Denying an insurer’s summary motion to dismiss, a New Jersey court ruled that a policyholder was entitled to insurance coverage of a major environmental cleanup, finding that it was not bound by a former parent’s settlement and release of coverage in connection with the cleanup of a different site.

The decision has significant implications for insurance coverage disputes involving former subsidiaries and the authority of named insureds to release claims. The decision stems from Radiac Abrasives Inc.’s claim for coverage of a pollution cleanup in New Jersey that could cost as much as $30 million.

“The court correctly relied upon both the express terms of the settlement agreements, which mandated that only entities under the current control of the signatory could be bound, and prevailing New Jersey law holding that policyholders have independent rights to the insurance policies that cannot be settled away by others without their consent,” stated Cort Malone of Anderson Kill, who represented Radiac.

“The decision upholds favorable law protecting policyholders who are not parties to a settlement by maintaining their independent right to pursue coverage.”

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Radiac Abrasives Inc. v. Hartford Accident & Indemnity Co., et als., Superior Court of New Jersey, Essex County, Aug. 26, 2024, Docket No: ESX-L-005483-20

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