Continental Insurance Company v. Honeywell International, Inc.

Annotate this Case

This appeal involved questions about the insurance coverage available to defendant Honeywell International, Inc. (Honeywell) for thousands of bodily-injury claims premised on exposure to brake and clutch pads (friction products) containing asbestos. The New Jersey Supreme Court granted certification to address two issues: (1) whether the law of New Jersey or Michigan (the headquarters location of Honeywell’s predecessor when the disputed excess insurance policies were issued) should control in the allocation of insurance liability among insurers for nationwide products-liability claims; and (2) whether it was error not to require the policyholder, Honeywell, to contribute in the allocation of insurance liability based on the time after which the relevant coverage became unavailable in the marketplace (that is, since 1987). The Supreme Court determined New Jersey law on the allocation of liability among insurers applied in this matter, and the Court set forth the pertinent choice-of-law principles to resolve this dispute over insurance coverage for numerous products-liability claims. Concerning the second question, on these facts, the Court also affirmed the determination to follow the unavailability exception to the continuous-trigger method of allocation set forth in Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437 (1994).

SYLLABUS

This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the
Clerk for the convenience of the reader. It has been neither reviewed nor approved by the
Court. In the interest of brevity, portions of an opinion may not have been summarized.)

Continental Insurance Company v. Honeywell International, Inc. (A-21-16) (078152)

Argued October 24, 2017 -- Decided June 27, 2018

LaVECCHIA, J., writing for the Court.

This appeal involves questions about the insurance coverage available to defendant
Honeywell International, Inc. (Honeywell), a New Jersey based corporation, for thousands of
bodily-injury claims premised on exposure to brake and clutch pads (friction products)
containing asbestos. The Court granted certification to address two issues. First, whether the
law of New Jersey or Michigan (the headquarters location of Honeywell’s predecessor when
the disputed excess insurance policies were issued) should control in the allocation of
insurance liability among insurers for nationwide products-liability claims. Second, whether
it was error not to require the policyholder, Honeywell, to contribute in the allocation of
insurance liability based on the time after which the relevant coverage became unavailable in
the marketplace (that is, since 1987).

The Bendix Corporation (Bendix) -- a corporate predecessor to defendant Honeywell
-- for many years manufactured and sold friction products that contained asbestos. Bendix
stopped using asbestos in its friction products in 2001, having continued to manufacture the
items even after 1987 when insurance for asbestos-related claims for such products ceased to
be available in the marketplace. In 2000, Continental Insurance Company (Continental)
(which wrote many primary insurance policies for Bendix during the relevant years), and
related companies, commenced this action seeking declaratory relief concerning the rights
and obligations associated with insurance coverage for the asbestos-related bodily injury
claims filed against Honeywell as a corporate successor to Bendix.

The choice-of-law issue: Bendix was incorporated in 1929 under the laws of the
State of Delaware. Aspects of its business took place in different states. Between 1969 and
1983, Bendix situated its executive headquarters, including its insurance office, in Michigan;
another central office was in New York. Bendix also had significant contacts with New
Jersey. Until 1973, Bendix’s largest center of operations and payroll was in New Jersey.
Honeywell is the corporate successor to Bendix. Honeywell’s headquarters and principal
place of business have always been located in Morristown, New Jersey. Since 1983, all
insurance operations for Bendix and its successors have been located in New Jersey. The
excess insurance policies at issue here were all brokered, issued, and delivered to Bendix in
Michigan. None contain a choice-of-law provision governing the allocation issue. In 2006
the trial court held that New Jersey insurance-allocation law would apply in this matter.

1
The allocation issue: Under New Jersey’s current law on allocation of liability
among insurers, an insured is not forced to assume responsibility in allocation during the
insurance coverage block of policies for years in which insurance is not reasonably available
for purchase. Owens-Illinois, Inc. v. United Ins. Co.,
138 N.J. 437, 478-79 (1994). Travelers
Casualty & Surety Company (Travelers) (taking the lead in argument) and St. Paul Fire and
Marine Insurance Company (St. Paul), both excess insurers, argued that the coverage block
should run until the year in which Honeywell, as the successor to Bendix, ceased
manufacturing the friction products -- 2001. Honeywell maintained that the coverage block
should end in the 1986-87 period when first primary (1986) and then excess (April 1, 1987)
insurance ceased to be available. Applying Owens-Illinois’s approach to allocation of risk to
claims arising exclusively from pre-1987 initial exposure, the court determined in 2011 that
the unavailability of commercial insurance should end the coverage block of insurance.

The trial court entered a final judgment in 2013, after which Travelers and St. Paul
jointly appealed the trial court’s 2006 order, which granted Honeywell’s partial summary
judgment motion and applied New Jersey allocation law, and the 2011 order, which granted
Honeywell’s partial summary judgment motion and held that Honeywell had no allocation
responsibility for pre-1987 initial exposure claims because after 1987 it was not able to
obtain insurance coverage for asbestos claims. The Appellate Division affirmed but required
a remand not pertinent to this appeal. The Court granted certification.
228 N.J. 437 (2016).

HELD: New Jersey law on the allocation of liability among insurers applies in this matter, and
the Court sets forth the pertinent choice-of-law principles to resolve this dispute over insurance
coverage for numerous products-liability claims. Concerning the second question, on these
facts, the Court also affirms the determination to follow the unavailability exception to the
continuous-trigger method of allocation set forth in Owens-Illinois.

1. The first step in a conflicts analysis is to decide whether there is an actual conflict
between the laws of the states with interests in the litigation. New Jersey law employs the
continuous-trigger doctrine, as initially adopted in Owens-Illinois,
138 N.J. 437. Given that
the continuous-trigger theory would implicate multiple insurance policies, the Court also
adopted a methodology for allocating liability among those policies. Id. at 474-75. When
determining an insurer’s liability, a court is to consider both the insurer’s time on the risk and
the degree of risk that insurer assumed. Ibid. Several policy rationales were at work in the
Owens-Illinois approach. See id. at 472-76. The Court emphasized that the theory
underlying insurance is risk allocation, id. at 472, and that an insurance allocation scheme
that spreads costs throughout the industry and promotes an efficient use of resources
translates to more money available to respond in the event of disease and damage, id. at 478.
Michigan utilizes a different allocation method. In Arco Industries Corp. v. American
Motorists Insurance Co.,
594 N.W.2d 61, 69 (Mich. Ct. App. 1998), aff’d by an equally
divided court,
617 N.W.2d 330 (Mich. 2000), the Michigan Court of Appeals specifically
considered and rejected the Owens-Illinois approach, concluding that policy considerations
weighed in favor of adopting the time-on-the-risk method. A substantive difference
separates the New Jersey and Michigan legal approaches and policy considerations here, and
so the Court must engage in a choice-of-law analysis. (pp. 30-37)
2
2. The Court stated in State Farm Mutual Automobile Insurance Co. v. Estate of Simmons
that “the law of the place of the contract ordinarily governs the choice of law because this
rule will generally comport with the reasonable expectations of the parties . . . and will
furnish needed certainty and consistency in the selection of the applicable law.”
84 N.J. 28,
37 (1980). In Simmons, the Court relied on § 193 of the Restatement (Second) of Conflict of
Laws (Am. Law Inst. 1971) (Restatement). Id. at 35-36, 57. Since Simmons, the Court has
discussed the role of two other pertinent Restatement provisions. Section 188 of the
Restatement generally addresses conflicts-of-law determinations in contract settings where
the parties have not made an effective choice of law. Section 6 of the Restatement sets forth
the factors that are relevant in a conflicts determination when there is no local statutory
directive controlling the issue. In Gilbert Spruance Co. v. Pennsylvania Manufacturers’
Ass’n Insurance Co., the Court considered choice of law regarding insurance coverage in the
context of a mass tort and noted that, when determining the conflicts-of-law rule to govern
casualty-insurance contracts, Restatement § 193 usually is initially consulted but that
Restatement §§ 188 and 6 are analytically more appropriate.
134 N.J. 96, 97, 104 (1993).
Courts have found it “tempting” to extract from Spruance a “bright-line rule.” The Court
clarified in Pfizer, Inc. v. Employers Insurance that “there is no way to avoid a careful site-
specific determination, made upon a complete record,” and that, when the risk is “to some
degree transient,” a court must use the Restatement § 6 factors in its analysis.
154 N.J. 187,
197 (1998). Although condensed and reframed into four inquiries, the Pfizer analysis
nevertheless remained tethered to the section 6 factors. (pp. 37-46)

3. In a contract dispute over insurance allocation for nationwide products liability claims
asserting bodily injury due to asbestos exposure, neither Restatement § 193 nor Simmons
provides the proper starting point. The conflicts analysis here should center on Restatement
§§ 188 and 6, as the later decisions in Spruance and Pfizer have taught. With respect to the
§ 188 contacts, not all are of equal importance or value in this fact-specific inquiry. Two
strong considerations under § 188, applied to this matter, combine to point toward New
Jersey. Here, the place of performance, § 188(c), and the domicile, residence, and places of
incorporation and of business of the parties, § 188(e), all point to New Jersey. The latter
takes into account enduring characteristics and deserves to be a starting point in the analysis.
Further, heavy weight must be given to the nature of the insured risk and its site. New Jersey
is the longstanding domicile of the insured in this litigation (since 1983). Turning to the
Restatement’s factors in section 6, helpfully condensed in Pfizer, the question is whether
New Jersey’s relationship with the case is sufficiently significant to warrant application of
New Jersey law. The first inquiry described in Pfizer consolidates several § 6 factors and
asks, simply, whether application of the competing states’ laws would advance the policy
interests that the law was intended to promote. The second Pfizer factor focuses on whether
application of a competing state’s law would frustrate the policies of other states. The third
factor considers the interests of the parties, and the contacts outlined in Restatement § 188
the come to the fore. Finally, courts look at the interests of judicial administration under the
last Pfizer factor, which asks “what choice of law works best to manage adjudication of the
controversy before the court.”
154 N.J. at 199. Applying those inquiries, conflicts-of-law
principles favor application of New Jersey allocation law in the present dispute over liability
among insurers and affirms the Appellate Division on the first issue. (pp. 46-54)
3
4. The continuous-trigger and related unavailability exception theories for allocation of
insurance liability have been recognized and applied in New Jersey since Owens-Illinois.
The Court determined to use that method of allocation of liability, finding it superior by
virtue of (1) encouraging the acquisition of insurance and spreading costs throughout the
industry; (2) promoting the efficient use of insurance resources to make more money
available to respond in catastrophic circumstances; (3) compelling insurers to minimize their
costs; and (4) advancing principles of simple justice.
138 N.J. at 472-78. The continuous-
trigger method assumes the availability of insurance and incorporates an unavailability
exception. Courts have applied the “unavailability exception,” in accordance with Owens-
Illinois, to require an insured to share in an allocation of liability under the continuous-
trigger doctrine only when it foregoes purchasing available insurance. (pp. 54-55)

5. St. Paul and Travelers ask the Court to create an equitable exception to the unavailability
rule, whereby corporations that continue to manufacture products after insurance becomes
unavailable for those products would be deprived of the insurance coverage they purchased
prior to that unavailability. The Court has affirmed that the continuous-trigger theory of
liability is the law of New Jersey multiple times since Owens-Illinois. That theory holds
insurers responsible for the losses that actually occur on their watch, using a formula that
approximates a scientific assessment of the amount of injury, even if the actual injury
manifests later. Clearly, the law on allocation methodology differs among the states. No
doubt, legitimate policy reasons may have led sister courts to reach diverse conclusions. In
Owens-Illinois the Court acknowledged that “[i]f, after experience, we are convinced that our
solution is inefficient or unrealistic, we will not hesitate to revisit” the allocation paradigm
with its continuous-trigger and unavailability doctrines.
138 N.J. at 478. This appeal,
however, does not present a compelling vehicle to reconsider New Jersey precedent on
allocation. None of the initial asbestos exposures, on which claims Honeywell is seeking
insurance coverage, occurred after insurance became unavailable. Although the disputed
policies involved in this appeal concern excess insurance, they are occurrence policies. This
case simply does not present facts on which to consider abandoning the unavailability
exception, let alone whether to create a novel equitable exception to that exception. Indeed,
the basic policy objectives of Owens-Illinois are all served by affirming the judgment as to
the coverage block and moving the case to closure. (pp. 55-64)

AFFIRMED.

JUSTICE ALBIN, dissenting in part, expresses the view that, as applied here, the
judicially created doctrine known as the “unavailability exception” gives a corporation a free
pass if it continues to expose workers to extremely dangerous products after insurance
coverage becomes unavailable and stresses that equity demands that a corporation that
continues to manufacture a dangerous product without insurance become the ultimate insurer
for its actions. Justice Albin concurs in the Court’s conflict-of-law analysis and resolution.

