Paul Oil Co., Inc. v. Federated Mut. Ins. Co., 97-16190
| Citation | 154 F.3d 1049 |
| Decision Date | 08 September 1998 |
| Docket Number | No. 97-16190,97-16190 |
| Parties | 29 Envtl. L. Rep. 20,136, 98 Cal. Daily Op. Serv. 7009, 98 Daily Journal D.A.R. 9688 PAUL OIL COMPANY, INC., a California Corporation, Plaintiff-Appellant, v. FEDERATED MUTUAL INSURANCE COMPANY, a Minnesota Corporation, Defendant-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Lori T. Okun, Greben & Associates, Sacramento, California, for plaintiff-appellant.
Thomas H. Crouch, Charles E. Spevacek, Jeffrey M. Thompson, Meagher & Geer, Minneapolis, Minnesota, for defendant-appellee.
Appeal from the United States District Court for the Eastern District of California; Oliver W. Wanger, District Judge, Presiding. D.C. No. CV-95-05308-OWW.
Before: REINHARDT, NOONAN, and THOMPSON, Circuit Judges.
Paul Oil Company, Inc. (Paul Oil), a California corporation, appeals the grant of summary judgment against it in its suit against Federated Mutual Insurance Co. (Federated), a Minnesota corporation. The district court, after first denying Federated's motion for summary judgment, reconsidered, finding that Paul Oil's attempt to defeat the motion had depended upon a sham. The district court also denied Paul Oil's offer of additional testimony on the ground that Paul Oil had been disingenuous as to the availability of the witness whose testimony it belatedly attempted to offer. Affirming the district court, we write to call attention to the duties of counsel to the court.
Paul Oil is a family-owned business whose president and CEO since 1974 has been Ross Barton Paul (Bart Paul). The company is a jobber of Shell Oil products. In 1985 it leased property on Highway 99 in Livingston, California from Leonard and Shirley Blevins. The property had previously been used for a convenience store and gas station. It contained one underground gasoline storage tank holding 8,000 gallons, two tanks holding 5,000 gallons and a 4,000 gallon tank holding diesel fuel.
On May 24, 1986 Paul Oil entered into several insurance contracts with Federated, including a pollution liability insurance policy.
On the first page of the policy in type much larger than the rest of the text a heading announced: "THIS IS A CLAIMS MADE POLICY--PLEASE READ CAREFULLY." The first paragraph under this heading said the company would pay compensatory damages for bodily injury or property damage provided that "(1) such bodily injury or property damage is caused by a pollution incident which commences subsequent to the retroactive date shown in the declarations of this policy; and (2) the claim for such damages is first made against the insured during the policy period and reported to the company during the policy period or within fifteen days after its termination." The policy continued: "A claim shall be deemed to have been made only when suit is brought or written notice of such claim is received by the insured." The "retroactive date" was the same as the date the policy was entered into, May 24, 1986
Federated issued similar policies to Paul Oil for May 24, 1988 through May 24, 1989 and for May 24, 1989 through August 1, 1989 when Paul Oil cancelled.
Paul Oil tested the tanks on the property and in June 1986 found a leak in a supply line between the tank and a pump. It was due to a faulty pipeline coupling. Paul Oil replaced the coupling and cleaned out the soil. The company notified the Merced County Environmental Management Department, which approved its handling of the problem. The amount of soil removed was approximately five cubic yards. Paul Oil was receiving deliveries three times a week and doing from 60,000 to 80,000 gallons of business per month. It kept a tight inventory control of the gasoline in the tanks by doing daily stickings. The company was unaware of any other leaks or losses from the tanks. Occasionally there were small losses when a driver drove away from a pump with the nozzle from the tank still in his car.
In 1989 the California Department of Transportation began studies for a bypass in Livingston and made an environmental investigation that revealed at least 20,000 gallons of petroleum product in the ground that apparently had come from the site occupied by Paul Oil. On November 14, 1990 the district attorney of Merced County notified Paul Oil and prior occupiers of the site of alleged code violations that had caused the problem. In 1992 Paul Oil was sued by the Bergers, adjacent land owners, who asserted that their land had been contaminated from the Paul Oil site. In 1994 the California Regional Water Quality Control Board sent Paul Oil a Clean Up and Abatement Order. The order noted that the gasoline contamination dated back to 1978 and the total amount in the soil was between 37,000 and 50,000 gallons.
Paul Oil tendered these matters to Federated for defense and indemnification. Federated denied any duty to defend or to indemnify, noting that none of the claims had been made while the policies were in effect.
On March 29, 1995 Paul Oil filed suit against Federated in the Superior Court for Merced County. The suit referred generally to "policies" issued by Federated which gave rise to obligations that Federated was not fulfilling. The suit sought declaratory relief, damages for breach of contract, and damages for breach of the implied covenant of good faith. On the ground of diversity Federated removed the suit to the federal district court for the Eastern District of California.
Both sides took deposition testimony, Federated taking inter alia the deposition of Bart Paul. Both sides also served each other with interrogatories. On August 14, 1995 Federated moved for summary judgment. At a hearing on the motion the court asked Paul Oil's counsel to identify any record evidence of a claim in 1986 by Merced County and gave counsel five days to search the record for such evidence. Counsel responded with Bart Paul's sworn declaration stating that Merced County had inspected leakage at the site in 1986. The district court then granted Federated's motion for summary judgment, subject to another grace period for Paul Oil to introduce evidence of a claim during the period the policies were in effect. In response Paul Oil submitted the declaration of Jeff Palsgaard, Director of the Division of Environmental Health of the county, stating that it was and had been ...
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