Griffith Energy Servs., Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA

• Decision Date: 25 August 2015
• Docket Number: No. 923, Sept. Term, 2013.,923, Sept. Term, 2013.
• Citation: 120 A.3d 808,224 Md.App. 252
• Parties: GRIFFITH ENERGY SERVICES, INC. v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, et al.
• Court: Court of Special Appeals of Maryland

224 Md.App. 252

120 A.3d 808

GRIFFITH ENERGY SERVICES, INC.

v.NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, et al.

No. 923, Sept. Term, 2013.

Court of Special Appeals of Maryland.

Aug. 25, 2015.

David Elkind (John A. Gibbons, Dickstein Shapiro LLP, on the brief), Washington, DC, for Appellant.

Christopher P. Ferragamo (Richard W. Bryan, Jackson & Campbell, PC, on the brief), Washington, DC, for Appellee.

Panel: DEBORAH S. EYLER, LEAHY and CHARLES E. MOYLAN, JR. (Retired, Specially Assigned), JJ.

Opinion

DEBORAH S. EYLER, J.

In this insurance coverage case, Griffith Energy Services, Inc. (“Griffith”), the appellant, challenges a declaratory judgment entered by the Circuit Court for Howard County in favor of New Hampshire Insurance Company (“New Hampshire”) and National Union Fire Insurance Company of Pittsburgh, Pa. (“National Union”) (collectively “the Insurers”), the appellees. Griffith had sought a ruling that a business automobile liability policy issued by New Hampshire (“the Auto Policy”) and a business comprehensive general liability insurance policy issued by National Union (“the CGL Policy”) both covered property damage that resulted from a mis-delivery of home heating oil by a Griffith fuel truck driver.

The circuit court disagreed. On summary judgment, it ruled that the Auto Policy provided coverage, but that its liability policy limit was exhausted; that the CGL Policy did not provide liability coverage; and that Griffith was not entitled to additional costs of defense.

FACTS AND PROCEEDINGS

A. The Incident.

Griffith is in the home heating oil business. On August 24, 2010, one of its fuel truck drivers was scheduled to make a delivery to 1129 Colonial Avenue, in Alexandria, Virginia. By mistake, he drove to 1135 Colonial Avenue (“1135”). 1135 is the center house of three connected houses, i.e., a “triplex.” The houses are 17 feet wide and share one roof. The addresses for the other houses in the triplex are 1137 Colonial Avenue (“1137”), and 1133 Colonial Avenue (“1133”).

At 1:08 p.m., the driver attached the truck's fuel dispensing hose to an exterior uncapped fill port extruding from the rear basement wall of 1135. He proceeded to pump about 330 gallons of fuel oil into the fill port. He had been pumping for slightly over 8 minutes when Katherine Turner, who rented 1135, rushed outside and told him that oil was pouring into the finished basement. (1135 had been converted from oil heat, and the fuel oil tank had been removed.)

The driver immediately realized that he was at the wrong address and stopped pumping. He contacted his dispatcher, who in turn notified John Hall, a Griffith claims specialist, who arrived within an hour. The driver remained on the scene and was there when Hall arrived. The driver left the premises between 2:30 and 3:00 p.m.

Hall entered 1135 through the front door and smelled heating oil. The carpet in the finished area of the basement was saturated with oil, and there was oil on the floor in the finished bathroom. Hall noticed an exposed floor drain at the rear of the basement, in the utility area, and observed that oil had flowed down it.

The Alexandria Fire Department (“AFD”) responded, also within an hour of the incident, and AFD personnel conducted atmospheric monitoring tests in all three houses. The tests revealed “trace readings displaying on the lower explosive limit” in the basement of 1135. The other houses were “clear for flammability readings.” AFD personnel determined it was likely that much of the heating oil had gone down the basement drain in 1135. They could not tell at that point whether the drain was connected to municipal lines or simply emptied below the basement's concrete slab. (The latter subsequently was determined to be the case.) The AFD Fire Marshall condemned 1135 and shut off the utilities to all three houses.

Hall contacted Miller Environmental, Inc. (“MEI”), an environmental management firm, and representatives of that company arrived at the scene within a few hours of the incident. They laid down sorbent material in the basement of 1135 to soak up free-standing oil. Around 5:30 p.m., Timothy Trayers, the owner of 1137, arrived home and reported finding oil in his sump. The sump was in the rear corner of his basement, near the common wall with 1135 and adjacent to the area in which the fill port emptied. Hall and others entered the basement of 1137 and found the oil in the sump. No other oil was visible in 1137 at that time. Approximately 25 gallons of heating oil was pumped out of the sump that evening. The basement of 1133 was inspected as well. It did not have a sump, and there was no oil then visible. MEI set up air scrubbers in 1137 and 1133.

