Court Opinion

ID: 9629691
Source: CourtListenerOpinion
Date Created: 2023-08-22 09:47:26.464183+00
Date Added: 2024-06-11T09:17:57.075674
License: Public Domain

*111Justice ALBIN,
dissenting.
In the name of consistency, the Court interprets Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437, 650 A.2d 974 (1994), to reach not its inevitable, but its inequitable conclusion. The Court today holds that a policyholder who suffers property damage or personal injury as a result of a toxic environmental exposure occurring over a number of years must pay in full all deductibles for all of the triggered policies before he is entitled to any insurance coverage. That holding will come as a great surprise to many small business and property owners, who may find their assets completely depleted paying multiple deductibles before ever accessing the insurance for which they thought they had bargained. The written insurance contracts in this ease do not speak to the issue and do not compel such a result. Nor does an enlightened public policy. This Court crafted the governing principle in Owens-Illinois to maximize insurance coverage when dealing with environmental damage and to further notions of simple justice. Spaulding Composites Co., Inc. v. Aetna Casualty and Surety Co., 176 N.J. 25, 36, 819 A.2d 410 (2003) (citing Owens-Illinois, Inc., supra, 138 N.J. at 472-73, 650 A.2d 974). Because I believe the Court, though well intentioned, has taken a detour from those goals in this case, I must respectfully dissent.
In Owens-Illinois, we constructed a methodology to address the difficult issue of the allocation of insurance coverage among multiple policies in cases of progressive environmental injury or damage that runs a course of years from the toxic exposure to the manifestation of the injury or damage. We recognized that in such cases it would be an impossible task to quantify the extent of harm caused within any particular year. Owens-Illinois, supra, 138 N.J. at 466, 468, 650 A.2d 974. We, therefore, concluded that, as a matter of public policy, it was fair to “treat the progressive injury or damage as an occurrence within each of the years of a [comprehensive general liability] policy.” Id. at 478, 650 A.2d 974. We allocated the coverage among the triggered policies from the time of exposure to manifestation of the injury or damage based *112on the risk assumed by the carrier and its years on the risk, thereby proportionately spreading the costs of indemnification. Id. at 475, 650 A.2d 974. Accordingly, an insurance company, for each triggered policy year, would pay its pro rata share of the recovery costs. Our Court adopted that paradigm not because it flowed from the language of the insurance policies at issue, but because equity and notions of simple justice demanded that we do so. Id. at 471, 472-73, 650 A.2d 974.
With the Owens-Illinois methodology as an overlay to the insurance policies, the Court has decided that the remaining language of those policies must be honored, requiring that each deductible of each triggered policy first be exhausted before insurance coverage is reached. However, the policies do not address long-tail environmental contamination cases or the use of multiple deductibles in an Owens-Illinois paradigm. Because the insurance contracts do not reflect the reasonable expectations of the parties on that issue, this Court should be guided by the principle of equity to achieve substantial justice. Requiring each deductible to be exhausted in multiple insurance policies over a course of years before an insurance company is compelled to pony up even a dollar is not in keeping with the reasonable expectations of the parties and not mandated by our jurisprudence.
The unfairness of such a formula becomes evident when we envision its real-world application. Let us consider a small business owner who has had twenty years of coverage from comprehensive general liability policies in which the deductible in each year is $25,000 and the total insurance coverage for each year is $1,000,000. In the ease of a business owner who suffers property damage or is sued for personal injury as a result of environmental contamination spanning the twenty policy years, the policyholder will not see a penny of insurance coverage if the costs related to the damage or injury are $500,000 or less because the policyholder must pay twenty years of deductibles. The Court’s approach allows that inequitable result even though had the harm occurred in just one year covered by the policies, the business owner would *113pay a deductible of only $25,000 and the insurance carrier would pay the remaining $475,000. Mandating the payment of multiple deductibles, as in the example given here, may lead to the bankrupting of the policyholder, who reasonably believed that to access $1,000,000 of coverage, he was required only to pay a $25,000 deductible. Simple justice suggests that those reasonable expectations should be fulfilled. I would follow the approach proposed by the amici CSR Limited and Island Transportation Corporation, to achieve that equitable result.
Under the amici approach, the allocation between the policyholder’s deductibles and the insurance coverage would be based on a joint and several and pro rata methodology. First, the policyholder must pay the number of deductibles necessary to yield the insurance coverage for the loss. Using the previous example as a template, if the policyholder suffered a loss in the amount of $2,500,000 as a result of an environmental contamination spanning twenty policy years, he would have to pay three deductibles to trigger the coverage of three policies to satisfy the loss. The first $25,000 deductible would release $975,000 of insurance, the second $25,000 deductible would release another $975,000 of insurance, and the last $25,000 deductible would release the remaining $475,000 necessary to satisfy the $2,500,000 loss. Thus, for each deductible paid under the policy, the maximum coverage limits of that policy are available. Second, the loss paid is then allocated among each of those twenty policies in proportion to the risk assumed. In my example, the policy coverage for each year was the same and accordingly the risk assumed was equal over the twenty policies. The insurance payout is calculated by subtracting the $75,000 deductible from the total loss of $2,500,000. The insurance payout of $2,425,000 is then divided equally over the twenty policies, requiring each policy to pay $121,250. The Court’s methodology would require the policyholder to satisfy the twenty deductibles- — $500,000—before triggering the insurance coverage. I am confident that the amici approach, although not as neat and simple to apply as the Court’s, would further, rather than frustrate, the salutary goals of Owens-Illinois. It is true *114that the Court’s approach will protect policyholders in the event of a catastrophic loss. However, for those policyholders unable to pay the multiple deductibles before accessing insurance coverage, this Court’s decision will be catastrophic. People and businesses buy insurance to protect against losses that might otherwise bankrupt them. The Court’s decision denies the policyholder the very benefit that comes with the promise of insurance coverage.
The approach I suggest would not place the insurance industry at any serious disadvantage. Insurance carriers would adapt to the new reality by charging premiums and setting deductibles accordingly. Because this Court’s decision will render illusory the insurance coverage policyholders thought they possessed and impoverish some of them before they receive the benefit of the insurance coverage they purchased, I must dissent.
Justice ZAZZALI joins in this dissent.