Home Insurance Company v. Cornell-Dubilier Electronics, Inc.

HOME INSURANCE COMPANY, Plaintiff, v. CORNELL-DUBILIER ELECTRONICS, INC., FEDERAL PACIFIC ELECTRIC COMPANY, AETNA CASUALTY & SURETY COMPANY, AIU INSURANCE COMPANY, AMERICAN CENTENNIAL INSURANCE COMPANY, AMERICAN INSURANCE COMPANY, AMERICAN INTERNATIONAL INSURANCE COMPANY, AMERICAN MOTORISTS INSURANCE COMPANY, CALIFORNIA UNION INSURANCE COMPANY, COLUMBIA CASUALTY COMPANY, CONTINENTAL CASUALTY INSURANCE COMPANY, EMPLOYERS MUTUAL CASUALTY COMPANY, FIREMAN'S FUND INSURANCE COMPANY, FIRST STATE INSURANCE COMPANY, GRANITE STATE INSURANCE COMPANY, HARTFORD ACCIDENT & INDEMNITY COMPANY, HIGHLANDS INSURANCE COMPANY, INTERNATIONAL SURPLUS LINES INSURANCE COMPANY, LEXINGTON INSURANCE COMPANY, LIBERTY MUTUAL INSURANCE COMPANY, CERTAIN UNDERWRITERS AT LLOYDS OF LONDON, LUMBERMAN'S MUTUAL CASUALTY COMPANY, MIDLAND INSURANCE COMPANY, NORTH RIVER INSURANCE COMPANY, NORTHWESTERN NATIONAL INSURANCE COMPANY, PRUDENTIAL REINSURANCE COMPANY, PURITAN INSURANCE COMPANY, TRANSIT CASUALTY COMPANY, WRENFORD INSURANCE COMPANY, Defendants and EXXON MOBIL CORPORATION, Intervenor-Respondent. CORNELL-DUBILIER ELECTRONICS, INC. and FEDERAL PACIFIC ELECTRIC COMPANY, Plaintiffs v. COLUMBIA CASUALTY COMPANY and CONTINENTAL CASUALTY COMPANY, Defendants.

No. A-3011-18

Superior Court of New Jersey, Appellate Division

June 23, 2021

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 5, 2021.

On appeal from the Superior Court of New Jersey, Law Division Mercer County, Docket Nos. L-5192-96, L-2773-02, and L-0463-05.

John C. Sullivan argued the cause for appellant Appearing London Market Insurers (Clyde & Co. U.S. LLP, Post & Schell PC, Mendes & Mount, LLP, and Mary Ann D'Amato (Mendes & Mount, LLP) of the New York bar, admitted pro hac vice attorneys; John C. Sullivan, Daren S. McNally, Rebecca S Bardach, Daniel J. Wityk and Mary Ann D'Amato on the briefs).

John M. Toriello argued the cause for intervenor-respondent (Holland & Knight LLP, attorneys; John M. Toriello, Marisa Marinelli, Daniel K. Winters and Stosh M. Silivos, on the brief).

Before Yannotti, Mawla and Natali, Judges.

PER CURIAM

At issue in this appeal is the applicability of an indemnification provision contained in a settlement agreement and the appropriate forum to resolve that dispute. Intervenor-defendant Exxon Mobil Corporation (Exxon) agreed to indemnify certain London Market insurers, including entities referred to collectively by the parties as defendant Appearing London Market Insurers (ALMI), that issued policies to Exxon between 1980 and 1983.

Exxon intervened in a pending New Jersey declaratory judgment action involving Cornell-Dubilier Electronics, Inc. (CDE) its former indirect subsidiary, that addressed insurance coverage claims with regard to CDE's environmental liabilities. ALMI moved to dismiss Exxon's claims in favor of a New York City forum, in accordance with the settlement agreement's forum selection clause. Exxon opposed the motion and maintained, among other reasons, that enforcement of the forum selection clause would violate New Jersey public policy as expressed in the entire controversy doctrine. In a May 18, 2011 Law Division order, the court agreed with Exxon and denied ALMI's motion.

Exxon further argued, based on the unique circumstances presented, any indemnification it owed ALMI was extinguished based on ALMI's failure to tender its indemnity claim in a timely fashion. Exxon also argued it was entitled to reimbursement of its attorneys' fees.

ALMI maintained that excusing Exxon's indemnification obligation would violate the terms of the settlement agreement and governing New York law. In a December 15, 2017 order, the court disagreed with ALMI and granted Exxon summary judgment and attorneys' fees. ALMI filed a motion for reconsideration, which the court denied in a February 2, 2018 order. On appeal, ALMI challenges portions of the court's May 18, 2011, December 15, 2017, and February 2, 2018, orders and January 31, 2019 final judgment.

