Title: American Employers Insurance Company v. Elf Atochem North America, Inc.
Citation: N/A
Docket Number: a-190-97
State: new-jersey
Issuer: new-jersey Supreme Court
Date: March 17, 1999

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). O'HERN, J., writing for a unanimous Court. In this appeal, the Court considers whether the New Jersey Property-Liability Insurance Guaranty Association (NJPLIGA) should indemnify a policyholder of an insolvent insurance carrier for environmental cleanup costs incurred at a facility of the policyholder in Bryan, Texas. American Employers' Insurance Company and Commercial Union Insurance Company (referred to collectively as Commercial Union) filed an insurance declaratory judgment action against Elf Atochem North America, Inc. (Elf), seeking to disclaim coverage for environmental damage claims relating to pollution at approximately eighty Elf sites throughout the United States. One of those sites was in Bryan, Texas. In response, Elf filed cross-claims and a third-party complaint, one of which was against NJPLIGA. After some ancillary proceedings in respect of the Texas site, NJPLIGA sought a partial summary judgment to dismiss the claims arising out of that site, asserting that they were not covered clams because Elf is not a resident of New Jersey nor is the site located in New Jersey. The trial court denied NJPLIGA's motion for summary judgment, concluding that Elf was a resident of several states and in this case was clearly a resident of the State of New Jersey for purposes of NJPLIGA. The Appellate Division denied NJPLIGA's motion for leave to appeal. Because the matter involves issues of important public policy and the costs to NJPLIGA of defending the Bryan, Texas suit are substantial, the Supreme Court granted leave to appeal. HELD: Because Elf's principal place of business is not within the State of New Jersey, it is not a resident of New Jersey for the purposes of the NJPLIGA Act and its claim, therefore, is not a covered claim under that Act. 1. Although NJPLIGA assumes the contractual obligations of insolvent insurance companies that were licensed to transact business within this State at the time the policy was issued or when the insured event took place, N.J.S.A. 17: 30A-5d limits covered claims to those in which the claimant or insured is a resident of this State at the time of the insured event or to those where the property from which the claim arises is permanently located in this State. (pp. 8-9) 2. While the Post-Assessment Property and Liability Insurance Guaranty Model Act (Model Act) adopted an amendment that defines the residence of a corporate policyholder as the state in which its principal place of business is located at the time of the insured event, New Jersey has not adopted that amendment. Thus corporations may still be regarded as a resident of several states. (pp. 9-10) 3. Because the NJPLIGA Act is patterned after but not identical to the Model Act, an examination of the Model Act does not resolve whether a corporation is a resident for NJPLIGA purposes. (pp. 10-11) 4. Whether a corporation that does no more than transact business in New Jersey should be considered a resident for purposes of protection under NJPLIGA for a claim arising elsewhere than in New Jersey concerning a site not located in New Jersey is a question of legislative intent. (pp. 13-14) 5. Considering the core purposes of the Act, a business entity should be considered a resident of New Jersey for the purposes of NJPLIGA when its principal place of business is within the State. (p. 14) 6. In the context of determining residence for the purposes of coverage by an insurance guaranty association, when the site of the risk is not located within a state, then the claimant's relationships with the state from which guaranty is sought should be considered. (p. 15) 7. Adoption of the principal place of business rule to determine residence for NJPLIGA purposes, which is consistent with the Guiding Principles for Settling Disputes Between and Among Property and Casualty Insurance Guaranty Associations as to Responsibility for Claims ( Guiding Principles ), will simplify the process of decision and will expedite the processing of claims fairly and efficiently. (pp. 15-18) 8. Although the proper analysis of residency involves an assessment of various factors, Elf's business presence alone is insufficient to establish residency for the purpose of qualifying for coverage under NJPLIGA. (p. 18) 9. It is unlikely that it was the intent of the Legislature to require New Jersey insurance premium payers to pay for the clean up of sites in Texas for a corporation whose principal