In New Jersey, a property owner affected by a release from an underground storage tank cannot succeed on a private nuisance or trespass action absent demonstration of the tank owner’s intentional, negligent or reckless conduct.  Moreover, neither the tank owner’s insurer’s agreement to remediate the affected property nor the migration of the leaked substance onto the affected property conveys the affected property owner third party beneficiary status such that the property owner can maintain a bad faith action against the insurance provider.  In Ross v. Lowitz, No. A-101-13 (N.J. Aug. 6, 2015), the New Jersey Supreme Court recently issued a decision narrowing the avenues to recovery of property owners affected by a release from a neighboring underground storage tank by clarifying these two rules.

In Ross, plaintiffs, who owned a home affected by the release of fuel oil from a neighbor’s underground storage tank, brought suit against the current and former owners of the neighboring property and their insurance providers.  Plaintiffs discovered the contamination only after having entering into a contract to sell their property. Upon discovery, the prospective buyer rescinded the sale.  Seeking damages related to remediation, loss of use of their home, and the diminution of its value, the plaintiffs alleged private nuisance, trespass, negligence, strict liability, and Spill Act liability against all defendants and breach of the covenant of good faith and fair dealing against the insurance providers, despite not being named insureds on the insurance contracts.

After plaintiffs brought suit, the defendant insurance providers arranged for remediation of the plaintiffs’ property and compensated plaintiffs for their associated out-of-pocket losses, and the New Jersey Department of Environmental Protection later inspected the site and issued a No Further Action Letter.  With remediation having been satisfactorily completed, the plaintiffs dropped their strict liability and Spill Act claims that sought only remediation costs.  The lower courts entered summary judgment in favor of defendants on plaintiffs’ remaining claims, despite their seemingly sympathetic situation.

Reviewing the dismissal of plaintiffs’ private nuisance and trespass claims, the New Jersey Supreme Court determined that the maintenance of an underground fuel oil storage tank was not an “unreasonably dangerous” activity that would warrant strict liability and that imposing liability for passive migration of contaminants from an underground tank or under Section 839 of the Restatement 2d of Torts would be improper absent some demonstration of the storage tank owners’ negligent, reckless, or intentional misconduct.  With no evidence of such misconduct on the record, the Court upheld the dismissal of the plaintiffs’ nuisance and trespass claims.

The Court also upheld the lower courts’ dismissal of the plaintiffs’ claims against the insurers.  The Court held that the plaintiffs were not third-party beneficiaries of the neighbors’ insurance policy or the insurance companies’ agreement to remediate their property because they were not named insureds nor did the insurance companies intend that they be beneficiaries to the contracts.  Finally, the Court ruled that the mere migration of fuel oil from the neighbors’ storage tank did not convey third-party beneficiary status on the plaintiffs. 

In the end, though plaintiffs were not responsible for remediation costs of their property, their further recovery under private nuisance, trespass, or third-party beneficiary claims was barred.

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