Opinion
Civ. No. 91-5436 (DRD).
August 26, 1999.
Kevin E. Wolff, Esq., Kristin V. Gallagher, Esq., McElroy, Deutsch Mulvaney, Morristown, N.J., Attorneys for Third-Party Defendant The North River Insurance Company
Lee Hilles Wertheim, Esq., Thomas E. Redburn, Jr., Esq., Lowenstein Sandler, P.C., Roseland, N.J., Attorneys for Defendant and Third-Party Plaintiff Cosan Chemical Corporation.
O P I N I O N
In this action, defendant and third-party plaintiff Cosan Chemical Corporation ("Cosan") seeks to require third-party defendant North River Insurance Company ("North River") to defend and indemnify it for costs incurred in connection with the investigation and remediation of environmental contamination at Cosan's former facility in Clifton, New Jersey. North River has moved for summary judgment pursuant to Fed.R.Civ.P. 56. Oral argument was heard on August 23, 1999. For the reasons set forth below, North River's motion will be denied.
I. BACKGROUND
On December 17, 1991, plaintiffs Frederick V. Dexter, Jr. and Raymond J. Ellison (the Plaintiffs) initiated this action seeking damages from Cosan under the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. § 9601 et seq., and the New Jersey Spill Compensation and Control Act, as amended, N.J.S.A. 58:10-23.11 et seq., for environmental contamination of Cosan's former facility at 481 River Road in Clifton, New Jersey, and adjoining properties. Following a bench trial, I entered judgment against Cosan on January 10, 1997. While the matter was pending on appeal, Cosan settled with the Plaintiffs. Cosan also entered into and remains subject to an administrative consent order with the New Jersey Department of Environmental Protection which provides for ongoing investigation and remediation of contamination on the Clifton facility and adjoining properties.
Cosan commenced a third-party action against its primary and excess insurance carriers — including North River — seeking indemnity for the damages Cosan paid to Plaintiffs, reimbursement of Cosan's costs of defending against Plaintiffs' claims, and a declaration that the carriers were liable to indemnify Cosan for future environmental investigation and remediation costs. Cosan contends that North River issued it a policy, number ML-178602, effective from June 6, 1975, to July 6, 1978. Cosan believes this policy provided both comprehensive general liability and umbrella coverage with limits of $500,000 and $5,000,000, respectively, per year.
Upon being notified of the claim by Cosan, North River performed a search for the alleged policy. First, North River's Environmental Claims Unit office attempted to determine whether any previous claim had been made by Cosan. See Gallagher Cert. Ex. D. No previous claim was found so the Environmental Claims Unit reviewed its computer system for any policy issued to Cosan. Id. Upon finding nothing in its computer system, the Environmental Claims Unit asked the North Jersey office of North River to search its records for a policy. Id. That search revealed no information about a policy sold to Cosan. Id. Finally, in February of 1993, North River's San Francisco Records Department instituted a search for the alleged policy and found no reference to the same. Id.
As of the date of this opinion, neither Cosan nor North River have been able to locate a copy of the policy. Cosan has, however, submitted significant amounts of secondary evidence in hopes of proving that a policy existed. First, Cosan produced three certificates of insurance issued to Technical Coatings, Inc., Suntec Paint, Inc., and Tower Paint Manufacturers dated October 3, 1977, October 7, 1977, and March 2, 1978, respectively. These companies were vendors of Cosan who had demanded proof of insurance. All of the certificates were on forms provided by North River and issued by Frank B. Saul Associates, Inc. ("Saul"), as North River's authorized representative. All three certificates list the insured as Cosan Chemical Corp. and Cosan Chemical Canada, Ltd., 481 River Road, Clifton, New Jersey, and describe insurance coverage issued to Cosan under policy number ML-178602 with an effective date of June 6, 1975, and an expiration date of June 6, 1978, as primary property damage limits of $500,000 each occurrence and in the aggregate, and umbrella liability limits of $5,000,000.
