Too Little, Too Late

(MCW represents certain first-party insurers in this case)

In an October 15, 1997 decision, the Superior Court of New Jersey granted summary judgment to certain first-party insurers in an environmental coverage action brought by PPG Industries, Inc. ("PPG"). PPG was seeking coverage under all-risk property insurance policies in effect in the 1960's for environmental damage at three sites in Hudson County, New Jersey.

The court held that summary judgment was mandated by the service-of-suit provision in the first-party policies at issue, which required PPG to commence suit against the insurer within twelve months of the "discovery by the Assured of the occurrence which gives rise to the claim." The insurers pointed out that the damage had occurred from the late 1920's through the early 1960's; PPG knew of the damage by the late 1950's; and PPG was formally notified of the alleged damage by the government in the 1980's, but brought suit in 1995. The court held that on these facts summary judgment was warranted, and noted that an insurer need not demonstrate prejudice to enforce a service of suit provision. As to the question of the time of "discovery," the court observed that even if only the time of the issuance of the Administrative Consent Order were considered, PPG was still out of time. The court disagreed with PPG that the terms "discovery" and "occurrence" in the service of suit provision were ambiguous. The court also rejected, as totally unfounded in the policy language, PPG's argument that the occurrence giving rise to the claim should not be deemed to occur until the $1,000,000 deductible had been exhausted

The court said:

[T]here is no support for this novel theory. The fair interpretation does not refer to the exhaustion of the deductible. Common sense compels that the insurer has a right to be made aware of the claim before the last dollar of the deductible is reached; to hold otherwise simply flies in the fact of logic.