New
Jersey courts and the Third Circuit have found that property can sustain physical
loss or damage without experiencing structural alteration. IN GREGORY PACKAGING V TRAVELERS, THE COURT
FOUND THAT Plant closed by ammonia discharge suffered direct physical property
loss
This insurance coverage
dispute arises out of a property insurance
policy which Defendant
Travelers Property Casualty
Company of America
(“Travelers”) issued to Plaintiff Gregory
Packaging, Inc. (“Gregory
Packaging”). Subject to limitations and exclusions, the policy covered
“direct physical loss of or damage to” Gregory Packaging’s property. In July
2010, ammonia was released inside one of Gregory Packaging’s facilities in Newnan, Georgia. Gregory Packaging now moves for partial
summary judgment on the issue
of whether it incurred “direct
physical loss of or damage
to” property from the ammonia
release
The sudden discharge of ammonia that temporarily closed a New
Jersey-based manufacturer's plant qualifies as direct physical property loss or
damage under New Jersey law, a federal judge has ruled.
Newark, New Jersey-based juice cup manufacturer Gregory
Packaging Inc. sued its commercial property insurer, Hartford,
Connecticut-based Travelers Cos. Inc., in 2012 for denying coverage on claims
stemming from a 2010 incident at its packaging facility in Newnan, Georgia. The company was forced to shutter the facility
for several days after a contract worker was severely burned by liquidized and
gaseous ammonia accidentally released from the facility's refrigeration system.
The court granted Gregory Packaging's motion for a partial
summary judgment declaring that the release of the ammonia and the subsequent
shut-down of the facility constitute “physical loss of or damage to” the
company's property, absent a clear definition of the phrase in the terms and
conditions of its property insurance policy with Travelers.
“There is no genuine dispute that the ammonia release
physically transformed the air within Gregory Packaging's facility so that it
contained an unsafe amount of ammonia or that the heightened ammonia levels
rendered the facility unfit for occupancy until the ammonia could be
dissipated,” Judge Walls wrote, adding that the loss of use of the facility met
the requirements for direct physical loss under New Jersey and Third Circuit insurance
laws.
“The court recognized that when a key policy term such as
'direct physical loss or damage' is not defined, the ambiguity must be
construed in favor of the policyholder, and that an accident that renders a
building unfit for occupancy and in need of remediation constitutes physical
loss by any reasonable understanding of the term,” Robert Chesler, shareholder
at New York-based Anderson Kill P.C. and counsel for Gregory Packaging, said in
a statement released on Wednesday. “That's good news for policyholders.”
Judge Walls noted that Gregory Packaging must still demonstrate
in court that the release of the ammonia occurred as the result of a covered
cause of loss, which Travelers has also challenged.
GREGORY PACKAGING, INC.,
Plaintiff,
v.
TRAVELERS PROPERTY CASUALTY
COMPANY OF AMERICA,
Defendant.
OPINION
Civ. No. 2:12-cv-04418 (WHW) (CLW)
UNITED STATES DISTRICT COURT DISTRICTOF NEW JERSEY
Walls, Senior District Judge
This insurance coverage
dispute arises out of a property insurance
policy which Defendant
Travelers Property Casualty
Company of America
(“Travelers”) issued to Plaintiff Gregory
Packaging, Inc. (“Gregory
Packaging”). Subject to limitations and exclusions, the policy covered
“direct physical loss of or damage to” Gregory Packaging’s property. In July
2010, ammonia was released inside one of Gregory Packaging’s facilities. Gregory Packaging
now moves for partial summary
judgment on the issue of whether it incurred “direct
physical loss of or damage
to” property from the ammonia
release. Without oral argument under Federal Rule of Civil Procedure 78(b),
the Court finds
that Gregory Packaging sustained “direct physical
loss of or damage to” property
and grants Gregory Packaging’s motion.