Second, Cosan has provided a portion of a COMPAC policy form that North River allegedly used for policies with an "ML" prefix during the 1975-78 time period. According to Roger A. Quigley, North River's corporate designee regarding the existence of the alleged policy and underwriting procedures, this form was used in connection with primary multi-peril liability policies and the missing portions of the form would have contained some standard language drafted by North River. Quigley also confirmed that the prefix "ML" in the policy number was used by North River for multi-peril policies, including comprehensive general liability coverage.
Third, Cosan has provided a change endorsement, dated June 6, 1978, extending coverage, including comprehensive general liability coverage, under policy ML-178602 to July 6, 1978. See Gallagher Cert. Ex. H. The endorsement was issued by Saul as the authorized representative of North River. Cosan also provided documents concerning its payments to Saul of a premium due under North River policy number ML-178602. Id. Ex. J. Finally, Cosan provided deposition testimony of North River's designated witness, Roger L. Prickett ("Prickett"). Cosan believes that Prickett's testimony tends to show that a policy was issued to it by North River.
II. DISCUSSION
North River has moved for summary judgment and claims that Cosan's third-party complaint should be dismissed because it has failed to prove the terms and conditions of a policy it alleges North River issued to it during the 1970s. Cosan opposes the motion and argues that it has presented enough evidence from which a reasonable trier of fact could conclude that North River had issued it policy number ML-178602 and is liable to Cosan under this policy.
A. Standard
The Court may grant summary judgment when, drawing all inferences in favor of the non-moving party, the pleadings, supporting papers, affidavits, and admissions on file, demonstrate that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see Todaro v. Bowman, 872 F.2d 43, 46 (3d Cir. 1989); Davis v. Portline Transportes Maritime Internacional, 16 F.3d 532, 536 n. 3 (3d Cir. 1994); Chipollini v. Spencer Gifts, Inc., 814 F.2d 893, 896 (3d Cir.) (in banc), cert.dismissed, 483 U.S. 1052, 108 S.Ct. 26, 97 L.Ed.2d 815 (1987). The Court's function is not to weigh the evidence and discern the truth of the matter, but to determine whether there is a genuine issue of material fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Petruzzi's IGA v. Darling-Delaware, 998 F.2d 1224, 1330 (3d Cir.), cert. denied, 510 U.S. 994, 114 S.Ct. 554, 126 L.Ed.2d 455 (1993). An issue is "genuine" if a reasonable jury could possibly hold in the non-movant's favor with regard to that issue. Anderson, 477 U.S. at 248; Miller v. Indiana Hospital, 843 F.2d 139, 143 (3d Cir.), cert. denied, 488 U.S. 870, 109 S.Ct. 178, 102 L.Ed.2d 147 (1988). A fact is material if it influences the outcome of the action under the governing substantive law.Anderson, 477 U.S. at 248.
The moving party bears the burden of establishing that there are no genuine issues of material fact for trial regardless of who bears the ultimate burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the non-moving party bears the burden of proof at trial, as Plaintiff does here, the moving party may satisfy its burden on a motion for summary judgment by showing that the non-moving party has failed to adduce evidence sufficient to establish an essential element that the non-movant would have to prove at trial. Id.
Once that burden is met, the non-moving party "may not rest upon the mere allegations" of its complaint to raise a genuine issue of fact, but must submit evidence specifically showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e); Robin Const. Co. v. United States, 345 F.2d 610, 614-15 (3d Cir. 1965). If the party opposing the motion fails to do so, the "factual record will be taken as presented by the moving party and judgment will be entered as a matter of law." United States v. City of Hoboken, 675 F. Supp. 189, 192 (D.N.J. 1987).
If the Court determines that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law, then summary judgment may be granted.
