Dilmar Oil Co., Inc. v. Federated Mut. Ins. Co.
| Decision Date | 25 March 1997 |
| Docket Number | No. CIV. A. 4:96-114-22.,CIV. A. 4:96-114-22. |
| Citation | 986 F.Supp. 959 |
| Court | U.S. District Court — District of South Carolina |
| Parties | DILMAR OIL COMPANY, INC., Plaintiff, v. FEDERATED MUTUAL INSURANCE COMPANY, Defendant. |
William Thomas Lavender, Jr., Susan Batten Lipsomb, Nexsen Pruet Jacobs and Pollard, Columbia, SC, for Plaintiff.
Laura J. Hanson, Nicholas A. Gumpel, Susan M. Radde, Peter G. Lennington, Meagher & Geer, Minneapolis, MN, Richard F. Mehrhof, Jr., Allgood Childs Mehrhof and Millians, Augusta, GA, for Defendant.
This is an environmental insurance coverage case initiated by plaintiff Dilmar Oil Company, Inc. (Dilmar) against defendant Federated Mutual Insurance Company (Federated). Dilmar principally claims that the terms of a Federated pollution liability policy required Federated to provide coverage for petroleum contamination caused by releases of petroleum products from Dilmar's underground storage tanks. By its Complaint, Dilmar claims Federated breached its insurance contract by refusing to provide coverage, and that the breach was in "bad faith." Dilmar also advances alternative claims of misrepresentation, breach of oral contract, and illusory coverage. Jurisdiction as to all claims is based upon diversity of citizenship, 28 U.S.C. § 1332.
The matter came before the court for hearing on January 15, 1997. Two motions were pending before the court at the time of hearing: Federated's Motion for Summary Judgment, filed November 26, 1996; and Dilmar's Motion to Amend Complaint and to Join a Party, also filed November 26, 1996. At the hearing on these motions, the court granted Dilmar's request for supplemental briefing and evidentiary submissions. Dilmar filed its Supplemental Memorandum and evidentiary submissions on January 30, 1997. On February 7, 1997, Federated filed a Motion to Strike Additional Submissions of Dilmar Oil Company, and also filed a Supplemental Brief.
The court has reviewed all of the briefs and exhibits, and has studied the applicable law. For the reasons given below, the court: (1) grants Federated's Motion for Summary Judgment; (2) denies Dilmar's Motion to Amend Complaint and to Join a Party; and (3) denies Federated's Motion to Strike Additional Submissions of Dilmar Oil Company.
The following facts are drawn from the complete record before the court, including all pleadings, briefs, affidavits, depositions, or other filings. All of the following facts are undisputed. For purposes of the analyzing Federated's Motion for Summary Judgment, all inferences are drawn in Dilmar's favor.
Dilmar is a large petroleum marketer based in Latta, South Carolina. Dilmar operates numerous gasoline stations and convenience stores, and several bulk petroleum plants in South Carolina. Federated is a mutual insurance company based in Minnesota that has targeted petroleum marketers as a niche market for its insurance products for over twenty years. Federated insured Dilmar under successive Commercial Package Policies in effect from January 1, 1987 to January 1, 1992. The only coverage at issue in this lawsuit is the Pollution Liability Coverage in effect from January 1, 1989 to July 1, 1989 (the "Policy").
During the first half of 1989, Dilmar voluntarily tested several of its bulk plants and retail gasoline stations for possible petroleum contamination.1 Between March and June 1989, Dilmar confirmed petroleum contamination at eight of its sites.2 Dilmar promptly reported the contamination to the South Carolina Department of Health and Environmental Control ("DHEC"). Dilmar hired its own environmental consultants to contain, remove, and abate the confirmed contamination.
Because the contamination at Dilmar's sites resulted from leaking underground petroleum storage tanks, Dilmar sought reimbursement of its clean-up costs from DHEC under the South Carolina State Underground Petroleum Environmental Response Bank Act, S.C.Code Ann. §§ 44-2-10, et seq. ("the Superb Act"). At that time, the Superb Act provided Dilmar with a vehicle by which it could obtain reimbursement for the clean-up costs Dilmar incurred through the "Superb Account." In relevant part, Section 44-2-130(A) provided:
To encourage voluntary rehabilitation, a person conducting site rehabilitation under Section 44-2-110, which defines the early detection incentive program, either through his own personnel or subcontractors, is entitled to directly bill the Superb Account or be reimbursed for reasonable costs incurred in connection with the site rehabilitation if prior approval therefor is obtained from the department. Prior to or during the grace period established under the early detection incentive program, the person is eligible to directly bill or be reimbursed for all reasonable costs incurred in connection with site rehabilitation.
