Earlier this month, a New Jersey appellate court affirmed a lower court’s ruling that the insured, not solvent insurers, was responsible for the liability apportioned to policies not covered by New Jersey’s Property Liability Insurance Guaranty Association (PLIGA). The insured, Ward Sand and Materials Company (Ward), was sued by the New Jersey Department of Environmental Protection related to cleanup of municipal waste accepted at a sand mining facility from 1970 to 1991.

Prior to litigation, three of Ward’s insurers—Mission National Insurance Company, Integrity Insurance Company, and Western Employers Insurance Company—had been declared insolvent. During the litigation, two of Ward’s insurers, Reliance Insurance Company and Home Insurance Company, were declared insolvent.  Following a multi-million dollar settlement in the environmental litigation, Ward brought suit against its primary and excess insurance carriers, as well as PLIGA, seeking an order allocating insurance coverage for the settlement.  PLIGA settled with Ward on behalf of the insolvent insurers, but the trial court issued a decision requiring Ward to assume any sums allocated to its insolvent insurers in excess of the payments by PLIGA.

Ward filed a motion for reconsideration, which the trial court denied, and then appealed the decision. After all of the relevant insurers had become insolvent but before the litigation in this case, the New Jersey legislature amended the statute regarding PLIGA to clarify that exhaustion of underlying policies had only occurred once all available insurance limits had been met.  The New Jersey Supreme Court held that this meant that “for the years in which PLIGA is standing in the palce of an insolvent carrier in a long-tail environmental contamination case, the insured—not the solvent insurer—is compelled to make payments before accessing statutory benefits under the PLIGA Act.”  Thus, the appellate court affirmed the trial court’s determination that Ward was responsible for the shares allocated to its insolvent insurers. Ward Sand and Materials Co. v. The TransAmerica Insurance Company, No. A-1479-13T1 (N.J. Super. Ct. App. Div. Jan. 12, 2016).