FACTUAL AND PROCEDURAL BACKGROUND
Gregory Packaging, headquartered in Newark, New Jersey, makes and sells juice cups. Pl.’s Mem. 1, ECF No. 40; Pl.’s Statement
of Material Facts (“Pl.’s SMF”) ¶ 1, ECF No. 41; Def.’s Opp. 4, ECF No. 49; Def.’s Responsive Statement
of Material Facts (“Def.’s Resp. SMF”) ¶ 1,
ECF No. 49-1. In 2009, Gregory Packaging
decided to build a new juice packaging
facility and purchased a building for that purpose on Amlajack
Boulevard in Newnan, Georgia. Pl.’s Mem. 2; Pl.’s SMF ¶ 7; Def.’s Opp. 4; Def.’s Resp. SMF” ¶ 7. Travelers issued Gregory Packaging
a property insurance
policy for the period running from February
28, 2010 to September 11, 2010. Pl.’s Mem. 5; Def.’s Opp. 13.
The insurance policy states that Travelers “will pay for direct physical
loss of or damage to Covered Property caused by or resulting
from a Covered Cause of Loss.” Pl.’s SMF ¶ 3; Def.’s
Resp. SMF ¶ 3. It defines “Covered
Property” to include
“designated buildings or structures at the premises
described in the Declarations, including:
. . . (2) Fixtures . . . [and] (3) Machinery
and equipment permanently attached
to the building . . . .” Pl.’s SMF ¶ 4;
Def.’s Resp. SMF ¶ 4; Cert. of
Robert D. Chesler (“Chesler Cert.”) ¶ 3, Ex. A, Form DX T1 00 03 98. The policy’s
“Declarations” indicate, and the parties have not disputed, that the policy covered the buildings and structures Gregory
Packaging purchased in Newnan, Georgia. Chesler Cert. ¶ 3, Ex. A, Form IL T0 03 04 96.[1]
Gregory Packaging needed to install
machinery and equipment
in its new building before it could
begin producing juice
cups there. Pl.’s
Mem. 2; Def.’s
Opp. 4-5. Gregory
Packaging installed a refrigeration system at the facility which used anhydrous
ammonia as its refrigerant. Pl.’s SMF ¶¶ 8-9; Def.’s Resp. SMF ¶¶ 8-9. By July 20, 2010, the basic installation of the refrigeration system was complete, and Gregory Packaging’s contractors from Uni-Temp
Refrigeration, Inc. (“Uni-Temp”) were working to start the refrigeration system so that it could begin operating as needed for the juice
packaging process. Pl.’s Mem. 2-3; Def.’s Opp. 5-6. During the start-up
process on July 20, 2010, ammonia was released from the refrigeration system into the facility. Pl.’s SMF ¶ 11; Def.’s Resp. SMF ¶ 11. The ammonia
severely burned a Uni-Temp
employee who was working at or near the site of the discharge. Pl.’s Mem. 4; Pl.’s SMF ¶ 13; Def.’s
Resp. SMF ¶¶ 11, 13; Def.’s Opp. 1.
The parties contest
what caused the ammonia release.
Gregory Packaging asserts
that it was caused by or coincided with an “explosion,” which ejected the ammonia from the refrigeration system in liquid and gaseous
forms. Pl.’s Mem. 3-4. Travelers
asserts that there was no explosion, and that the ammonia was released when the Uni-Temp
employee attempted to fix a leaking union
in the refrigeration system but “turned the nut on the union the wrong way,
loosening it instead of tightening it,” and thereby
“caused a larger amount of ammonia to escape from the union.”
Def.’s Opp. 7-8.
The parties agree that the facility was evacuated after the ammonia
release and that various governmental agencies arrived on the scene. Pl.’s Mem 4; Chesler Cert. ¶ 4, Ex. B at 206; Def.’s Opp. 8. They also agree that Gregory Packaging
hired a remediation company, Rhino Services, LLC, to dissipate the ammonia from the
building. Pl.’s SMF ¶ 15; Def.’s Resp. SMF ¶ 15.
The parties dispute
how long it took Rhino
Services to remediate the ammonia presence
in the building. Gregory Packaging asserts that it took approximately one week. Pl.’s
Mem. 4. Travelers states that “Rhino worked at the Newnan Facility for approximately 5 days” and points to witness testimony
which Travelers argues shows that “it took considerably less than 5 days for the ammonia
levels to reach a safe level for occupancy.” Def.’s Opp. 8. Despite the parties’ argument
about how long it took to dissipate the ammonia, Travelers’ statements about the remediation acknowledge that an unsafe amount of ammonia was released into the building,
that it remained present in the
building for some amount of time, and that it was remediated.