Act 486 § 2, 1988 Statutes at Large, pp. 4074-75.
As originally enacted, the Superb Act provided for reimbursement of on-site clean-up costs without regard to the existence of insurance if the site was reported during the "grace period."3 Thus, Dilmar was entitled to receive Superb Act reimbursement from DHEC "without recourse to reimbursement or recovery." Id. at 4073-74.
In addition to notifying DHEC, Dilmar also timely submitted first-party voluntary clean-up cost claims to Federated. The Federated Policy in effect at the time Dilmar submitted its 1989 claims was a six-month "claims made" policy. In order to potentially invoke coverage under the Policy, a claim must be made "during the policy period"— January 1, 1989 to July 1, 1989. Dilmar testified that it understood the meaning of the "claims made" requirement. The Policy contained three separate and distinct insuring agreements, two of which are not applicable to Dilmar's 1989 coverage claims.
Insuring Agreement 1 provides third-party liability coverage for "Bodily Injury and Property Damage Liability." It provides, in relevant part:
This insurance applies to "bodily injury" and "property damage" only if a claim for damages because of the "bodily injury" or "property damage" is first made in writing against any insured during the policy period.
Because no third-party claims for bodily injury or property damage liability were first made against Dilmar in writing during the Policy, Insuring Agreement 1 has not been triggered.
Insuring Agreement 2 provides for "Reimbursement of Mandated Off-Site `Clean-up Costs.'" Insuring Agreement 2 provides, in pertinent part:
The insured's obligation to pay "clean-up costs" because of "environmental damage" must be asserted under statutory authority of the government of the United States of America, Canada or any political subdivision of the United States or Canada. Notice asserting such obligation must be first received by you during the policy period.
Because no governmental authority issued an order mandating clean-up during the Policy, Insuring Agreement 2 has not been triggered.
Insuring Agreement 3 was added to the Policy by endorsement. It provides coverage for "Voluntary `Clean-up Costs' Reimbursement." In relevant part, Insuring Agreement 3 provides:
We will reimburse the insured for other "clean-up costs" initiated at the "insured site" during the policy period that the insured incurs, provided that:
a. The insured gives us immediate notice of an actual or suspected "pollution incident" that commences on or after the Retroactive Date shown in the Declarations;
Federated has acknowledged that Dilmar's voluntary clean-up claims submitted to Federated during 1989 triggered Insuring Agreement 3.
The Policy at issue was also subject to the "Coordination of Benefits With Governmental Funding Program" Endorsement (the "Coordination of Benefits Endorsement"). The Endorsement reads:
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
As a condition for this policy to apply, it is agreed that the insured shall:
a. pay all fees, taxes, or premiums; and
b. complete all required applications and registration forms; and
c. comply with all laws, regulations or statutes
in order to secure available funds from any governmental funding programs. Any failure or inability to secure funds from any program shall void this insurance to the extent that such funds would have applied to any loss covered under this insurance. If the inability to secure funds is directly attributable to the existence of this insurance, coverage shall also be void so as to permit contribution from any such governmental funding program.
It is further agreed that any sum payable by a governmental funding program to the insured or on behalf of the insured shall reduce the Limits of Insurance shown in the Declarations by a corresponding amount if such payment would otherwise have been made under this insurance.
We reserve the right to recover all or part of any payment made to the insured by a governmental funding program as reimbursement for losses incurred under this insurance.
(emphasis added). Federated properly filed the Endorsement with the South Carolina Department of Insurance, and the Endorsement was approved for use in October 1988.
Before Federated added the Coordination of Benefits Endorsement to the Policy, Federated sent Dilmar a notice stating, in relevant part:
AN IMPORTANT NOTICE OF PREMIUM AND COVERAGE CHANGES
* * * * * *
Many states have implemented or are considering the implementation of governmental funding programs to address the clean up and/or third party liability costs of pollution losses from petroleum storage tank systems.
A new endorsement is being attached to your pollution policy which requires you to register and pay all applicable fees, taxes or premiums to obtain available funds from any governmental funding...
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