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Penn Tank Lines, Inc. v. Liberty Surplus Insurance Corporation

May 27, 2011

PENN TANK LINES, INC.
v.
LIBERTY SURPLUS INSURANCE CORPORATION



The opinion of the court was delivered by: Legrome D. Davis, J.

ORDER

AND NOW, this 27th day of May 2011, upon consideration of the parties' cross-motions for summary judgment to determine whether Plaintiff Penn Tank Lines, Inc. is entitled to indemnification under the insurance policy numbered TIE-NY-100048-016 issued by Defendant Liberty Surplus Insurance Corporation, and each party's opposition, it is hereby ORDERED that Plaintiff's Motion for Summary Judgment (Doc. No. 16) is GRANTED in part and DENIED in part, and Defendant's Motion for Summary Judgment (Doc. No. 18) is DENIED. Accordingly, it is further ORDERED and DECLARED that:

1. A claim within the meaning of the policy for costs incurred by Plaintiff in connection with environmental contamination resulting from a March 24, 2006 gasoline spill in Melbourne, Florida, was first made against Plaintiff during the policy period, July 1, 2006 to July 1, 2008;

2. Plaintiff timely reported the claim to Defendant during that policy period;

3. Genuine issues of disputed material fact remain to be determined by the fact finder as to whether the policy exclusion for "Known Circumstances and Non-Disclosure" precludes insurance for the claim arising from the gasoline spill;

4. Genuine issues of disputed material fact remain to be determined by the fact finder as to whether Plaintiff complied with the policy duty to timely notify Defendant of pollution conditions that might result in a claim within the meaning of the policy; and

5. Plaintiff did not knowingly make false statements or knowingly fail to disclose information which was material to the risk against which Plaintiff sought to be insured under the policy.

BY THE COURT: /s/ Legrome D. Davis Legrome D. Davis, J.

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

CIVIL ACTIONNo. 10-cv-178

PENN TANK LINES, INC. v. : LIBERTY SURPLUS INSURANCE CORPORATION

MEMORANDUM

Legrome D. Davis, J.

May 27, 2011

This action arises from an insurance claim by Plaintiff Penn Tank Lines, Inc. ("Penn Tank") under a claims-made pollution liability policy issued by Defendant Liberty Surplus Insurance Corporation ("LSI"). The parties have filed cross-motions for summary judgment to determine whether Penn Tank is entitled to indemnification under the insurance policy. Penn Tank's Motion will be granted in part and denied in part, and LSI's Motion will be denied.

I. PROCEDURAL AND FACTUAL BACKGROUND

Penn Tank transports gasoline and other fuels by truck throughout the United States.*fn1

On March 24, 2006, a Penn Tank truck overturned in a single vehicle, rollover accident on Interstate 95 in Melbourne, Florida.*fn2 The truck driver, Joseph DeSimone, was killed. The truck's cargo of 8,800 gallons of gasoline and the truck's diesel fuel spilled along the roadway.*fn3 Penn Tank maintains that its liability for the costs to clean up the gasoline is insured and LSI disclaims any duty to indemnify Penn Tank under the policy.

On January 8, 2010, Penn Tank filed suit in the Court of Common Pleas of Philadelphia County. On January 14, 2010, LSI removed the action to this Court. The Complaint alleges that LSI breached its insurance contract to pay for clean-up costs from the accident (Count I), was unjustly enriched by its wrongful retention of policy proceeds (Count II), and declined indemnity in bad faith (Count III). By June 22, 2010 Order (Doc. No. 11), the Court granted LSI's motion to dismiss Counts II and III. On October 1, 2010, discovery closed. On October 15, 2010, Penn Tank and LSI filed the instant cross-motions for summary judgment. (Doc. Nos. 16, 18.)

Spanning the period from July 1, 2002, to July 1, 2008, LSI insured Penn Tank under three consecutive "Contractors Pollution Liability" policies, each insuring a two-year policy period.*fn4 The policies insured liability claims first made against Penn Tank during the policy period and reported to LSI as required by the policy terms.

Penn Tank also procured insurance through FS Insurance, Ltd. ("FS Insurance"), a captive specialty insurer for its member companies in the trucking industry.*fn5 Discover Re underwrote the policies procured through FS Insurance using several insurance carriers. In 2000, one of those carriers, Discover Property & Casualty Insurance Company, issued to Penn Tank a policy ("Discover Re policy") that provided insurance for trucking and automobile liability, among other coverages, on a per "accident" basis.*fn6 The policy insured "covered pollution cost or expense" resulting from the ownership, maintenance or use of insured trucks.*fn7 The Discover Re policy was renewed annually through July 1, 2008.

Marsh USA, Inc. ("Marsh") acted as Penn Tank's insurance broker for all of its insurance policies.*fn8 Penn Tank used Marsh's services in the purchase of the LSI policies and renewals of the LSI and Discover Re policies.*fn9 Marsh also managed the insurance program of FS Insurance.*fn10 Gallagher Bassett Services, Inc. ("Gallagher Bassett") was the third-party administrator contracted by Penn Tank to handle its liability claims under the Discover Re policy.*fn11 Penn Tank reported those claims directly to Gallagher Bassett.*fn12

On March 24, 2006, Penn Tank, through Gallagher Bassett, reported the accident to FS Insurance, submitting a detailed report that stated: "Our Safety Department presently on the scene -- Gasoline spill from loaded trailer being cleaned up."*fn13 FS Insurance agreed to pay for the initial clean-up of the gasoline spill.*fn14 Penn Tank employed Florida Environmental Regulation Specialists ("FER") to address the spill. The day of the accident, FER and the Florida Department of Environmental Protection ("FDEP") inspected the site. FER, using various contractors, performed primary clean-up work at the site during March 27-31, 2006. Some tons of contaminated soil were removed and replaced with clean fill.*fn15 During April to June 2006, FER prepared invoices for the primary clean-up, a total of $278,152.23.*fn16 FER submitted the invoices to Gallagher Bassett, FS Insurance paid the invoices under the General Re policy, and Gallagher Bassett issued the payments to FER on behalf of Penn Tank.*fn17 No demand for money was made against Penn Tank for costs to clean up the spill.*fn18

On March 30, 2006, Penn Tank's safety director, Steven Chastain, and FER's environmental manager, Richard Boik, inspected the accident site. The next day, Chastain reported to Penn Tank's risk control manager, William Parlaman, providing a detailed description of the site. Chastain reported that gasoline had entered the water table and approximately 20,000 gallons of water would have to be removed from the site. He also reported Boik's opinion that given the amount of contamination, clean-up efforts realistically would not achieve a level of "Ground Water Clean." Boik planned to install monitor wells and "hope[d]" clean-up efforts would reach the level of "Natural Attenuation," noted as a level that "allows for the natural process to breakdown the remaining product contamination and not require any additional ...


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