CHIEF JUSTICE RABNER and JUSTICES FERNANDEZ-VINA, SOLOMON, and
TIMPONE join in JUSTICE LaVECCHIA’s opinion. JUSTICE ALBIN filed an
opinion, dissenting in part. JUSTICE PATTERSON did not participate.
4
SUPREME COURT OF NEW JERSEY
A-
21 September Term 2016
078152

CONTINENTAL INSURANCE
COMPANY, FIDELITY & CASUALTY
COMPANY OF NEW YORK,
COMMERCIAL INSURANCE COMPANY
OF NEWARK, N.J., and COLUMBIA
CASUALTY COMPANY,

Plaintiffs,

HONEYWELL INTERNATIONAL, INC.
(f/k/a ALLIEDSIGNAL, INC.,
successor to BENDIX AVIATION
CORPORATION and BENDIX
CORPORATION),

Defendant-Respondent,

and

ST. PAUL FIRE AND MARINE
INSURANCE COMPANY,

Defendant-Appellant,

and

AFFILIATED FM INSURANCE
COMPANY, ALLSTATE INSURANCE
COMPANY, AMERICAN HOME
ASSURANCE COMPANY, AMERICAN
INSURANCE COMPANY, CALIFORNIA
UNION INSURANCE COMPANY,
CENTURY INDEMNITY COMPANY,
COMMERCIAL UNION INSURANCE
COMPANY as successor to
EMPLOYERS LIABILITY ASSURANCE
CORPORATION, LTD., EMPLOYERS
INSURANCE OF WAUSAU,
FIREMAN’S FUND INSURANCE
COMPANY, GRANITE STATE

1
INSURANCE COMPANY, GREAT
AMERICAN INSURANCE COMPANY,
HOME INSURANCE COMPANY,
INSURANCE COMPANY OF NORTH
AMERICA, NATIONAL UNION FIRE
INSURANCE COMPANY OF
PITTSBURGH, PA, NORTH RIVER
INSURANCE COMPANY, TRAVELERS
INDEMNITY COMPANY,
UNDERWRITERS AT LLOYDS LONDON
and CERTAIN LONDON MARKET
COMPANIES, including ANGLO
SAXON INSURANCE ASSOC. LTD.,
DOMINION INSURANCE COMPANY,
DRAKE INSURANCE COMPANY,
EAGLE STAR INSURANCE COMPANY,
INSTITUTE OF LONDON
UNDERWRITERS, LONDON &
EDINBURGH INSURANCE COMPANY
LTD., PRUDENTIAL ASSURANCE
COMPANY LTD., SOUTHERN
INSURANCE COMPANY, and WORLD
AUXILIARY INSURANCE CORP.,
LTD.,

Defendants,

and

HONEYWELL INTERNATIONAL, INC.
(f/k/a ALLIEDSIGNAL, INC.,
successor to BENDIX AVIATION
CORPORATION and BENDIX
CORPORATION),

Defendant/Third-Party
Plaintiff-Respondent,

TRAVELERS CASUALTY & SURETY
COMPANY (f/k/a AETNA CASUALTY
& SURETY COMPANY),

Third-Party Defendant-
Appellant,

2
and

AIU INSURANCE COMPANY,
AMERICAN CENTENNIAL INSURANCE
COMPANY, ASSOCIATED
INTERNATIONAL INSURANCE
COMPANY, CENTRE INSURANCE
COMPANY (f/k/a LONDON
GUARANTEE AND ACCIDENT
COMPANY OF NEW YORK),
CONTINENTAL CASUALTY COMPANY,
THE CONTINENTAL INSURANCE
COMPANY as successor in
interest to HARBOR INSURANCE
COMPANY (f/k/a HARBOR
INSURANCE COMPANY), EVEREST
REINSURANCE COMPANY (f/k/a
PRUDENTIAL REINSURANCE
COMPANY), EXECUTIVE RISK
INDEMNITY INC. (f/k/a
AMERICAN EXCESS INSURANCE
COMPANY), FEDERAL INSURANCE
COMPANY, FIRST STATE
INSURANCE COMPANY, FREMONT
INDEMNITY COMPANY (f/k/a
INDUSTRIAL INDEMNITY
COMPANY), GENERAL REINSURANCE
CORPORATION, HARTFORD
ACCIDENT & INDEMNITY COMPANY,
INTERNATIONAL INSURANCE
COMPANY (f/k/a INTERNATIONAL
SURPLUS LINES INSURANCE
COMPANY), LEXINGTON INSURANCE
COMPANY, MT. MCKINLEY
INSURANCE COMPANY (f/k/a
GIBRALTAR CASUALTY COMPANY),
MUTUAL FIRE, MAINE & INLAND
INSURANCE COMPANY, ROYAL
INDEMNITY COMPANY, THE TOKIO
MARINE & FIRE INSURANCE
COMPANY, LTD., TWIN CITY FIRE
INSURANCE COMPANY, UTICA
MUTUAL INSURANCE COMPANY,
WESTPORT INSURANCE COMPANY
(f/k/a PURITAN INSURANCE
COMPANY), and CERTAIN LONDON
MARKET COMPANIES, including

3
ACCIDENT & CASUALTY INSURANCE
COMPANY, ALBA GENERAL
INSURANCE COMPANY (f/k/a ALBA
GENERAL INSURANCE COMPANY
LIMITED), AVIATION & GENERAL
INSURANCE COMPANY LIMITED,
AXA INSURANCE PLC (f/k/a
PROVINCIAL INSURANCE PUBLIC
LIMITED COMPANY), THE BRITISH
AVIATION INSURANCE COMPANY
LIMITED, BRITISH LAW
INSURANCE COMPANY LIMITED,
BRITISH RESERVE INSURANCE
COMPANY LIMITED, BRITISH
TRADERS INSURANCE COMPANY
LTD., C.A.M.A.T. INSURANCE
COMPANY LIMITED, C.F.A.U.,
CONTINENTAL ASSURANCE COMPANY
OF LONDON, LTD., CORNHILL
INSURANCE PUBLIC LIMITED
COMPANY (f/k/a CORNHILL
INSURANCE COMPANY LIMITED),
EDINBURGH ASSURANCE COMPANY
LTD., EDINBURGH INSURANCE
COMPANY LIMITED, EDINBURGH
NO. 2 GROUP, ELVIA SWISS
INSURANCE COMPANY (f/k/a
HELVETIA ACCIDENT INSURANCE
COMPANY LIMITED), EXCESS
INSURANCE COMPANY LIMITED,
FIDELIDADE INSURANCE COMPANY
OF LISBON, GE SPECIALTY
INSURANCE (UK) LIMITED (f/k/a
THREADNEEDLE INSURANCE
COMPANY LIMITED), GENERAL
INSURANCE COMPANY HELVETIA
LIMITED, GROUPAMA INSURANCE
COMPANY LIMITED (f/k/a
MINISTER INSURANCE COMPANY
LIMITED), HELVETIA INSURANCE
COMPANY LTD., HELVETIA SWISS
INSURANCE COMPANY LIMITED
(f/k/a HELVETIA ACCIDENT
SWISS INSURANCE COMPANY),
IRON TRADES INSURANCE COMPANY
LIMITED (f/k/a IRON TRADES
MUTUAL INSURANCE COMPANY

4
LIMITED), LA MINERVE
INSURANCE COMPANY LIMITED,
LOMBARD MARINE & GENERAL
INSURANCE COMPANY LTD.,
LONDON & EDINBURGH GENERAL
INSURANCE COMPANY, LONDON &
OVERSEAS AVIATION A.C., MOTOR
UNION INSURANCE COMPANY
LIMITED, NATIONAL CASUALTY
COMPANY, NATIONAL CASUALTY
COMPANY OF AMERICA, THE NEW
INDIA ASSURANCE COMPANY
LIMITED, PHOENIX ASSURANCE
PUBLIC LIMITED COMPANY,
PHOENIX AVIATION INSURANCE
COMPANY LIMITED, PHOENIX
INSURANCE COMPANY LTD., RIVER
THAMES INSURANCE COMPANY
LIMITED, ROAD TRANSPORT &
GENERAL INSURANCE CO. LTD.,
ROYAL SCOTTISH ASSURANCE PLC
(f/k/a THE ROYAL SCOTTISH
INSURANCE COMPANY LIMITED),
SCOTTISH LION INSURANCE
COMPANY LTD., STRONGHOLD
INSURANCE COMPANY LIMITED,
SWISS NATIONAL INSURANCE
COMPANY LIMITED, SWISS UNION
GENERAL INSURANCE COMPANY
LIMITED, SWITZERLAND GENERAL
INSURANCE COMPANY LIMITED,
TRENT INSURANCE COMPANY
LIMITED, TUREGUM INSURANCE
COMPANY LIMITED, ULSTER
INSURANCE COMPANY LIMITED,
UMA, UNITED SCOTTISH
INSURANCE COMPANY AVIATION
LTD., UNITED SCOTTISH
INSURANCE COMPANY LIMITED,
VANGUARD INSURANCE COMPANY
LIMITED, VICTORIA AVIATION,
VICTORIA INSURANCE COMPANY,
LTD., and THE WORLD MARINE &
GENERAL INSURANCE PLC (f/k/a
THE WORLD MARINE & GENERAL
INSURANCE COMPANY LIMITED),

5
Third-Party Defendants.

CONTINENTAL INSURANCE COMPANY,
FIDELITY & CASUALTY COMPANY OF
NEW YORK, COMMERCIAL INSURANCE
COMPANY OF NEWARK, N.J., and
COLUMBIA CASUALTY COMPANY,

Plaintiffs,

HONEYWELL INTERNATIONAL, INC.
(f/k/a ALLIEDSIGNAL, INC.,
successor to BENDIX AVIATION
CORPORATION and BENDIX
CORPORATION),

Defendant-Respondent,

and

ST. PAUL FIRE AND MARINE INSURANCE
COMPANY,

Defendant-Appellant,

and

AFFILIATED FM INSURANCE COMPANY,
ALLSTATE INSURANCE COMPANY,
AMERICAN HOME ASSURANCE COMPANY,
AMERICAN INSURANCE COMPANY,
CALIFORNIA UNION INSURANCE
COMPANY, CENTURY INDEMNITY
COMPANY, COMMERCIAL UNION
INSURANCE COMPANY as
successor to EMPLOYERS
LIABILITY ASSURANCE
CORPORATION, LTD., EMPLOYERS
INSURANCE OF WAUSAU,
FIREMAN’S FUND INSURANCE
COMPANY, GRANITE STATE

6
INSURANCE COMPANY, GREAT
AMERICAN INSURANCE COMPANY,
HOME INSURANCE COMPANY,
INSURANCE COMPANY OF NORTH
AMERICA, NATIONAL UNION FIRE
INSURANCE COMPANY OF
PITTSBURGH, PA, NORTH RIVER
INSURANCE COMPANY, TRAVELERS
INDEMNITY COMPANY,
UNDERWRITERS AT LLOYDS LONDON
and CERTAIN LONDON MARKET
COMPANIES, including ANGLO
SAXON INSURANCE ASSOC. LTD.,
DOMINION INSURANCE COMPANY,
DRAKE INSURANCE COMPANY,
EAGLE STAR INSURANCE COMPANY,
INSTITUTE OF LONDON
UNDERWRITERS, LONDON &
EDINBURGH INSURANCE COMPANY
LTD., PRUDENTIAL ASSURANCE
COMPANY LTD., SOUTHERN
INSURANCE COMPANY, and WORLD
AUXILIARY INSURANCE CORP.,
LTD.,

Defendants,

and

HONEYWELL INTERNATIONAL, INC.
(f/k/a ALLIEDSIGNAL, INC.,
successor to BENDIX AVIATION
CORPORATION and BENDIX
CORPORATION),

Defendant/Third-Party
Plaintiff-Respondent,

TRAVELERS CASUALTY & SURETY
COMPANY (f/k/a AETNA CASUALTY
& SURETY COMPANY),

7
Third-Party Defendant-
Appellant,

and

8
WESTPORT INSURANCE COMPANY
(f/k/a PURITAN INSURANCE
COMPANY), and CERTAIN LONDON
MARKET COMPANIES, including
ACCIDENT & CASUALTY INSURANCE
COMPANY, ALBA GENERAL
INSURANCE COMPANY (f/k/a ALBA
GENERAL INSURANCE COMPANY
LIMITED), AVIATION & GENERAL
INSURANCE COMPANY LIMITED,
AXA INSURANCE PLC (f/k/a
PROVINCIAL INSURANCE PUBLIC
LIMITED COMPANY), THE BRITISH
AVIATION INSURANCE COMPANY
LIMITED, BRITISH LAW
INSURANCE COMPANY LIMITED,
BRITISH RESERVE INSURANCE
COMPANY LIMITED, BRITISH
TRADERS INSURANCE COMPANY
LTD., C.A.M.A.T. INSURANCE
COMPANY LIMITED, C.F.A.U.,
CONTINENTAL ASSURANCE COMPANY
OF LONDON, LTD., CORNHILL
INSURANCE PUBLIC LIMITED
COMPANY (f/k/a CORNHILL
INSURANCE COMPANY LIMITED),
EDINBURGH ASSURANCE COMPANY
LTD., EDINBURGH INSURANCE
COMPANY LIMITED, EDINBURGH
NO. 2 GROUP, ELVIA SWISS
INSURANCE COMPANY (f/k/a
HELVETIA ACCIDENT INSURANCE
COMPANY LIMITED), EXCESS
INSURANCE COMPANY LIMITED,
FIDELIDADE INSURANCE COMPANY
OF LISBON, GE SPECIALITY
INSURANCE (UK) LIMITED (f/k/a
THREADNEEDLE INSURANCE
COMPANY LIMITED), GENERAL
INSURANCE COMPANY HELVETIA
LIMITED, GROUPAMA INSURANCE
COMPANY LIMITED (f/k/a
MINISTER INSURANCE COMPANY
LIMITED), HELVETIA INSURANCE
COMPANY LTD., HELVETIA SWISS
INSURANCE COMPANY LIMITED
(f/k/a HELVETIA ACCIDENT

