Boardman Petroleum, Inc. v. Federated Mut. Ins. Co.
| Citation | 926 F. Supp. 1566 |
| Decision Date | 29 September 1995 |
| Docket Number | Civil A. No. CV 193-33. |
| Parties | BOARDMAN PETROLEUM, INC. d/b/a Red & Jack Oil Company, Plaintiff, v. FEDERATED MUTUAL INSURANCE COMPANY and American Automobile Insurance Company, a wholly owned subsidiary of Fireman's Fund Insurance Company, Defendants. |
| Court | U.S. District Court — Southern District of Georgia |
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Raymond Gordon Chadwick, Jr., Robert Perry Sentell, III, Kilpatrick & Cody, Augusta, GA, for Boardman Petroleum, Inc.
Richard R. Mehrhof, Jr., Allgood, Childs, Mehrhof & Millians, Augusta, GA, Charles E. Spevacek, Laura J. Hanson, Aaron B. Latto, Meagher & Geer, Minneapolis, MN, for Federated Mutual Insurance Company.
Robert L. Allgood, N. Kenneth Daniel, Allgood & Daniel, Augusta, GA, Patrick Michael Shine, Jon E. Elenius, Caron, Greenberg & Fitzgerald, Chicago, IL, Bridget K. Galane, Caron, Greenberg & Fitzgerald, San Francisco, CA, for American Automobile Ins. Co.
Fireman's Fund Insurance Company's Motion for Summary Judgment is GRANTED IN PART AND DENIED IN PART; Boardman Petroleum, Inc.'s Motion for Partial Summary Judgment is GRANTED IN PART AND DENIED IN PART and its Motion for Leave of Court to Amend Complaint is DENIED; Federated Mutual Insurance Company's Motion for Summary Judgment is GRANTED IN PART AND DENIED IN PART.1
In this declaratory judgment action Boardman Petroleum, Inc. d/b/a Red & Jack Oil Company ("Boardman") seeks a determination that Federated Mutual Insurance Company ("Federated") and Fireman's Fund Insurance Co. ("Fireman's Fund"),2 Boardman's insurers, are liable for clean-up costs and defense expenses incurred as a result of underground petroleum contamination at two Smile Gas Stations. Since the 1950's, Boardman has owned and operated a chain of Smile Gas Stations in Georgia, Florida, North Carolina, South Carolina and Virginia. The Smile Gas Stations concerned in this litigation are located at 126 West Indiantown Road, Jupiter, Florida (designated by Boardman as "Smile Gas Station No. 8" and referred to hereafter as "Smile 8") and 2801 Wrightsboro Road, Augusta, Georgia (referred hereafter as "Smile 3").
Provisions of two types of insurance policies are at issue: occurrence-based general liability policies ("general liability policies") and claims-made pollution liability policies ("pollution liability policies").4 For the periods August 15, 1977, to August 15, 1985, Federated sold general liability policies to Boardman to cover its Smile Gas Stations.5 From August 15, 1985, to August 15, 1986, Boardman's Smile Gas Stations were insured under general liability policies issued by Fireman's Fund.6 Federated also insured Boardman's Smile Gas Stations under pollution liability policies with combined dates of coverage from August 15, 1987, to February 15, 1990.7 Smile 8 and Smile 3 were insured properties under the general liability policies of both Defendants and under Federated's pollution liability policies.
Defendants rely on several sections of these policies to support denial of coverage. The foremost issue in this case, however, is the correct "trigger" of coverage under the general liability policies. The "trigger" issue is paramount because the facts in this case involve burial contamination from petroleum contained in underground storage tanks ("UST's"). At two of Boardman's gas station sites, UST's leaked petroleum into the surrounding property. Due to its latent character, burial contamination may remain undetected for months or years. When latent property damages are discovered after the dates of insurance coverage, an issue arises as to whether coverage applies.8
Two schools of thought on this issue are well and fervently represented by the litigants in this case. Under Boardman's "exposure" trigger theory, coverage applies if the contamination develops during the dates of coverage. The "manifestation" trigger theory, adopted in this litigation by Federated,9 is that a claim for latent contamination is not covered unless discovered within the policy period. Although the trigger issue has been addressed by some federal courts and other state jurisdictions, it has not been addressed by a Georgia appellate court or the General Assembly.10
Boardman purchased Smile 8 in 1979. Operation began in 1980. Boardman installed five UST's at Smile 8. In 1984, newly-enacted Florida legislation mandated installation of leak detection systems on existing UST's by January 1, 1989.