place of business is in Pennsylvania. (pp. 19-21) 10. Should individual insurance guaranty associations continue to argue that each is the creature of its own state legislature and therefore cannot participate in a uniform nationwide system, then the need for a federal insurance guaranty association would seem apparent. (pp. 25-26) Judgment of the trial court denying NJPLIGA's motion for summary judgment as to the Bryan, Texas claims is REVERSED, and the trial court is directed to enter judgment in favor of NJPLIGA as to those claims. CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, STEIN, and COLEMAN join in JUSTICE O'HERN's opinion. SUPREME COURT OF NEW JERSEY A- 190 September Term 1997 AMERICAN EMPLOYERS' INSURANCE COMPANY and COMMERCIAL UNION INSURANCE COMPANY (as successor to certain obligations of EMPLOYERS' SURPLUS LINE INSURANCE COMPANY and EMPLOYERS' LIABILITY ASSURANCE CORPORATION, LTD), Plaintiffs-Respondents, v. ELF ATOCHEM NORTH AMERICA, INC., Defendant-Respondent, and PENNWALT CORPORATION and its successors and assigns, A.C.E. INSURANCE COMPANY (BERMUDA) LTD., THE AETNA CASUALTY AND SURETY COMPANY, ALLIANZ UNDERWRITERS INSURANCE COMPANY, ALLSTATE INSURANCE COMPANY, as successor to NORTHBROOK EXCESS AND SURPLUS INSURANCE COMPANY, formerly NORTHBROOK INSURANCE COMPANY, AMERICAN HOME ASSURANCE COMPANY, AMERICAN RE-INSURANCE COMPANY, ATLANTA INTERNATIONAL INSURANCE COMPANY, BIRMINGHAM FIRE INSURANCE COMPANY OF PENNSYLVANIA, CALIFORNIA UNION INSURANCE COMPANY, CENTENNIAL INSURANCE COMPANY, THE CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA, CHICAGO INSURANCE COMPANY, CITIZENS CASUALTY COMPANY OF NEW YORK, CONTINENTAL CASUALTY COMPANY, THE CONTINENTAL INSURANCE COMPANY, EMPLOYERS INSURANCE OF WAUSAU, A Mutual Company, FEDERAL INSURANCE COMPANY, FIREMAN'S FUND INSURANCE COMPANY, FIRST STATE INSURANCE COMPANY, GIBRALTAR CASUALTY COMPANY, GRANITE STATE INSURANCE COMPANY, GREAT AMERICAN INSURANCE COMPANY, THE HANOVER INSURANCE COMPANY, THE HOME INSURANCE COMPANY, ILLINOIS INSURANCE EXCHANGE, INSURANCE COMPANY OF NORTH AMERICA, INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, INTERNATIONAL INSURANCE COMPANY, INTERNATIONAL SURPLUS LINES INSURANCE COMPANY, CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, LONDON MARKET INSURANCE COMPANIES, LEXINGTON INSURANCE COMPANY, MUTUAL MARINE INSURANCE COMPANY, NATIONAL CASUALTY COMPANY, NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, NEW ENGLAND INSURANCE COMPANY, NORTH RIVER INSURANCE COMPANY, NORTH STAR REINSURANCE CORPORATION, OIL CASUALTY INSURANCE, LTD., OLD REPUBLIC INSURANCE COMPANY, PACIFIC EMPLOYERS INSURANCE COMPANY, PENNSYLVANIA PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION, PURITAN EXCESS AND SURPLUS LINES INSURANCE COMPANY, ROYAL INDEMNITY COMPANY, SAFETY NATIONAL CASUALTY CORPORATION, ST. PAUL FIRE AND MARINE INSURANCE CO., ST. PAUL SURPLUS LINES INSURANCE CO., TALEGEN HOLDINGS INC. (Formerly Crum and Forster, Inc.), THE TRAVELERS INDEMNITY COMPANY, UNAT (a member of American International Group), WINTERTHUR SWISS GROUP, X.L. INSURANCE COMPANY, LTD. (NBA EXCESS AND SURPLUS LINES BERMUDA, LTD.) THE YASUDA FIRE &amp; MARINE INSURANCE COMPANY OF AMERICA, ZURICH INSURANCE COMPANY, and JOHN DOES ONE THROUGH TWO HUNDRED, Defendants, THE NEW JERSEY PROPERTY-LIABILITY INSURANCE GUARANTY ASSOCIATION, Defendant-Appellant, and ELF ATOCHEM NORTH AMERICA, INC. and PENNWALT CORPORATION, Third-Party Plaintiffs, v. AIU INSURANCE COMPANY; AMERICAN RE-INSURANCE COMPANY; BIRMINGHAM FIRE INSURANCE COMPANY OF PA; CALIFORNIA UNION INSURANCE COMPANY (Succeeded by CIGNA Specialty Insurance Co.); CENTENNIAL INSURANCE COMPANY; CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA; CHICAGO INSURANCE COMPANY; THE CONTINENTAL CORPORATION (as Successor-in-Interest to HARBOR INSURANCE COMPANY); CONTINENTAL CASUALTY CO.; FEDERAL INSURANCE COMPANY; GIBRALTAR CASUALTY COMPANY; GREAT AMERICAN INSURANCE COMPANY; THE HANOVER INSURANCE COMPANY; THE HOME INSURANCE COMPANY; INSURANCE COMPANY OF NORTH AMERICA; INTERNATIONAL INSURANCE COMPANY; LIBERTY MUTUAL INSURANCE COMPANY; NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA; NEW ENGLAND INSURANCE COMPANY; NORTH BROOK INSURANCE COMPANY (Succeeded by Allstate Insurance Company); OLD REPUBLIC INSURANCE COMPANY; PACIFIC EMPLOYERS INSURANCE COMPANY; PURITAN EXCESS AND SURPLUS LINES INSURANCE COMPANY (as Successor-in-Interest to PURITAN INSURANCE COMPANY, formerly THE MANHATTAN FIRE AND MARINE INSURANCE COMPANY); ROYAL INDEMNITY COMPANY; SAFETY Third-Party Defendants. Argued December 1, 1998 -- Decided March 17, 1999 On appeal from the Superior Court, Law Division, Union County. Hugh