9
SWISS INSURANCE COMPANY),
IRON TRADES INSURANCE COMPANY
LIMITED (f/k/a IRON TRADES
MUTUAL INSURANCE COMPANY
LIMITED), LA MINERVE
INSURANCE COMPANY LIMITED,
LOMBARD MARINE & GENERAL
INSURANCE COMPANY LTD.,
LONDON & EDINBURGH GENERAL
INSURANCE COMPANY, LONDON &
OVERSEAS AVIATION A.C., MOTOR
UNION INSURANCE COMPANY
LIMITED, NATIONAL CASUALTY
COMPANY, NATIONAL CASUALTY
COMPANY OF AMERICA, THE NEW
INDIA ASSURANCE COMPANY
LIMITED, PHOENIX ASSURANCE
PUBLIC LIMITED COMPANY,
PHOENIX AVIATION INSURANCE
COMPANY LIMITED, PHOENIX
INSURANCE COMPANY LTD., RIVER
THAMES INSURANCE COMPANY
LIMITED, ROAD TRANSPORT &
GENERAL INSURANCE CO. LTD.,
ROYAL SCOTTISH ASSURANCE PLC
(f/k/a THE ROYAL SCOTTISH
INSURANCE COMPANY LIMITED),
SCOTTISH LION INSURANCE
COMPANY LTD., STRONGHOLD
INSURANCE COMPANY LIMITED,
SWISS NATIONAL INSURANCE
COMPANY LIMITED, SWISS UNION
GENERAL INSURANCE COMPANY
LIMITED, SWITZERLAND GENERAL
INSURANCE COMPANY LIMITED,
TRENT INSURANCE COMPANY
LIMITED, TUREGUM INSURANCE
COMPANY LIMITED, ULSTER
INSURANCE COMPANY LIMITED,
UMA, UNITED SCOTTISH
INSURANCE COMPANY AVIATION
LTD., UNITED SCOTTISH
INSURANCE COMPANY LIMITED,
VANGUARD INSURANCE COMPANY
LIMITED, VICTORIA AVIATION,
VICTORIA INSURANCE COMPANY,
LTD., and THE WORLD MARINE &

10
GENERAL INSURANCE PLC (f/k/a
THE WORLD MARINE & GENERAL
INSURANCE COMPANY LIMITED),

Third-party Defendants.

Argued October 24, 2017 – Decided June 27, 2018

On certification to the Superior Court,
Appellate Division.

Andrew T. Frankel argued the cause for
appellants St. Paul Fire and Marine Insurance
Company and Travelers Casualty and Surety
Company (Windels Marx Lane & Mittendorf, and
Simpson Thacher & Bartlett, attorneys; Stefano
V. Calogero, of counsel; Stefano V. Calogero,
Andrew T. Frankel, Tanya M. Mascarich, on the
briefs).

Michael J. Lynch (K&L Gates) of the
Pennsylvania bar, admitted pro hac vice,
argued the cause for respondent Honeywell
International, Inc. (K&L Gates, attorneys;
Michael J. Lynch, Donald E. Seymour, John T.
Waldron, and Donald W. Kiel, on the briefs).

Carl A. Salisbury and Paul E. Breene submitted
a brief on behalf of amicus curiae United
Policyholders (Bramnick, Rodriguez, Grabas,
Arnold & Mangan, and Reed Smith, attorneys).

Brian R. Ade submitted a brief on behalf of
amicus curiae Complex Insurance Claims
Litigation Association (Rivkin Radler,
attorneys).

JUSTICE LaVECCHIA delivered the opinion of the Court.

This appeal involves questions about the insurance coverage

available to defendant Honeywell International, Inc.

(Honeywell), a New Jersey based corporation, for thousands of

bodily-injury claims premised on exposure to brake and clutch

11
pads (friction products) containing asbestos. We granted

certification to address two issues. First, we consider whether

the law of New Jersey or Michigan (the headquarters location of

Honeywell’s predecessor when the disputed excess insurance

policies were issued) should control in the allocation of

insurance liability among insurers for nationwide products-

liability claims. Second, we address whether it was error not

to require the policyholder, Honeywell, to contribute in the

allocation of insurance liability based on the time after which

the relevant coverage became unavailable in the marketplace

(that is, since 1987).

In addressing the allocation question, we note that

Honeywell does not seek coverage in this dispute for claims that

involve initial product exposure occurring after insurance was

not available and while the policyholder continued to

manufacture the product. Although some of the claims presented

involve injury that manifested after the date of excess-

insurance unavailability, the class of claims to be addressed by

the coverage block of insurance all presume that product

exposure predated the insurance unavailability. Thus,

consistent with New Jersey’s continuous-trigger doctrine,

Honeywell is seeking coverage under excess insurance policies

for claims only from exposure occurrences during the period of

policy coverage.

12
Different jurisdictions approach pinpointing the occurrence

of injury using varying methodologies. We, and a majority of

jurisdictions, rely on medical science that teaches asbestos-

related disease is progressive, as body tissue is injured when

an individual inhales asbestos fibers. Owens-Illinois, Inc. v.

United Ins. Co.,
138 N.J. 437, 454 (1994). That concept led to

our adoption of the continuous-trigger doctrine in insurance

liability allocation, which assumes progressive injury in each

policy year following initial exposure. See ibid. To some

extent that determination involves a legal fiction. Id. at 457.

However, by allocating responsibility based on the date of

initial exposure and every policy year thereafter, we maximize

the insurance resources available to claimants suffering bodily

injury.

Under our current law on allocation of liability among

insurers, an insured is not forced to assume responsibility in

that allocation during the insurance coverage block of policies

for years in which insurance is not reasonably available for

purchase. Id. at 478-79 (referring to unavailability rule).

The trial court and the Appellate Division both concluded

that New Jersey law applied, although for different reasons.

Both courts further determined that, under the circumstances,

the second question must be answered in the negative.

13
For the reasons that follow, we also hold that New Jersey

law on the allocation of liability among insurers applies in

this matter, and we set forth the pertinent choice-of-law

principles to resolve this dispute over insurance coverage for

numerous products-liability claims.

Concerning the second question, on these facts, we also

affirm the determination to follow the unavailability exception

to the continuous-trigger method of allocation set forth in

Owens-Illinois.

The unpublished Appellate Division decision in this matter

distilled the extensive record developed by the trial court. We

draw from the panel’s summary of the facts and procedural

history and credit the panel for its fine work.

By way of general background, The Bendix Corporation

(Bendix) -- a corporate predecessor to defendant Honeywell --

for many years manufactured and sold friction products that

contained asbestos. Bendix stopped using asbestos in its

friction products in 2001, having continued to manufacture the

items even after 1987 when insurance for asbestos-related claims

for such products ceased to be available in the marketplace.

Beginning around 1975, Bendix began to receive liability

claims asserting that asbestos in its friction products caused

14
bodily injury to users. In the years leading up to the summary

judgment proceedings in this matter, Bendix and its successors

received approximately 147,000 claims, of which about 71,000

have been resolved. Claimants sued Bendix in almost all fifty

states, and its insurers have spent more than $1 billion on

indemnity payments.

Certain matters are undisputed. The friction products

contained asbestos. Honeywell is responsible for asbestos

liabilities attributed to Bendix, although it disputes the

dangerousness of its friction products. And, excess insurance

coverage for asbestos-related personal injury claims became

unavailable for purchase after April 1, 1987.

In 2000, Continental Insurance Company (Continental) (which

wrote many primary insurance policies for Bendix during the

relevant years), and related companies, commenced this action

seeking declaratory relief concerning the rights and obligations

associated with insurance coverage for the asbestos-related

bodily injury claims filed against Honeywell as a corporate

successor to Bendix. Bendix advanced cross-claims and third-

party claims against various insurers, including Travelers

Casualty & Surety Company (Travelers) and St. Paul Fire and

Marine Insurance Company (St. Paul).

Honeywell settled with Continental and most other insurers.

The ten insurance policies that remain at issue involve excess

15
insurance issued to Bendix by Travelers and St. Paul. Eight of

the policies were issued to Bendix by Travelers’s predecessor,

Aetna Casualty & Surety Company (Aetna). Two of the policies

were issued by St. Paul. St. Paul was since acquired by

Travelers but is separately identified for purposes of this

appeal.

The choice-of-law issue in this matter arose from the

following procedural actions. Honeywell filed a motion for

partial summary judgment in 2006, asking the court to apply New

Jersey insurance allocation law while opposing the application

of Michigan law. Travelers opposed Honeywell’s motion and filed

a cross-motion, seeking the application of Michigan law to its

policies. St. Paul did not oppose Honeywell’s motion or make a

separate motion. The motion judge granted Honeywell’s motion,

denied Travelers’s cross-motion, and held that the laws of New

Jersey would apply to the insurance allocation questions. The

court memorialized its order on November 9, 2006.

With that general background in mind, we turn to some finer

details.

Bendix was incorporated in 1929 under the laws of the State

of Delaware. Aspects of its business took place in different

states. During the course of its corporate existence, Bendix

had manufacturing operations in all fifty states and twenty-two

16
foreign countries, and sold its products throughout the United

States. Administratively though, from about 1940 to 1969,

Bendix maintained its headquarters in South Bend, Indiana, while

also having central offices in Detroit and New York. Its

insurance office was in South Bend. Between 1969 and 1983,

Bendix situated its executive headquarters, including its

insurance office, in Michigan; another central office was in New

York. Bendix also had significant contacts with New Jersey.

Until 1973, Bendix’s largest center of operations and payroll

was in New Jersey.

Bendix had a variety of businesses, spanning such areas as

automotive products, aerospace products, industrial products,

financial services, and others. Included among its products are

those at the center of the claims at issue here: friction

products.

Bendix and its successors manufactured asbestos products in

New York from 1939 until 2001 and in Tennessee from 1965 through

2001. As noted, asbestos ceased to be used as a component of

the friction products in 2001.

Honeywell is the corporate successor to Bendix as a result

of the following corporate changes. The Allied Corporation

(Allied) acquired Bendix in 1983 and operated it as a wholly

owned subsidiary, assuming Bendix’s obligations and liabilities.

Allied was incorporated under the laws of the State of New York

17
and had its principal place of business in New Jersey. In 1985,

Allied and Signal Companies merged, becoming wholly-owned

subsidiaries of The Allied-Signal Inc., a new Delaware

corporation that also has been headquartered in New Jersey since

the merger. The Allied-Signal Inc. changed its name to

AlliedSignal Inc. in 1993; AlliedSignal Inc. merged with

Honeywell, Inc., in December of 1999 and changed its name to

Honeywell. Honeywell was incorporated under the laws of the

State of Delaware, but its headquarters and principal place of

business have always been located in Morristown, New Jersey.

Since 1983, all insurance operations for Bendix and its

successors have been located in New Jersey. In total, Honeywell

has purchased more than $3.5 billion in umbrella and excess

insurance for Bendix’s and its successors’ liabilities from

insurers whose principal places of business were located in over

fourteen states and countries, including New Jersey.

It appears not to be disputed that the excess insurance

policies, which were not subject to settlement before the trial

court, were all brokered, issued, and delivered to Bendix in

Michigan. Travelers’s predecessor, Aetna, issued its disputed

policies to Bendix between 1977 and 1983; St. Paul issued its

disputed policies between 1968 and 1970. None of the policies

contain a choice-of-law provision governing the allocation issue

before us.

18
C.

As noted, the trial court granted Honeywell’s motion for

partial summary judgment in 2006, holding that New Jersey

insurance-allocation law would apply in this matter.

When, in 2011, the motion court addressed motions for

partial summary judgment that involved the dispute over the

duration of the coverage block of insurance, the parties were

eleven years into the case. The parties asked the court to

consider resolving six issues as a matter of law, as well as to

appoint a special allocation master as Owens-Illinois suggested

would be appropriate for complicated, long tail, asbestos-

injury-claims cases.

The duration of the coverage block teed up the issue of the

unavailability rule’s application in this matter. All parties

agreed that the beginning point would be 1940. Continental, the

primary insurer for many years, started paying out claims in the

1980s, before Owens-Illinois was decided in 1994. It had some

years in which its policy had no upper limit. Consistent with

promoting the interests of its insured, it began paying claims

for claimants and to assist Bendix and its successors in the

resolution of claims, leaving coverage disputes to be resolved

independently. Eventually, Continental assigned to Honeywell

its rights with respect to the primary’s responsibilities under

allocation. That assignment included the considerable

19
complication that its records made it difficult to determine how

Continental had been variously assigning costs (i.e., defense

costs or liability costs and to which matter), which affected

the order of exhaustion of policies among insurers. As the

record highlights, between 1980 and 1994, Continental’s

assignment of past defense costs was unclear and, once those

costs could be identified, required assessment in respect of the

allocation theory to be applied to this matter. That and other

issues were implicated in this complicated matter of insurance

liability allocation that was the essence of the complaint in

this matter.

