Bradford Oil Co. v. Stonington Ins. Co.

Decision Date09 September 2011
Docket NumberNo. 10–361.,10–361.
Citation190 Vt. 330,54 A.3d 983,2011 VT 108
PartiesBRADFORD OIL COMPANY, INC. v. STONINGTON INSURANCE COMPANY and State of Vermont Agency of Natural Resources.
CourtVermont Supreme Court

OPINION TEXT STARTS HERE

William H. Sorrell, Attorney General, and Nicholas F. Persampieri and Scot L. Kline, Assistant Attorneys General, Montpelier, for DefendantAppellant.

Bret P. Powell of Powell Orr & Bredice PLC, Williston, for DefendantAppellee Stonington Insurance Company.

Present: REIBER, C.J., DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.

DOOLEY, J.

[190 Vt. 332]¶ 1. This case considers who should bear responsibility for the cost of cleaning up petroleum contamination caused by releases from a gas station's underground storage tanks. The controversy in this appeal is between the State of Vermont, which runs the Vermont Petroleum Cleanup Fund (VPCF) and Stonington Insurance Co. (Stonington), which insured Bradford Oil, the owner of the underground storage tanks, for approximately a three-and-a-half-year period. The State appeals from the trial court's judgment limiting Stonington's liability to a 4/27 share of past and future cleanup costs and awarding the State $45,172.05. On appeal, the State argues: (1) this Court's application of time-on-the-risk allocation in Towns v. Northern Security Insurance Co., 2008 VT 98, 184 Vt. 322, 964 A.2d 1150, does not preclude joint and several liability under all standard occurrence-based policy language; (2) the circumstances here, including the reasonable expectations of the insured and the equity and policy considerations, support imposing joint and several liability on Stonington for all of the State's VPCF expenditures; and (3) even if time-on-the-risk allocation would otherwise be appropriate, Stonington is not entitled to such allocation because it has failed to show sufficient facts to apply this allocation method in the present case. We conclude that Towns does control here, and we are unconvinced by the State's reasonable expectations, equity, and policy arguments to distinguish this recent decision. Accordingly, we affirm.

¶ 2. Plaintiff Bradford Oil Company, Inc. (Bradford) owns a Mobil station in St. Johnsbury that is the site of the petroleum contamination at issue. According to the parties' experts, the contamination may have begun as early as the 1960s or as late as the end of the 1970s. The Agency of Natural Resources (ANR) placed the site on the Vermont Hazardous Waste Sites List when, in April 1997, petroleum contamination was discovered following the removal of three underground storage tanks. In recent years, at the State's direction, Bradford has been paying to investigate and clean up the contamination, and the VPCF has reimbursed most of Bradford's expenses. Bradford initiated this case in 2006 to establish coverage for its cleanup liability under four commercial general liability policies from Stonington. The State cross-claimed seeking reimbursement to the VPCF from Stonington under the same policies. The coverage periods for the policies at issue began on July 18, 1994, and continued through December 1, 1997.

¶ 3. Initially, Stonington denied that its policies provided any coverage for the contamination damage on Bradford's property, but it eventually stipulated to the existence of coverage, leaving only the allocation of costs and damages before the trial court. The allocation question arises because the coverage periods of Bradford's Stonington policies cover only a portion of the total time that contaminationwas allegedly occurring and that other policies might have been triggered, if any others existed.1

¶ 4. Stonington filed a motion for partial summary judgment in October 2009, asserting that a simple time-on-the-risk allocation method should apply in this case and that the company should be held liable for damages only in proportion to the time it assumed the risk of loss. Under a time-on-the-risk allocation or “pro-ration by years” method, each triggered policy bears responsibility for damages in proportion to the time it was “on the risk,” relative to the total time of triggered coverage. Towns, 2008 VT 98, ¶ 33, 184 Vt. 322, 964 A.2d 1150 (quotation omitted). Stonington argued that the trial court should follow this Court's decision in Towns, where we held that a simple time-on-the-risk allocation method was appropriate based on standard occurrence-based insurance policy language in the context of slowly occurring environmental contamination. The Washington Superior Court, Civil Division, agreed that Towns controls this case. The court granted Stonington's motion for summary judgment as to the method of risk allocation, but found that it could not determine Stonington's actual total liability on summary judgment because the proportion of time for which Stonington was responsible was still in dispute. Following summary judgment, in response to the remaining issues of fact identified by the trial court, the parties submitted a joint statement of facts not in dispute. Based on these undisputed facts and the earlier summary judgment decision, the trial court issued a judgment in August 2010 decreeing that Stonington's liability under its four insurance policies is limited to a 4/27 share of past and future cleanup costs and awarding the State $45,172.05 from Stonington for reimbursement of the VPCF expenditures and interest on the expenditures. This appeal followed.