B. Evidentiary Standard
In the course of establishing coverage, an insured typically introduces the insurance policy into evidence. "The plaintiff suing on a policy of casualty insurance must establish that defendant was carrying the insurance risk in question, and should introduce the policy into evidence." 21 Appleman on Insurance § 12094, at 22 (1980). In the case where "[a] policy is lost or mislaid, it is proper to introduce another policy coupled with evidence that it is the same in form as the policy sued on." Id. § 12354, at 470-71 (footnotes omitted);see also 44 Am. Jur.2d Insurance § 1924 (1982) ("If the insurer properly raises the issue, the burden is upon the plaintiff, in an action upon an insurance policy, of proving the execution, delivery or consummation of the insurance contract").
With respect to whether proof of the terms of missing policies must be by a preponderance of the evidence, as Cosan maintains, or by clear and convincing evidence, as North River asserts, courts are divided. Among the reasons for the higher standard is that the policy itself was central to the parties' obligations. See Borough of Sayerville v. Bellefonte Ins. Co., 320 N.J. Super. 598, 602-03, 728 A.2d 225, 227 (App.Div. 1998).
Published opinions from other jurisdictions have applied the clear and convincing standard to missing policies.See, e.g., Boyce Thompson Inst. for Plant Research, Inc. v. Insurance Co. of N. Am., 751 F. Supp. 1137, 1140 (S.D.N.Y. 1990); Emons Indus., Inc. v. Liberty Mut. Fire Ins. Co., 545 F. Supp. 185, 188 (S.D.N Y 1982); Keene Corp. v. Insurance Co. of N. Am., 513 F. Supp. 47, 48 n. 1 (D.D.C.) (court dismissed the complaint against an insurer because the only evidence of coverage was index cards of policy numbers), rev'd on other grounds, 667 F.2d 1034 (D.C. Cir. 1981), cert. denied, 455 U.S. 1007, 102 S.Ct. 1644, 71 L.Ed.2d 875 (1982).
The court in Remington Arms Co. v. Liberty Mut. Ins. Co., 810 F. Supp. 1420 (D.Del. 1992), reached the opposite conclusion. The Remington Arms-court reviewed several reported decisions applying a clear and convincing standard to missing policy terms, and concluded that those decisions were not well reasoned. Id. at 1423-26. The court observed that the usual standard in civil matters was the preponderance standard and found the typical insurance dispute was unlike those civil cases where the exceptional standard of clear and convincing evidence was applied: mostly instances of alleged fraud and undue influence, involving the existence and terms of a will or deed; reformation of an instrument because of mutual mistake; creation of a constructive or parol trust; an oral contract for specific performance; or impeachment of a notary's acknowledgment. Id. at 1425. The Delaware federal court concluded that in the case of establishing policy terms, the evidence is "usually comprised of business records and standard forms made by and found in the possession of the party against whom they were being offered." Id. at 1426. Thus, especially where fraud was not alleged, the court deemed it more practical and fair to apply the preponderance standard. Id.
Following the Remington Arms decision, a number of courts around the country have adopted its reasoning or cited it approvingly in applying a preponderance standard to missing policies. See Americhem Corp. v. St. Paul Fire Marine Ins. Co., 942 F. Supp. 1143, 1144 (W.D.Mich. 1995); Servants of Paraclete v. Great Am. Ins. Co., 866 F. Supp. 1560, 1571-72 (D.N.M. 1994);American States Ins. v. Mankato Iron Metal, 848 F. Supp. 1436, 1441 (D.Minn. 1993); see also J.T. Baker v. Aetna Cas. Sur. Co., 1996 WL 451316 (D.N.J. August 5, 1996) (court noted that it "concur[red] with the Remington Arms assessment that the preponderance of evidence standard of proof should apply in the commercial insurance environmental context because the rationale of preventing fraud is absent").