The trial court determined that one law on allocation

should apply and that should be New Jersey law. That approach

allowed the court to use one set of rules to sensibly and

coherently allocate responsibility among insurers, over decades

of actions, and the many payments already made by insurers, as

well as the insured, depending on the policy-imposed obligations

and coverage limitations held to apply. And, the court’s

determination was consistent with previous decisions that

recognized that Owens-Illinois could be applied retroactively,

including for defense costs. See Champion Dyeing & Finishing

Co. v. Centennial Ins. Co.,
355 N.J. Super. 262, 270-71 (App.

Div. 2002); see generally Chem. Leaman Tank Lines, Inc. v. Aetna

20
Cas. & Sur. Co.,
177 F.3d 210, 229-31 (3d Cir. 1999) (applying

Owens-Illinois retroactively).

The determination of the coverage block was immensely

important to the continued resolution of the issues. The Owens-

Illinois allocation methodology, simply described, looks at the

time on the risk horizontally and the total limits in each

annual period vertically. Thus, an endpoint to the coverage

block of insurance to be divvied up for claims and defense costs

is essential to the calculation and to the assignment of risk to

be borne by primary insurers and exhausted in each policy year

before the excess insurer is tapped for its contributions for

that year.

Owens-Illinois utilizes that allocation approach,

recognizing also a continuous-trigger doctrine to explain the

basis for recognizing occurrences in the year of first exposure

to asbestos and in each subsequent policy year. To avoid having

its insurance triggered, an insurer has the burden of showing

that exposure did not occur earlier or during the policy year

for which it wrote coverage for the insured. Otherwise,

manifestation of injury presenting itself thereafter resulted in

allocation of that individual’s claim, in accordance with

mathematical formulae, to that insurer’s policy year.

It was within the context of that setting and law that the

motion court considered the parties arguments over the duration

21
of the coverage block. Travelers (taking the lead in argument)

and St. Paul, both excess insurers, argued that the coverage

block should run until the year in which Honeywell, as the

successor to Bendix, ceased manufacturing the friction products

–- 2001. Honeywell maintained that the coverage block should

end in the 1986-87 period when first primary (1986) and then

excess (April 1, 1987) insurance ceased to be available. To the

excess insurers, Honeywell was arguing for truncating the

insurance coverage block. To Honeywell, Travelers was arguing

for extenuation of the insurance coverage block.

The unavailability rule’s application in this case became a

point of debate. Travelers asserted earlier in this matter that

a fact question existed about whether insurance was available in

the marketplace. In 2007, another motion judge ordered

discovery and a hearing on that question. When the presently

discussed motion for partial summary judgment came before the

deciding motion judge, the court concluded that there was no

genuine issue of fact concerning the question. The court held

that commercial policies were not available to Honeywell

beginning with the 1986/87 period as it had maintained, and we

note that fact determination is not challenged in this appeal.

As a result of the discovery that had taken place though,

Travelers also argued, in connection with the partial summary

judgment motion, that Honeywell was self-insured. In advancing

22
that argument, it pointed to the company’s maintenance of

corporate reserves. Travelers further argued that Honeywell had

assumed the risk and should be treated as responsible for the

years that it continued to manufacture friction products after

1987 until 2001 -- another fifteen years, which would reduce the

exposure of the excess carriers in the allocation methodology

form that which would occur under a coverage block that ended in

1987.

With respect to the reserves, the trial court dismissed the

argument that maintenance of reserves is the equivalent of self-

insurance. The court also rejected the argument that somehow

that business practice of maintaining reserves represented an

assumption of insurance risk relevant to resolution of the

coverage block dispute.

The focal point to the argument and decision by the court

was the unavailability rule application, or not, to determining

triggered years of insurance for purposes of allocation under

the Owens-Illinois paradigm.

On that point, the court heard from Travelers the arguments

that continued manufacturing by Honeywell from 1987 to 2001

increased the number of pre-1987 exposure claims, increased the

potential value of pre-1987 claims by alleged enhanced injury

from continued exposure, and resulted in encouraging more people

to file claims based on pre-1987 exposure.

23
Honeywell argued that the record lacked factual or expert

evidence to support those assertions of inference. Moreover,

Honeywell emphasized that Owens-Illinois allocation theory

addressed assumption of insurance risk not assumption of tort

risk.

Ultimately, the trial court agreed with Honeywell that the

insurance coverage period should not be extended, as Travelers

requested, to include years from 1987 to 2001. Applying Owens-

Illinois’s approach to allocation of insurance risk to claims

arising exclusively from pre-1987 initial exposure, the court

determined that the unavailability of commercial insurance

should end the coverage block of insurance. Hence, the decision

fixed with certainty the policies, with their specific terms and

amounts, that were available for the special master to consider

when allocating among insurers and Honeywell for that period of

time alone. That July 22, 2011 decision had the result of not

requiring the court, or anyone else, to attempt to determine how

policy amounts or limits or related insurance concerns for post-

1987 years would be overlaid on Honeywell during the 1987-2001

period when manufacturing continued or how such corporate

finances would be sorted out between post- and pre-1987 claims.

After the parties consented to the appointment of a special

allocation master (SAM), this matter proceeded before the SAM

with policy years, policies, and amounts certain for the period

24
of 1940-1987 as he addressed the already complicated issues

before him. As the SAM’s initial report to the trial court

clearly noted before delving into the difficult issues assigned

to him,

[a] Bendix asbestos claim triggers those
policies issued to Bendix and/or Honeywell
that were in effect during the portion of the
Trigger Period that is within the coverage
block. Exposure to an asbestos product shall
be presumed to be exposure to a Bendix
product, with the burden shifting to each
insurer to prove that there was no exposure to
a Bendix product before or during its policy
period. There is no coverage under a policy
where the claimant’s first exposure to
asbestos from a Bendix product takes place
after the effective period of a given policy
expired.

After holding hearings and hearing argument, the SAM issued

a report and supplemental report containing recommendations on

allocation. The trial court adopted the SAM’s recommendations,

with one exception not relevant to this appeal, and entered a

final judgment on September 16, 2013. By the time this matter

reached appellate processes, almost all claims had settled.

Travelers and St. Paul jointly appealed the trial court’s

two orders to the Appellate Division. They appealed the

November 9, 2006 order, which granted Honeywell’s partial

summary judgment motion and applied New Jersey allocation law,

and the July 22, 2011 order, which granted Honeywell’s partial

25
summary judgment motion and held that Honeywell had no

allocation responsibility because after 1987 it was not able to

obtain insurance coverage for asbestos claims. The Appellate

Division affirmed the trial court but required a limited remand

not pertinent to this appeal.

The appellate panel considered the trial court’s choice-of-

allocation-law ruling only as applied to Travelers’s eight

excess policies.1 In its substantive review of that question,

the panel determined that there was a conflict between the

insurance-allocation methodologies of New Jersey, as determined

by Owens-Illinois, and the Michigan time-on-the-risk

methodology, espoused by the Michigan Court of Appeals in Arco

Industries Corp. v. American Motorists Insurance Co.,
594 N.W.2d 61 (Mich. Ct. App. 1998) (Arco), aff’d by an equally divided

court,
617 N.W.2d 330 (Mich. 2000). The appellate panel found

inapplicable the Restatement (Second) of Conflict of Laws (Am.

Law Inst. 1971) (Restatement) § 193, entitled “Contracts of

Fire, Surety or Casualty Insurance,” because its site-specific

approach was inconsistent with Travelers’s nationwide insurance

policies and Bendix’s selling of the friction products

1 Because St. Paul had not filed a motion before the trial court
for the application of Michigan law and did not oppose
Honeywell’s motion asking the court to apply New Jersey law, its
policies were not considered by the panel for purposes of this
first issue.

26
throughout the United States. The appellate panel instead

analyzed the issue through Restatement §§ 188 and 6. The panel

particularly relied on the § 6 factors, as distilled by this

Court in Pfizer, Inc. v. Employers Insurance,
154 N.J. 187, 198-

99 (1998). The appellate panel considered the public policy

interests of both states; the interests of commerce among the

states; the interests of the parties, including an evaluation of

where the insurance policies were brokered, negotiated,

underwritten, and issued; and the interest of judicial

administration. Ultimately, the panel agreed with the trial

court and concluded that the choice-of-law analysis supported

the application of New Jersey law to Travelers’s eight excess

policies, which were in effect between February 1, 1977 and

October 1, 1983.

The appellate panel further agreed with the trial court

that, under Owens-Illinois, Honeywell was not required to

contribute to allocation for pre-1987 initial exposure claims

even if the claimant did not manifest injury until after 1987,

given that excess insurance for asbestos-related claims was not

reasonably available for purchase after 1987.

St. Paul and Travelers petitioned this Court for

certification, raising both the choice-of-law and allocation

issues. We granted their petition.
228 N.J. 437 (2016).

II.

27
Turning first to the choice-of-law question, the parties

disagree on the outcome of the first step in that inquiry:

whether a true conflict exists. Travelers contends there is a

difference in the methodologies of the two states. Honeywell,

on the other hand, maintains that Michigan has not clearly

adopted a set methodology and, so, it has no policy with which

New Jersey’s methodology can be said to conflict.

Assuming there is a conflict requiring a choice-of-law

determination, the parties differ as to the proper analytic

approach and the outcome.

Travelers asks this Court to resolve and clarify the

relationship between Restatement §§ 193 and 188 and our prior

decisions and focuses in particular on State Farm Mutual

Automobile Insurance Co. v. Estate of Simmons,
84 N.J. 28

(1980). Travelers acknowledges that our law has moved from a

lex-loci-contractus approach toward a most-significant-

relationship approach in contract disputes. However, Travelers

emphasizes that

the law of the place of the contract
ordinarily governs the choice of law because
[that] rule will generally comport with the
reasonable expectations of the parties
concerning the principal situs of the insured
risk during the term of the policy and will
furnish needed certainty and consistency in
the selection of the applicable law.

[(quoting Simmons,
84 N.J. at 37).]

28
Travelers maintains that we have directly addressed choice-of-

contract-law questions only in the context of environmental

coverage disputes and not in circumstances akin to those present

here, where a products-liability case has resulted in claims

across the nation. It argues that New Jersey’s site-specific

choice-of-law approach for environmental disputes is not well

suited for products-liability cases in which insurance contract

disputes arise.

Here, Travelers maintains that, because the insurance

contracts at issue were brokered, negotiated, underwritten,

issued, and delivered to Bendix in Michigan, the presumption

under Simmons and Restatement § 193 in favor of application of

the law of the place of contract should result in a presumptive

application of Michigan law in this matter. Travelers asserts

that no state has an interest that overcomes, in this instance,

the presumption that a court should apply the laws of the site

of contracting.

Honeywell disagrees that Simmons’s purported presumption --

that the site of the place of contract is of paramount

importance -- is applicable in these circumstances. It argues

that we have rejected adopting the law of the site of the

contract as the presumptive law and urges consideration of the

comparative interests of the respective states. Here, Honeywell

urges application of the Restatement § 6 factors, as distilled

29
in Pfizer. Applying those factors, Honeywell argues that the

relative interests of Michigan are minimal compared to the

interests of New Jersey.

We reserve a more granular discussion about the § 6

factors, as they pertain in this matter, for our later analysis.

III.

We begin with familiar terrain. Choice-of-law questions

involve legal determinations, and therefore our review is de

novo. McCarrell v. Hoffmann-La Roche, Inc.,
227 N.J. 569, 583-

84 (2017). Furthermore, when a civil action is brought in New

Jersey, we use New Jersey choice-of-law rules to decide whether

this state’s or another state’s legal framework should be

applied. Id. at 583.

The first step in a conflicts analysis is to decide whether

there is an actual conflict between the laws of the states with

interests in the litigation. P.V. ex rel. T.V. v. Camp Jaycee,

197 N.J. 132, 143 (2008). “If there is no actual conflict, then

the choice-of-law question is inconsequential, and the forum

state applies its own law to resolve the disputed issue.” Rowe

v. Hoffman-LaRoche, Inc.,
189 N.J. 615, 621 (2007). A conflict

of law requires a “substantive difference” between the laws of

the interested states. DeMarco v. Stoddard,
223 N.J. 363, 383

(2015). A “substantive difference” is one that “is offensive or

30
repugnant to the public policy of this State.” Ibid.; see also

McCarrell,
227 N.J. at 584 (noting statute of limitations

difference was “outcome determinative” to question before

Court). Here, we agree with the appellate panel’s determination

that there is a substantive difference between the New Jersey

and Michigan approaches to determining the allocation of

liability between manufacturers and insurers for injuries that

progress after exposure to an allegedly toxic substance.

New Jersey law employs the continuous-trigger doctrine, as

initially adopted by this Court in our seminal case on insurance

allocation, Owens-Illinois,
138 N.J. 437.

In Owens-Illinois, we held “that when progressive

indivisible injury or damage results from exposure to injurious

conditions for which civil liability may be imposed, courts may

reasonably treat the progressive injury or damage as an

occurrence within each of the years of [the insurance] policy.”