¶ 5. This Court reviews a grant of summary judgment de novo, applying the same standard as the trial court. Towns, 2008 VT 98, ¶ 8, 184 Vt. 322, 964 A.2d 1150. We will uphold summary judgment if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Id.;V.R.C.P. 56(c)(3). Likewise, our review of a trial court's interpretation of an insurance contract is “plenary, and nondeferential,” because such an interpretation is a question of law. Towns, 2008 VT 98, ¶ 8, 184 Vt. 322, 964 A.2d 1150 (quotation omitted).

¶ 6. The central question here is which of the two principal methods of allocating costs and damages is appropriate given the facts of this case. The first allocation method, advocated for by the State, is joint and several liability,2 in which “any policy on the risk for any portion of the period in which the insured sustained property damage ... is jointly and severally obligated to respond in full, up to its policy limits, for the loss.” Towns, 2008 VT 98, ¶ 33, 184 Vt. 322, 964 A.2d 1150 (quotation omitted). Under joint and several liability as argued by the State, Stonington would be liable for all cleanup costs up to its policy limits, irrespective of when the contaminant exposure occurred, but would have the right to obtain contribution from other insurers or the owner for the period in which there is no insurance based on a time-on-the risk analysis. The second method, advocated for by Stonington, and adopted by the trial court, is the time-on-the-risk or “pro-ration by years” method in which “each triggered policy bears a share of the total damages proportionate to the number of years it was on the risk, relative to the total number of years of triggered coverage.” Id. (quotation omitted). Under this method, Stonington is liable for only 4/27, or 15%, of the cleanup costs.

¶ 7. Specific policy language limiting coverage affects whether liability allocation should be joint and several or related to time on the risk. “Claims-made” policies generally restrict coverage to claims made during the policy period “without regard to the timing of the damage or injury.” Id. ¶ 29 (quotation omitted). “Occurrence-based” policies, on the other hand, provide coverage only for injury or property damage “which occurs during the policy period.” Id. ¶ 28 (quotation omitted); see also Montrose Chem. Corp. v. Admiral Ins. Co., 10 Cal.4th 645, 42 Cal.Rptr.2d 324, 913 P.2d 878, 892 (1995) (holding that standard occurrence-based policy “was intended to provide coverage when damage or injury ... occurs during the policy period”). In cases of contamination from continuing leakage of hazardous materials, courts have used the “continuous trigger” theory to find that damage from continuous exposure to contaminants during a policy period is an “occurrence” sufficient to trigger coverage under an occurrence-based policy. See Towns, 2008 VT 98, ¶ 6, 184 Vt. 322, 964 A.2d 1150; see also Montrose, 42 Cal.Rptr.2d 324, 913 P.2d at 894 (stating that under continuous-trigger test, “injuries and property damage that are continuous or progressively deteriorating throughout successive policy periods are covered by all policies in effect during those periods”).

¶ 8. The State makes two categories of arguments: (1) Towns should be narrowed so it doesn't apply to commercial general liability insurance or to litigation brought by the State on behalf of the VPCF; and (2) Towns should not apply on the facts of this case. Before we get to the specifics of these arguments, we summarize our decision in Towns.Towns involved a property owner who, from 1972 to 1987, diverted waste and debris from his waste-hauling business to his own private property to use as fill. This fill resulted in chemical contamination, which was described in the case as generally including “an initial ‘burst’ of constituents lasting several months, followed by a relatively ‘steady state’ of contamination lasting for as long as the material remains in place.” Towns, 2008 VT 98, ¶ 32, 184 Vt. 322, 964 A.2d 1150. The litigation involved an action filed by the property owner against an insurance company that had provided him a homeowner's liability policy covering the property from November 1983 to June 1987. The property owner was self-insured from November 1972 until November 1983. Id. ¶ 6 n. 2. As in the current case, the insurance policy at issue in Towns was an occurrence-based policy. Id. ¶ 28. We concluded that chemical contamination undoubtedly occurred during the period when the insurance...

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