COMMERCIAL GENERAL LIABILITY- POLLUTION EXCLUSION NOT APPLICABLE TO PERSONAL INJURY CLAIM

Commercial General Liability	Environmental Claims
Pollution Exclusion	Expectation of Coverage

Dr. Roy Scalia (Scalia), a physician with office space at the Parkway Shopping Center (Center) alleged that exposure to fumes that were released while T. A. Fanikos Painting (Fanikos worked at the Center resulted in him suffering from nausea, vomiting, light-headedness, loss of equilibrium and headaches that were significant enough for him to seek medical treatment. T. A. Fanikos Painting (Fanikos was a subcontractor for NAV-ITS, Inc. (Nav-Its) a construction contractor that was contracted to do fit-out work at Center. Nav-It carried commercial general liability coverage with Selective Insurance Company of America (Selective). The policy had a standard pollution exclusion with a very limited exception.

Scalia filed a complaint against Nav-Its and several others for his injuries. Nav-Its forwarded the complaint to Selective, seeking defense and indemnification. Selective declined both coverage and defense, citing the policy pollution exclusion. Scalia resolved his case against Nav-Its through binding arbitration.

Nav-Its filed an action against Selective seeking declaratory judgment that Selective was obligated to defend and indemnify it in connection with Scalia's underlying personal injury action. Selective moved for summary judgment and Nav-Its filed a cross motion for partial summary judgment. The trial court denied Selective's motion and granted Nav-Its partial summary judgment, finding Selective obliged to defend and indemnify Nav-Its in accordance with the policy. Selective's move for reconsideration was denied, on the basis that the exclusion applied only to traditional environmental claims. Selective appealed.

On appeal, the trial court was reversed, finding that the pollution exclusion was not necessarily limited to only the clean-up of traditional environmental damage. Nav-Its' petition for certification and Selective's cross petition was referred to the New Jersey Supreme Court.

Nav-Its argued that it had a reasonable expectation that coverage applied to claims arising from the normal work of the insured. Selective argued that the exclusion was not limited to traditional environmental claims.

The Supreme Court rejected Selective's interpretation as overly broad, unfair and contrary to the reasonable expectations of New Jersey and other state regulatory authorities that were given the opportunity to disapprove it. It argued that exclusions for avoiding catastrophic environmental claims should not also be used to exclude claims reasonable policyholders expect to be covered by the insurance policy. Traditional environmental pollution events consistent with those indicated in the clause, such as "discharge, dispersal, release or escape," should dictate its application.

The Appellate Division judgment was reversed and the case remanded to the trial court for further proceedings consistent with the Supreme Court opinion.

NAV-ITS, Inc., Plaintiff-Appellant and Cross-Respondent, v. Selective Insurance Company Of America, Defendant-Respondent and Cross Appellant. New Jersey Supreme Court. No. A-20/21-04. Filed April 7, 2005. On certification to the Superior Court, Appellate Division. Reversed and remanded. 2005 CCH Personal and Commercial Liability Cases. Paragraph 16,019.