Id. at 478. We acknowledged that “injury may mean different

things in different contexts” and that “the point at which the

law will say that injury requires indemnity” is not “easily

understandable.” Id. at 457. “In that sense,” we noted, “the

concept of injury, like the related concepts of duty and

causation, is an instrument of policy.” Ibid. We reviewed the

approaches taken by other jurisdictions to that same question,

31
id. at 459-68, and ultimately settled on the continuous-trigger

theory of liability as a matter of compelling public policy, id.

at 478. We held that “courts may reasonably treat the

progressive injury or damage as an occurrence within each of the

years of a CGL [(comprehensive general liability insurance)]

policy.” Ibid.

Given that the continuous-trigger theory would implicate

multiple insurance policies, we also adopted a methodology for

allocating liability among those policies. Id. at 474-75.

Under that approach, when determining an insurer’s liability, a

court is to consider both the insurer’s time on the risk and the

degree of risk that insurer assumed. Ibid. That entails

“proration on the basis of policy limits, multiplied by years of

coverage.” Id. at 475.

Several policy rationales were at work in the Owens-

Illinois approach. See id. at 472-76. Our decision identified

the goals sought to be achieved through the designated

allocation approach. Specifically, we sought to (1) “make the

most efficient use of the resources available to cope with

environmental disease or damage,” id. at 472; (2) encourage

“responsible conduct that will increase, not decrease, available

resources,” ibid.; (3) spread risk among multiple insurers, id.

at 472-73; (4) encourage policyholders to purchase coverage

32
every year, ibid.; and (5) serve “principles of simple justice,”

id. at 473.

It bears repeating here, as we emphasized then, that the

theory underlying insurance is risk allocation. Id. at 472.

“Because insurance companies can spread costs throughout an

industry and thus achieve cost efficiency, the law should, at a

minimum, not provide disincentives to parties to acquire

insurance when available to cover their risks. Spreading the

risk is conceptually more efficient.” Id. at 472-73. We said

that an insurance allocation scheme that spreads costs

throughout the industry and promotes an efficient use of

resources translates to more money available to respond in the

event of disease and damage. Id. at 478.

This Court has continued to emphasize those public interest

effects when, for example, extending the allocation principles

to include excess insurance in its methodology. See Carter-

Wallace, Inc. v. Admiral Ins. Co.,
154 N.J. 312, 325-27 (1998)

(rejecting excess insurers’ horizontal exhaustion theory and

adopting vertical loss allocation by year as keeping with policy

principles of Owens-Illinois); see also Spaulding Composites

Co., Inc. v. Aetna Cas. & Sur. Co.,
176 N.J. 25, 39-42 (2003)

(reinforcing primacy of Owens-Illinois’s policy goals when

rejecting enforcement of non-cumulation clause in CGL policy).

33
In sum, we have in New Jersey a longstanding allocation

approach built on a continuous-trigger theory premised on the

notion that asbestos and other progressive environmental

injuries are multiple occurrences and must be treated as such.

See Benjamin Moore & Co. v. Aetna Cas. & Sur. Co.,
179 N.J. 87,

104 (2004) (“The multiple occurrence template is a matter of

substance that is at the heart of Owens-Illinois.”). Our

methodology for determining allocation of liability among

insurers whose policies cover asbestos-related diseases over a

period of years considers both the insurers’ time on the risk

and the degree of risk assumed. Insurers do not share a single

loss under that methodology; rather, each is made responsible

for losses on its watch, subject to the limits of the policy

each has written, “as calculated in accordance with a formula we

developed as a proxy for a scientific assessment of the amount

of injury happening at each phase on the continuum.” Id. at

105.

Michigan utilizes a different allocation method.

A pro rata allocation theory based on a “time-on-the-risk”

methodology was adopted by the intermediate Court of Appeals in

Arco,
594 N.W 2d at 68-69.2 That approach “allocates liability

2 We acknowledge the argument that Michigan does not have a
settled policy because of a Michigan Court of Appeals decision
34
among triggered policies using the periods covered by each

insurer without considering the coverage limits of the triggered

policies.” Id. at 68. Although a majority of the Michigan

Supreme Court did not vote to affirm Arco, lending it

“diminished precedential value,” In re Martin,
602 N.W.2d 630,

632 n.2 (Mich. Ct. App. 1999), Arco remains precedential

nonetheless, see Mich. Ct. R. 7.215(J)(1); see also Stoner v.

N.Y. Life Ins. Co.,
311 U.S. 464, 467 (1940) (holding that

federal courts in diversity jurisdiction cases “must follow the

decisions of intermediate state courts in the absence of

convincing evidence that the highest court of the state would

decide differently”).3

Importantly, in Arco, the Michigan Court of Appeals

specifically considered and rejected the Owens-Illinois

approach, concluding that the policy considerations articulated

that conflicts with Arco. To support that position, Honeywell
cites to a subsequent unpublished Court of Appeals opinion that
adopted an “all sums” method of allocation, mandating that the
insurers must pay all of the insured’s liability without
temporal limitations. However, unpublished decisions in
Michigan are not precedential and not binding, see Mich. Ct. R.
7.215(C)(1), and therefore such opinions cannot affect our
analysis in this case.
3 Notably, other courts regard Michigan as applying a pro rata
allocation method that employs the time-on-the-risk approach.
See Decker Mfg. Corp. v. Travelers Indem. Co.,
106 F. Supp. 3d 892, 895 (W.D. Mich. 2015); Alticor, Inc. v. Nat’l Union Fire
Ins. Co. of Pa.,
916 F. Supp. 2d 813, 832-33 (W.D. Mich. 2013);
Century Indem. Co. v. Aero-Motive Co.,
318 F. Supp. 2d 530, 545
(W.D. Mich. 2003).
35
by commentators weighed in favor of adopting the time-on-the-

risk method:

The time-on-the-risk method should be
adopted by courts because its inherent
simplicity promotes predictability, reduces
incentives to litigate, and ultimately reduces
premium rates.

Courts can easily administer the time-
on-the-risk method. Once a court determines
the scope of the progressive injury, that is,
the total damage[,] . . . it can readily
allocate the damages among the triggered
policies. . . .

Unlike the Owens-Illinois method, the
effects of deductibles, excess insurance, and
self-insurance are easy to calculate by
pretending that the policy’s share of damages
was the damage that actually occurred during
that policy period.

. . . .

The simplicity of the time-on-the-risk
method removes many of the incentives to
litigate the allocation of damages. Since the
parties will know in advance how the court
will allocate liability, there is much less of
the uncertainty that encourages wasteful
litigation. . . .

In addition to decreasing the amount of
litigation, this method provides a way for
insurance companies to estimate more
accurately total expected liability; as a
result premiums should decline. . . . Because
this method, unlike the Owens-Illinois method,
does not rely on a case-by-case determination
of how much coverage was purchased, it also
obviates the concern about inconsistent
application.

[Arco,
594 N.W 2d at 69 (first and fifth
ellipses in original) (quoting Michael G.

36
Doherty, Allocating Progressive Injury
Liability Among Successive Insurance
Policies,
64 U. Chi. L. Rev. 257, 281-83
(1997)).]

In sum, a substantive difference separates the New Jersey

and Michigan legal approaches and policy considerations for the

insurance allocation question at issue, and so we must engage in

a choice-of-law analysis for determining which state’s

allocation framework applies.

To that question we now turn.

Turning to New Jersey’s rules on conflicts of laws in the

setting of insurance contracts and multiple claimants, we begin,

as urged by Travelers, with Simmons, because that case marked

the beginning of this Court’s modernization of conflicts law.

Our Court rejected the former choice-of-law rules of lex

loci contractus (for insurance contracts), see Simmons,
84 N.J.

at 36-37, and lex loci delicti (for torts), see Veazey v.

Doremus,
103 N.J. 244, 247-49 (1986), in favor of using a more

flexible “governmental interest” standard that comes from the

Restatement. When we took that step in Simmons, the choice-of-

law question involved the limits of automobile insurance

coverage issued in Alabama to an Alabama insured who, shortly

after temporarily relocating to New Jersey, became involved in a

37
car accident in New Jersey.
84 N.J. at 30. In Simmons, the

Court held that when the judiciary is called on to determine

choice-of-law principles in the context of interpreting an

“automobile liability insurance contract, the law of the place

of the contract will govern the determination . . . unless the

dominant and significant relationship of another state to the

parties and the underlying issue dictates that this basic rule

should yield.” Id. at 37. We ultimately found no cogent reason

not to follow Alabama law on automobile liability insurance in

the resolution of the claims in the litigation. Id. at 38.

In explaining the proper conflict-of-law analysis when

multiple parties and insurers were involved, our Court stated

that the

proper approach in resolving conflict-of-law
issues in liability insurance contract
controversies . . . in both the contract field
as well as in the somewhat related tort field
. . . calls for recognition of the rule that
the law of the place of the contract
ordinarily governs the choice of law because
this rule will generally comport with the
reasonable expectations of the parties
concerning the principal situs of the insured
risk during the term of the policy and will
furnish needed certainty and consistency in
the selection of the applicable law.

[Id. at 37.]

In Simmons, we relied on § 193 of the Restatement. Id. at

35-36, 57. Section 193, addressing conflicts of law in the

38
specific setting of contracts of fire, surety or casualty

insurance, provides that

[t]he validity of a contract of fire, surety
or casualty insurance and the rights created
thereby are determined by the local law of the
state which the parties understood was to be
the principal location of the insured risk
during the term of the policy, unless with
respect to the particular issue, some other
state has a more significant relationship
under the principles stated in § 6 to the
transaction and the parties, in which event
the local law of the other state will be
applied.

Since Simmons, this Court has continued to confront

conflict-of-law questions concerning insurance coverage in

complex settings involving mass torts. In those subsequent

cases, we have discussed the role of two other pertinent

Restatement provisions that warrant identification before

proceeding to review those cases.

Section 188 of the Restatement generally addresses

conflicts-of-law determinations in contract settings where the

parties have not made an effective choice of law. It provides

that “[t]he rights and duties of the parties with respect to an

issue in contract are determined by the local law of the state

which, with respect to that issue, has the most significant

relationship to the transaction and the parties under [the § 6

factors].” More specifically, subparagraph (2) of § 188

39
identifies the contacts to be considered when applying the § 6

factors. They are:

(a) The place of contracting,

(b) The place of negotiation of the contract,

(d) The location of the subject matter of the
contract, and

(e) The domicil, residence, nationality,
place of incorporation and place of
business of the parties.

Section 6 of the Restatement sets forth several generic

conflicts-of-law principles. In particular, it sets forth the

factors that are relevant in a conflicts determination when

there is no local statutory directive controlling the issue.

Specifically, Section 6 provides:

[T]he factors relevant to the choice of the
applicable rule of law include
(a) the needs of the interstate and
international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other
interested states and the relative
interests of those states in the
determination of the particular issue,
(d) the protection of justified
expectations,
(e) the basic policies underlying the
particular field of law,
(f) certainty, predictability and
uniformity of result, and

40
(g) ease in the determination and
application of the law to be applied.

With those additional Restatement sections in mind, we turn

back to review our case law in this area.

In Gilbert Spruance Co. v. Pennsylvania Manufacturers’

Ass’n Insurance Co.,
134 N.J. 96, 97 (1993), we considered

choice of law regarding insurance coverage in the context of a

mass tort. Specifically, we granted certification to address

“whether a comprehensive general liability policy containing a

pollution exclusion, issued by an out-of-state carrier and

covering an out-of-state defendant’s operations, should be

construed pursuant to New Jersey law.” Ibid. Ultimately, we

affirmed the Appellate Division’s holding that when it is

reasonably foreseeable to parties to an insurance contract that

a New Jersey waste site will obtain the insured’s waste

products, our substantive law dictates the interpretation of the

insurance agreement because New Jersey “had the dominant

significant relationship.” Id. at 98.

In Spruance, the plaintiff company (Spruance), a

Pennsylvania corporation, manufactured paint products in

Philadelphia and, in the 1970s and 1980s, “consigned its waste

to independent waste haulers, who transported the waste to [dump

sites] in New Jersey.” Ibid. Four of those sites formed “the

41
basis of multiple toxic-tort claims for personal injury and

property damage,” which led New Jersey’s then-Department of

Environmental Protection to bring public remediation and

enforcement actions. Ibid. During the pertinent period,

Spruance had negotiated and purchased primary and excess

insurance policies in Pennsylvania from a Pennsylvania

corporation, covering plant operations in numerous states. Id.

at 98-99. The policies contained a pollution-exclusion clause;

accordingly, when Spruance submitted notice of claims arising

from the New Jersey waste sites, the insurance carrier

disclaimed coverage based on the exclusion. Id. at 99.

Spruance filed a declaratory judgment action in New Jersey on

the coverage question, and New Jersey courts had to determine

whether Pennsylvania or New Jersey law applied to the

interpretation of the pollution-exclusion clause. Ibid.

In considering the conflicts-of-law question when the

matter reached our Court, we restated our rejection of a

“mechanical and inflexible lex loci contractus rule in resolving

conflict-of-law issues in liability-insurance contracts,” and

referenced our “more flexible approach that focuses on the state

that has the most significant connections with the parties and

the transaction.” Id. at 102. We noted that when determining

the conflicts-of-law rule to govern casualty-insurance

contracts, Restatement § 193 usually is initially consulted;

42
however, we concluded that § 193 did not provide a satisfactory

framework for the fact-specific question presented, explaining

that

[i]f the principal location of the insured
risk is in a single state for a major portion
of the insurance period, that location “is the
most important contact to be considered in the
choice of the applicable law, at least as to
most issues.” However, the location of the
risk has less significance when a movable risk
is concerned or when “the policy covers a
group of risks that are scattered throughout
two or more states.”
[Id. at 104 (quoting Restatement § 193 cmt.
b).]