P. Francis argued the cause for appellant (Francis &amp; O'Farrell, attorneys; Mr. Francis and Peter A. Olsen, on the brief). James W. Christie, III, argued the cause for respondents American Employers' Insurance Company and Commercial Union Insurance Company (Christie, Pabarue, Mortensen and Young, attorneys; Marybeth Smith Werb, on the brief). Paul E. Breene argued the cause for respondent Elf Atochem North America, Inc. (Anderson Kill &amp; Olick, attorneys; Mr. Breene and Ian R. Scheinmann, on the briefs). Michael E. Goldman, Deputy Attorney General, argued the cause for amicus curiae New Jersey Department of Banking and Insurance (Peter Verniero, Attorney General of New Jersey, attorney; Joseph L. Yannotti, Assistant Attorney General, of counsel; Mitchell A. Newmark, Deputy Attorney General, on the brief). Richard R. Spencer, Jr., submitted a brief on behalf of amicus curiae National Conference of Insurance Guaranty Funds (Bressler, Amery &amp; Ross, attorneys; Mr. Spencer and Jennifer E. Birmingham, on the brief). The opinion of the Court was delivered by O'HERN, J. "In the arena of environmental insurance law, it sometimes appears that just as soon as one issue of importance is resolved, like Hydra, the many-headed serpent in Greek mythology, at least two new issues arise to replace it." General Accident Ins. Co. of America v. Department of Envtl. Protection, 143 N.J. 462, 463-64 (1996) (quoting Jeffrey L. Fillerup and Dominic S. Nesbitt, The Duty to Defend: Post-Montrose Issues, 718 PLI/Comm. 49 (PLI Commercial Law and Practice Course Handbook Series No. 4477, May-June 1995)). One such new issue that has arisen concerns the responsibility of a liability insurance guaranty association to stand in the shoes of an insolvent insurance company to provide indemnity for environmental cleanup costs incurred by the policyholder. The specific question is whether the New Jersey Property-Liability Insurance Guaranty Association (NJPLIGA) should indemnify a policyholder of an insolvent insurance carrier for environmental cleanup costs incurred at a facility of the policyholder in Bryan, Texas. The enabling legislation requires NJPLIGA to stand in the shoes of its insolvent member insurance companies only in proceedings involving "covered claims." N.J.S.A. 17:30A-8a(2). Covered claims include those in which "(1) the claimant or insured is a resident of this State at the time of the insured event; or (2) the property from which the claim arises is permanently located in this State." N.J.S.A. 17:30A-5d. Thus the determination of whether NJPLIGA is obliged to provide coverage for the policyholder's claims with respect to the Bryan, Texas facility rests on whether the policyholder was a resident of New Jersey at the time of the insured event. Based on our review of New Jersey law and consideration of the purposes and objectives of NJPLIGA, we conclude that the policyholder is not a resident of New Jersey for the purposes of the NJPLIGA Act and that the claim is not a "covered claim" under the statute. NO. A-190 AMERICAN EMPLOYERS' INSURANCE COMPANY, et al., Plaintiffs-Respondents, v. ELF ATOCHEM NORTH AMERICA, INC., Defendant-Respondent, and PENNWALT CORPORATION, et al., Defendants, and THE NEW JERSEY PROPERTY-LIABILITY INSURANCE GUARANTY ASSOCIATION, Defendant-Appellant, and ELF ATOCHEM NORTH AMERICA, INC., et al., Third-Party Plaintiffs, v. AIU INSURANCE COMPANY, et al., Third-Party Defendants. DECIDED shall seek recovery first from the association of the place of residence of the insured at the time of the insured event except that if it is a first party claim for damage to property with a permanent location, he shall seek recovery first from the association of the location of the property. . . . [I]f recovery is denied or deferred by the association, a person may proceed to recover from any other insurance guaranty association or its equivalent from which recovery may be legally sought. [N.J.S.A. 17:30A-12.] The residence of an insured entity which is not a natural person shall be determined by considering which state has the most significant contacts with the insured. In making this determination, the following criteria should be considered: (I) state where executive offices or corporate headquarters are located; (ii) location of the operation where the insured event occurred; (iii) state of incorporation; (iv) state where the applicable insurance policy was issued or delivered; and (v) state that is considered the insured entity's primary domicile for state income tax purposes. Other factors may be considered if it is agreed those factors are relevant to the inquiry. [ 1 N.A.I.C. Proc. 458 (1986).]