Petrogram - Winter 2010 - (Page 17)
Overcoming the Obstacles
Court Finds Cleanup Cost Coverage
Bob Fingar, Guilday, Tucker, Schwartz & Simpson, P.A.
s you may recall, in the fall 2009 Petrogram, we wrote an article entitled Why (Your Insurance Company Thinks) Your Tank Insurance Policy is Worthless. Go find it, I’ll wait… It’s on your bookshelf. No, to the left. There it is. Got it? Page 32. Nice picture of a garbage can overflowing with money. Well, maybe you’re not wasting premium payments anymore thanks to a recent Jacksonville trial court’s decision in a case styled First Coast Energy, L.L.P. v. Mid-Continent Casualty Company and Great American Insurance Company, Case No. 16-2006-CA-001738 (Final Judgment, September 28, 2010).
DEP/EPA leak autopsy studies show that release detection works less than half the time.
In the previous Petrogram article, we explained that insurance companies had devalued storage tank policies by failing to interpret the policies in accordance with federal regulations. Specifically, the policies typically cover “Confirmed Releases.” Under the policies, a “release” from the storage tank system can be “confirmed” in three ways: by a (failed) system tightness test, a “site check,” or another federal or state approved method. The problem was that the insurance companies did not attribute any significance to the term “site check.” This meant that if you found contamination, but passed a tank and line tightness test, the insurer would usually deny coverage.
We argued, and the court in the First Coast case agreed, that the term “site check” in the policy has the same meaning as the term “site check” in the EPA’s regulations in 40 CFR 280.52. As the court stated: “It is clear from these regulations that a ‘site check’ can confirm a release even in the absence of a failed system tightness test or the triggering of approved release detection. A ‘site check’ is dependent on expert determination that assessment results indicate there is contamination that originates from a covered storage tank system.” The court then found that the compelling expert testimony was that the release came from the covered storage tank system to the exclusion of non-covered sources such as historical contamination (i.e., that pre-dates the policy retroactive date), a surface spill or an off-site source. While the insurance companies may appeal the trial court’s ruling, it is interesting to note that the Department of Environmental Protection intervened in this case on First Coast’s side. One of the Department’s objectives was to force the insurance companies to abandon their unduly narrow policy interpretation. DEP has a cause of action against a facility owner under Section 376.308, Florida Statutes. But DEP also has the right to sue the owner’s carrier directly under Section 376.309 (2), Florida Statutes. So if insurance companies continue to interpret policies contrary to federal laws,
particularly having marketed the policies as to enable the owner or operator to comply with federal law, they are likely to continue to face regulatory action. The decision in First Coast will make the environmental consultant’s job that much more important. DEP/EPA leak autopsy studies show that release detection works less than half the time. Therefore, when contamination is discovered without a failed tightness test or release detection trigger, the consultant will have to do soil and groundwater assessment and other investigation to show that the release came from the storage tank system. In some cases, it could be an uphill battle, but tank owners and operators have just been handed the climbing tools. ❍ Bob Fingar is “of counsel” with Guilday, Tucker, Schwartz & Simpson, P.A. If you have any questions regarding this article or other petroleum matters, please call us on the Legal Hotline at 800-226-7091.
Table of Contents for the Digital Edition of Petrogram - Winter 2010
Petrogram - Winter 2010
FPMA Salutes Its Patron Members
Cost Savings Is the New Trend
Out & About the Industry: New Year Petro-Financing Prognostications
CITGO Steps Outside the Box
Enviro Corner: Adaptation
Overcoming the Obstacles: Court Finds Cleanup Cost Coverage
A Bad Combination: Drugs & Alcohol in the Workplace
Local Store Marketing for Convenience Stores
Index of Advertisers/Advertiser.com
Petrogram - Winter 2010