Olympic Pipe Line Company v. Somerset Marine, Inc., No. 52058-0-1 (WA 11/8/2004)
| Decision Date | 08 November 2004 |
| Docket Number | No. 52058-0-1,Consolidated with No. 52658-8,52058-0-1 |
| Court | Washington Supreme Court |
| Parties | OLYMPIC PIPE LINE COMPANY, and HISCOX DEDICATED CORPORATE MEMBER, LTD., Appellants, v. SOMERSET MARINE, INC., NATIONAL-BEN FRANKLIN INSURANCE COMPANY OF ILLINOIS; MARINE OFFICE OF AMERICA CORP.; CONTINENTAL INSURANCE COMPANY; NAVIGATORS INSURANCE COMPANY; AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE COMPANY; ALLIANZ UNDERWRITER INSURANCE COMPANY; LEXINGTON INSURANCE COMPANY; GERLING-KONZERN; ZURICH SPECIALTIES LONDON LIMITED; NEW HAMPSHIRE INSURANCE COMPANY; CERTAIN UNDERWRITERS AT LLOYD'S; COMMERCIAL UNION ASSURANCE COMPANY PLC; and TERRA NOVA INSURANCE COMPANY LIMITED, Respondents. |
Appeal from Superior Court of King County. Docket No: 01-2-21446-2. Judgment or order under review. Date filed: 03/13/2003. Judge signing: Hon. Linda Lau.
Counsel for Appellant(s), Jacquelyn A. Beatty, Attorney at Law, 1201 3rd Ave Ste 2900, Seattle, WA 98101-3284.
Michael Edward Ricketts, Attorney at Law, 505 Madison St Ste 300, Seattle, WA 98104-1123.
Counsel for Respondent(s), Michael Alan Barcott, Attorney at Law, 999 3rd Ave Ste 2600, Seattle, WA 98104-4018.
Kara Heikkila, Holmes Weddle & Barcott, 999 3rd Ave Ste 2600, Seattle, WA 98104-4011.
Eileen Bower, Ross, Dixon & Bell, 70 West Madison Street Suite 525, Chicago, IL 60602-4261.
Julie Burgener, Ross, Dixon & Bell, 70 West Madison, Suite 525, Chicago, IL 60602-4261.
David E Prange, Abbot & Prange PC, Us Bancorp Tower, 111 SW 5th Ave Ste 2650, Portland, OR 97204-3605.
Donald James Verfurth, Carney Badley Spellman, 700 5th Ave Ste 5800, Seattle, WA 98104-5017.
Matthew Taylor Boyle, Mitchell Lang & Smith, 600 University St Ste 2505, Seattle, WA 98101-3134.
J. C. Ditzler, Cozen and O'Connor, 1201 3rd Ave Ste 5200, Seattle, WA 98101-3071.
Jodi Ann Mc Dougall, Cozen O'Connor, 1201 3rd Ave Ste 5200, Seattle, WA 98101-3071.
Timothy John Tompkins, Hagerty Insurance Agency INc., 141 Rivers Edge Dr Ste 200, Traverse City, MI 49684-3299.
D. Clark Burton, Severson & Werson, 1 Embarcadero Center, 26th Floor, San Francisco, CA 94111.
Katherine A. Knopoff, Severson & Werson, 1 Embarcadero Center, 26th Floor, San Francisco, CA 94111.
Michael Murphy, Severson & Werson, 1 Embarcadero Center, 26th Floor, San Francisco, CA 94111.
Melissa O'Loughlin White, Cozen OConnor, 1201 3rd Ave Ste 5200, Seattle, WA 98101-3071.
Joanne Thomas Blackburn, Attorney at Law, 2nd & Seneca Bldg 18 Fl, 1191 2nd Ave, Seattle, WA 98101-3438.
Gary Dean Swearingen, Garvey Schubert & Barer, 1191 2nd Ave Fl 18, Seattle, WA 98101-3438.
Olympic Pipe Line and Hiscox Insurance appeal a trial court's decision granting summary judgment to several insurers. They argue that the trial court improperly considered inadmissible evidence that went to the subjective intent of the parties, and that the court incorrectly defined terms in the insurance contract. We agree that certain evidence submitted in support of the motions for summary judgment should not have been considered by the trial court. But the commonly understood meaning of the challenged terms, combined with the language and purpose of the policies, clearly shows that Olympic was not a named insured under any of the policies. We therefore affirm the trial court's summary judgment orders.
Olympic Pipe Line transports refined petroleum products from refineries in northwest Washington to Seattle and Portland. In mid-1999, Olympic's pipeline ruptured near Whatcom Creek in Bellingham, Washington. The petroleum ignited, and an explosion and fire caused significant damage. Three people died. Many lawsuits were brought against Olympic for personal injuries and economic loss. Hiscox Insurance provided coverage for Olympic, and exhausted its limits settling the lawsuits.