In such factual settings, we recognized that a clear

understanding about the principal location of the insured risk

would not necessarily be present and so a different approach was

warranted:

[W]hen the “subject matter of the insurance is
an operation or activity” and when “that
operation or activity is predictably
multistate, the significance of the principal
location of the insured risk diminishes” . . .
[and] the governing law is that of the state
with the dominant significant relationship
according to the principles set forth in
Restatement section 6.

[Id. at 112 (quoting Gilbert Spruance Co. v.
Pa. Mfrs.’ Ass’n Ins. Co.,
254 N.J. Super. 43,
50 (App. Div. 1992)).]

Spruance broke from the prior reliance on the place of the

contract in Simmons. Rather, we determined that the Restatement

§§ 188 and 6 provided a more useful framework for addressing the

43
various interests at stake. We determined those Restatement

sections to be analytically more appropriate “in the context of

commercial insurance and pollution exclusion involving out-of-

state waste generation, multi-state waste generation, and in-

state waste generation with the waste ultimately coming to rest

in New Jersey.” Spruance,
134 N.J. at 104.

Spruance’s reach has been the subject of debate. Even we

have commented that

[c]ourts have found it “tempting” to extract
from Spruance a “bright-line rule” of applying
the law of the state in which the waste
disposal site is located as long as it was
reasonably foreseeable to the contracting
parties that the insured’s waste would
predictably come to rest in that state.

[Pfizer,
154 N.J. at 197.]

However, as clarified in Pfizer, “there is no way to avoid a

careful site-specific determination, made upon a complete

record.” Ibid. (quotation marks omitted). When the risk is “to

some degree transient,” a court must use the Restatement § 6

factors in its analysis. Ibid. (quoting Spruance,
134 N.J. at
113). In Pfizer, this Court did that.

In that case, the Court relied on the factors in § 6,

informed by reasoning from General Ceramics, Inc. v. Firemen’s

Fund Insurance Cos.,
66 F.3d 647 (3d Cir. 1995), to articulate

the interests to be considered in an environmental toxic tort

setting when the location of the damage is ascertainable. Id.

44
at 197-98. Although condensed and reframed into four inquiries,

the Pfizer analysis nevertheless remained tethered to the

section 6 factors:

1. The competing interests of the states[,
which] require courts to consider whether
application of a competing state’s law under
the circumstances of the case “will advance
the policies that the law was intended to
promote[;]” . . .

2. The interests of commerce among the
states[, which] require courts to consider
whether application of a competing state’s law
would frustrate the policies of other
states[;] . . .

3. The interests of parties[, which] require
courts to focus on their justified
expectations and their needs for
predictability of result[;] . . . [and]

4. The interests of judicial administration[,
which] require a court to consider whether the
fair, just and timely disposition of
controversies within the available resources
of courts will be fostered by the competing
law chosen.

[
154 N.J. at 198-99 (quoting Gen. Ceramics, 66
F.3d at 656).]

The Pfizer Court explained that, in considering the

competing interests of the states, the inquiry should focus “on

'what [policies] the legislature or court intended to protect by

having [the] law apply to wholly domestic concerns, and then,

whether those concerns will be furthered by applying that law to

the multi-state situation.’” Id. at 198 (first alteration in

original) (quoting Gen. Ceramics, 66 F.3d at 656). The Court

45
also noted that the “contacts” outlined in § 188 are relevant in

order to “assess[] what parties might reasonably have expected

to be predictable.” Id. at 199; see also HM Holdings, Inc. v.

Aetna Cas. & Sur. Co.,
154 N.J. 208, 213-17 (1998) (applying

Pfizer analysis to multiple choice-of-law questions in

environmental-coverage dispute).

With that background, we turn to the conflict-of-law issue

before us.

To begin, we reject the insurers’ argument that Simmons

requires this analysis to begin with Restatement § 193 and its

presumption that the law of the place of contracting applies.

We no longer follow lex loci contractus for insurance contracts

and Simmons is factually distinct from this dispute. Simmons

began with a presumption in favor of the law of the contracting

state in an automobile-insurance-liability dispute, which was

sensible in light of that state’s relationship with the

“principal situs of the insured risk.”
84 N.J. at 37; see also

Restatement § 193. Neither Simmons nor § 193 persuasively

pertain in circumstances such as we have here: nationwide

products-liability claims spanning many years of product

exposure rather than a single occurrence event.

46
Indeed, in Spruance, we clarified that “the location of the

[insured] risk has less significance when a moveable risk is

concerned or when 'the policy covers a group of risks that are

scattered throughout two or more states.’”
134 N.J. at 104

(quoting Restatement § 193 cmt. b). The insurance policies at

issue here covered a scattered risk, insuring Bendix for

liability related to a commercial product that the manufacturer

distributed nationally. Unlike an environmental-coverage case,

the insurers were not insuring a risk site. Michigan, as the

place of contracting, did not relate to a risk site.

In a contract dispute over insurance allocation for

nationwide products liability claims asserting bodily injury due

to asbestos exposure, neither Restatement § 193 nor Simmons

provides the proper starting point. The conflicts analysis here

should center on Restatement §§ 188 and 6, as our later

decisions in Spruance and Pfizer have taught.

Section 188 sets forth the contacts to be taken into

account in applying the principles of § 6. Section 6’s factors,

to the extent helpfully condensed in our Pfizer decision, fill

out the inquiry.

With respect to the § 188 contacts with the states having

an interest in the question of substantive law, not all of the

contacts are of equal importance or value in this fact-specific

47
inquiry. Having already abandoned the place of contracting

(here Michigan) as the presumptive starting point, we adhere to

the observation in Restatement § 188 cmt. e. on subsection (2),

that “[s]tanding alone, the place of contracting is a relatively

insignificant contact.” That is particularly true where, as

here, the insured risk is not site-specific. The place of

negotiation (again Michigan) can be of importance, as recognized

in the Restatement’s comment to § 188.

However, two stronger considerations under § 188, applied

to this matter, combine to point toward New Jersey. Here, the

place of performance, § 188(c), and the domicile, residence, and

places of incorporation and of business of the parties,

§ 188(e), all point to New Jersey. The latter takes into

account enduring characteristics and deserves to be a starting

point in the analysis. Further, heavy weight must be given to

the nature of the insured risk and its site, or to an otherwise

performance-related location consideration. New Jersey is the

longstanding domicile of the insured in this litigation (since

1983). Honeywell is the successor to the rights of Bendix under

the insurance contract. As such, Honeywell’s place of domicile

and business (New Jersey) is easily determined at the time

coverage is invoked due to litigation, triggering the terms of

the insurance contract for these products liability claims.

Relatedly, New Jersey is also the place of performance for the

48
contractual defense and indemnification of Honeywell in this

litigation involving long-tail claims on an occurrence policy

for a predecessor’s products cast into the national marketplace.

Even before the New Jersey-based Honeywell became the successor

to Bendix, New Jersey was integrally involved in Bendix’s

business operations. It is no stranger to the dispute.

With those contacts in mind, we turn to the Restatement’s

factors in section 6, helpfully condensed in Pfizer, for our

analytical framework. The question is whether New Jersey’s

relationship with the case is sufficiently significant to

warrant application of New Jersey law.

In examining the competing interests of the states, the

first inquiry described in Pfizer consolidates several § 6

factors and asks, simply, whether application of the competing

states’ laws would advance the policy interests that the law was

intended to promote.

Owens-Illinois is very clearly a policy-driven opinion,

identifying several policies sought to be promoted through

application of our allocation methodology for progressive bodily

injury claims based on asbestos exposure. Honeywell contends

that application of the Owens-Illinois approach in this matter

will promote those policies. We generally agree. The policies

of maximizing insurance resources, encouraging the spreading of

risk throughout the insurance industry, promoting the purchase

49
of insurance when available, and considerations of simple

justice all are important to this state. Owens-Illinois and

Carter-Wallace focused on those policies. Fulfilling them will

benefit the State because they achieve worthy goals enhancing

the interests of a New Jersey insured, and the claimants who

were injured by progressive asbestos-related disease, by

maximizing insurance resources and prompting insureds to obtain

and maintain insurance coverage.

To the extent that Michigan’s time-on-the-risk approach

also seeks to benefit insureds and claimants, application of New

Jersey’s allocation law will not undermine those Michigan

interests. Moreover, it is far from clear what interest

Michigan has in insisting that its allocation methodology apply

in this insurance dispute, which no longer involves a Michigan-

based company.

Finally, although New Jersey’s interest in the “efficient

use of the resources available to cope with environmental

disease or damage,” Owens-Illinois,
138 N.J. at 472, may be less

compelling in a products-liability case where the harm is not

confined to New Jersey, the State’s interest in “simple justice”

will be advanced when the Travelers policies are subjected to

the same New Jersey law as the St. Paul policies.

In sum, we do not see a strong Michigan interest in its

allocation law being applied to this coverage dispute. This

50
matter involves nationwide products-liability claims relating to

items manufactured in virtually all fifty states and

internationally, sold in the national marketplace, and that now

are the liability of a successor, New Jersey-based corporation.

The second Pfizer factor considers commerce between the

states. That factor is analytically similar to the prior one.

It too supports application of New Jersey law. The inquiry

focuses on “whether application of a competing state’s law would

frustrate the policies of other states.” Pfizer,
154 N.J. at
198.

In addition to the competing interests of the states

already discussed, the public policy goals further identified in

Arco are prospective in nature. The Michigan Court of Appeals

sought to promote predictability, discourage litigation, and

reduce premiums. Arco,
594 N.W 2d at 70. Application of

Michigan’s time-on-the-risk method in this instance cannot

discourage litigation among these parties. Further, it would

not promote predictability. As the Appellate Division noted,

neither Bendix nor its insurers could have anticipated at the

time of contracting that Michigan would adopt that allocation

method, which was not yet part of Michigan’s law.

The third factor considers the interests of the parties.

Here the contacts outlined in § 188 of the Restatement come to

the fore. Courts look to the parties’ justified expectations

51
and need for predictability, as well as the other contacts

outlined in § 188. Travelers asserts that Michigan law should

govern because Michigan was the place of contracting. However,

as the Appellate Division noted, when the parties entered the

now-disputed excess insurance policies, they could not have

reasonably anticipated the later adoption of the time-on-the-

risk approach in Michigan. The parties did know though that the

Travelers policies covered risk related to products that Bendix

sold nationwide. The risk was not stationary; it extended

beyond Michigan’s borders. We are unpersuaded by Travelers’s

contention that the parties expected Michigan allocation law to

govern.

That said, we acknowledge that, at the time of contracting,

the parties could not have expected New Jersey law to control

either. However, section 188 directs courts to consider, among

other factors, the place of performance, Restatement § 188(c),

and the place of business of the parties, id. § 188(e). We

already determined that we view those two contacts as strongest

in the resolution of this dispute and both point toward New

Jersey. We give great weight in this analysis to Honeywell’s

status as a New Jersey corporation responsible for liability for

asbestos-related claims based on pre-1987 exposure to its

friction products. We conclude that this factor supports

application of New Jersey allocation law.

52
Finally, we look at the interests of judicial

administration under the last Pfizer factor, which asks “what

choice of law works best to manage adjudication of the

controversy before the court.”
154 N.J. at 199. In Owens-

Illinois, we designed special procedures for the resolution of

allocation disputes in cases involving long-tail losses.
138 N.J. at 477-78. The Court placed its faith in the discretion of

skilled masters and encouraged “the use of special case

calendars, management conferences, monitoring, [and] alternative

methods of dispute resolution.” Ibid.

We agree with the Appellate Division that Pfizer’s “special

judicial framework” will best manage adjudication of this

dispute. Travelers contends that procedural complexity will not

serve the interests of judicial administration and argues

instead for the simpler time-on-the-risk approach, which

requires fewer resources. That argument fails to persuade,

however, because the fourth factor focuses not only on resource

use but also on “best manage[ment]” of the case. New Jersey’s

system is well suited to resolve a complex allocation

controversy in a fair manner.

In sum, we conclude, in this contract setting where no

provision of the contract or of state law compels application of

a specific state’s law, that conflicts-of-law principles favor

application of New Jersey allocation law in the present dispute

53
over liability among insurers. Accordingly, for the reasons

expressed, we affirm the Appellate Division on the first issue

and turn to the second, questioning the use of our

unavailability exception in that allocation methodology.

IV.

The continuous-trigger and related unavailability exception

theories for allocation of insurance liability have been

recognized and applied in this state since the 1994 decision in

Owens-Illinois. As previously discussed, in that matter, which

involved toxic-exposure to asbestos, we addressed the use of

pollution-exclusion clauses in insurance policies and their

impact on the policyholder. After considering strong policy

arguments presented by all parties, we settled on the

continuous-trigger doctrine and its related allocation

methodology as being best for purposes of assessing liability

and promoting risk management.
138 N.J. at 478-79. We

determined to use that method of allocation of liability because

we found it superior by virtue of (1) encouraging the

acquisition of insurance and spreading costs throughout the

industry; (2) promoting the efficient use of insurance resources

to make more money available to respond in catastrophic

circumstances; (3) compelling insurers to minimize their costs;

and (4) advancing principles of simple justice. Id. at 472-78.