Gregory Packaging filed this action in July 2012, alleging
that the ammonia
release “resulted in the loss of property
and an interruption of business”
which qualified for coverage
under its property insurance policy.
Compl. ¶ 10. Gregory Packaging alleges that Travelers breached the parties’
insurance contract by rejecting Gregory
Packaging’s claim, id. ¶¶ 18-23,
and seeks a declaratory judgment
that Travelers is obligated to pay for Gregory Packaging’s damages. Id. ¶¶ 14-17. Travelers
disputes Gregory Packaging’s assertions, and indicates
that it denied Gregory Packaging’s insurance claim because
Gregory Packaging did not suffer physical loss or damage
to covered property
and because the loss was subject to a specific
exclusion under the policy’s
terms. Def.’s Opp. 14.
Gregory Packaging now moves for partial summary
judgment on the sole issue of whether
it incurred “direct
physical loss of or damage
to” property. Pl.’s
Mem. 1. Gregory
Packaging argues that “the explosion
made the ammonia refrigeration system inoperable and rendered the Georgia Plant uninhabitable,” thus inflicting direct physical loss of and damage to its property.
Id. at 1, 13. Travelers opposes Gregory Packaging’s motion on multiple
grounds. First, Travelers
disputes that Gregory
Packaging sustained “direct
physical loss of or damage to” property
as those policy
terms are construed under New Jersey
and Georgia law. Id. at
17-25. Advocating for a specific
interpretation of relevant
law, Travelers asserts
that “physical loss or damage”
necessarily involves “a physical change or alteration
to insured property requiring its repair or replacement.” Id.
at 18. Travelers
emphasizes that Gregory
Packaging’s “inability to use the plant . . . as it might have hoped or expected” does not constitute direct physical loss or damage. Id. Second, Travelers argues
that there are genuine disputes
of material fact “that relate
to whether the property suffered
the physical loss or damage alleged.” Def.’s Opp. 25-30. Third, Travelers
contends that partial
summary judgment is inappropriate on the issue of whether Gregory Packaging
sustained direct physical
loss or damage without simultaneously establishing the cause of any loss or damage and resolving other related factual matters.
Id. at 15-17. The Court addresses these arguments.
STANDARD OF REVIEW
Summary judgment is appropriate where “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A factual
dispute between the parties
must be both genuine and material to defeat a motion for summary judgment.
Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 247-48 (1986). A disputed
fact is material
where it would
affect the outcome
of the suit under the relevant substantive law. Id. at 248. A dispute as to a material fact is genuine when a rational trier of fact could return a
verdict for the non-movant. Scott v. Harris, 550 U.S. 372, 380 (2007).
Once the movant has carried
its initial burden
to demonstrate the absence of a genuine
issue of material
fact, the non-movant “must do more than simply show that there is some metaphysical doubt as to the material facts” in question. Scott, 550 U.S. at 380 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)).
Each party must support its position by “citing to particular parts of materials
in the record . . . or showing that the materials
cited do not establish the absence or presence of a genuine
dispute, or that an adverse
party cannot produce
admissible evidence to support the fact.” Fed. R. Civ. P. 56(c)(1).
At this stage, “the judge’s
function is not himself to weigh the evidence and determine the truth of the matter.”
Anderson, 477 U.S. at 249. Where there is a genuine dispute
as to a material fact, the court must view that fact in the light most favorable to the
non-movant. Scott, 550 U.S. at 380.
DISCUSSION
1. There Is No Genuine Dispute that the
Ammonia Release Temporarily Incapacitated Gregory Packaging’s Facility
There is no genuine dispute that the ammonia release on July 20, 2010 rendered Gregory Packaging’s facility physically unfit for normal human occupancy
and continued use until the ammonia was sufficiently dissipated. Travelers admits that there was an ammonia
release from the refrigeration system into the facility, Pl.’s SMF ¶ 11; Def.’s Resp. SMF ¶ 11, and that Gregory Packaging hired Rhino Services to dissipate
the ammonia in the building.
Pl.’s SMF ¶ 15; Def.’s Resp. SMF ¶ 15. Travelers even acknowledges that the purpose of Rhino Services’ remediation work was to reduce the ammonia gas “to reach a safe level for occupancy.” Def.’s Opp. 8.
