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NJ App. Div. Rejects Nuisance and Trespass Claims in Homeowner Leaking UST Case and Rejects Bad Faith Claim Against Insurers.

In a recent unpublished decision, Ross v. Lowitz the New Jersey Appellate Division addressed the question of whether a homeowner’s home heating oil that has migrated onto neighboring property constitutes a nuisance or continuing trespass; and further whether a neighboring property owner may sustain claims for breach of the covenant of good faith and fair dealing. Ultimately the court rejected each of these theories, holding that the absence of (a) any intentional or ultrahazrdous activities, and (b) any evidence that plaintiffs were intended beneficiaries of the insurance contract.

The dispute began with a leaking underground storage tank containing home heating oil on a single-family residential property. This property was owned by Ellman from 1988 until 1999, during which time Ellman maintained homeowner’s insurance. In 1999, Lowitz arranged for environmental testing on the property, which did not detect any leakage, and thereafter Lowitz proceeded to purchase the property and also maintained homeowner’s insurance. Then, in 2003, a leak was detected, and Lowitz’s homeowner’s insurance paid to clean up and remediate the resulting contamination.

In 2004, Plaintiffs purchased a home several lots down the street from Lowitz’s property. At the time of purchase, Plaintiffs were aware of the leak at the Lowitz residence, but were unaware that the contamination had migrated onto their property as well. Plaintiffs offered their home for sale and in 2007 entered into a contract, but the same week they were notified by Lowitz’s insurers of contamination to their property. As a result of this new information, the buyers cancelled their contract. Lowitz’s insurers sent letters to Plaintiffs offering to pay $20,000 for the replacement cost of the deck, pool and retaining wall that were removed in order to remediate Plaintiffs’ property, as well as monthly payments for carrying costs. The remediation was paid for and completed by late 2009, and a DEP No Further Action letter was issued around this time period. Plaintiffs incurred no out-of-pocket costs for the remediation.

Plaintiffs then filed suit against Lowitz, Ellman, and their respective insurers, alleging negligence, strict liability, Spill Act liability, trespass, nuisance, and breach of the covenant of good faith and fair dealing. After Plaintiffs dropped their strict liability and Spill Act claims, defendants each moved for summary judgment, which were each granted. Plaintiff appealed only the decision to dismiss the private nuisance and trespass claims against Ellman and Lowitz, and the bad faith claim against the insurers.

The court began its analysis of the nuisance and trespass issue by noting that “defendants’ liability turns on whether the migration of the home heating oil onto plaintiffs’ property lends itself to identification as a nuisance.” Noting first that “the essence of a private nuisance is an unreasonable interference with the use and enjoyment of land,” the court pointed to the Restatement (Second) of Torts, § 822 (1979), which sets forth that:

One is subject to liability for a private nuisance if, but only if, his conduct is a legal cause of an invasion of another’s interest in the private use and enjoyment of land, and the invasion is either (a) intentional and unreasonable, or (b) unintentional and otherwise actionable under the rules controlling liability for negligent or reckless conduct, or for abnormally dangerous conditions or activities.

The same limitations were noted to apply to claims for trespass:

Regardless of the analysis one might urge and the consequent label attached, be it nuisance, trespass or negligence, the issue here should logically depend on whether the offending landowner somehow has made a negligent or unreasonable use of his land when compared with the rights of the party injured on the adjoining lands.

(quoting Burke v. Briggs, 239 N.J. Super. 269, 274 (App. Div. 1990)).

Applying the “abnormally dangerous activity” analysis applicable in New Jersey, as adopted in Biniek v. Exxon Mobil Corp., 358 N.J. Super. 587 (Law Div. 2002), the court agreed with the motion judge’s conclusion that Lowitz did everything she could do to diligently and reasonably maintain the UST; that the migration of oil was not caused by an intentional or negligent act of either Lowitz or Ellman; and that a homeowner’s use of an underground storage tank for home heating oil is not an abnormally dangerous activity to which strict liability may attach. As such, the grant of summary judgment on these claims was affirmed.

As to the bad faith claim against the insurer defendants, the court held that “plaintiffs, as persons purportedly injured by the carriers’ insured, are precluded from filing a direct claim against the insurance companies absent an assignment of rights.” Further, because “third-party beneficiary status arises where the parties to the contract intended at the outset to confer a benefit on the third party sufficient to enforce it in court” (which does not appear to have been the case here), Plaintiffs were held not tobe “third-party beneficiaries to the contracts of insurance who are therefore entitled to make a direct claim against the policies.” The court concluded by holding that “[t]here is no basis, including public policy considerations, on which to conclude that these insurers intended, or should be compelled, to confer a direct right upon these plaintiffs merely by issuing insurance policies to Lowitz.”

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