Opinion ID: 1929606
Heading Depth: 2
Heading Rank: 1

Heading: What laws should govern interpretation of the pollution-exclusion clause?

Text: The analysis is that set forth in Pfizer concerning factor one, the competing interests of the states. Pfizer, supra, 154 N.J. at 198-99, 712 A. 2d 634. We must consider the laws of three states, New Jersey, New York or that of the waste site. The interests identified by both the Appellate Division and Supreme Court in Spruance, to secure financial resources, to remediate New Jersey toxic waste sites, and to compensate the victims of pollution in New Jersey, are not implicated. See Spruance, supra, 134 N.J. at 100-01, 629 A. 2d 885 (citing Gilbert Spruance Co. v. Pennsylvania Mfrs.' Ass'n Ins. Co., 254 N.J.Super. 43, 47-48, 603 A. 2d 61 (App.Div. 1992)). The nine sites are outside of New Jersey. Despite this fact, the trial court reasoned that application of New Jersey law would foster the policy interests of other states in securing financial resources to compensate victims of pollution and to remediate [their] toxic waste sites. However, the Restatement section 6 (section 6) analysis focuses on whether the wholly domestic concerns of a competing state (such as New Jersey) are advanced by application of its law to the point in issue, Pfizer, supra, 154 N.J. at 198-99, 712 A. 2d 634, not whether application of New Jersey law would better serve the environmental concerns of another state than would that state's own law. The interests identified in Morton International, Inc. v. General Accident Insurance Co. of America, 134 N.J. 1, 629 A. 2d 831 (1993), cert. denied, 512 U.S. 1245, 114 S.Ct. 2764, 129 L. Ed. 2d 878 (1994), in protecting the objectively reasonable expectations of New Jersey policyholders and in deterring misrepresentation of nondisclosure by insurance companies to state regulatory authorities, are implicated in this case. Because HM Holdings is a resident policyholder, the issue is the extent of that interest. As noted, the policies were purchased by USI when it was a nonresident, negotiated outside of New Jersey, and were designed to cover risks not located in New Jersey (at least not these). That the policyholder has since moved to New Jersey does not deprive the policyholder of the protection of New Jersey law, but tempers the weight to be given to that factor. See Allstate Ins. Co. v. Hague, 449 U.S. 302, 337, 101 S.Ct. 633, 653, 66 L. Ed. 2d 521, 546 (1981) (Powell, J., dissenting) (stating that if a policyholder could choose the substantive rules to be applied to an action ... the invitation to forum shopping would be irresistible). If the situation were otherwise, and New Jersey (where the policyholder had moved) had the more restrictive view of coverage under the pollution-exclusion clause, we are certain that New Jersey's laws should yield to the laws of the waste sites that would have the more dominant relationship to the transaction and the issue. Concerning factor two, the interests of commerce would be hindered if New Jersey law were applied to determine a dispute with which it did not have a dominant significant relationship. Given that the location of the waste site carries very substantial weight in the section 6 analysis, NL Industries, Inc. v. Commercial Union Insurance Co., 65 F. 3d 314, 321 (3d Cir.1995), and that the policyholder did not have a significant business presence in New Jersey when the policies were purchased or when the occurrences under the policies took place, New Jersey's interests are less significant than those of the waste sites. But see J. Josephson, Inc. v. Crum & Forster Ins. Co., 293 N.J.Super. 170, 679 A. 2d 1206 (App.Div.1996) (holding that New Jersey law governs choice of law when New Jersey company hires licensed hauler to transport waste to Pennsylvania). Concerning factor three, certainly, in this case the justifiable expectations of the parties at the time when they entered the insurance contracts could not have been that New Jersey law would govern issues of coverage in Illinois or Michigan. Finally, although we do not minimize the case-management difficulties for the trial court, for the reasons stated in Pfizer we do not believe that the interests of judicial administration should overcome the other factors. On balance, the section 6 factors point toward application of the law of the waste sites.