Insurers who paid to clean up environmental contamination in exchange for court-approved site releases aren’t necessarily protected from subsequent suits by third parties.
Chief U.S. District Judge Jerome Simandle in Camden held on Sept. 30 that a 2002 consent decree, under which five insurance carriers paid to remediate two Superfund sites, did not afford immunity from affected landowners who had no notice of the settlement.
The plaintiffs in U.S. v. South Jersey Clothing Co., owners of a farm claiming groundwater contamination, won a $9 million judgment against insolvent polluters and are seeking to collect it from their carriers.
The carriers objected, citing the consent decree.
Simandle acknowledged that the farmers’ claim clearly fell within the broad terms of releases that absolved the carriers of liability.
But he also found that whether the farmers were bound by those releases turned on whether they had a protected property interest in the coverage at the time of the decree, and whether they had notice their rights were being foreclosed, as required by due process.
Simandle found the farmers did not receive actual or constructive notice that the decree would foreclose their rights because the information about it published in the Federal Register and circulated in the community did not mention the insurers.
He left the state law issue of a pre-existing property interest to be decided in a state court suit by Richard and Sherry Marolda, owners of Vineland-based Marolda Farms, against North River Insurance, Maryland Casualty, Zurich American Insurance and Continental Insurance Cos. and the Insurance Co. of the State of Pennsylvania (ICSOP).
The insureds, Garden State Cleaners and South Jersey Clothing, operated businesses on sites the U.S. Environmental Protection Agency placed on the Superfund list in 1988 because of groundwater contamination from volatile organic compounds.
In 1996, the EPA sued the companies for reimbursement under the Comprehensive Environmental Response, Compensation and Liability Act, but learned they had no money, so looked to their carriers.
The Sept. 25, 2002, consent decree that ended the case also resolved another federal suit brought by the New Jersey Department of Environmental Protection, as well as two state court coverage actions, and incorporated settlement agreements with the insurers.
The Maroldas, who claim they did not discover their water was contaminated until later, sued the polluters in Atlantic County Superior Court in 2006 and obtained a default judgment.
After a proof hearing, Judge Steven Perskie awarded them damages of $9.17 million in June 2008.
Their lawyer, Louis Giansante, says the bulk of the sum was for the lost redevelopment value of a parcel in Buena Vista Township where they ran a horse farm. The well was shut down due to the contamination, leaving it without any water supply and thus, useless for residential construction, he says.
Unable to enforce the judgment against the polluters, the Maroldas went after the carriers, who parried with the consent decree.
Superior Court Judge Joseph Kane dismissed on the ground that he lacked jurisdiction.
An appeals court affirmed, finding there was jurisdiction but comity required the Maroldas to go to federal court, leading them to move for relief from the consent decree.
The EPA, joined by the DEP, objected, telling the court it was “concerned about maintaining the integrity of the settlements it reaches,” especially in the case of a 10-year-old judgment.
Simandle emphasized he was not reopening the consent decree.
Giansante, who heads a Moorestown firm, says a 2006 EPA study showing contamination in the early 1990s will help the Maroldas on the property interest question.
He adds, “It would seem incredibly unfair for a victim of pollution to have their rights foreclosed in a settlement between the government and the only source of funds that can make them whole, the carrier of the insolvent polluters.”
DEP spokesman Larry Hajna declines comment.
Not responding to a request for comment were the carriers’ counsel: John Favate of Springfield’s Hardin, Kundla, McKeon, Poletto & Polifoni (North River); Suzanne Cocco Midlige of Morristown’s Coughlin Duffy (Maryland Casualty, Zurich American and Continental); and Jason Pozner of Coughlin Duffy in Morristown and Michael Cohen of Florham Park’s Saiber (ICSOP). •