SDV Insights

Policy Language Matters: New Jersey Court Bars Cleanup Coverage Under Broad Policy Terms

The New Jersey Appellate Division in Handy & Harman v. Beazley USA Services, Inc., provided clarity regarding the interpretation of the Prior or Pending Litigation Exclusion in a site-specific environmental liability insurance policy. 

In Handy & Harman, the Appellate Division affirmed the trial court’s determination that the insurer was not required to defend or indemnify its policyholder, a metal etching company. The court held that the Prior or Pending Litigation Exclusion (which applied to prior litigation and prior claims) barred coverage for natural resource damages sought in the current litigation because (1) an Administrative Consent Order (“ACO”) is a claim; and (2) the underlying lawsuit was based on the same environmental contamination as addressed in the ACO.1

Handy & Harman operated a metal etching company in Montvale, New Jersey, from 1984-1985. In 1985, Handy & Harman decided to sell the Montvale property where it conducted its metal etching business. Metal etching uses dangerous chemicals like trichloroethylene (“TCE”). Prior to the sale, Handy & Harman was required to set up pre-closure approved cleanup and detoxification plans. The cleanup plans required approval by the New Jersey Department of Environmental Protection (“NJDEP”) pursuant to the Environmental Cleanup Responsibility Act (“ECRA”). 

In 1987, Handy & Harman entered into an ACO with NJDEP to implement the requirements described in ECRA. Essentially, the ACO was a government order requiring compliance with its terms and local statutes. The ACO, among other things, required Handy & Harman to submit a Sampling Plan to NJDEP. In 1990, Handy & Harman provided NJDEP with a Revised Sampling Plan and Cleanup Plan. The plans included Handy & Harman’s efforts to remove contaminated soil, perform geological surveys, and install wells. 

In 2017, Handy & Harman purchased a site-specific environmental liability insurance policy (the “Policy”), from Beazley which covered Handy & Harman’s Montvale property from December 2017 – 2020.

In December 2019, NJDEP filed a lawsuit against Handy & Harman seeking reimbursement for the costs and damages New Jersey incurred and would continue to incur because of the discharge of hazardous materials at the Property in Montvale.2  The complaint alleged that TCE leaked into the groundwater, causing contamination and requiring the State to install filtration systems to supply clean water for public consumption. As a result, NJDEP sought “reimbursement for all cleanup and removal costs and damages it has incurred, including lost value and reasonable assessment costs for any natural resource damages.”3

Handy & Harman put Beazley on notice of the complaint and sought a defense and indemnification. Beazley issued two reservation of rights letters, citing the Policy’s Prior or Pending Litigation Exclusion and Specified Coverage and Contamination Exclusion. Subsequently, Handy & Harman filed a complaint against Beazley alleging breach of contract and sought declaratory relief. Applying New York law, the trial court granted Beazley's motion for summary judgment and determined, based on the Policy's plain language and structure, that the Prior or Pending Litigation Exclusion barred coverage.

To determine if the Prior or Pending Litigation Exclusion applied, the Appellate Division, was required to determine whether the damages alleged by NJDEP against Handy & Harman arose out of a “claim, demand, or legal proceeding against the policyholder or involved the covered property.” Specifically, the applicability of the Prior or Pending Litigation Exclusion depended on whether the NJDEP lawsuit and the ACO arose out of the same facts. To make that determination, the Court looked to the relevant language in the exclusion which states in relevant part, “this Insurance does not apply to . . . Cleanup Costs, Damages, and Claims . . . arising out of or resulting from any . . . cause of action, Claim . . . demand. . . or litigation . . . against . . . any Insured or involving any Covered Location; . . . based on substantially the same matters as alleged in the pleadings of such prior or pending [litigation] against . . . any Insured or involving any Covered Location.”4

The Policy's definition of “claim” was crucial to the Court’s determination of whether the Prior or Pending Litigation Exclusion applied. The Policy defined a “claim” as "1. a written demand received by an [i]nsured for money or services or alleging liability or responsibility, including, but not limited to service of suit or institution of arbitration proceedings; or . . . 2. a court or government agency order or government or regulatory action filed against the [i]nsured.”5  

The Court held that the ACO is a “claim” under both definitions. First, the ACO is a “claim” because it is a “written demand.” The ACO demanded Handy & Harman to undergo continuing remedial activities. In fact, because the sale of the Montvale Property could not have happened without the completion of the remediation demonstrates how mandatory the ACO process was.6   Second, the ACO is a government agency order with the force of law behind it, the fact that Handy & Harman voluntarily entered into the ACO process did not diminish the ACO’s force. The ACO was filed within the Agency, and nothing in the definition requires the ACO to be filed in court to be a “claim.” Essentially, the Court concluded that the ACO was a “demand” because Handy & Harman faced significant penalties for noncompliance.  

Next, the court determined that the “NJDEP suit is ‘based on substantially the same matters as alleged in the pleadings’” of the ACO.8 Specifically, the NJDEP suit and ACO arose out of Handy & Harman’s contamination and pollution, which caused natural resource damages. Therefore, the Court found that the Prior or Pending Litigation Exclusion applied, and Beazley was not required to indemnify Handy & Harman.

How Handy & Harman Might Affect Coverage for Policyholders  

Ultimately, the determination in Handy & Harman does not mean that every government agency order will be a claim under the Prior or Pending Litigation Exclusion. However, policyholders should be mindful of the takeaway from Handy & Harman which is that policy language is a determinative factor in obtaining coverage. In Handy & Harman the broad definition of “claim” and the broad language in the Prior or Pending Litigation Exclusion left Handy & Harman without coverage. By way of example, a court could hold a written notice or demand of a loss on a construction project is a “claim” as long as it has the “force of law.” Moreover, policyholders who operate businesses that utilize harmful chemicals, requiring environmental policies, should be aware that a court may construe government orders or similar demands as a “claim.”

As a result of Handy & Harman, policyholders must be aware that an administrative consent order with the force of law could constitute a “claim” under the Prior or Pending Litigation Exclusion, depending on the definitions of “claim” and the wording of the exclusion in the policy.

For more information on this topic, contact Stacy M. Manobianca at

*Special thanks to Shelby M. Ross, Law Clerk, for help on this article. 

See Handy & Harman v. Beazley USA Servs., Inc., No. A-2068-20, 2023 WL 2317188, at *11, 16 (N.J. Super. Ct. App. Div. Mar. 2, 2023). 
2  Id. at *2 (NJDEP alleged violations of “the New Jersey Spill Compensation and Control Act . . . the New Jersey Water Pollution Control Act . . . and the common law”). 
3 Id. at *3.
4 Id. (alteration in original).
5 Id. at *4-5.
6 Id. at *5.
7 Id
8 Id. at *6. 


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