54
The continuous-trigger method assumes the availability of

insurance and incorporates recognition of an unavailability

exception. As we explained in Owens-Illinois, “[w]hen periods

of no insurance reflect a decision by an actor to assume or

retain a risk, as opposed to periods when coverage for a risk is

not available, to expect the risk-bearer to share in the

allocation is reasonable.” Id. at 479. The Court thus made it

clear that a policyholder is not responsible for the pro rata

portion of liability that reflects a period of insurance

unavailability. Id. at 479. Courts have applied the

“unavailability exception,” in accordance with the language of

Owens-Illinois, to require an insured to share in an allocation

of liability under the continuous-trigger doctrine only when it

foregoes purchasing available insurance. See Farmers Mut. Fire

Ins. Co. of Salem v. N.J. Prop.-Liab. Ins. Guar. Ass’n,
215 N.J.
522, 538-39 (2013) (collecting cases); Champion Dyeing,
355 N.J.

Super. at 276-77.

In this appeal, St. Paul and Travelers ask this Court to

create an equitable exception to the unavailability rule,

whereby corporations that continue to manufacture products after

insurance becomes unavailable for those products would be

deprived of the insurance coverage they purchased prior to that

unavailability. The insurers contend that the Appellate

55
Division misapplied this Court’s precedent when it held

Honeywell was entitled to coverage, asserting that the panel’s

application of Owens-Illinois conflicts with the public policy

objectives underpinning that decision. They urge us to conclude

that Honeywell’s decision to continue to manufacture and sell

products containing asbestos, after insurance was no longer

available, should result in requiring Honeywell to contribute to

the losses from its past and future sale of those products.

They urge the Court to find an “exceptional circumstance”

warranting departure from Owens-Illinois in this case. Thus,

they claim that, for purposes of performing the allocation of

risk, the coverage block of insurance should have been extended

to include all years that Honeywell continued to manufacture the

friction products. They assert that, otherwise, application of

the unavailability rule will encourage manufacturers to behave

irresponsibly. Manufacturers, they argue, will be allowed to

transfer the risk of that subsequent (post-insurance

unavailability) conduct to their prior insurers. They do not

ask for this Court to overrule Owens-Illinois and its

unavailability exception in the allocation methodology, but

argue about its application to the facts of this case.

Joining with the insurers, as amicus curiae, is the Complex

Insurance Claims Litigation Association (CICLA). CICLA’s main

argument is that this Court should abandon the unavailability

56
doctrine altogether, an argument not raised by the insurers

themselves. CICLA claims a trend in the law of other

jurisdictions away from recognition of an unavailability

exception. CICLA contends that the exception undermines the

public policy objectives that support the allocation methodology

of Owens-Illinois and encourages manufacturers to forego

insurance while continuing to produce and sell potentially

dangerous products. CICLA adds that the unavailability

exception complicates insurance coverage litigation by creating

additional issues requiring expanded discovery.

In contrast, Honeywell primarily points to the record that

establishes that excess insurance was no longer available after

April 1987. Honeywell emphasizes that it is seeking coverage

only for claims alleging first exposure to a Bendix product

before 1987 -- while Bendix and its successors had active

occurrence-policy coverage for asbestos-based risks -- even if

manifestation occurred after that point in time. Honeywell

stresses that, under existing law, their conduct after 1987 is

not relevant because it does not affect the prior exposure for

which they had purchased insurance. Thus, Honeywell contends,

the Owens-Illinois unavailability rule was applied correctly and

consistently with the policy objectives expressed in that

opinion. Honeywell underscores that it is inaccurate for the

insurers to contend that it is seeking to foist post-1987

57
conduct onto insurers. In the alternative, Honeywell contends

that its adversaries misread Owens-Illinois to allow for

liability allocation to an insured for a time when insurance was

unavailable.

United Policyholders (UP), appearing as amicus curiae in

support of Honeywell, argues that the trial court and Appellate

Division appropriately applied the Owens-Illinois unavailability

exception. UP notes that, in Owens-Illinois, the Court focused

on the policyholder’s conscious decision to forego the purchase

of available insurance rather than the policyholder’s decision

to engage in a particular kind of business activity. In fact,

UP contends, in Owens-Illinois the Court expressly contrasted a

specific decision by an actor to assume or retain a risk during

a period of no insurance with those periods when insurance

coverage is not available. It too emphasizes that the record

clearly establishes that excess-insurance coverage for asbestos

risk was not available after 1987. UP further urges that we not

abandon precedent because Owens-Illinois has offered certainty

in its formula and has encouraged settlement of complex coverage

disputes.

We have affirmed that the continuous-trigger theory of

liability is the law of this state multiple times since the

decision in Owens-Illinois. For example, in Benjamin Moore, we

58
reiterated our policy principles and noted that “[t]he multiple

occurrence template is a matter of substance that is at the

heart of Owens-Illinois.”
179 N.J. at 104. The theory

triggers multiple policies, thus maximizing
resources available for toxic tort cases. It
is what encourages the purchase of insurance.
It is what voids “other insurance” clauses.
It is what makes “non-cumulation” clauses
inapplicable. It is what requires a
calculation of the loss that occurred during
each policy period. It is our effort to
regularize the essentially irregular
progressive environmental damage case and make
it amenable to disposition in accordance with
the undertakings in the insurance contract.

[Id. at 104-05.]

Most importantly, as discussed previously, the theory holds

insurers responsible for the losses that actually occur on their

watch, using a formula that approximates “a scientific

assessment of the amount of injury,” even if the actual injury

manifests later. Id. at 105. We have articulated those

principles in a number of settings. See, e.g., Spaulding,
176 N.J. 25; Quincy Mut. Fire Ins. Co. v. Borough of Bellmawr,
172 N.J. 409 (2002); Carter-Wallace,
154 N.J. 312.

On appeal, the policy implications of the unavailability

rule has been a focus of an amici that seeks the total

elimination of the unavailability exception. Travelers also

maintains that assumption of tort risk should factor into the

establishment of a coverage block, eliminating application of

59
the unavailability rule when a company continues to manufacture

a product after commercial insurance is no longer available.

Clearly, the law on allocation methodology differs among

the states. Other states have adopted policies different from

the “continuous-trigger” and “unavailability exception” theories

embraced by New Jersey. See, e.g., Arceneaux v. Amstar Corp.,

200 So. 3d 277, 287-88 (La. 2016); KeySpan Gas E. Corp. v.

Munich Reins. Am., Inc.,
96 N.E.3d 209, 214-16 (N.Y. 2018);

Bradford Oil Co. v. Stonington Ins. Co.,
54 A.3d 983, 991-92

(Vt. 2011). In the debate over the suitability of adopting an

Owens-Illinois approach, the discussions are noticeably context-

dependent.4

No doubt, legitimate policy reasons may have led sister

courts to reach diverse conclusions regarding each one’s

allocation analysis and whether an unavailability exception is

4 Indeed, not all cases line up as reviewing progressing injury
from asbestos or other harmful substances, but instead arise in
alternate contexts, such as interpretation of traditional
pollution exclusion clauses. See, e.g., Md. Cas. Co. v. W.R.
Grace & Co.,
794 F. Supp. 1206, 1229 (S.D.N.Y. 1991) (“One would
not usually associate asbestos with the substances listed in the
exclusion, namely, smoke, fumes or waste. Those substances bear
a closer relation to industrial pollution, the usual subject of
the ordinary pollution exclusion.” (citation omitted)); Pub.
Serv. Co. v. Wallis & Cos.,
986 P.2d 924, 939-40, 943 (Colo.
1999) (rejecting continuous-trigger theory in pollution
context); Am. Bumper & Mfg. Co. v. Hartford Fire Ins. Co.,
550 N.W.2d 475, 484 (Mich. 1996) (declining to adopt either
occurrence-manifestation theory or continuous-trigger theory).

60
sensible in a particular scheme. Compare Sybron Transition

Corp. v. Sec. Ins. of Hartford,
258 F.3d 595, 599-600 (7th Cir.

2001) (commenting on idea that insurance can be “available” or

“unavailable”), and Crossmann Cmtys. of N.C., Inc. v.

Harleysville Mut. Ins. Co.,
717 S.E.2d 589, 594-95, 599-601

(S.C. 2011) (adopting “time-on-risk” approach to “forward[]

important policy goals” and preserve incentive for business to

purchase sufficient insurance, promoting stability in insurance

market), with R.T. Vanderbilt Co. v. Hartford Accident & Indem.

Co.,
156 A.3d 539, 573-74 (Conn. App. Ct.) (adopting continuous-

trigger theory in asbestos case because substance immediately

injures body following exposure and theory accounts for unknowns

in progression of disease, and continuous-trigger analysis is

“the fairest and most efficient way to distribute indemnity and

defense costs”), certif. granted,
171 A.3d 62;
171 A.3d 63

(Conn. 2017).

In Owens-Illinois we acknowledged that “[i]f, after

experience, we are convinced that our solution is inefficient or

unrealistic, we will not hesitate to revisit” the allocation

paradigm with its continuous-trigger and unavailability

doctrines.
138 N.J. at 478. This appeal, however, does not

present a compelling vehicle to reconsider our precedent on

allocation. It specifically does not present a proper factual

61
basis to revisit the unavailability rule that is part of the

coherent principles that comprise our allocation methodology.

The record in this appeal, carefully addressed by the trial

court, indisputably demonstrates when insurance became

unavailable in the marketplace. Importantly, none of the

initial asbestos exposures, on which claims Honeywell is seeking

insurance coverage, occurred after insurance became unavailable.

The claimants initially were exposed to asbestos at times when

the manufacturer was covered by the excess insurance policies at

issue. Although the disputed policies involved in this appeal

concern excess insurance, we are dealing with occurrence

policies. Further, we are addressing claims pertaining to

exposure to asbestos during the policy periods claimed to have

caused progressive asbestos-related disease. See Owens-

Illinois,
138 N.J. at 454 (confirming injury to body tissue

occurs on inhalation through exposure to asbestos fibers).

This case simply does not present facts on which to

consider abandoning the unavailability exception, let alone

whether to create a novel equitable exception to that exception

that would retroactively deprive parties of paid-for insurance

coverage due to their post-coverage-period conduct. Sufficient

justification for even contemplating taking steps to alter our

allocation methodology, with its unavailability rule, is absent

here. The continued application of the unavailability rule

62
supports the public policy objectives originally intended by our

prorated allocation methodology.

For the reasons that preceded in this opinion’s discussion

of the trial court’s motion practice, we agree with the

Appellate Division that the trial court correctly kept its focus

on whether Honeywell could reasonably have purchased insurance

for asbestos-related claims. The assumption-of-risk language in

Owens-Illinois, in context, addressed only assumption of an

insurance risk for the existing claim periods when insurance was

reasonably available but the insured elected not to purchase it.

That is not what has happened here. Moreover, we decline to

upend this long-litigated dispute to recognize here an equitable

exception to the unavailability rule.

In light of the extended litigation and the fact that the

manufacturer ceased producing these friction products seventeen

years ago, we decline to disrupt the coverage block of insurance

fixed by the trial court, which resulted in maximizing the

insurance resources available for claimants. Indeed, the basic

policy objectives of Owens-Illinois -- of maximizing insurance

resources, encouraging the spreading of risk throughout the

insurance industry, promoting the purchase of insurance when

available, and of simple justice -- are all served by affirming

the judgment and moving to closure this mammoth allocation

dispute, going back to 1940 through to the ending of insurance

63
availability in 1987. Further, we reject that this holding will

disincentivize manufacturers from responsible behavior regarding

products for which insurance becomes unavailable, for whatever

reason may be discernable. This manufacturer ceased its

production. Our affirmance of the insurance coverage block

established in this matter is rooted in the overall record

before us. To the extent that our dissenting colleague would

use this case to have this matter address alterations to the

continuous-trigger concept as it was originally fashioned, and

to the Owens-Illinois allocation paradigm, in order to promote

social policy regarding tort law, that invitation is not one

that these circumstances compel us to accept.

The judgment of the Appellate Division is affirmed.

CHIEF JUSTICE RABNER and JUSTICES FERNANDEZ-VINA, SOLOMON,
and TIMPONE join in JUSTICE LaVECCHIA’s opinion. JUSTICE ALBIN
filed an opinion, dissenting in part. JUSTICE PATTERSON did not
participate.