Only one New Jersey court has dealt with the specific issue of the evidence required to prove the existence and terms of a lost or missing insurance policy. See Borough of Sayerville v. Bellefonte Ins. Co., 320 N.J. Super. 598, 728 A.2d 225 (App.Div. 199 8). In that case, an insured brought an action to recover under a lost or missing comprehensive general liability insurance policy. Id. at 600, 728 A.2d at 226. The trial court granted summary judgment in favor of the insurer, finding that the plaintiff had failed to satisfy its burden in producing the insurance policy or establishing the terms. Id. In reversing the trial court, the Appellate Division stated that the evidence submitted was sufficient to overcome summary judgment motions. Id. Additionally, the court stated that in lost or missing insurance policy cases, the insured need only prove the existence and terms of the policy by a preponderance of the evidence unless allegations of fraud were present.Id. at 604, 728 A.2d at 228.
I find the reasoning in Borough of Sayerville andRemington Arms to be compelling. Because no allegations of fraud exist in the present action, Cosan need only prove the existence and terms of the policy by a preponderance of the evidence.
C. Evidence Submitted
Cosan claims that it had purchased an insurance policy from North River and, in the absence of producing the actual policy, has provided secondary evidence in support of its allegations. Secondary evidence is admissible to prove the contents of a lost writing, including an insurance policy, as long as the document has been lost or destroyed and that the loss is not the result of bad faith on the part of the documents proponent. See Fed.R.Evid. 1002, 1004; Remington Arms, 810 F. Supp. at 1426.
Cosan has produced a significant amount of secondary evidence which tends to prove the existence of an insurance policy sold to it by North River. First, the three insurance certificates issued by a North River agent indicate that North River issued policy number ML-178602 to Cosan, effective June 6, 1975, to June 6, 1978, providing primary and umbrella liability coverage with limits of $500,000 and $5,000,000, respectively. Under New Jersey statutory law, these certificates constitute "prima facie evidence of [their] own authenticity and genuineness and of the facts stated" therein. See N.J.S.A. 12A:1-202. Additionally, there is no evidence that North River attempted to correct the certificates issued by Saul. As a North River underwriter testified, the insurer required its producers to send it copies of insurance certificates they had issued. Underwriters at North River reviewed the certificates for accuracy and notified the producer if any errors were found. Saul was not contacted about any errors in these certificates.
Second, the change endorsement indicates that coverage under the policy was extended from June 6, 1978, to July 6, 1978. As Quigley stated in his deposition testimony, the only purpose of a change endorsement is to amend the terms of an existing policy. If North River had never issued a policy to Cosan, then there would be no reason for a change endorsement to exist.
Cosan has also provided evidence which tends to prove the terms of the policy. First, Quigley admitted in his deposition that the partial COMPAC policy form that Cosan produced was in fact used by North River. According to Quigley, North River used the form for primary multi-peril policies bearing the prefix of "ML" that were issued during the 1975-1978 time period, and that these policies included comprehensive general liability coverage. See Gallagher Cert. Ex. D, I. Quigley testified that a majority of the coverage language in the complete form consisted of standard policy terms drafted by the Insurance Services Office or another similar organization. Additionally, any umbrella liability terms would be contained in the form used by North River for umbrella policies issued during the relevant time period. Id. Ex. D.
The material submitted, when considered as a whole, is sufficient to create a genuine issue of material fact as to whether North River issued the policy and what the exact terms were. North River's argument that each piece of secondary evidence, examined alone, is insufficient to prove the existence and/or terms of the policy is unpersuasive. While each piece of evidence may be inadequate when considered in isolation, decisions are not made in a vacuum. It is possible that a panel of jurors will conclude that the information submitted, when taken as a whole, meets the preponderance of evidence standard. Accordingly, North River's motion will be denied.
III. CONCLUSION
For the reasons set forth above, North River's motion for summary judgment will be denied. An appropriate order will issue.
O R D E R
Third-party defendant, North River Insurance Company ("North River"), having moved for summary judgment pursuant to Fed.R.Civ.P. 56; and the Court having heard oral argument on August 23, 1999; and in accordance with this Court's opinion of even date;
IT IS this day of August, 1999, hereby
ORDERED that North River's motion for summary judgment be and hereby is DENIED.