During the New Jersey Supreme Court’s 2016-2017 term two significant environmental law cases were decided. One of the rulings limited the state’s potential liability pursuant to the Spill Compensation and Control Act. The other enabled policyholders to assign their rights to an environmental claim after an insured loss occurred. N.J.S.A. 58:10-23.11 et seq.
Three additional cases of interest to environmental practitioners are on the court’s docket for the 2017-2018 term. The issues to be considered pertain to soil disturbance on preserved farms, the non-disclosure of a partial cleanup to a potential purchaser, and the allocation of risk in the insurance context.

Supreme Court Rulings

• State’s Spill Act Liability. The state’s taxpayers can collectively breathe easier as a result of the Supreme Court’s ruling in NL Industries v. State of New Jersey, which dismissed a Spill Act contribution claim asserted against the state. 228 N.J. 280 (2017), rev’g 442 N.J. Super. 403 (App. Div. 2015). For additional discussion of the lower court rulings that were reversed, see L. Goldshore, “State Dodges Spill Act Bullet,” 223 N.J.L.J. 1155 (Apr. 17, 2017).

NL Industries, faced with shouldering a $79 million cleanup of the Raritan Bay Slag site, a Superfund site, looked to spread the liability net to include numerous other potentially responsible parties. That resulted in the company seeking contribution from the state based on actions it took, or failed to take, concerning the site in the 1960s and early 1970s in its capacities as a regulator and riparian landowner. N.J.S.A. 58:10-23.11 et seq.
The court identified the primary statutory issue as whether the Spill Act, which took effect in 1977, retroactively stripped the state of sovereign immunity for pre-act activities. In rejecting the argument that the state had liability for pre-Spill Act activities, the court traced the statute’s legislative history and noted that it was “silent on the relationship between the 1991 amendment and its connection to contribution actions against the state generally, and with respect to pre-Act activities by the state, in particular.” The state’s sovereign immunity was an additional factor considered by the court, which reasoned that “a legislative waiver of sovereign immunity must be expressed clearly and unambiguously and a retroactive waiver of sovereign immunity requires the clearest of expression.”
The state’s involvement with this site was similar to the state’s role in hundreds, if not thousands, of other sites where a discharge of hazardous substances has occurred. As the court noted, if the state was held to have Spill Act liability in this scenario, such a finding “could have [a] profound impact on the fiscal affairs of the state.”
• Anti-Assignment Clause. In Givaudan v. Aetna Casualty, the plaintiff sought coverage arising from environmental contamination at a manufacturing facility. 227 N.J. 322 (2017). From the 1960s through 1990, the facility had been operated by a related corporate entity.
Numerous carriers had provided occurrence based liability coverage for policy periods running through Jan. 1, 1986. The insurers declined to provide coverage based on the claimant not being “the named insured” in the policies. The carriers also relied on the “anti-assignment clause” in the policies in response to an attempt by the named insured to assign its post-loss rights. That provision requires consent by the insurer for an assignment to be effective.
The court rejected the carriers’ arguments based on the distinction between a pre-loss assignment, which involves “a transfer of a contractual relationship,” and a post-loss assignment, which is simply “the transfer of the right to a money claim.” The court concluded that what occurred here “was a post-loss claim assignment and therefore that the rule we adopt today voiding application of anti-assignment clauses to such assignments applies.”

On the Docket

• Soil Disturbance on Preserved Farms. The Supreme Court has agreed to hear State Agriculture Development Committee (SADC) v. Quaker Valley Farms. 2015 WL 12732835 (App. Div. 2016), certif. granted ___ N.J. ___ (2017). For additional discussion of the lower court rulings, see L. Goldshore, “Down on the Farm,” 222 N.J.L.J. 3775 (Nov. 28, 2016).
At issue is whether the owner of a farm preserved pursuant to the Agriculture Retention and Development Act could extensively grade a portion of the property to facilitate the construction of hoophouses, a common form of greenhouse. N.J.S.A. 4:1C-11 et seq. The trial court found that the landowner had violated a deed of easement (DOE) its predecessor had granted to the SADC, which limited non-agricultural development of the property and ordered remediation of the soil disturbance estimated by a state expert to cost in excess of $3 million.
Initially, the Appellate Division issued a decision that affirmed the trial court’s ruling. But, in an unusual move, the court withdrew its earlier opinion and remanded the matter.
The appeals court reasoned that “[i]n light of the past non-enforcement [of soil disturbance], and the lack of detailed limitations on land grading activities,” the SADC had failed “to turn square corners” in its dealings with the landowners. The court instructed that “the DOE should be interpreted to permit the construction of structures for agricultural purposes (including hoophouses) so long as the landowner conserves soil to the extent practicable in doing so” and a determination as to whether the defendants “took the necessary steps, to the extent practicable, to conserve the soil disrupted by the land-grading activities.” The case is being closely watched by the owners of the state’s 230,000 acres of preserved farms.
• Fraudulent Concealment. The issue in Catena v. Raytheon Co. is whether fraud claims that arose from concealment of a pre-sale partial environmental cleanup were barred by the statute of limitations or whether the discovery rule applied. 447 N.J. Super. 43 (App. Div.), certif. granted 228 N.J. 404 (2016). The decision should also clarify the extent to which the standard “as is” clause provides protection where there has been a failure to disclose known environmental conditions.

When plaintiff purchased the property in 1988 he was unaware that the lender in possession had directed a partial removal of contaminated soils. A decade later, in connection with a refinancing, an environmental investigation disclosed soil contamination which was reported to the DEP. The state agency promptly advised that investigation/remediation was required.
In 2005, plaintiff commenced litigation that alleged common law fraud and Consumer Fraud Act violations. N.J.S.A. 56:8-1 et seq. During the course of discovery, plaintiff learned of the pre-closing partial cleanup and in 2008 amended complaints were filed.
The trial court dismissed the claims on the grounds that the limitations period commenced in 1998 when plaintiff executed a DEP memorandum of agreement (MOA) that required investigation/cleanup. The Appellate Division disagreed based on the discovery rule. It reasoned plaintiff did not discover, and could not have discovered through reasonable diligence, until May of 2002. The court’s resolution of this issue will be of significant interest to environmental and real estate practitioners.
• Choice of Law/Assumption of Risk. The issues inContinental Ins. Co. v. Honeywell Int’l are: (i) whetherNew Jersey law should be applied to the allocation of insurance coverage for personal injury asbestos claims, and (ii) whether the policyholder assumed its own risk when coverage for these claims was no longer available. 2016 WL 3909530 (App. Div.), certif. granted 228 N.J. 437 (2016).
Honeywell’s predecessor manufactured and sold asbestos-containing brake and clutch pads. As a result, that company was involved in extensive personal injury and wrongful death lawsuits throughout the country.
The initial issue concerned whether Michigan, rather than New Jersey, insurance allocation law should be applied to certain excess insurance policies. Based on its analysis of the relevant choice-of-law factors, the Appellate Division concluded that New Jersey law should be applied.
The appeals court also considered the “unavailability exception” to the allocation methodology. It found that excess insurance for asbestos-related personal injury claims has been unavailable since 1987, and that Honeywell did not assume the risk after that date.•