predictability necessary to a healthy business environment. Indeed, for 

these very reasons, traditional contract principles direct that 

the parties' objectively reasonable expectations govern the 

choice of law decision. See National Starch and Chem. Co. v. 

Great Am. Ins. Cos., 743 F. Supp. 318, 324 (D.N.J. 1990) ("[T]he 

reasonable expectations of the parties are controlling[, and] 

State Farm [v. Simmons] must be applied with a view toward 

fulfillment of the parties' objectively reasonable 

expectations.").0 We agree with the district court that the 

parties' objectively reasonable expectations were that New York 

law would govern the interpretation of these contracts. See

7/11/91 Op. at 10 ("Because all parties to the contract knew at 

the time of the signing the general rule that the law of the 

 

0Although the National Starch court, failing to anticipate 

Gilbert Spruance, applied the uniform contract approach to choose 

the law of the place of contract over the laws of the states 

where sites were located, its statement of the principle quoted 

in the main text remains valid. The National Starch court cited 

general contract cases from New Jersey to support the proposition 

that reasonable expectations should govern contract issues, 

including the choice of applicable law. See Meier v. New Jersey 

Life Ins. Co., 503 A.2d 862, 869-70 (N.J. 1986) (using reasonable 

expectations to determine scope and terms of policy surrender). 
33 

state in which the contract was formed governed the contract, it 

is reasonable to assume that the parties reasonably expected New 

York law to apply.") 

 Nevertheless, the district court did not accord this 

consideration much weight in its analysis, principally because it 

was under the erroneous impression that New Jersey's strong 

interest in remediating environmental contamination within the 

state gave New Jersey, where many of the waste sites were 

located, a dominant interest in applying its laws to any and all 

coverage disputes.0 As we have explained, however, Gilbert 

Spruance only increased the importance of the interest of the 

waste-site state in environmental coverage disputes, not in 

product liability suits. Consequently, the objectively reasonable 

expectations of the parties should have been accorded the 

considerable weight that they ordinarily receive, which favors 

New York law in this case. 

 5. The Basic Policies Underlying the Relevant 

 Fields of Law (Insurance and Tort Law) 

 The differing degrees of interest which competing 

states have in vindicating various insurance and tort law 

policies also affect the choice of law. Insurance law policy 

deals primarily with the proper standards and procedures for the 

 

0The 7/11/91 district court opinion predated Gilbert Spruance and 

thus did not rely on it. The district court's May 26, 1994 

opinion disposing of the four new lead paint claims, see supra p. 

8, does cite Gilbert Spruance in order to affirm its emphasis on 

the location of the waste sites in the companion environmental 

action, which was the basis for its decision to apply New Jersey 

law to the lead paint claims. As we have explained, this was 

incorrect. 
34 

fair interpretation of the insurance contract, accounting for the 

interests of the insurer, the insured, and the public. Given the 

overwhelming contacts of the insurance transaction to New York, 

we are hard pressed to find an interest New Jersey (or any other 

state) can assert in using its law to determine the balance of 

relevant insurance policies. 

 Tort law policies, on the other hand, influence the 

standards and procedures used to determine liability, fix 

compensation, and deter tortious conduct. The sole interest New 

Jersey could have in applying its tort law under the facts of the 

lead paint cases (where the injury occurred elsewhere) would be 

to discipline a company incorporated under its laws. As we have 

noted, however, New Jersey seems to be more concerned with 

assuring adequate funds for compensation and remediation than it 

does with imposing penalties. See supra at 31-32. Because NL's 

principal place of business and, perhaps more importantly, the 

locus of the alleged tortious conduct were not in New Jersey, see

supra at 4-5, New Jersey's interest in disciplining the company 

is weak. It is New York, as the locus of the alleged 

conspiratorial acts and as NL's principal place of business, 

which has the interest in fashioning the penalty imposed by the 

tort system. 

 To the extent that the harms occurred and the injured 

parties resided in Pennsylvania and Louisiana, those states may 

have an interest in assuring that the tortfeasor redresses the 

property damage and personal injury. The relative strength of 

such an interest depends on the balance of policies -- such as 
35 

compensating victims or deterring culpable conduct, see

Restatement Conflicts (Second) § 145 cmt. c -- struck by the 

relevant tort laws. In any case, both Pennsylvania and Louisiana 

have some interest in seeing that the harms occurring within 

their borders are redressed. But New Jersey does not have a 

cognizable interest in applying its tort laws to these lead paint 

coverage disputes. 

 6. Certainty, Predictability, and Uniformity of Result 

 This factor closely tracks the concerns embodied in the 

first (needs of the interstate system) and fourth (justified 

expectations of the parties) factors in its concern about the 

effects of more flexible, and thus less predictable, legal rules 

on commercial activity. As we have explained, New York as the 

place of contracting and as the locus of the allegedly unlawful 

activity would presumably apply its law to this case. The 

district court correctly recognized that these parties must have 

reasonably expected New York law to apply, and it is likely that 

repeat players in this market, whose business the resolution of 

this case will affect, would also expect New York law to apply 

under these circumstances. While some might have entertained the 

possibility that the insurance coverage action might be governed 

by the law of the states where the harms ultimately occurred 

(here, Pennsylvania and Louisiana), it is unlikely that anyone 

expected that the law of a state whose connections and interests 

are as tangential as New Jersey's are in this case would apply. 

Indeed, to establish a standard where such comparatively minor 

interests could govern would throw settled expectations into 
36 

disarray; parties would have no way of predicting which law would 

apply to their contracts. We therefore conclude that this factor 

strongly favors the choice of New York law. 

 7. Ease of Determination and Application 

 The Restatement explains that choice-of-law rules 

"should be simple and easy to apply." See Restatement Conflicts 

(Second) § 6, cmt. j. Presuming that the law of the place of 

contracting applies to non-environmental insurance coverage 

disputes provides a simple and clear cut rule for courts to apply 

ex post. Such a rule also provides a stable and predictable 

environment for contracting parties ex ante. This factor, 

therefore, also favors New York law, although the Restatement 

does not weigh this consideration too heavily. Id. 

 8. Summary 

 After performing this separate choice-of-law analysis 

for the lead paint coverage disputes, we conclude that the 

interests implicated in this lead paint coverage action do not 

relate to the contacts NL had with New Jersey. At best, New 

Jersey had an "interest in seeing that harms caused by its 

corporations are properly redressed." 5/26/94 Op. at 11. But 

given that NL's principal place of business was in New York and 

that New Jersey's laws do not apply to the underlying products 

liability actions, this interest is especially attenuated here. 

In contrast, the connections of NL and of the insurance 

transaction to New York are both significant and pertinent, 

giving rise to the substantial interest New York has in seeing 
37 

its law apply: the insurance contract was negotiated and 

performed in New York; the policies were coded as New York 

policies; New York taxes were paid on the policies; both parties 

maintained their principal places of business there; and the 

conspiratorial acts underlying these lead paint claims are 

alleged to have occurred there. Under Simmons, therefore, New 

York law should apply. 

IV. Conclusion

 We will therefore reverse the judgment of the district 

court and remand for further proceedings in which the court 

should apply New York law to the four new lead paint actions. 

Because the issues of CU's duty to defend and its rights to 

contribution and allocation were improperly decided under New 

Jersey law, the district court should make the New York law 

determination in the first instance on remand. We do not reach 

the other claims.0

 

0Although CU's duty to indemnify NL for these lead paint claims 

was separately adjudicated in the environmental action, which is 

not before us, we believe that the foregoing analysis of Gilbert 

Spruance may be pertinent to the indemnity issue as well.