Beyond the parties’
apparent agreement that the ammonia
rendered the building
temporarily unfit for occupancy and use, Gregory
Packaging has put forth substantial evidence that the ammonia discharge
physically incapacitated its facility. Multiple
witnesses have testified
that the facility was evacuated after the ammonia release because it was
unsafe. Edward Gregory, President of Gregory Packaging, testified that government authorities “evacuated the area for a mile radius” after the incident.
Chesler Decl. ¶ 4, Ex. B at 203. Paul Heerema, Vice President of the firm Gregory Packaging hired to install
the refrigeration system,
testified that “[t]he
fire department took charge
and set up a hot zone, and no one could enter the building.” Id. ¶ 7, Ex. E at 200. Mr. Heerema also stated that “the fire department directed us that they would not allow anyone in the building”
after the incident
occurred or the following morning.
Id. ¶ 7, Ex. E at 125, 128, 200. In a statement which Mr. Gregory, according to his testimony,
wrote two days after the incident, he recounted that “Rick Anthony of Uni-Temp . . . returned to the interior of the freezer
dressed in a safety suit in an effort to direct the fire crew to the proper valves needed to turn off any more leaks.” Cert. of Robert F. Cossolini
(“Cossolini Cert.”) ¶ 4, Ex. C; Chesler
Decl. ¶ 4, Ex. B at 202-04.
A Uni-Temp “Work Order Summary” also indicates that the ammonia
level in the facility was too high for normal human occupancy. The Uni-Temp work order summary states: “on 7-21-10 still
could not get into the building until
the ammonia level
came down in the building.” Cossolini Cert. ¶ 6, Ex. E at
2.
Multiple witnesses have also testified
that Rhino Services
was hired to dissipate the ammonia in order to make the facility safe for occupancy. In his written account of the incident,
Mr. Gregory stated that “the Fire Chief told me that we would need to hire an outside
environmental clean-up service,” which led to Gregory Packaging’s engagement of Rhino
Services for remediation. Cossolini Cert. ¶ 4, Ex. C. Gabriel
Rios, manager of the facility,
testified that Gregory
Packaging “had to air the property because
of the ammonia leak. The vapors. And we hired a company
called Rhino. Rhino was to do the cleanup. . . . Wash down anything with water. They were trying to get rid – they had brought in dry ice, trying to neutralize the stuff inside the
plant. Set up fans and all that.” Cossolini Cert. ¶ 3, Ex. B at 88.
Travelers has not put forth any evidence that contradicts the conclusion that the ammonia
discharge incapacitated Gregory Packaging’s facility until the ammonia was dissipated.
The Ammonia Discharge Inflicted “Direct Physical Loss of or Damage
to” Gregory Packaging’s Facility
Under Either New Jersey or Georgia
Law
Because there is no genuine dispute that the ammonia discharge temporarily incapacitated Gregory
Packaging’s facility, the Court will determine as a matter of law whether the ammonia- induced
incapacitation constituted “direct
physical loss of or damage
to” the facility
within the meaning
of that phrase in the insurance policy.
The phrase “direct physical loss of or damage to” is
not defined by the policy.
Choice of Law
This case invokes
the Court’s diversity
jurisdiction and, as such, the Court must first determine which state’s substantive law applies. Gregory Packaging is headquartered in Newark, New Jersey, but the ammonia
release occurred at its facility
in Georgia. Gregory
Packaging asserts that there
is no conflict between New Jersey and Georgia law regarding the interpretation of insurance contracts and that, under federal court choice of law principles, the Court should apply
New Jersey law to this case. Pl.’s Mem. 6-8. Travelers does not address the choice of law issue.
A federal court applies the choice of law rules of its forum state—here, New Jersey—in order to determine
which state’s law controls in cases under its diversity
jurisdiction. Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 497 (1941). New Jersey applies a two-step choice of law test. P.V.
v. Camp Jaycee, 962 A.2d 453, 460-61 (N.J. 2008). In the first step, the court decides if an “actual
conflict” exists between potentially applicable laws by determining “whether
there is a distinction between them.” Id. at 460; Lebegern v. Forman, 471 F.3d 424, 428-30 (3d Cir. 2006) (internal citations
omitted). If there is no conflict or only a “false conflict,”
where the potentially applicable laws would produce the same result on the particular issue presented, the court avoids the choice of law question and applies New Jersey law. Lebegern, 471 F.3d at 428; Williams v. Stone, 109 F.3d 890, 893 (3d Cir. 1997). If there is an actual conflict,
the court proceeds to the second step and must determine which jurisdiction has the “most significant relationship to the claim.” Camp Jaycee, 962 A.2d at
460.