64
SUPREME COURT OF NEW JERSEY
A-
21 September Term 2016
078152

CONTINENTAL INSURANCE
COMPANY, FIDELITY & CASUALTY
COMPANY OF NEW YORK,
COMMERCIAL INSURANCE COMPANY
OF NEWARK, N.J., and COLUMBIA
CASUALTY COMPANY,

Plaintiffs,

HONEYWELL INTERNATIONAL, INC.
(f/k/a ALLIEDSIGNAL, INC.,
successor to BENDIX AVIATION
CORPORATION and BENDIX
CORPORATION),

Defendant-Respondent,

and

ST. PAUL FIRE AND MARINE
INSURANCE COMPANY,

Defendant-Appellant,

and

Defendants,

and

HONEYWELL INTERNATIONAL, INC.
(f/k/a ALLIEDSIGNAL, INC.,
successor to BENDIX AVIATION
CORPORATION and BENDIX
CORPORATION),

Defendant/Third-Party
Plaintiff-Respondent,

TRAVELERS CASUALTY & SURETY
COMPANY (f/k/a AETNA CASUALTY
& SURETY COMPANY),

Third-Party Defendant-
Appellant,

2
and

5
Third-Party Defendants.

CONTINENTAL INSURANCE COMPANY,
FIDELITY & CASUALTY COMPANY OF
NEW YORK, COMMERCIAL INSURANCE
COMPANY OF NEWARK, N.J., and
COLUMBIA CASUALTY COMPANY,

Plaintiffs,

HONEYWELL INTERNATIONAL, INC.
(f/k/a ALLIEDSIGNAL, INC.,
successor to BENDIX AVIATION
CORPORATION and BENDIX
CORPORATION),

Defendant-Respondent,

and

ST. PAUL FIRE AND MARINE INSURANCE
COMPANY,

Defendant-Appellant,

and

AFFILIATED FM INSURANCE COMPANY,
ALLSTATE INSURANCE COMPANY,
AMERICAN HOME ASSURANCE COMPANY,
AMERICAN INSURANCE COMPANY,
CALIFORNIA UNION INSURANCE
COMPANY, CENTURY INDEMNITY
COMPANY, COMMERCIAL UNION
INSURANCE COMPANY as
successor to EMPLOYERS
LIABILITY ASSURANCE
CORPORATION, LTD., EMPLOYERS
INSURANCE OF WAUSAU,
FIREMAN’S FUND INSURANCE
COMPANY, GRANITE STATE

Defendants,

and

HONEYWELL INTERNATIONAL, INC.
(f/k/a ALLIEDSIGNAL, INC.,
successor to BENDIX AVIATION
CORPORATION and BENDIX
CORPORATION),

Defendant/Third-Party
Plaintiff-Respondent,

TRAVELERS CASUALTY & SURETY
COMPANY (f/k/a AETNA CASUALTY
& SURETY COMPANY),

7
Third-Party Defendant-
Appellant,

and

10
GENERAL INSURANCE PLC (f/k/a
THE WORLD MARINE & GENERAL
INSURANCE COMPANY LIMITED),

Third-party Defendants.

JUSTICE ALBIN, dissenting in part.

This Court is the steward of the common law, charged with

the responsibility of developing legal principles that will

promote fairness and good public policy in our system of

justice. Today’s majority opinion is at odds with that charge.

The majority has taken a single obscure phrase in Owens-

Illinois, Inc. v. United Insurance Co.,
138 N.J. 437, 479

(1994), to perpetuate a doctrine that incentivizes corporations

to manufacture products that are dangerous, and even lethal, to

the mechanics and others who work with them.

As applied here, the judicially created doctrine known as

the “unavailability exception” gives a corporation a free pass

if it continues to expose workers to extremely dangerous

products after insurance coverage becomes unavailable. Under

the unavailability exception, this Court compels insurance

carriers that previously insured the corporation -- but later

refuse to do so -- to remain the guarantors for claims arising

during the years the corporation continues to manufacture its

dangerous products. This misguided application of the doctrine

does not further notions of fairness or a rational public

policy, as is evident from this case.

11
Since 1940, The Bendix Corporation (Bendix)1 secured

insurance coverage for the brake and clutch pads it manufactured

and sold. Those brake and clutch pads contained asbestos, a

dangerous substance, which if inhaled by a worker can cause

various respiratory diseases and even increase the risk of

developing certain cancers -- diseases that result many times in

death. See Centers for Disease Control and Prevention, Health

Effects of Asbestos, https://www.atsdr.cdc.gov/asbestos/

health_effects_asbestos.html (last updated Nov. 3, 2016).

Beginning in 1975, Bendix faced asbestos-related personal-injury

claims from individuals across the country. By 1987, there were

over 2,600 claims filed against Bendix for injuries allegedly

caused by the asbestos-containing brake and clutch pads. Then,

in 1988 alone, the number of claims soared to more than 3,600.2

By 1985, the Centers for Disease Control and Prevention

(CDC) had recognized the increased harm related to extended

1 Defendant Honeywell International, Inc. is the corporate
successor to Bendix and now responsible for all asbestos
liabilities attributed to Bendix. Ante at ___ (slip op. at 14-
15).

2 As of 2007, approximately $504,000,000 had been paid out on
over 28,000 claims related to those products. Over 80 percent
of the total settlement dollars were for mesothelioma cases.
Mesothelioma is a rare cancer that may not manifest until thirty
to forty years after exposure. See Centers for Disease Control
and Prevention, Health Effects of Asbestos, https://www.atsdr.
cdc.gov/asbestos/health_effects_asbestos.html (last updated Nov.
3, 2016).
12
exposure to asbestos. See, e.g., Centers for Disease Control

and Prevention, NIOSH: Health Hazard Evaluation Report 5 (June

1985), https://www.cdc.gov/niosh/hhe/reports/pdfs/83-44-1596.pdf

(describing asbestosis as “form of pulmonary fibrosis secondary

to the accumulation of airborne asbestos in the lungs”). Not

only is duration of exposure a risk factor in whether

individuals eventually manifest an asbestos-related injury, it

is also correlated with the severity of the injury. Ibid.

(noting that severity of disease is correlated with type and

duration of exposure to asbestos).

Given the apparent health hazards and number of pending and

expected personal-injury lawsuits relating to Bendix’s brake and

clutch pads, the primary insurance carriers in 1986 and then the

excess insurers in 1987 declined to underwrite coverage for

those products. Despite the known medical dangers of asbestos,

more than a decade of lawsuits, and an insurance marketplace

that refused to provide coverage for its asbestos products,

Bendix opted to continue to manufacture its asbestos-containing

brake and clutch pads for fourteen more years without liability

coverage. Bendix’s decision put at risk the health and safety

of countless workers exposed to the dangerous asbestos fibers in

its products over those fourteen years.

Now, a majority of the Court holds that Bendix, though it

paid no premiums for coverage, is insured for the injuries

13
caused to mechanics and others who worked with the products it

continued to manufacture -- so long as the first asbestos

exposure predated the period when the company went bare of

insurance. According to the majority, the insurance carriers

that previously issued liability policies to Bendix must pick up

this grisly tab. Of course, in the future, companies similarly

situated to Bendix will have less incentive to stop producing

dangerous products under such a scheme.

In my view, we have reached this point so in conflict with

good public policy by not giving a common-sense reading to

Owens-Illinois, a landmark case intended to further the public

welfare. Owens-Illinois constructed a methodology to allocate

insurance coverage among multiple policies in cases of

progressive toxic diseases that run a course of years from the

first exposure to the manifestation of the disease.
138 N.J. at
478-79. Implicit in the discussion on allocation methodology is

the understanding that duration of asbestos exposure is linked

to disease. Id. at 474-75. Because of the impossibility of

quantifying the extent of harm caused to an individual in any

particular year, the Court, as a matter of public policy,

decided to “treat the progressive injury or damage as an

occurrence within each of the years [of a comprehensive general

liability] policy.” Id. at 468, 478 (emphasis added). The

allocation scheme spread the costs of indemnification coverage

14
among the triggered policies from the time of exposure to

manifestation of the disease based on the risk assumed by the

carrier and its years on the risk. Id. at 475. The Court

adopted that paradigm because equity and notions of simple

justice demanded that it do so. Id. at 472-73.

The Court also recognized that a company might determine to

go without insurance for a period of years and, under those

circumstances, the allocation scheme includes the company’s pro

rata contribution, depending on its time on the risk and the

degree of the risk it assumed. Id. at 479. The language in

Owens-Illinois that is at the core of the controversy arises

from one seemingly obscure phrase. The Court stated, “[w]hen

periods of no insurance reflect a decision by an actor to assume

or retain a risk, as opposed to periods when coverage for a risk

is not available, to expect the risk-bearer to share in the

allocation is reasonable.” Ibid. (emphasis added). The quoted

clause is known as the unavailability exception. Owens-Illinois

mentions the “unavailability” of insurance in passing. There is

no further explanation or support given for the clause.

One logical interpretation of that clause accords with the

notions of fairness and simple justice advanced in Owens-

Illinois. If insurance is unavailable to a company for a

product that it has stopped manufacturing, the insurance

carriers that issued occurrence policies in prior years remain

15
on the risk through the time until the disease manifests. No

one would dispute the application of the allocation scheme in

that manner.

It is another thing, however, to say that a company, such

as Bendix, that continues to manufacture an inherently dangerous

product for which no insurance carrier will provide liability

coverage can avoid full financial accountability and transfer

the risk to prior insurers. Such a system runs counter to the

principles of fairness and justice enunciated in Owens-Illinois

and those underlying our tort law. Other courts have also

acknowledged the absurdity of applying the unavailability

exception to actors like Bendix. See, e.g., R.T. Vanderbilt Co.

v. Hartford Accident & Indem. Co.,
156 A.3d 539, 585-88 (Conn.

App. Ct. 2017) (recognizing that application of unavailability

exception might provide corporate actor “a windfall at its

insurers’ expense” because “insurers might have to defend and

indemnify claims for injuries that would not have occurred, or

that would have been less severe, but for [the actor]’s decision

to continue to sell [an asbestos-containing product]”).

Equity demands that a corporation that continues to

manufacture a dangerous product without insurance become the

ultimate insurer for its actions. Justice O’Hern -- the author

of Owens-Illinois -- reminds us that corporate actors should

“know that if they do not transfer to insurance companies the

16
risk of their activities that cause continuous and progressive

injury, they may bear that untransferred risk.” See
138 N.J. at
473.

The unavailability exception, as applied by the majority,

removes Bendix’s corporate accountability as a self-insurer for

those workers first exposed to Bendix asbestos products before

1987 and in the fourteen years that it continued to manufacture

its dangerous products. By diluting Bendix’s responsibility as

a self-insurer, the majority’s decision fails not only to deter

corporate risk-taking at the expense of public health, but

rather gives an incentive to such risk-taking because there is

no full financial reckoning for continued bad behavior. By

holding companies accountable for their irresponsible conduct,

tort law has a salutary deterrent effect. Although the dominant

force motivating most companies is to increase profits, one of

the major purposes of the common law is to promote the public

health and welfare of our citizens.

The majority’s decision also interferes with the natural

flow of market forces, which, if left untouched, would advantage

the public. When insurance carriers no longer provide coverage

for the continued manufacture of a product endangering the

public health because of the prospect of financially ruinous

lawsuits, the marketplace is making a definitive statement that

whatever good the product offers is outweighed by the risk.

17
Under such circumstances, the natural course of events might

lead the company to abandon the manufacture of the dangerous

product.

But, if insurance carriers that previously provided

coverage for the product must -- by the fiat of the Court --

insure the risk against their will, then corporations can send

their potentially deadly wares into the stream of commerce

knowing that they will not bear the full risk in doing so. The

perverse logic of this scheme is evident here.

Bendix continued to manufacture asbestos-containing brake

and clutch pads for fourteen years after insurance was no longer

available. For fourteen years, workers exposed to asbestos

fibers before 1987 remained exposed to the potentially deadly

toxin, increasing their risk of contracting various serious and

lethal diseases. Yet, Bendix now gets -- and future similarly

situated companies will get -- a windfall bailout because this

Court has conscripted insurance carriers into paying the bill.

The Owens-Illinois Court had in mind an equitable

allocation formula -- not the twisted one that has taken root

from a single difficult-to-decipher clause in an opinion

intended to promote the public welfare. Nor did the Court

expect that its opinion would be “the 'last word’ in this area.”

Owens-Illinois,
138 N.J. at 478 (quoting N. States Power Co. v.

Fid. & Cas. Co.,
523 N.W.2d 567, 665 (Minn. 1994)). Indeed, it

18
instructed a future Court to “revisit the issue [of coverage for

long-term exposure injury]” if the solution provided is

“inefficient or unrealistic.” Ibid.

I expect that insurance carriers will adjust to this new

methodology. Knowing that they will be compelled to provide

coverage, whether they wish to or not, carriers may decide to

offer coverage at much higher premiums -- thus rendering

insurance available for products that would have been

uninsurable.

I do not believe that the path that the majority is taking

can be justified by Owens-Illinois or sound public policy. I

believe that the majority is making a critical error in allowing

the unavailability exception to extend to claims of workers

whose first asbestos exposure occurred before 1987 but whose

diseases progressed during the fourteen years that Bendix

continued to expose them to the potentially lethal fibers --

despite the absence of insurance coverage. “[T]o send the

correct signals to the economic system, a judge must appreciate

the consequences of legal decisions on future behavior.” Id. at

473 (alteration in original) (citation omitted).

This case is not just about Bendix or asbestos products,

but about the signal this Court gives to corporate actors who

must assess costs and risks -- and profits -- when deciding

whether to unloose their uninsured dangerous products on the

19
public or their uninsured dangerous substances into the

environment.

I therefore respectfully dissent from the part of the

majority opinion addressing the unavailability exception. I

concur in the Court’s conflict-of-law analysis and resolution.

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