In 1988, testing revealed that one of the Smile 8 UST's was leaking. Boardman took the leaking UST out of service. On September 22, 1989, Boardman notified Federated of the contamination discovery. At this time Smile 8 was insured under Federated's pollution liability policy. On December 19, 1989, Federated notified Boardman that Federated would handle the claim under the pollution liability policy subject to a complete reservation of rights. Boardman did not notify Fireman's Fund of the contamination discovered at Smile 8 until December 16, 1992.
On February 20, 1990, the remaining UST's at Smile 8 were removed. The Florida Department of Environmental Regulation (FDER) demanded that Boardman remediate the petroleum contamination at Smile 8. Boardman filed a Notice of Discharge with the FDER and sought to obtain funding under Florida's Pollution Liability Insurance and Restoration Program for remediation. The FDER denied Boardman's request because Boardman had not installed proper leak detection equipment in accordance with the 1984 Florida UST regulations. On April 1, 1990, Federated determined that Boardman was not entitled to clean-up costs reimbursement under the pollution liability policy. This decision was based on a Coordination of Benefits endorsement in the policy. Under the endorsement, coverage does not exist unless the insured complies with all state regulations that would entitle the insured to government clean-up funds.
Tropic Tint is an automobile and residential window tinting business in West Palm Beach, Florida, located next to the former Smile 8. On February 19, 1992, Tropic Tint filed suit against Boardman. Tropic Tint's complaint alleged damage to its real property caused by migrating petroleum contamination. On February 28, 1992, Boardman notified Federated of the Tropic Tint lawsuit. By letter dated March 9, 1992, Federated denied coverage under its general liability policy based on an absolute pollution exclusion found in the policy. By letter dated March 12, 1992, Federated also denied coverage under its pollution liability policy because that policy, a claims-made policy, expired February 15, 1990, prior to the date the Tropic Tint suit was filed. Boardman did not notify Fireman's Fund of the Tropic Tint suit until December 1992.11
In December 1992, Boardman informed Federated and Fireman's Fund that a report by International Fuel and Lubrication Consultants supported the theory that petroleum contamination at Smile 8 emanated from gasoline produced prior to 1984. The report implicated coverage under earlier general liability policies of the two insurers. Federated and Firemen's Fund agreed to pay for the defense costs of the Tropic Tint litigation, subject to a reservation of rights.
From 1955 to December 1986, Boardman leased and operated Smile 3. The landowner was PGC Associates. When Boardman closed Smile 3 in 1986, UST's were removed from the property. The removal of the UST's did not reveal any contamination. In May 1988, however, environmental consultants hired by PGC Associates discovered petroleum contamination.
On December 28, 1990, PGC Associates filed a lawsuit against Boardman in this United States District Court.12 PGC Associates alleged that its property was damaged as a result of petroleum contamination from the UST's at Smile 3. On February 22, 1991, Boardman tendered the defense of PGC Associates' complaint to Federated and Fireman's Fund. On April 18, 1991, Federated and Firemen's Fund agreed to assume the defense of the case under reservation of rights. On March 10, 1992, Federated filed a declaratory judgment action in this Court, seeking a determination that Federated did not have an obligation to indemnify or defend Boardman in the PGC Associates lawsuit. Fireman's Fund filed a cross claim requesting similar relief.
During the pendency of PGC Associates v. Boardman, Boardman and its insurers performed environmental tests at the former Smile 3 site. The tests indicated significant groundwater contamination in and around former tank beds. On October 7, 1992, Boardman notified the Georgia Department of Natural Resources (GDNR) of the contamination discovered at Smile 3. On October 19, 1992, the PGC Associates action in this Court was dismissed without prejudice by stipulation. In December of 1992, the declaratory judgment action in this Court was also dismissed without prejudice.
On February 3, 1993, the GDNR informed Boardman that corrective measures would be required to remediate the Smile 3 site. Boardman gave Federated and Fireman's Fund notice of the GDNR's letter claim and requested that the insurers defend and indemnify Boardman under the general liability policies. The Defendants reserved their rights to deny coverage of Boardman's claim for the mandated remediation costs.
Ultimately, both Defendants denied coverage of Boardman's various claims in connection with Smile 8 and Smile 3. Boardman originally filed this action in Superior Court. The case was removed to this Court on February 19, 1993. Plaintiff's First Amended Complaint13 alleges that the Defendants breached their insurance contracts with Plaintiff; that Defendants have acted in bad faith and have been stubbornly litigious in violation of O.C.G.A. § 13-6-11; and seeks a declaratory judgment that Defendants are liable under the insurance policies for clean-up costs and defense expenses...
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