Property owners who suffer damages as a result of contamination must be aware of time limitations to recover damages.   A New Jersey appellate court recently upheld the rule that, unlike recovery of cleanup costs in contribution actions under the New Jersey Spill Compensation and Control Act, recovery of other damages under tort theories, such as lost sales, lost rental values and the like, remain subject to the six-year statute of limitations.  In 320 Assocs., LLC v. New Jersey Natural Gas Co., (A-1831-16T2) (June 29, 2018), the Appellate Division, upheld a lower court’s decision dismissing Plaintiff’s claims for money damages as untimely.

The owner of commercial property located near a New Jersey Natural Gas property sued the gas company for damages resulting from coal tar that had migrated onto the owner’s property.  The owner asserted common law claims against the gas company for negligence, per se negligence, strict liability, nuisance and trespass.  It sought damages for a lost sale and lost rental value as well as an order mandating the gas company to cleanup up both properties.

The Appellate Division determined that, since Plaintiff discovered the contamination in 2008, the six year statute of limitations barred all but one claim.  Only the nuisance survived for further fact finding because nuisance is considered ongoing so long as the nuisance can be abated.

The case is a reminder that property owners with common law claims need to be aware that, while environmental statutes permit claims for cleanup and cleanup costs without time limitations, other damages are not recoverable if they are asserted after the statutory limitations periods.

The New Jersey Supreme Court recently clarified the elements needed to sustain a claim for nuisance and trespass in the environmental context.  Generally, plaintiffs assert claims under common law such as nuisance and trespass to recover non-cleanup costs associated with environmental contamination.  In Ross v. Lowitz, the defendant homeowners tested an underground storage tank (“UST”) on their property and discovered that the UST leaked.  They subsequently notified their insurance companies.  The contamination on the defendant homeowners’ property migrated to the plaintiffs’ adjacent property.  The insurance companies funded the cleanup and the New Jersey Department of Environmental Protection eventually issued a No Further Action Letter for the cleanup.  However, as a result of the contamination, a prospective purchaser of the plaintiffs’ house cancelled the contract of sale.

The plaintiffs filed suit against defendant homeowners and asserted among other claims, nuisance and trespass.  The plaintiffs also sued the defendant homeowners’ insurance companies asserting that they were a third party beneficiary under the insurance policies.  The plaintiffs sought damages for alleged loss of use of their home and diminution in the value of their property.  The defendants moved for summary judgment and the trial court dismissed the claims against the insurance company and plaintiffs’ claims under the theories of nuisance and trespass.  The appellate division affirmed the trial court’s determination.

The New Jersey Supreme Court in affirming the lower court’s decision, clarified the necessary elements to maintain a cause of action under common law nuisance and trespass.  The Court reviewed the Restatement (Second) of Torts to determine the validity of plaintiffs’ nuisance and trespass claims.  In addressing the nuisance claim, the Court noted that under Section 822 of the Restatement, the plaintiffs must show that the discharge of contaminants from the homeowners’ UST was either negligent or the result of an abnormally dangerous activity.  The Court noted that the storage of home heating oil in a UST is not an abnormally dangerous activity.  The Court further found no fault on behalf of the defendant homeowners that would support a claim for nuisance.

The Court made a similar determination regarding plaintiffs’ trespass cause of action.  Again relying on the Restatements, the Court concluded that to maintain a cause of action under trespass, the plaintiffs must show that defendant homeowners were at fault.  Because the homeowners acted in a reasonable manner in having the UST tested and then contacting their insurance companies upon finding that the UST leaked, the Court affirmed the dismissal of the plaintiffs’ trespass and nuisance claims.

In addressing plaintiffs’ claim against the homeowners’ insurance company, the Court noted that in order for a third party to be found a beneficiary to a contract, the contracting parties must have expressed an intent to have the third party a beneficiary of the contract when they entered into their agreement.  The Court found that there was no evidence that the parties intended the plaintiffs to be third-party beneficiaries to the insurance policy.  The Court ruled that the trial court properly dismissed plaintiffs’ claims against the insurance companies.

The take away from this case is that the mere discharge of contamination that impacts the property of another is insufficient to support claims under common law nuisance and trespass.  There must also be a showing that the persons responsible for the discharge of contaminants were at fault in allowing the discharge to occur.

The Appellate Division recent held that the storage of home heating oil in an underground storage tank is not an abnormally dangerous activity.  In Ross v. Lowitz, the plaintiffs, John and Pamela Ross, owned property that was contaminated by heating oil that migrated on to their property from an adjacent property that was owned by defendant, Lowitz, and previously owned by defendant, Ellman.  Both individual defendants had insurance.

Prior to purchasing her property from Ellman, Lowitz had the underground heating oil tank (“UST”) tested, which did not detect any leaks.  Lowitz also maintained heating oil supply contracts with heating oil vendors who never reported any problems with the UST.

In 2003, Lowitz entered an agreement to sell her property.  Prior to closing the sale, the UST was tested again, which revealed a leak.  The sale did not go forward.

In 2004, plaintiffs purchased their property, which was adjacent to Lowitz’s property.  In 2007, plaintiffs signed a contract to sell their property and at about the same time were informed that contamination from Lowitz’s property had migrated on to their property.  Consequently, the plaintiffs’ buyers canceled the contract.

Plaintiffs filed a lawsuit against the individual defendants (Ellman and Lowitz) and their insurance companies seeking damages.  The plaintiffs alleged negligence, strict liability, Spill Act liability, trespass, nuisance and breach of the covenant of good faith and fair dealing against the insurance companies.

The trial court entered an Order providing relief to the plaintiffs during the cleanup, which included payment of plaintiffs’ carrying cost on their mortgage and repairing certain damage to plaintiffs’ property.  The cleanup of the contamination was eventually completed and the New Jersey Department of Environmental Protection issued a no further action letter.  The cleanup was paid entirely by the defendants’ insurance companies.  Because the cleanup was completed, plaintiffs dismissed their claims under the Spill Act and the common law theory of strict liability.

As to the remaining claims, the defendants filed motions for summary judgment, which were granted by the trial court.  Plaintiffs appealed, and the Appellate Division held that liability for private nuisance and trespass is not imposed without proof of some fault, i.e., negligence, or an intentional or hazardous activity requiring a higher standard of care.  The Court further observed that strict liability is only applicable where the injury was caused by abnormally dangerous or intentional conduct.

Although the strict liability claim had been dismissed, the Court analyzed whether strict liability could be imposed under common law theories of nuisance or trespass.  The Court concluded that a homeowner’s use of an underground storage tank for storing home heating oil is not an abnormally dangerous activity for which strict liability may be imposed.  The Court further held that the individual defendants acted diligently and reasonably to maintain the USTs and that the discharge of heating oil was not the result of defendants’ negligent or intentional acts.  As such, the Court affirmed the dismissal of plaintiffs’ negligence, nuisance and trespass claims.

As to the insurance company defendants, the Appellate Division also affirmed the trial court’s decision that there was no basis as a matter of law for plaintiffs to assert direct claims against the defendant insurance companies.  Moreover, the Court determined that plaintiffs were not third party beneficiaries of the insurance policies, which would have entitled them to make a direct claim against the policies.