We affirm in part and vacate and remand in part. We affirm those portions of the court's May 18, 2011 order in which the court denied ALMI's motion to dismiss the New Jersey litigation based on the settlement agreement's forum selection clause, and its December 15, 2017 order granting Exxon summary judgment. We also affirm the court's February 2, 2018 order denying ALMI's motion for reconsideration.

We vacate, however, the court's December 15, 2017 and January 31, 2019 orders to the extent that they awarded Exxon attorneys' fees, as the court failed to explain specifically the legal and factual bases for such an award. We accordingly remand for the court to make appropriate findings of fact and conclusions of law on that limited issue.

I.

We distill the relevant facts from the trial court proceedings that have spanned over twenty-four years. Between 1980 and 1983, CDE was an indirect subsidiary of Exxon. During this period, multiple subscribing insurers, ^[1] including ALMI, issued liability policies to Exxon and, in accordance with the policies' terms and conditions, CDE.

In February 1992, the New Jersey Department of Environmental Protection (DEP) issued a directive and notice to insurers advising CDE of potential liability related to its release of hazardous materials at its twenty-six-acre manufacturing facility in South Plainfield, which it operated from approximately 1932 to 1962. The following month, CDE sent a letter to its London Market insurers, including ALMI, "claim[ing] coverage . . . under all other policies which [were] issued on [CDE's] behalf, even if not specifically listed." In 1994, the United States Environmental Protection Agency (EPA) became involved with assessing the environmental impact at the South Plainfield site.

On December 19, 1996, Home Insurance Company filed a complaint against CDE, its direct parent company, and thirty of CDE's insurers. The complaint sought a declaratory judgment adjudicating the rights and obligations of the parties as to various environmental liability claims against CDE, including those associated with its South Plainfield facility. Sixteen insurance companies appeared in the action collectively as "London Market Insurers." ALMI was included among the London Market Insurers. Exxon, however, was not named in this suit.

CDE filed a cross-claim in October 1998 against certain of the defendant insurers and sought a declaration of those insurers' obligations "under [its] policies issued to CDE," noting it provided notice of the environmental liability claim with its 1992 letter. In May 1999, CDE propounded discovery requests upon ALMI requesting, among other information, identification and production of "all liability insurance policies issued by [ALMI] at any time in which . . . CDE . . . was a named insured, an additional insured, or otherwise a covered party (such as a shareholder or subsidiary)." ALMI responded in April 2001, identifying eleven policies, none of which included policies it issued to Exxon and which covered CDE.

In June 2000, Exxon, ALMI, and certain other insurers who issued liability policies to Exxon, entered into a settlement agreement that resolved an unrelated environmental enforcement action. The insurers, including ALMI, paid Exxon a settlement amount and Exxon, in exchange, released ALMI in Paragraph 3.1 of the agreement from all claims for coverage under their policies in connection with environmental liability "to assure [ALMI] their peace and freedom from such claims."

Central to the issues before us, in Paragraph 4.1, Exxon agreed to:

[D]efend, indemnify, save, and hold harmless [ALMI] . . . from and against all claims, including claims for indemnity, defense, subrogation, reimbursement, and/or contribution arising out of the [policies] and relating to [environmental liability] asserted by . . . any former [subsidiary] or [affiliate of Exxon].

Paragraph 4.2 also required the parties to act in good faith "in responding to and defending against such claims," and in Paragraph 4.3 the parties agreed that:

In connection with such defense, [Exxon] shall give written notice to [ALMI] of the identity of defense counsel. Absent good cause, [ALMI] shall agree to the counsel chosen by [Exxon], which counsel shall indicate in all pleadings and court filings that it is acting on behalf of [Exxon] as the indemnitor of [ALMI] and therefore, the positions taken are not necessarily those of [ALMI]. [ALMI] may assume control of their own defense by providing to [Exxon] written notice of such intention, in which case, all subsequent costs associated with the defense of the proceeding or litigation shall be borne by [ALMI].

Under Paragraph 10.1, the parties agreed that, in the event a dispute arose out of the settlement agreement or the insurance policies, they "may mutually agree to resolve said disputes through binding arbitration." If the parties elected to file in court, however, they consented in Paragraph 10.2 that any action would be venued in a New York City court and that the substantive law of the State of New York would apply.

Unable to resolve the insurance coverage dispute regarding the environmental liabilities relating to the South Plainfield site, CDE and ALMI proceeded to a bench trial on February 18, 2004. Exxon was still not named in the action.

After considering the testimony and extensive documentary evidence, Judge Jack M. Sabatino determined that the relevant insurance policies issued by ALMI and other insurers covered the environmental harm that occurred at the site. The litigation then turned to the "allocation phase" in which "issues of exhaustion and/or triggered insurance policies" would be resolved.

In late 2008, ALMI's expert produced a report that for the first time referenced the...