Gull Indus., Inc. v. Granite State Ins. Co.

Citation493 P.3d 1183
Decision Date23 August 2021
Docket NumberNo. 78277-1-I,78277-1-I
Parties GULL INDUSTRIES, INC., Petitioner/Cross-Respondent, v. GRANITE STATE INSURANCE COMPANY, Respondent/Cross-Petitioner, Allianz Underwriters Insurance Company; American Economy Insurance Company; American States Insurance Co. (successor to Western Casualty and Surety Company ); Chicago Insurance Company; Columbia Casualty Company; Federal Insurance Company; Fireman's Fund Insurance Company ; General Insurance Company of America; Indiana Insurance Company ; National Union Fire Insurance Company of Pittsburgh, PA; Ohio Casualty Insurance Company; Pacific Indemnity Company; Safeco Insurance Company of America ; State Farm Fire and Casualty Company; TIG Insurance Company; United States Fidelity & Guaranty Company; Westport Insurance Corporation; and Zurich-American Insurance Company, Defendants.
CourtCourt of Appeals of Washington


Dwyer, J. ¶1 This complex environmental insurance coverage action began when Gull Industries, Inc. (Gull) filed suit for declaratory relief and related damages against a dozen insurance companies. Gull alleged that the insurers breached their obligations under primary and excess policies to provide coverage for environmental contamination liabilities at more than 200 retail gas stations (sites) it owned or operated during a period of nearly 50 years.

¶2 Over the course of nearly nine years of litigation and over 25,000 pages of filings, the trial court has made multiple rulings interpreting insurance coverage obligations, dismissed Gull's claims pertaining to 115 sites on summary adjudication, and found that one site triggered coverage following a bench trial on several bellwether "test" sites. Every insurer, except for Granite State Insurance Company (Granite State), has since settled with Gull or exhausted its policy limits. Granite State's coverage obligations remain unresolved on over 100 sites.

¶3 Before proceeding further on the remaining sites where factual issues prevent summary adjudication, the parties sought discretionary review of numerous issues that will influence or control the future course of this litigation. We accepted review. Now, for the reasons discussed below, we affirm some of the trial court's rulings and reverse others.


¶4 The core facts underlying this coverage action are largely undisputed. Between 1959 and 2005, Gull owned or operated approximately 220 retail gas stations throughout the Pacific Northwest. Gull also owned fuel tanker trucks and employed drivers to deliver gasoline to underground storage tanks at its sites.


¶5 Gull purchased multiple primary general liability, primary automobile liability, and excess umbrella liability policies during its years of operation.1 Granite State provided Gull excess umbrella liability insurance from 1980 to 1983 under three consecutive policies. Each policy provided $15,000,000 in coverage per occurrence and in the aggregate.

¶6 The first Granite State policy, effective October 1, 1980 to October 1, 1981, was excess to insurance issued by The Home Insurance Company (Home). Home provided Gull comprehensive general liability (CGL) coverage for property damage with a per occurrence limit of $100,000 and business automobile liability (Auto Liability) coverage for property damage with a per occurrence limit of $100,000. Home also provided coverage for personal injuries, employer's liability, and miscellaneous liability.

¶7 Granite State's two other policies, effective October 1, 1981 to October 1, 1983, were excess to insurance afforded by Transamerica Insurance Group (TIG). TIG provided Gull primary CGL property damage coverage up to $100,000 per occurrence and Auto Liability property damage coverage up to $500,000 per occurrence.2

¶8 The CGL and Auto Liability coverages provided by Home and TIG are reflected in the "Schedule of Underlying Insurance" on each corresponding Granite State excess policy. Gull's property damage insurance coverage is illustrated in the following table:

Coverage Level Companies on the Risk
1980-81 1981-82 1982-83
Excess Granite State Granite State Granite State
$15,000,000 $15,000,000 $15,000,000
Primary Home TIG TIG
$100,000 (CGL) $100,000 (CGL) $100,000 (CGL)
$100,000 (Auto) $500,000 (Auto) $500,000 (Auto)

¶9 Since at least 1984, Gull has been continuously investigating and remediating contaminated soil and groundwater at its sites. As is typical for gas stations operated decades ago, Gull claims, gasoline was released at its sites due to leaks from underground storage tanks, spills from customers over filling their vehicle gas tanks, and spills from the unloading of bulk fuel trucks. Consequently, many of its sites became demonstrably contaminated with petroleum and other hazardous substances.

