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Pittston Co. v. Allianz Ins. Co.

Citation: 28 ELR 20066
(08/27/1997)

The court holds that two insureds' claims arising from a polluted oil transfer terminal are not barred by the doctrine of known loss, nor are they unambiguously precluded by the comprehensive marine liability package (CMLP) policies at issue. The court first holds that one of the insureds had a legitimate insurable risk, and, thus, coverage was not barred by the doctrine of known loss. Certainty of legal liability, rather than certainty of damage, is required to trigger application of the doctrine. The insured did not receive notice of any legal liability until some six years after it purchased the insurance policies. Moreover, the statute pursuant to which liability was imposed was not enacted until after the policies were issued. And the insurers did not allege that the insured misrepresented or wrongfully withheld information regarding the condition of the site at issue.

The court next remands for trial the question of whether the other insured's CMLP policies provide coverage. The court holds that the CMLP policies are ambiguous. The policies were not contracts of adhesion and are more properly treated as traditional, jointly negotiated contracts. Therefore, the insured cannot benefit from the doctrine of contra proferentum, which favors coverage. Although the court agrees with the district court that the "architecture" of the policies can be read to preclude stand-alone coverage, the court also finds it reasonable to interpret the language as granting such coverage. Furthermore, the extrinsic evidence does little to clear up the ambiguity. The court also holds that the known loss doctrine does not bar potential coverage for the second insured under the CMLP policies for the reasons discussed above with respect to the first insured.

Counsel for Plaintiffs
Robert N. Sayler
Covington & Burling
1201 Pennsylvania Ave. NW, Washington DC 20004
(202) 662-6000

Counsel for Defendants
John E. Heintz
Howrey & Simon
1299 Pennsylvania Ave. NW, Washington DC 20004
(202) 783-0800

Before Mansmann and Duplantier,* JJ.