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Carpenter Technology Corp. v. Admiral Insurance Co.6/17/2002
Argued September 24, 2001
The State of New Jersey and the United States identified Carpenter Technology Corporation (Carpenter), a corporation with its principal place of business in Pennsylvania, as a potentially responsible party (PRP) for environmental contamination at four sites in New Jersey. In response, Carpenter commenced a declaratory judgment action in which it sought a declaration of coverage for the claims under multiple insurance policies issued by defendant insurance companies. Three of Carpenter's insurers became insolvent and, as a result, the New Jersey Property-Liability Insurance Guaranty Association (NJPLIGA) and the Pennsylvania Property and Casualty Insurance Guaranty Association (PPCIGA) (formerly known as the Pennsylvania Insurance Guaranty Association (PIGA)) were added as defendants.
PPCIGA is the primarily-liable guaranty association because any entity that may recover from more than one insurance guaranty association shall seek recovery first from the association of the residence of the insured. N.J.S.A. 17:30A-12a. The issue in this appeal is the amount of credit to which NJPLIGA is entitled because of PPCIGA's primary liability. The trial court concluded that NJPLIGA is entitled to a credit per "covered claim" of $299,900, which represents the maximum statutory amount PPCIGA could tender Carpenter under Pennsylvania law. The Appellate Division rejected that conclusion, holding that NJPLIGA is entitled only to a credit for the amount PPCIGA actually paid Carpenter in settlement of each covered claim. We conclude that the Appellate Division's holding contravenes the Legislature's intent in creating New Jersey's insurance guaranty association. We therefore reverse.
I.
In 1974, our Legislature enacted the New Jersey Property- Liability Insurance Guaranty Association Act, N.J.S.A. 17:30A- 1 to -20 (Act). The Act requires that all insurers in New Jersey, with limited exceptions, join NJPLIGA in order to transact business. Railroad Roofing & Bldg. Supply Co. v. Financial Fire & Cas. Co., 85 N.J. 384, 389-90 (1981); N.J.S.A. 17:30A-6. NJPLIGA is obligated to assume the contractual obligations of an insolvent insurer and to pay certain claims up to the limit of the policyholder's contract, subject to a maximum liability of $300,000. N.J.S.A. 17:30A- 8a(1). In order to fund those claims, the Act authorizes NJPLIGA to collect assessments from member insurers that are used to pay both "covered claims," N.J.S.A. 17:30A-5d, and the Association's costs and expenses, N.J.S.A. 17:30A-8a(3). Member insurers can seek to recoup the amount of the assessment from their insureds by adding a surcharge on policy premiums. N.J.S.A. 17:30A-16a.
In 1994, the New Jersey Department of Environmental Protection (NJDEP) and the United States Environmental Protection Agency (EPA) identified Carpenter, incorporated under the laws of Delaware with its principal place of business in Pennsylvania, as a PRP for property damage and environmental contamination at four sites in New Jersey, two sites in Pennsylvania, and one site in Maryland. At the time Carpenter filed its declaratory judgment action, Carpenter manufactured specialty steel products and operated manufacturing plants in Pennsylvania and New Jersey. According to Carpenter's complaint, the property damage at the four New Jersey sites was due to either the treatment or recycling of manufacturing by-products, or in the case of one site where Carpenter operated an underground facility for storing solvents, the damage resulted from the leakage of chemicals such as Trichloroethylene (TCE). TCE is commonly used in manufacturing to degrease machine parts. Toxicological Profile for Trichloroethylene. U
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