Insurance Policy’s Sublimit Applies Following Underground Storage Tank Leak

Last week, the Second Circuit issued a summary order affirming a judgment of a district court involving the terms of a pollution and remediation liability policy.  The policy denied coverage for loss “based upon or arising out of the existence of any underground storage tank(s) and associated piping” except for certain specified tanks and piping that was listed on an endorsement to the policy.  In 2009, the insured discovered an underground storage tank at one of its gas stations discharged several thousand gallons of gasoline.  The parties agreed that the tank was listed on the endorsement and that the policy provided coverage.

The parties disagreed, however, about whether a separate endorsement applied that inserted a sublimit of $1 million for each loss or remediation expense associated with the tanks in which coverage existed.  The insured argued that the meaning of the phrase “underground storage tank(s) and associated piping” varied across the policy so that the sublimit would not apply to the losses and expenses of this particular loss, even though the tank would still qualify under the endorsement that provided specific exceptions to the policy’s general denial of coverage for storage tanks and associated piping.  The district court, nor the Second Circuit, were persuaded.  The Second Circuit explained that the insured “points to no ‘countervailing reason’ for according varying meanings to the same phrase in this insurance policy.  To the contrary, the policy unambiguously uses the same terms in order to precisely and consistently define the scope of coverage, both in the exclusionary language and in the sublimit . . . there is no ambiguity here.”