Opinion ID: 2062885
Heading Depth: 2
Heading Rank: 1

Heading: Environmental Pollution and the Definition of Occurrence.

Text: Irrespective of the effect of the As Damages language and the pollution-exclusion clause on Morton's claims for indemnification against its carriers, the ultimate issue remaining to be addressed is whether the events resulting in the property damage ordered to be remediated in the Ventron litigation constitute an accident or an occurrence as defined in the various CGL policies. As noted, supra at 10-11, 629 A. 2d at 836, the primary CGL policy in effect until October 1964 provided coverage for all sums which the Insured shall become legally obligated to pay    for damages because of injury to or destruction of property    caused by accident, the term accident being undefined. Effective in October 1964, the policy was amended by substituting resulting from an occurrence for the words caused by accident, and defining occurrence as follows: The word occurrence as used in this endorsement means an unexpected event or happening which results in injury to or destruction of tangible property during the policy period, or a continuous or repeated exposure to conditions which result in injury to or destruction of tangible property during the policy period provided the insured did not intend or anticipate that injury to or destruction of property would result   . Effective October 1966, and continuing throughout the period germane to this litigation, the primary CGL policies covering Morton's predecessors defined occurrence as follows: Occurrence means 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. In reviewing the trial court's grant of summary judgment to the insurers on the claims for indemnification, the Appellate Division separately addressed the pre-1966 policy that provided coverage for damages caused by accident, and the post-1966 policies providing coverage for damages resulting from an occurrence. With respect to the accident-based policy, the Appellate Division correctly acknowledged that the trial court had focused improperly on the manner in which the injury had been caused and had erroneously concluded that the policy did not provide coverage for the unexpected result of a deliberate act. 266 N.J. Super. at 335, 629 A. 2d at 914. Nevertheless, referring to the settled rule that a volitional act could qualify as an accident if the insured did not intend to cause harm or was not substantially certain that harm would occur, see Broadwell, supra, 218 N.J. Super. at 533, 528 A. 2d 76, the Appellate Division concluded that the trial court's error had been harmless because the evidence was overwhelming that plaintiff's predecessors must have been substantially certain that such harm would occur   . Id. 266 N.J. Super. at 336, 629 A. 2d at 914. In addressing the occurrence-based policies, the Appellate Division, without the benefit of this Court's decisions in Voorhees v. Preferred Mutual Insurance Co., 128 N.J. 165, 607 A. 2d 1255 (1992), and SL Industries, Inc. v. American Motorists Insurance Co., 128 N.J. 188, 607 A. 2d 1266 (1992), observed that the definition of occurrence was analogous to coverage provisions in other cases in which courts have determined that the character of the act can be the basis of an inference that the insured intended the injury. 266 N.J. Super. at 330, 629 A. 2d at 911. Relying primarily on Atlantic Employers v. Tots & Toddlers, 239 N.J. Super. 276, 282-83, 571 A. 2d 300 (App.Div. 1990), certif. denied, 122 N.J. 147, 584 A. 2d 218 (1990), a child-sex-abuse case, the Appellate Division, referring to Morton's predecessors, concluded that [t]he intentional character of the act is the basis for the inference that the insured either intended or was manifestly indifferent to the prospect of injury. 266 N.J. Super. at 330, 629 A. 2d at 911. In reaching that conclusion, however, the Appellate Division noted that the substantial environmental pollution over a long period together with the knowledge by Morton's predecessors that the substance being discharged    was toxic and harmful rendered unacceptable a conclusion that no harm had been expected. Id. at 332, 629 A. 2d at 913. Morton asserts that the Appellate Division's reliance on Atlantic Employers, supra, improperly equated the discharge of pollutants with child molestation as acts that could be deemed intentionally injurious as a matter of law. Morton contends that the Appellate Division improperly invoked an objective standard for determining whether harm had been intended or expected under the occurrence-based policies, ignoring the long-standing principle that coverage exists for the unintended results of intentional acts. We recently had occasion to address issues analogous to those raised by Morton, although in a different context, in Voorhees and SL Industries. In Voorhees, supra, 128 N.J. 165, 607 A. 2d 1255, the insured under a homeowner's policy was sued on the basis of statements she had made at a public meeting questioning the competency of her child's teacher, the plaintiff alleging that she had sustained various injuries including extreme emotional distress. The homeowner's policy provided coverage for liability arising from bodily injury caused by an occurrence, defined as an accident, but excluded coverage for liability caused intentionally. Id. at 171, 607 A. 2d 1255. The carrier disclaimed coverage, asserting that the claims were based on the insured's intentional act and that the complaint sought recovery for personal rather than bodily injury. After the underlying case was settled, Voorhees sued her carrier for damages based on its disclaimer of coverage. A divided panel of the Appellate Division, reversing the trial court, determined that the carrier had a duty to defend irrespective of whether the claim was based on an occurrence, construing the complaint as alleging causes of action that would be covered under the term bodily injury. 