¶10 Gull is jointly, severally, and strictly liable for remediating these sites under Washington's Model Toxics Control Act (MTCA), chapter 70.105D RCW,3 and to third party claimants who share MTCA liability with Gull. "The primary intent of MTCA is that [p]olluters should pay to clean up their own mess.’ " Pope Res., LP v. Dep't of Nat. Res., 190 Wash.2d 744, 751, 418 P.3d 90 (2018) (alteration in original) (quoting State of Washington Voter's Pamphlet, General Election 6 (Nov. 8, 1988)). "The provisions of [MTCA] are to be liberally construed to effectuate the policies and purposes of this act." Former RCW 70.105D.910 (1989). MTCA imposes joint and several liability on "current owners and operators of a facility, persons who owned or operated a facility at the time hazardous substances were disposed or released, and any other person who caused the disposal or release of the hazardous substance at any facility." Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wash.2d 654, 661, 15 P.3d 115 (2000) ; former RCW 70.105D.040(1)(b) (1989).

¶11 Gull asserted that it faces liability under MTCA because the releases at some sites resulted in third party property damage implicating Gull's primary CGL and Auto Liability coverages. Gull further alleged that it has been threatened with lawsuits at 15 sites, received cleanup notifications from regulatory agencies at 19 sites, and has been sued by third parties at 9 sites. MTCA contribution actions were filed by third parties against Gull concerning groundwater contamination at Station 269 (Lynnwood) and Station 272 (Seattle). Gull tendered its defense of these actions to primary insurer TIG under both the CGL and Auto Liability coverages. TIG agreed to defend Gull against these actions under its policies, subject to a full reservation of rights.


¶12 In December 2011, Gull filed this action against Granite State and 12 other insurance companies, seeking coverage for its environmental response costs at each of its current and former sites. Specifically, Gull sought (1) a declaratory judgment stating that the insurers are jointly and severally liable for all defense and indemnity costs to investigate and remediate groundwater contamination at all 220 sites, (2) damages for and interest on all costs incurred in connection with its liabilities, and (3) reasonable attorney fees and costs. It alleged that property damage occurred continuously at its sites throughout decades of insurance coverage, which triggered both CGL and Auto Liability policies in each year of coverage.

¶13 Given the number of insurers and sites involved in the case, the trial court adopted a phased approach to the litigation. Phase I focused on Gull's coverage claims in connection with five bellwether "Test Sites."4 Phase I(a) was limited to insurance contract interpretation issues through summary judgment, while Phase I(b) addressed all remaining triable issues at a bench trial.

¶14 In April 2015, Gull moved for partial summary judgment seeking a ruling that Granite State's duty to indemnify is triggered upon the exhaustion of Gull's primary insurance immediately beneath the Granite State policy in the same policy period (vertical exhaustion). Granite State countered that its excess policy coverage is not triggered until all of Gull's "valid and collectible" underlying insurance is exhausted, regardless of the years in which those primary policies were issued (horizontal exhaustion). The trial court denied Gull's motion, ruling that horizontal exhaustion would apply to Granite State's coverage obligation:

Granite State's "other insurance" clause also limits the Granite State policy to being "excess" to other valid and collectible insurance and provides that the policy "shall not contribute with other such insurance." The policy does not limit itself to a particular year; indeed the "other insurance" clause refers to "any other insurer" without limitation. In other words, Granite State has specifically limited its liability in the contract negotiated with Gull, both in the context of its definition of "ultimate net loss" and its reference to "other insurance."
... The contract places limits on Granite State's liability in the face of its otherwise joint and several liability. Such a limitation does not violate public policy or Washington law.

¶15 In July 2015, Granite State and TIG jointly moved for partial summary judgment to dismiss Gull's claims as to 109 sites based on the "owned property exclusions" (OPE) in the insurers’ policies. They argued that the OPE sites should be dismissed because (1) there was no evidence of contamination or (2) the...

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