Damage by Gas Tank Occurred at Time of Rupture, Not Installation

 

In Walla Walla College v. Ohio Cas. Ins. Co., 2009 WL 987405, an insured sought declaration that its CGL insurance policies in effect at the time of the installation of an underground gasoline storage tank covered property damage occurring when the tank subsequently ruptured, after the policies expired. The trial court entered summary judgment in favor of the insurer, and the insured appealed.

 

The insured, Walla Walla College , had purchased three fiberglass underground storage tanks from 3-D Tank & Petroleum Equipment Co., Inc. Ten years after 3-D Tank installed the tanks, approximately 10,000 gallons of gasoline leaked from one tank into the ground. The College incurred expenses and loss of revenue as the result of the remediation effort required to clean up the pollution caused by the leak. Great American Insurance (now Ohio Casualty) insured Walla Walla College under CGL policies from 1990 until 1992. Walla Walla College asserted that these policies covered the losses caused by the gasoline leak because the tanks were improperly installed, which resulted in the gasoline leak.

 

The question the Court of Appeals of Washington thus sought to resolve was whether the property damage occurred when the tank was improperly installed in 1991, or 10 years later when the tank ruptured and leaked?

 

The College contended the gasoline leaked through the crack in the bottom of the tank as the result of a downward rotation of the end cap of the tank causing the bottom of the tank to buckle and crack. According to the College, the end cap droop was caused by insufficient backfill under the tank. The College asserted that 3-D Tank was negligent in obtaining or preparing the backfill.

 

Coverage under both policies was triggered by “property damage” during the policy periods. Although the College contended the damage to the tank occurred immediately upon its installation, starting a continuing process that resulted in the tank's failure, the court disagreed.

 

The court explained that a process began, but the property damage did not occur until the tank failed in 2001, long after the policies had expired. The damage occurred at the time of the rupture , not at the time of installation, since the insured sought coverage for property damage for contamination from the leak, not for the damage to the tank itself.

 

The College next contended that there were two kinds of property damage-damage to the storage tank and diminution in value.

 

The court held that diminution in value of the tank was not covered property damage covered under the policies, which contained a “your product” exclusion for coverage for the tank itself. Even though a process of deterioration of the tank may have occurred immediately after the installation, no property damage occurred until the time the tank ruptured. Further, stress to the tank did not constitute “property damage” under the policy as it was not “physical injury to tangible property” and the “your product” exclusion applied.

 

Thus, the court affirmed the trial court's grant of summary judgment, concluding there was no genuine issue of material fact indicating that property damage occurred during the policy periods .