246 N.J. Super. 564, 570-73, 588 A. 2d 417. On appeal, we noted that the duty-to-defend clause was not triggered absent a potentially-coverable occurrence, 128 N.J. at 180, 607 A. 2d 1255, observing that the insurer had limited its coverage to occurrences that were accidental in order to avoid responsibility for covering insureds whose conduct was deliberately wrongful. Ibid. Writing for the Court, Justice Garibaldi adverted to the careful balance that we had struck between the public policy that denies insurance indemnification for the civil consequences of wrong-doing, and the policy that favors compensation of victims through insurance proceeds to the extent that that compensation will not condone and encourage intentionally-wrongful conduct. Id. at 181, 607 A. 2d 1255. The competing considerations were set forth in Burd v. Sussex Mutual Insurance Co., 56 N.J. 383, 267 A. 2d 7 (1970): The exclusion of intentional injury from coverage stems from a fear that an individual might be encouraged to inflict injury intentionally if he was assured against the dollar consequences. Pulling the other way is the public interest that the victim be compensated, and the victim's rights being derivative from the insured's, the victim is aided by the narrowest view of the policy exclusion consistent with the purpose of not encouraging an intentional attack. And the insured, in his own right, is also entitled to the maximum protection consistent with the public purpose the exclusion is intended to serve. [ Id. at 398-99, 267 A. 2d 7 (citations omitted).] We held in Voorhees that the accidental nature of an occurrence is determined by analyzing whether the alleged wrongdoer intended or expected to cause an injury, 128 N.J. at 183, 607 A. 2d 1255, observing that an injury would be regarded as having been caused by an occurrence if the injury was unintended and unexpected, whether or not the act that caused the injury was intentional. That interpretation prevents those who intentionally cause harm from unjustly benefitting from insurance coverage while providing injured victims with the greatest chance of compensation consistent with the need to deter wrong-doing. It also accords with an insured's objectively-reasonable expectation of coverage for unintentionally-caused harm. [ Ibid. ] We also held in Voorhees that [a]bsent exceptional circumstances that objectively establish the insured's intent to injure, we will look to the insured's subjective intent to determine intent to injure. Id. at 185, 607 A. 2d 1255. We also noted that in cases involving particularly reprehensible conduct, the intent to injure can be presumed from the act without an inquiry into the actor's subjective intent to injure. That objective approach focuses on the likelihood that an injury will result from an actor's behavior rather than on the wrongdoer's subjective state of mind. Id. at 184, 607 A. 2d 1255 (citing Atlantic Employers, supra, 239 N.J. Super. 276, 571 A. 2d 300, the child-sex-abuse case, as example of factual setting in which intent to injure can be inferred on basis of objective conduct). Nevertheless, the Court concluded that the insured's statements, although intentional, had not been made under circumstances suggesting that injury to the teacher had been intended or expected, and also noting that the complaint's inclusion of an allegation of negligent infliction of emotional distress presumes the absence of an intent to injure. Id. at 185, 607 A. 2d 1255. In SL Industries, supra, we confronted the related issue whether a general intent to cause injury that is inherent in a valid claim based on intentional fraud necessarily incorporates the intent to cause the specific resulting injury, emotional distress, or whether proof of a subjective intent to cause the specific injury is required. 128 N.J. at 209-13, 607 A. 2d 1266. The suit underlying the coverage action in SL Industries included allegations by the insured's employee that he had been the victim of willful age discrimination in violation of the Age Discrimination in Employment Act, 29 U.S.C.A. §§ 621 to 634, as well as allegations of common-law fraud to the effect that he had been induced to retire by the false statement that his position was to be eliminated. After settling the underlying suit, the insured instituted a coverage action against its carrier, which the Law Division dismissed on summary judgment. Reversing, the Appellate Division held that although coverage was not provided for intended harm, coverage would be provided for the unforeseen results of intentional conduct, remanding the case to the Law Division to determine whether the employee's emotional distress had been intended or expected. 