At the time of the incident, Olympic was owned by three separate companies — Equilon (37.5 percent), ARCO (37.4 percent), and GATX Terminals Corp. (GTC) (25.1 percent). Equilon functioned as the operator, managing the day-to-day operations. Olympic's board of directors consisted of six members with each owner-company appointing two board members.
GTC itself was a wholly owned subsidiary of GATC, which was wholly owned by GATX. Olympic and Hiscox Dedicated Corporate Member (collectively "Olympic") brought several suits to compel coverage under the excess policies purchased by Olympic's three owners.1 This case concerns the policies issued to GTC and its parent company GATX.
GTC purchased marine terminal operator liability (MTOL) policies covering its terminal and pipeline operations. Somerset Marine and Navigators Insurance underwrote the first policy. Premiums for the policy were based on "throughput," or the amount of petroleum product GTC transported. The contract treated terminal and pipeline operations differently, imposing a separate premium for each, based on the annual throughput. For example, the premium covering terminal operations was $.70 per 1,000 barrels, while the premium for pipelines was $1.91 per 1,000 barrels transferred. The policy also contained a specific endorsement entitled "pipeline coverage." This endorsement listed five covered pipelines. Olympic was not one of these specified pipelines.2 Immediately below this the policy stated that "{i}n consideration of premiums as agreed, underwriters agree to indemnify the Assured in respect of any claims arising out of the above schedule operations up to a limit of $1,000,000 per incident occurring during the policy period, subject to policy terms . . . ."
GTC also obtained two excess policies for its terminal and pipeline operations. The first, also underwritten by Somerset and Navigators, provided coverage for claims exceeding $1 million up to $9 million for terminals, and up to $4 million for pipelines. This policy also charged a premium based on throughput.3 The second excess policy, underwritten by Somerset, Navigators, National-Ben Franklin and Continental, charged a flat premium. This policy provided coverage for claims between $10 million and $15 million, but excluded the five pipelines specifically covered in the primary and first excess policies.
GTC's parent corporation GATX had various policies issued to it that Olympic claimed included Olympic as a named insured. These policies provided four layers of excess liability coverage for GATX and its subsidiaries. The policies each defined "insured" as "such subsidiary or owned or controlled companies of the Named Insured . . . ."
The first excess policy issued to GATX, underwritten by American International Specialty Lines Insurance Company (AISLIC), provided a $25 million first layer of excess coverage. The policy provided a schedule of underlying amounts for each liability and specifically referenced pipelines. The policy had additional underlying limits for particular risks. For example, the policy set the underlying limit for pipelines at an additional $5 million.
The second layer of coverage GATX obtained is a form-following policy provided by Allianz Underwriters Insurance. This policy follows the exact terms found in the AISLIC policy except for the limits, period of coverage, premium, and renewal agreement. The policy provided $25 million in excess coverage.
The next layer of coverage involved policies with a number of insurers, including Lexington, New Hampshire, London Insurers, and Gerling-Konzern (hereinafter "Gerling"). These policies provided a $110 million layer of insurance covering losses exceeding $50 million. As with the first and second layer of coverage, these policies had additional underlying limits for particular risks. All relevant language in these insurance agreements is identical to those in the AISLIC policy.
The final layer of insurance, issued by Certain Underwriters at Lloyd's Commercial Union, and Terra Nova (hereinafter "Lloyd's"), provided $100 million in coverage for losses exceeding $160 million. The language defining "insured" under the policy is also identical to the other policies.
The insurers brought summary judgment motions arguing that Olympic was not a named insured. Olympic responded that it was a named insured either as a "subsidiary or owned or controlled company," or as a joint venture under GATX's various policies.
The trial court granted summary judgment to all the insurers. Olympic and Hiscox timely appeal.
At issue in these consolidated cases is whether Olympic was a named insured under the various policies purchased by GATX and GTC. The insurers contend that the parties did not intend to insure Olympic, and that the contracts reflect this intent. Olympic argues that it is included in the definition of "insured" and "assured" under the various contracts, and that the parties' post-hoc claims to the contrary are inconsistent with policy language and extrinsic evidence.
Interpreting an insurance policy is a matter of law that we review de novo.4 We first note that the insurers infer that Olympic does not have standing to enforce the contracts. But if Olympic is a named insured under the policy, then by definition Olympic is an intended beneficiary, and would have standing to enforce the policies.5 We will therefore address the merits of Olympic's arguments.
There are two types of policies at issue, the commercial excess policies issued to GATX and the MTOL policies issued to GTC. We therefore address each type of policy separately.
The four layers of excess insurance policies issued to GATX all define the insured as:
Only the following are included in the definition of "INSURED" under this Policy:—
(A) The Named Insured, and if the Named Insured in Item 1 (a) of the Declarations as a partnership or joint venture, the partnership or joint venture so designated and any partner or member thereof, but only with respect to their liability as such. The Named Insured shall also include, until such time as they may be sold or...
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