Allocation of Loss Dispute
November 7, 2016
The insured pipeline company brought an action against excess liability insurers to recover remediation and settlement costs arising from a 1976 turbine fuel leak. This case is Columbia Casualty Company v. Plantation Pipe Line Company, 2016 WL 4548664.
In 1976, Plantation employees discovered that turbine fuel had leaked from an underground pipeline. Within 24 hours, Plantation repaired the pipeline, cleaned up the leak, and compensated the affected landowner. In 2007, an employee found contaminated soil during maintenance of a pipeline and this contamination was traced back to the 1976 leak.
Plantation had primary insurance through American Reinsurance Company and excess liability coverage with Columbia Casualty. The excess policy limits were $2 million. Plantation filed an action in 2012 seeking recovery for amounts it spent to settle third party claims and for remediation costs. Columbia contended that its policy was not triggered by the claims at issue here. The Superior Court, Fulton County, entered summary judgment in favor of the insured and this appeal followed.
The Court of Appeals of Georgia noted the insurer's argument that the environmental contamination caused by the occurrence in 1976 continued to unfold as the quantity of pollutant that Plantation failed to clean up in 1976 migrated downward through the soil and formed a plume in the water table. Columbia argued that because of the progressive nature of environmental contamination, the resulting injury overlaps multiple successive insurance policy periods, and so, multiple successive insurance policies were potentially triggered. This means that the losses claimed by Plantation should be allocated among those multiple policies. Columbia contended that the continuous trigger theory should be adopted since the losses took place over three decades and thus, the claims should be allocated pro rata among each successive policy period from 1976 to 2007.
The court said that even if it were to adopt the continuous trigger theory, the application of the theory is premised on the assumption that the Columbia policy contains language that limits coverage to property damage that takes place during the policy period. However, the court pointed out, the Columbia policy did not provide that the policy applies to property damage that occurs during the policy period; instead, the policy provides that it applies to occurrences taking place during the policy period. The court said this means it is presented with a policy that by its plain terms covers property damage caused by an occurrence, provided the occurrence takes place during the policy period and provided the insured's losses exceed the attachment point of the policy. The court found that there was no dispute that an occurrence took place during Columbia's policy period, that property damage occurred as a result of that occurrence, and that the insured's losses exceeded the $2 million attachment point of Columbia's excess policy.
The court affirmed the ruling of the trial court and held that the Columbia policy that applied to occurrences taking place during the policy period provided coverage without allocation to successive policies.
(As a side note, Columbia contended that the known loss doctrine applied but the court said that the doctrine is not the law of Georgia.)
Editor's Note: The Court of Appeals of Georgia rules that policy language prevents the allocation of loss in this instance. The court said that the insurer could have drafted language in the policy to limit coverage to occurrences taking place during the policy period to the extent of injury taking place during the policy period. The insurer did not do this and so, allocation was not granted.