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Two Farms, Inc. v. Greenwich Insurance Co.

United States District Court, Second Circuit

January 6, 2014

TWO FARMS, INC., Plaintiff,
v.
GREENWICH INSURANCE COMPANY, Defendant.

OPINION AND ORDER

JOHN G. KOELTL, District Judge.

These are cross-motions for partial summary judgment in a dispute between the plaintiff, Two Farms, Inc., ("Two Farms"), and the defendant, Greenwich Insurance Company ("Greenwich"). The dispute concerns the meaning of a provision in an insurance policy that Greenwich issued to Two Farms. The clause at issue limits to $1, 000, 000 coverage for losses sustained because of underground storage tanks and associated piping that Two Farms uses at its gas stations. Greenwich contends that the limitation applies to losses that Two Farms incurred because of a gasoline discharge at one of its facilities and thus that Greenwich fulfilled its obligations under the policy by paying $1, 000, 000 to Two Farms. Two Farms contends that the limitation is inapplicable to the over $5, 000, 000 in losses allegedly sustained because of the gasoline discharge. Two Farms thus seeks a judgment in its favor and against Greenwich for at least $4, 000, 000, the remaining difference that Two Farms claims is owed under the policy.

Greenwich moves for summary judgment dismissing all claims under Rule 56 of the Federal Rules of Civil Procedure. Two Farms cross-moves for partial summary judgment on the issue of liability under the same rule. This Court has jurisdiction pursuant to 28 U.S.C. § 1332 based on diversity of citizenship. For the reasons explained below, the provision at issue unambiguously limits the plaintiff's coverage to $1, 000, 000 for the loss at issue in this dispute. Accordingly, the plaintiff's motion for partial summary judgment is denied and the defendant's motion for summary judgment is granted.

I.

The following facts are undisputed unless otherwise indicated.

A.

Greenwich is a Delaware corporation with its principal place of business in Stamford, Connecticut. Two Farms is a Maryland corporation with its principal place of business in Baltimore, Maryland. Two Farms does business under the name Royal Farms and owns a network of gas stations and convenience stores, as well as a dairy production plant in Maryland.

B.

In April 2008, Two Farms purchased from Greenwich Pollution and Remediation Legal Liability Policy No. PEC000906403 ("the Policy"). (Pl.'s Rule 56.1 Stmt. at ¶ 4; Def.'s Resp. to Pl.'s Rule 56.1 Stmt. at ¶ 4.) The Policy was effective from April 16, 2008, through April 16, 2010. (Certification of Charles Stoia ("Stoia Cert.") Ex. C ("2008 Policy").) The Policy provides coverage for pollution conditions and remediation expenses for such conditions "on, at, under, or emanating from the location(s)" specified in the Policy's Pollution Legal Liability Schedule and Remediation Legal Liability Schedule. (2008 Policy at 1.) Two Farms's facility at 7950 Pulaski Highway in Baltimore, Maryland (the "Pulaski Highway Facility") is listed on both schedules. (2008 Policy at Endorsement 4.)

Although the Policy covers losses arising from pollution conditions and remediation expenses, it enumerates fourteen exclusions from coverage. (2008 Policy at 4-7.) Several of the exclusions also contain exceptions that restore some or all of the excluded coverage. (See, e.g., 2008 Policy at 5, 7.)

This action pertains to Exclusion 13 - the Underground Storage Tank(s) Exclusion (the "UST Exclusion") - to the 2008 Policy. The UST Exclusion excludes coverage for claims "based upon or arising out of the existence of any underground storage tank(s) and associated piping." (2008 Policy at 4, 7.) However, the UST Exclusion also contains an exception, which provides in relevant part that the Exclusion "does not apply to the underground storage tank(s) or associated piping... listed in the Underground Storage Tank(s) and Associated Piping Schedule, if any." (2008 Policy at 7.) The underground storage tank and associated piping at the Pulaski Highway Facility is listed on the Underground Storage Tank(s) and Associated Piping Schedule. (2008 Policy at Endorsement 10.)

The 2008 Policy also contains Endorsement 7, titled the "Dedicated UST Sublimit Endorsement" (the "UST Sublimit"). The UST Sublimit applies annual sublimits of liability "to all Underground Storage Tanks and Associated Piping scheduled to [the] Policy." (2008 Policy at Endorsement 7.) The UST Sublimit caps the coverage amount for each loss or remediation expense at $1, 000, 000 and caps the total coverage for such expenses at $5, 000, 000. (2008 Policy at Endorsement 7.) The term "underground storage tanks and associated piping" is not defined in the UST Sublimit or anywhere else in the Policy.

C.

In September of 2008, after the Policy issued, Two Farms requested through its insurance broker that Greenwich provide quotes for additional coverage for leaks from its underground storage tanks. (Stoia Cert. Ex. U.) In response, Greenwich provided Two Farms with four quotes. (Stoia Cert. Ex. U.) One of the offered quotes would have increased the UST Sublimit to $5, 000, 000 for each pollution condition or remediation expense, while leaving the annual sublimit at $5, 000, 000. (Stoia Cert. Ex. U.) Another would have increased the UST Sublimit to $10, 000, 000 for each pollution condition and remediation expense and also increased the yearly sublimit on liability to that amount. (Stoia Cert. Ex. U.) Two Farms rejected all four quotes, electing not to upgrade its coverage. (Stoia Cert. Exs. Z, AA.)

In December of 2009, Two Farms discovered that thousands of gallons of gasoline had been discharged into the area surrounding its Pulaski Highway Facility (the "Discharge"). (Second Am. Compl. At ¶ 11.) The Discharge was caused at least in part by a defective "O-Ring." (Pl.'s Rule 56.1 Stmt. at ¶ 17; Def.'s Resp. to Pl.'s Rule 56.1 Stmt. at ¶ 17.) The O-Ring is a component of the submersible turbine pump, a device that draws gasoline out of an underground storage tank ("UST"). (Ex. 2 to Pl.'s Mem. Supp. Pl.'s Mot. for Summ. J. at 5.) The O-ring is located in a "containment sump" that sits on top of an UST. (Stoia Cert. Ex. B.) In this case, the defective O-Ring permitted gasoline to leak into the containment sump. (Pl.'s Rule 56.1 Stmt. at ¶ 17; Def.'s Resp. to Pl.'s Rule 56.1 Stmt. at ¶ 17.) Gas then leaked from the containment sump into the ground because of a loose electric conduit coupling connection. ...


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