Lacey Municipal Utilities Authority v. New Jersey Department of Environmental Protection

162 N.J. 30, 738 A.2d 955 (1999)
  • Opinion Date: October 28, 1999

ENVIRONMENTAL CLAIMS; SPILL ACT; STATUTE OF LIMITATIONS—A municipality that filed its Spill Act claim before a clarifying regulation had been adopted was permitted to measure the one year statute of limitations period from the date it made payment rather than from the date it first committed itself to make the reimbursable payment.

This appeal involved the one-year statute of limitations for a municipality filing a reimbursement claim against the fund established by the New Jersey Spill Compensation and Control Act (Spill Fund). In particular, this municipality extended its water system into two areas after discovering that wells for residential drinking water contained various hazardous substances in excess of the level established as safe. The New Jersey Department of Environmental Protection (DEP), which administers the Act, denied both claims because the law provides that “[c]laims shall be filed with the administrator not later than one year after the date of discovery of damage.” The Court held that the one-year period in which a public entity must file a claim begins on the date “on which the entity commits itself through official act to incurring damages compensable by” the Act. Because it found no clear regulations as to when damage is discovered, it permitted the municipality’s claims to proceed. The statute that created the Spill Fund does not define the phrase “discovery of damage.” At the time the two claims were filed, there were no regulations making it clear how that phrase would apply to a public-entity claimant. Therefore, “[t]o establish a date on which there was a ‛discovery of damage’ in the case of a public-entity claimant, the relevant inquiry is when the public entity knew or had reason to know that a claim against the Spill Fund would have to be made.” Under regulations adopted after this matter arose, the one-year period for making a claim begins at the point the entity makes a binding commitment to restore, repair or replace contaminated drinking wells. Here, however, because of the absence of clear regulations when this municipality filed its claims, as a matter of fairness, the Court permitted the municipality to proceed with its claims against the Spill Fund. In particular, with respect to the first claim, the municipality’s preliminary engineering work began in 1988, its contract for the water transmission work was awarded in December 1989, actual construction began in February 1990, and the first payment under the contract was approved by the municipality on April 4, 1990. On February 28, 1991, less than one year after the first payment was made, the municipality filed its claim against the Spill Fund in connection with the earlier of the two expansion projects. With respect to the second claim, the contract was awarded on January 23, 1991, work began on May 2, 1991 and the first payment was approved on June 26, 1991. The municipality filed its claim for reimbursement on June 22, 1992, less than one year after it approved its first payment. The municipality’s theory was that it did not actually incur damage until it had authorized payment for the two construction projects.