Charles and Christine Perham owned 1135 and rented it to Turner, who lived there with her son. As noted, 1137 was owned by Trayers; he lived there with his fiancee. Jim and Pam McVeigh owned and lived in 1133. The residents of all three houses stayed in hotels on August 24, 2010, and then were relocated to long-term housing, at Griffith's expense.

In accordance with Virginia law, Griffith notified the Virginia Department of Environmental Quality (“VDEQ”) about the incident. State and city laws required Griffith to clean the soil at the properties to reach a concentration of oil at or below 100 parts per million (“ppm”). The day after the incident, MEI tested the houses for volatile organic compounds (“VOCs”). The tests revealed VOC levels sufficiently elevated to render all three houses uninhabitable.

Based on oil having been found in the sump of 1137, and the water table in the area being high, MEI concluded that the oil that the driver pumped into 1135 “most probably ha[d] gone under the [basement] slabs of all three residences.” The slabs, which are the concrete basement floors of the houses, sit on a 14–inch layer of river stone, under which is native soil. The interior common walls of the houses are made of solid concrete block, and their footers extend to the native soil. The exterior walls of the triplex are brick and rest on hollow concrete block foundation walls, which extend below ground and are set on concrete footers, which also rest on native soil.

On August 26, 2010, the basements of the houses were prepared for “subslab assessment.” All salvageable personal belongings were removed from the houses and the interior common walls between the basements were demolished. In the following days, the basement slabs were broken apart and removed down to the concrete footers. The river stone underlying the slabs was removed to the level of the soil. Multiple soil samples were taken at this depth and the bottom of the footers to determine the extent of the oil saturation and its migration in the soil. Samples also were taken from the hollow block walls above the footers. The soil around the perimeter of the triplex was probed for sampling, and monitoring wells were installed.

Analysis of the data obtained from these samples and wells revealed that the oil had “remain[ed] in the footprint of the three houses and ha[d] not gone past the house exterior walls.” On September 7, 2010, 1137 was condemned, and on September 22, 2010, 1133 was condemned.

As part of its remediation plan, Griffith first proposed demolishing, excavating, and replacing the houses. Subsequent clean-up and analysis of the site enabled Griffith to rehabilitate and restore the houses instead.

B. The Insurance Policies.

At the time of the incident, Griffith was a Named Insured on the Auto Policy and on the CGL Policy.¹ The policies were owned by Central Hudson Enterprises Corporation (“CHEC”). The Insurers are Pennsylvania companies with their principal places of business in New York City, and are licensed to transact business in Maryland. They are owned by Chartis USA, Inc. (“Chartis”), a member of the American International Group, Inc. (“AIG”). The policies were underwritten at the same time by the same underwriter, John Springer. Chartis Claims, Inc., is the claims administrator for the policies.

Also at the relevant time, Griffith was a Named Insured on an Excess Policy sold by Associated Electric & Gas Insurance Service Limited (“AEGIS”) to CHEC.

1. Auto Policy

Indemnity

The policy afforded Griffith $1,000,000 in liability coverage, as follows:

We will pay all sums an “insured” legally must pay as damages because of ... “property damage” to which this insurance applies, caused by an “ accident” and resulting from the.... use of a covered “auto.”

We will also pay all sums an “insured” legally must pay as a “covered pollution cost or expense” to which this insurance applies, caused by an “accident” and resulting from the.... use of covered “autos.” However, we will only pay for the “covered pollution cost or expense” if there is ... “property damage” to which this insurance applies that is caused by the same “accident.”

Auto Policy, Section II. A.² The fuel truck was a “covered ‘auto.’ ”

An “ ‘[a]ccident’ includes continuous or repeated exposure to the same conditions resulting in ... ‘property damage.’ ” Auto Policy, Section V.A. “Property damage” is “damage to or loss of use of tangible property.” Auto Policy, Section V.M. “ ‘Covered pollution cost or expense’ ” is

any cost or expense arising out of:

1. Any request, demand, order or statutory or regulatory requirement that any “insured” or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize or in any way respond to, or assess the effects of “pollutants”; or

2. Any claim or “suit” by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to or assessing the effects of “pollutants.”

Auto Policy, Section V.D. Fuel oil is a “pollutant.”³ “All ... ‘property damage’ and ‘covered pollution cost or expense’ resulting from continuous or repeated exposure to substantially the same conditions will be considered as resulting from one ‘accident.’ ”...