Since it is possible that either New Jersey or Georgia law could govern this motion,
the Court must first determine whether an actual
conflict exists between
New Jersey and Georgia law.
b. Application of
New Jersey Law
Under New Jersey law, “an insurance policy should be interpreted according
to its plain and ordinary meaning.” Voorhees v. Preferred Mut. Ins. Co.,
607 A.2d 1255, 1260 (N.J. 1992). “When the meaning of a phrase is ambiguous, the ambiguity is resolved in favor of the insured and in line with an insured’s objectively-reasonable expectations.” Id.
(internal citations omitted).
Several courts have construed the terms “physical damage” and “physical
loss or damage” under New Jersey
law to resolve insurance disputes. In doing
so, the Court
of Appeals for the Third Circuit noted that “[i]n ordinary parlance
and widely accepted
definition, physical damage
to property means ‘a distinct,
demonstrable, and physical alteration’ of its structure.” Port
Authority of N.Y. and N.J. v. Affiliated FM Ins. Co.,
311 F.3d 226, 235 (3d Cir. 2002).
While structural alteration provides the most obvious sign of physical
damage, both New Jersey courts
and the Third Circuit have also found that property
can sustain physical
loss or damage without experiencing structural alteration.
In Wakefern Food Corp. v. Liberty Mut. Fire Ins. Co., the New Jersey Appellate Division
considered a case where physical
damage was temporary and non-structural: the dispute turned on whether
an electrical grid had experienced “physical damage” during a blackout.
968 A.2d 724, 727 (N.J. Super. Ct. App. Div. 2009). The Court determined
that the electrical grid “was ‘physically damaged’ because, due to a physical incident
or series of incidents, the grid and its component generators and transmission lines were physically incapable of performing their essential function
of providing electricity.” Id. at 734. The Court acknowledged that there was disputed evidence
that the grid had experienced structural damage to “assorted individual pieces” of equipment, but explicitly rested
its decision on “the loss of function of the system as
a whole.” Id.
The Wakefern court supported its holding
by looking to the Colorado
Supreme Court’s decision
in Western Fire Ins. Co. v. First Presbyterian Church, 437 P.2d 52 (Colo. 1968), which held that a church building’s saturation with gasoline
vapors constituted a “direct physical
loss” when the building could no longer be occupied
or used. Wakefern, 968 A.2d at 735-36. The Wakefern court also relied on other cases
which it described as “likewise accept[ing] the view that ‘damage’ includes loss of function or value.” Wakefern, 968 A.2d at 735-36 (citing
cases). The Wakefern decision indicates that property’s temporary and non-structural loss of function
is recognized as direct physical
loss or damage under New Jersey law.
In Port Authority, the Third Circuit
similarly found that physical contamination of a building
rendering it useless
would constitute physical
loss under New Jersey law. Port Authority, 311 F.3d at 236. Travelers argues that Port
Authority held that physical loss or damage
cannot occur without
physical alteration and urges this Court to adopt its interpretation of the Port Authority holding as the proper enunciation of New Jersey
law.[2] Def.’s Opp. 18-19.
The Court rejects
this invitation because Travelers’ reading of Port Authority contradicts the opinion’s
plain text. The Circuit wrote that if “the presence of large quantities of asbestos in the air of a building is such as to make the structure
uninhabitable and unusable,
then there has been a distinct loss to its owner” which would constitute “physical loss.” Port
Authority, 311 F.3d at 236. The opinion
comports with the New Jersey
Appellate Division’s holding
in Wakefern that
property can be physically damaged,
without undergoing structural alteration, when it loses its essential functionality.
