Insured leased and operated a service station from 1982 until late 1989 or 1990.
It purchased a pollution liability policy from Federated Mutual Insurance Company ("Federated"), which it cancelled effective September 12, 1989.
The policy had a six month extended reporting period, which expired on March 12, 1990. The insured transferred control of the station in 1989, and another transfer took place
thereafter.
Contamination was discovered in a monitoring well on the property on March 19, 1990 and the Florida DEP discovered free product on March 29, 1990. Both dates fell outside the policy's reporting period.
In 1993, the new operators instituted suit against the insured and the insured filed a third party complaint against Federal.
The insured convinced the lower court that even though it had asked Federated to cancel the policy effective on the specified date, the policy could not be cancelled since it contained a provision that the insurer's cancellation of the policy would not take effect for 60 days.
This creative argument on the part of the insured would extend the reporting period sixty days, and arguably bring the claim within coverage.
However, the appellate court did not accept the argument that there was an ambiguity in the policy which mandated that cancellation of the policy by the insured was the equivalent of a cancellation of the policy by the insurer and therefore, the sixty day insurer cancellation period applied.
Rather, it found that the policy was clear on its face that the sixty day cancellation period only applied to an insurer cancellation.
As a result, court held that the cancellation of the policy was effective on September 12, 1989 and that the extended reporting period ended on March 12, 1990, with the result that the claims of the insured were outside of the coverage afforded under the policy.
11. Complaint Filed In California Superior Court in Owens Financial Group Inc. v. American Int’l Group Inc. (Reported in Mealey's Insurance Supplement, October 15, 1998).
According to the Complaint, Owens Financial Group and Owens Mortgage Investment Fund ("Owens") obtained a Pollution Legal Liability Policy from AIG for the period of January 22, 1997 to July 29, 1997. The policy covered real property on which a tire recycling facility was located.
In addition, Owens was an insured under a Pollution Legal Liability Policy that was issued by United Capital for the policy period July 29, 1997 to July 29, 1998.
On June 27, 1997, the California EPA ("Cal EPA") issued a cleanup and abatement order (the "Order") to the operator of the facility, Wenbury Environmental Company, Ltd.
("Wenbury") and Owens Financial Group. This order required the facility operators to "clean up waste tire piles, abate the effects thereof, or otherwise remediate a case of threatened pollution or nuisance".
On July 28, 1997, Owens provided AIG with a formal notice of loss in connection with the order of Cal EPA.
On or about September 26, 1997, AIG denied coverage of the claim of Owens, on the basis that "tires are not pollutants, that no claim had been made against the insured, that there are no cleanup costs, and if there was pollution, it commenced before the policy started...".
Throughout subsequent correspondence, AIG continued to deny coverage.
On January 6, 1998, Owens notified United Capital of the claim with respect to the Order and requested a defense as well as coverage for cleanup costs.
On February 11, 1998, United Capital denied coverage on the basis that, among other things, there were no claims for bodily injury or property damage and that the conditions that were the subject matter of the Order were not pollution conditions, but even if there was a pollution condition, it occurred prior to its policy.
On April 23, 1998, AIG also denied coverage of the claim of Owens under a general liability policy, on the basis that "tires were pollutants" and thus precluded from coverage.
Owens argued that both AIG and United Capital specifically agreed to insure the risk that Wenbury would leave tires on site and that Owens would be required to clean up the property.
The Complaint contained a specific cause of action against AIG for breach of the implied covenant of good faith and fair dealing on a number of bases, including AIG's determination under the Pollution Legal Liability policy that tires were not "pollutants"; its determination under its general liability policy that tires were "pollutants"; and its specific advertising campaign directed at tire recycling facilities.
The Complaint also listed specific causes of action against United Capital and the broker who was involved in the acquisition of the policies.
Our last information was that the suit had been put on hold.
12. Iowa Comprehensive Petroleum Underground Storage Tank Fund Board v. Federated Mutual Ins. Co., 596 N.W. 2d 546 (Iowa 1999).
CML Enterprises ("CML"), owner of property on which two underground storage tanks were located, purchased pollution liability coverage from Federated for the policy period March 5, 1990 through September 5, 1990.
The policy applied to claims "caused by a pollution incident that commenced on or after the retroactive date" of March 5, 1990.
The policy also excluded coverage for any "environmental damage caused by or contributed to by any pollution incident that commenced prior to the retroactive date" (emphasis added).
Contamination was discovered on June 28, 1990, and CML subsequently made a claim under the policy.
Federated denied coverage on the basis of the foregoing exclusion.
CML also made a claim to the plaintiff pursuant to a tank fund and was paid. In consideration of the payment, CML assigned the policy to plaintiff.
Plaintiff made a claim under the policy which was denied by Federated on the basis that the assignment was invalid.
Plaintiff filed a declaratory judgment suit against Federated.
