Summer 2001
Volume 10, No. 1
Court Limits Insurance Coverage for Landfill Dumping
by
Albert I. Telsey, Esq.
In 1986 the insurance industry put the “absolute pollution exclusion” clause into most new liability policies to clearly deny coverage for pollution liability because the “sudden and accidental” pollution exclusion clause in older policies was being interpreted by the courts (including New Jersey) to provide coverage when the insurance industry did not intend coverage. The new exclusion clause worked and has withstood court challenge.
Most pre-1986 policies, however, were occurrence-based policies. That means, if a policyholder can prove a pollution event occurred before 1986, the old “sudden and accidental” policy can still be triggered today. The good news for policyholders is that the old policy may provide coverage. The bad news is that a new Appellate Division opinion may make it harder to get that coverage. Quincy Mutual Fire Ins. Co. v. Borough of Bellmawr, Docket No. A-3861-98T5, decided March 20, 2001. Albert Telsey, an attorney with this firm, tried the Quincy case on behalf of plaintiff, Quincy Mutual Fire Insurance Co.
The facts in Quincy are these: Bellmawr dumped municipal waste at the Kramer Landfill for many years. Different carriers providing coverage over those years. Century Indemnity Co. provided coverage for the first few months Bellmawr was dumping; then Quincy was on the risk for many years; then other carriers were on the risk. Quincy was found responsible for all costs associated with Bellmawr’s liability at the landfill. Quincy appealed claiming that Century should be on the hook too because they were on the risk for a few months before Quincy.
The issue on appeal was – when does the period of coverage begin for an environmental insurance claim? New Jersey has a triple trigger theory of coverage. In other words, all carriers on the risk from the time pollution damage occurs (first trigger), thru the time it continues (second trigger) to the time it is cleaned up (third trigger) are on the risk. Quincy argued coverage begins when waste is dumped in the landfill because the landfill belonged to a third party, it was unlined and it was not supposed to accept hazardous waste. Hence Century is on the risk. Century argued that coverage begins when third party damage occurs, i.e., groundwater contamination, and, according to its expert, that did not occur until 200 days after the initial dumping occurred. Since Century was off the risk by that time, Century has no liability. The Appellate Division agreed (with one Justice dissenting).
This is bad news because a policyholder must now get an expert to prove when groundwater contamination occurred at a landfill before the carrier or carriers on the “first trigger” can be triggered. If those earlier policies cannot be triggered, then those years of exposure are considered covered by the policyholder. Is it worth the expense to hire an expert? Can the cost be recovered from the carrier? Will this holding apply to non-landfill cases? Each case must be examined on its own merits.
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DEP Proposes Significant Changes To Water Quality Regulations
by
Diane Alexander, Esq.
The significant shift in policy, which first appeared in the context of the planning regulation rule proposal has been proposed for incorporation into the Surface Water Quality Standards. The amendments proposed in the December 18, 2000 New Jersey Register (32 N.J.R. 4397) are intended to redefine antidegradation reviews and provide a regulatory transition into water quality management through the employment of a watershed approach which links criteria established on a watershed basis to watershed management planning.
The Surface Water Quality Standards (SWQS) Regulations found at N.J.A.C. 7:9B-1 et seq., establish general requirements for the preservation of water body quality; procedures to identify and designate appropriate uses of water bodies and a procedure to formally classify the water bodies based upon these identified uses. In addition, the SWQS embodies the water quality criteria applicable to the surface waters of the state and establishes antidegradation policies intended to maintain and preserve the level of quality of these surface waters. The proposed rules will revise stream classifications and clarify the impact of stream reclassification on existing dischargers; regulate nutrient, arsenic, lead and PCB levels; establish regulatory mixing zones in place of the current mixing zone policy; establish a metal translator provision for expressing water quality based effluent limits in a total recoverable form and establish an alternate point of application for nitrates, total dissolved solids and BDCM. However, it is NJDEP’s proposed antidegradation policy and changes to the classification of water bodies that will have the most profound effect upon all users of the water bodies in this state.
POTABLE WATER
NJDEP is proposing a new policy which would codify its intent to restore, maintain, preserve and protect water quality for potable water use. Simply stated, the policy provides that all freshwater surface water, irrespective of use, should be protected as potential sources of public drinking water. In addition to heightened scrutiny of permitted discharges to surface water, this policy change will affect all sources of pollutants, particularly non-point sources and stormwater dischargers which will be a continuing focus in watershed evaluations. In addition, NJDEP is proposing to create a new “surface water intake” policy which is incorporated into the antidegradation policy; regulatory mixing zone policies and point of application policies affecting water quality 1500 feet upstream and 500 feet downstream of a structure or apparatus used to withdraw surface water directly or indirectly that is conveyed to a treatment plant or is used for other purposes.
