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HM Holdings, Inc. v. Aetna Casualty & Surety Company

154 N.J. 208, 712 A.2d 645 (1998)

ENVIRONMENTAL LIABILITY; INSURANCE—Just because an insurance policyholder is a New Jersey resident, doesn’t mean that determinations of environmental insurance coverage for out-of-state sites is to be determined by New Jersey law (although issues as to proper notice may be subject to New Jersey law).

This is a companion case to Pfizer, Inc. v. Employers Insurance of Wausau, 154 N.J. 187 (1998). This is also a three-state, multisite environmental coverage case. None of the nine sites were in New Jersey. Although the policyholder was now a New Jersey resident, it was a resident of New York when it bought the underlying policies in New York. The Court was called upon to determine the appropriate choice of law and then to decide (a) whether the sudden and accidental pollution exclusion clause contained in certain of the insurance policies barred coverage of the claims; and (b) whether the late-notice defense was available to the insurance company. To do so, it followed its analysis in the Pfizer case.

The Court first decided the issue of the pollution exclusion clause. Here, it found (a) the laws of the three states to be in conflict; (b) the interests of commerce would be hindered if New Jersey law were to be applied because New Jersey does not have a dominant interest; (c) the parties did not expect New Jersey law to apply; and (d) the interests of judicial economy did not overcome the other factors. Therefore, the Section 6 factors of Restatement (Second) of Conflicts of Law, the competing interests of the states, pointed to the law of the sites being applied.

The Court then decided the issue of the late-notice defense. It first found the laws of New York and New Jersey to be in conflict. The Court also noted that because the purpose to be served by New Jersey’s late-notice rule is the protection of a New Jersey policyholder and also that the late notice may have occurred at a time when the policyholder was a corporate resident of New Jersey, New Jersey’s policies would be advanced by an application of its own laws while an application of New York’s law would not advance its own domestic concerns. Consequently, the Court held that the law of New Jersey or that of the waste sites should govern the late-notice issues and that this application would satisfy the expectations of the parties. If the law of the waste sites is similar to the way New York law treats late notice, such other state’s laws should yield to New Jersey’s unless the insurance companies are domestic companies of the waste sites.


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