248 N.J. Super. 458, 465-67, 591 A. 2d 677. On appeal, this Court also addressed the issue whether emotional distress caused by a fraudulent misrepresentation constituted intentional harm, noting preliminarily that the intent element in fraud, consisting of the intent to induce reliance, constitutes a subjective intent to injure. 128 N.J. at 209, 607 A. 2d 1266. We then framed the issue before us as whether any intent to injure will render the resulting injury intentional, whether the wrongdoer must intend the specific injury that results, or whether there is some middle ground between the two approaches. Ibid. After evaluating alternative theories, we endorsed the view expressed in Prudential Property & Casualty Insurance Co. v. Karlinski, 251 N.J. Super. 457, 464, 598 A. 2d 918 (App.Div. 1991), which we summarized as follows: Assuming the wrongdoer subjectively intends or expects to cause some sort of injury, that intent will generally preclude coverage. If there is evidence that the extent of the injuries was improbable, however, then the court must inquire as to whether the insured subjectively intended or expected to cause that injury. Lacking that intent, the injury was accidental and coverage will be provided. [128 N.J. at 212, 607 A. 2d 1266.] Accordingly, we affirmed that aspect of the Appellate Division's judgment remanding the case to the Law Division to determine whether the employee's emotional distress had been a probable outcome of the insured's general intent to injure and, if not, whether the insured subjectively had intended to cause the employee's actual injuries. Id. at 212-13, 607 A. 2d 1266. In applying our holding in Voorhees to claims seeking coverage for property-damage caused by environmental pollution under occurrence-based CGL policies, we acknowledge the impracticality of adherence to the general rule that we will look to the insured's subjective intent to determine intent to injure. Voorhees, supra, 128 N.J. at 185, 607 A. 2d 1255. Although insureds may concede that pollutants  even known pollutants  had been intentionally discharged, those insureds are virtually certain to insist that the resultant harm was unintended and unexpected. Absent smoking gun testimony from a disgruntled employee, proof of subjective intent to cause environmental harm will rarely be available in coverage litigation. We noted in Voorhees that an alternative to proof of subjective intent to injure existed in those cases in which the insured's actions are particularly reprehensible, [so that] the intent to injure can be presumed from the act without an inquiry into the actor's subjective intent to injure. 128 N.J. at 184, 607 A. 2d 1255. We cited Atlantic Employers, supra, 239 N.J. Super. 276, 571 A. 2d 300, a case in which the insured was sued for sexual abuse of children in a day-care center, as illustrative of conduct that was so inherently injurious as to warrant the conclusion that intent to injure could be presumed. Id. at 185, 607 A. 2d 1255. We are unpersuaded that environmental-pollution litigation should generally be included in that category of cases, typified by Atlantic Employers, in which reprehensible conduct justifies a presumption that injury was intended. As the numerous cases involving interpretation of the pollution-exclusion clause demonstrate, see supra at 43-69, 629 A. 2d at 855-870, insureds held responsible for remediation of environmental pollution vary significantly in their degree of culpability for the harm caused by pollutant discharges. A general rule in environmental-pollution coverage litigation that would permit intent to injure to be presumed simply on the basis of a knowing discharge of pollutants would be unjustified. Instead, we hold that in environmental-coverage litigation a case-by-case analysis is required in order to determine whether, in the context of all the available evidence, exceptional circumstances [exist] that objectively establish the insured's intent to injure. Voorhees, supra, 128 N.J. at 185, 607 A. 2d 1255. Those circumstances include the duration of the discharges, whether the discharges occurred intentionally, negligently, or innocently, the quality of the insured's knowledge concerning the harmful propensities of the pollutants, whether regulatory authorities attempted to discourage or prevent the insured's conduct, and the existence of subjective knowledge concerning the possibility or likelihood of harm. Notwithstanding the Appellate Division's reliance on Atlantic Employers to support its holding, 266 N.J. Super. at 324-325, 330, 333, 629 A. 2d at 908-909, 911, 913, we are satisfied that the Appellate Division's conclusion that environmental injury had been intended or expected rested essentially on its evaluation of the record before the trial court, and not on the assumption that environmental-pollution cases involving intentional discharges of pollutants inherently warrant a presumption that any resultant damage was intended.