Federated moved for summary judgment on the basis of the foregoing exclusion, which was granted.
The appellate court affirmed trial court's grant of summary judgment. In reaching its conclusion, appellate court examined a number of issues.
First, it examined the language of the exclusion in order to determine whether it was ambiguous.
Evidence indicated that there were pre-1990 incidents which could have caused or contributed to contamination, but that the damage could not be segregated by date, since there was simply one large plume.
Accordingly, based on a plain reading of the exclusion, court found that the issue of whether there were incidents during the policy period to be irrelevant, since there had plainly been incidents that took place prior to 1990 that "contributed to the contamination".
Court found that the exclusion was not capable of more than one meaning.
Next, court examined the reasonable expectations doctrine, and concluded that the doctrine did not apply here since Federated did nothing to indicate to its insured that a claim such as that presented would be covered. Further, it found the language of the exclusion to be clearly understandable to a layperson.
Court also rejected the plaintiff's waiver and estoppel arguments, which were based on the failure of Federated to conduct the site inspection to which it was entitled, primarily because the exclusion at issue in the case was unrelated to the right of inspection.
13. Camalloy Wire, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 695 N.Y.S. 2d 562
Insured's assignee sought coverage under a pollution liability policy for lost profits allegedly attributable to a "negative perception" created by an oil spill.
Appellate Division upheld decision of lower court dismissing claim on the basis that the claim was not made within the policy period. (This was a claims made policy).
In addition, court noted that lost profits do not appear to constitute property damage under the terms of the policy at issue.
14. American Empire Surplus Lines Ins. Co. v. Wightman Envt’l., Inc., 2000 U.S. Dist. LEXIS 1046 (W.D. Mich. Jan. 31, 2000).
The Berrien County Landfill Authority ("Landfill Authority") retained Wightman Environmental, Inc. ("Wightman"), an environmental engineering and consulting firm, in connection with the construction of new landfill cells.
The State rejected the Landfill Authority’s application with respect to one of the cells, on the basis of improper testing of clay, as well as failure to conduct density testing of clay at appropriate intervals. The Landfill Authority installed a second layer of clay to satisfy the State.
The Landfill Authority sued Wightman for damages arising out of Wightman's alleged negligence, and Wightman made a claim under its professional liability policy.
Insurer instituted a declaratory judgment action against Wightman and the Landfill Authority alleging that Wightman was not entitled to coverage under its policy on the basis of the exclusion for non-compliance with law.
The insurer and the Landfill Authority filed cross motions for summary judgment.
The exclusion at issue precluded coverage for “[a]ny “claim” arising out of any action of the "insured" if the "insured" was aware of non-compliance with any applicable statute or rule or regulation issued by a competent authority.”
The Landfill Authority argued that the exclusion did not apply because the claim arose out of its regulatory non-compliance, which in turn resulted from its reliance on Wightman's advice.
The insurer argued that the exclusion applies when the insured is aware of non compliance, and that the identity of the non-compliant party did not affect the exclusion. After hearing the arguments, court determined that the exclusion was ambiguous, since
both interpretations were possible.
Further, court construed the exclusion against the insurer (which drafted the policy) and explained that the language of the exclusion “would reasonably lead an insured to expect that the exclusion would not apply unless the insured had knowingly failed to comply with applicable rules and regulations.”
Court granted summary judgment to Wightman and the Landfill Authority because the insurer did not present any evidence that Wightman was subjectively aware of such non- compliance.
Court also noted that were it to give the exclusion the meaning suggested by the insurer, which would include any technical violation of regulations, regardless of how those regulations were interpreted in the past, would essentially render the insurer "claim proof."
In addition, court explained that in order to apply this exclusion, it would require evidence that the insured consciously intended to avoid legal requirements, which was not the case here.
As an aside, court explained that this exclusion was similar to the intentional acts exclusion which requires both an "intentional act" and an "intentionally caused injury," again two elements that were not found here.
15. Camalloy Wire Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 273 A.D. 2d 123 (First Dept. 2000), leave to appeal denied, 95 N.Y. 2d 763 (N.Y. 2000).
Plaintiff hired contractor to remove an underground storage tank. Contractor purchased a pollution liability policy from defendant insurer. Due to contractor's negligence, heating oil spilled into a nearby creek. Plaintiff sued contractor for cleanup costs and additional expenses.
Appellate Division previously affirmed summary judgment for insurer dismissing complaint to the extent that damages sought went beyond the amount spent to clean up. Plaintiff presented the same issue on appeal, and court rejected again, based on the law of
the case doctrine.
Here court noted that the policy was a "claims made and reported" policy, and that the only claim reported was the cleanup costs, which was less than the self insured retention in the policy.
16. The Morrow Corp. v. Harleysville Mutual Ins. Co., 101 F. Supp. 2d 422 (E.D. Va. 2000),