In other jurisdictions, courts considering non-structural property damage claims
have found that buildings rendered
uninhabitable by dangerous
gases or bacteria
suffered direct physical
loss or damage. Applying Pennsylvania law in Motorists Mutual Ins. Co. v. Hardinger, the Third Circuit
found that the bacteria contamination of a home’s water supply
constituted a “direct
physical loss” when it rendered
the home uninhabitable. 131 Fed.Appx. 823, 825-27 (3d Cir. 2005). See also Essex v. BloomSouth Flooring
Corp., 562 F.3d 399, 406 (1st Cir. 2009) (finding that, under Massachusetts law, an unpleasant
odor rendering property unusable constituted physical injury to the property); TRAVCO Ins. Co. v. Ward, 715 F.Supp.2d 699, 709 (E.D.Va. 2010), aff’d, 504 F. App’x. 251 (4th Cir. 2013) (finding
“direct physical loss” where “home was rendered uninhabitable by the toxic gases”
released by defective drywall).
In the present
case, there is no genuine
dispute that the ammonia release
physically transformed the air within Gregory Packaging’s facility so that it contained
an unsafe amount of ammonia
or that the heightened ammonia
levels rendered the facility unfit for occupancy until the ammonia
could be dissipated. The Court finds that the ammonia discharge inflicted “direct physical
loss of or damage to” Gregory Packaging’s facility, as that phrase would be construed
under New Jersey law by the New Jersey Supreme
Court, because the ammonia physically rendered the facility unusable for a period of time.
c. Application
of Georgia Law
The Court must also determine
how this motion would be resolved under Georgia law to discover whether an actual conflict exists between Georgia and New Jersey law.
Under Georgia law, “insurance is a matter of contract,
and the parties to an insurance policy
are bound by its plain and unambiguous terms.” Richards v. Hanover Ins. Co., 299 S.E.2d 561, 563 (Ga. 1983). “Any ambiguities in the contract
are strictly construed against the insurer
as drafter of the document;
any exclusion from coverage sought
to be invoked by the insurer is likewise strictly
construed; and insurance
contracts are to be read in accordance with the reasonable expectations of the insured where possible.” Id. (internal
citations omitted).
Although the Georgia
Supreme Court has not construed
the terms at issue here, the Court of Appeals
of Georgia has held that direct physical
loss or damage occurs when there is “an actual change in insured property then in a satisfactory state, occasioned by accident or other fortuitous event directly upon the property causing
it to become unsatisfactory for future use or requiring
that repairs be made to make it so.” AFLAC
Inc. v. Chubb & Sons, Inc., 581 S.E.2d 317, 319-20 (Ga. Ct. App. 2003) (citing cases). In the case establishing that standard, the court found that AFLAC had not sustained physical
loss or damage because its alleged property
damage was merely a defect
in its computer systems that had “existed
from the time the systems were created by design” and because
AFLAC did not allege that any fortuitous event had changed
the computer systems.
Id. at 320.
There is no apposite Georgia
case dealing with the physical
contamination of a building by harmful gas, but the incident at Gregory Packaging’s facility meets the standard set out in AFLAC. The ammonia discharge
was occasioned by a fortuitous event, whether it was an explosion or worker’s error, which produced an actual change
in the content of the air in Gregory Packaging’s facility. Before the ammonia discharge, the facility was in a satisfactory state for human occupancy and continued build-out, but after the ammonia discharge its state was unsatisfactory and required remediation. The Court finds that Gregory
Packaging would be entitled to partial summary
judgment that the ammonia discharge
caused “physical loss of or damage to” its facility
under Georgia law because there is no genuine dispute that the ammonia release
physically changed the facility’s
condition to an unsatisfactory state needing repair.
Because the Court
finds that Gregory
Packaging would be entitled to partial summary
judgment under either New Jersey or Georgia
law, there is a false conflict in the choice of law. As such,
the Court need not resolve
the choice of law question
and will apply
New Jersey law to decide
this motion. As stated earlier,
the Court finds that the ammonia discharge
inflicted “physical loss of or damage to” Gregory Packaging’s
facility under New Jersey law.