ANTIDEGRADATION REVIEW
The antidegradation policies proposed are intended to advance the Department’s goal of maintaining water quality through prohibiting changes in water quality unless considerable justification supporting such change is demonstrated. An antidegradation review will be triggered by any project deemed to constitute a “substantive amendment.” A substantive amendment is defined as an amendment to a wastewater or water quality management plan which includes any project or activity that has the potential to result in significant direct, indirect, or cumulative environmental impacts, however, projects which are already consistent with existing plans and do not require an amendment will be required to undergo an antidegradation review regardless of whether any Water Quality or Wastewater Management Plan must be amended.
For waters designated as Outstanding Natural Resource Waters (ONRW), no discharge will be allowed and for Freshwater One (FW 1) waters, increases in runoff form anthropogenic activities will be prohibited. The proposed antidegradation standard for point sources to Category One waters requires a demonstration that no reasonable alternatives exist and prohibits changes in water quality outside of the 95 percent confidence interval of the demonstrated mean water quality. For point source dischargers to other waters, the proposed standard will establish permit limitations equivalent to maintaining the loadings contained in the existing permit or the existing effluent quality for parameters not addressed in the permit, even at the requested higher flow, unless in-depth water quality and other analyses are performed and demonstrate, among other things, that no reasonable alternative exists and that changes to water quality are warranted and foster important social and economic goals. For non-point sources, a no net loading of pollutants demonstration is proposed as the antidegradation standard. An opportunity for public comment on antidegradation findings will be provided as part of the process.
At this time, the future of the Surface Water Quality Standards rule proposal is uncertain in light of the gubernatorial directive which waived the five year sunset provision of Executive Order No. 66 (1978) for the Water Quality Planning Rules thus allowing the related Water Quality Management Planning Rule proposal to lapse prior to adoption (see 32 NJR 2285(a) and 33 NJR 1588(a)). The Surface Water Quality Standards rule proposal will lapse if not adopted by December 18, 2001. Whether or not the Surface Water Quality Standards rule proposal is allowed to lapse, these fundamental issues and policy determinations will continue to dominate watershed permitting. Due to the significant impact of these rules, active participation in the dialogue is suggested.
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Client Alerts
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(Spring 2001) U.S. Senate Passes Brownfields Revitalization and Environmental Restoration Act of 2001. Senate Bill 350, which would amend CERCLA to provide increased funding for brownfields revitalization, passed in the U.S. Senate and now awaits a house vote. For more information, click here.
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(Summer 2001) Image Upgrade for New Jersey Sewerage Authorities. On June 26, 2001, Acting Governor Donald DiFrancesco signed Assembly Bill 2449 which amends the Sewerage Authorities Law (N.J.S.A. 40:14A-1 et seq.) to allow entities organized under that law to be renamed as “Water Reclamation Authorities.”
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(Spring 2001) Court Limits Insurance Coverage for Landfill Dumping. Based on a recent appellate court decision, it may be harder to recover for “sudden and accidental” pollution covered by pre-1986 insurance policies. For full text of the article, click here.
U.S. Senate Passes Brownfields Revitalization and Environmental Restoration Act of 2001.
On April 25, 2001, the U.S. Senate passed The Brownfields Revitalization and Environmental Restoration Act of 2001 (SB 350) by a vote of 99-0. The bill amends the Comprehensive Environmental Response, Compensation and Liability Act of 1980 to promote the cleanup and reuse of brownfields, to provide financial assistance for brownfields revitalization and to enhance state response programs. In particular, the bill provides increased funding for assessment and remediation of brownfields and assistance for state brownfields programs; extends liability protections for innocent parties, such as contiguous property owners and prospective purchasers; and limits federal E.P.A. enforcement when a response action is conducted in compliance with a state program. The bill has been referred to the Committee on Energy and Commerce, and the Committee on Transportation in the House of Representatives where the debate is expected to focus on the EPA enforcement issue. In addition, while SB 350 would more than double the current amount of $90 million in federal brownfields funds available to state and local governments annually, it is anticipated that the House will consider increasing that amount even further.
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