3. No Genuine Dispute
Exists to Preclude the Court from Granting Partial Summary Judgment
Travelers argues that genuine disputes
of material fact preclude the Court from granting Gregory
Packaging’s motion. Def.’s
Opp. 25-30. Gregory
Packaging responds that “Travelers’ disputed
facts are immaterial” because “[i]n this partial summary
judgment motion, there is one material fact: the Georgia
plant was evacuated and rendered temporarily uninhabitable.” Pl.’s Reply 6, ECF No. 50. The Court agrees that the factual disputes Travelers
has identified do not
challenge the central fact necessary to resolve this motion—that the ammonia release
temporarily incapacitated Gregory Packaging’s
facility.
First, Travelers argues that there is a genuine dispute as to whether the facility “suffered
an explosion.” Def.’s Opp. 26. This dispute is immaterial
to the present motion. What matters for this motion is that the ammonia was released,
and the parties do not dispute that it was.
Second, Travelers asserts
that there is genuine dispute
that the refrigeration system in Gregory
Packaging’s facility was rendered inoperable and required repair.[3] Def.’s Opp. 27. While there may be a genuine dispute as to the ammonia
discharge’s impact on the refrigeration system, the Court need not find that the refrigeration system sustained direct physical loss or damage to resolve
Gregory Packaging’s motion.
Because the Court has found that there is no genuine
dispute that the facility itself
was temporarily incapacitated by the ammonia
release and resolves
this motion on that basis, the Court does not address the question of whether the refrigeration system was also damaged. It is sufficient for this motion to find that the facility incurred direct physical
loss or damage.
Third, Travelers says that it disputes that “the plant
was rendered inoperable” after the ammonia
release. Def.’s Opp. 28. But its dispute
does not actually
challenge the fact that the facility was temporarily incapacitated by the ammonia.
Rather, Travelers “assumes
that Plaintiff’s allegation that ‘the plant was rendered
inoperable after the explosion’ is a
reference to the alleged ‘delay’ in the Newnan Facility becoming fully
operational.” Def.’s Opp. 28. Proceeding from this assumption, Travelers’ argument focuses
on whether the ammonia release
delayed the facility’s readiness for juice packaging operations. See Def.’s Opp. 28-29. Any such delay is a separate issue which
does not need to be resolved for the Court to decide this motion.
The Court finds that there is no genuine dispute
precluding the Court from resolving, as a matter
of law, that the ammonia-induced incapacitation constituted “direct
physical loss of or damage to” Gregory Packaging’s facility.
4. Partial Summary Judgment
is Appropriate
Travelers also argues that granting
partial summary judgment
on the issue of physical
loss or damage is inappropriate because establishing physical
loss or damage is not sufficient to determine that Gregory Packaging
is entitled to recover under the insurance
policy. Def.’s Opp. 15-17. Travelers
argues that factual
disputes exist as to whether
any physical damage that did occur arose
from a “Covered Cause of Loss,” as is required
under the policy,
and that it would be imprudent for the Court
to decide the issue of whether physical
loss or damage
occurred in isolation. Id. The Court disagrees. There is no genuine dispute
of material fact that the ammonia discharge caused the physical
incapacitation of the facility, and resolving the issue of physical damage now does not alter the fact that Gregory Packaging must still prove that the damage was caused by or resulted
from a “Covered Cause of Loss” and was not excluded under the policy’s
terms.
CONCLUSION
Gregory Packaging’s motion
for partial summary
judgment is granted.
The Court finds
that Gregory Packaging
incurred “physical loss of or damage to” its Newnan,
Georgia facility when ammonia gas was discharged into the facility’s air on July 20, 2010 and rendered
the facility temporarily unfit for occupancy.
Date: November 25, 2014
s/ William H. Walls___________
United States Senior District Judge
[1] The
issue of whether the physical loss or damage
was caused by or resulted from a
“Covered Cause of Loss,” as required
for coverage under the policy,
is not at issue in this motion.
[2]
This Court’s application of New Jersey law is dictated not by the Third Circuit
but by the Supreme Court of New Jersey. See Gares v. Willingboro Twp., 90 F.3d
720, 725 (3d Cir. 1996). The Third Circuit has directed that “[i]n the absence
of guidance from the state’s highest court, we are to consider decisions of the
state’s intermediate appellate courts for assistance in predicting how the
state’s highest court would rule.” Id.
[3]
Relatedly, Travelers also asserts that there is genuine dispute as to whether
there was an “explosive separation” of pipes in the refrigeration system and as
to whether certain pipes became misaligned. Def.’s Opp. 29-30.