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Dilmar Oil Co. v. Federated Mut. Ins. Co.

Citation: 28 ELR 20341
No. 97-1554, 129 F.3d 116/(4th Cir., 11/05/1997)

The court rejects a petroleum company's breach of contract and liability claims against its insurer. The insurance policy required the company to secure money from a state-administered fund to finance the cleanup of contamination from leaking underground storage tanks. However, in 1990 the state passed amendments invalidating provisions such as the one in the company's insurance policy, and in 1992 those amendments were made retroactive.

The court first holds that the company's breach of contract claim to recover reimbursement costs incurred in cleaning up contaminated sites was time barred by South Carolina's three-year statute of limitations. The company knew, or should have known, that the contract had been breached when the 1992 amendments were passed, at the latest. Failure to appreciate the effect of the amendments cannot toll the running of the statute of limitations.

The court next holds that because there was no claim during any applicable policy period, the insurance company is not liable for a state-ordered cleanup of a site. There needed to be a demand from the state environmental agency to the company during an applicable policy period as required by the insurance policy. However, the government mandate to clean up the site was received four years after the last insurance policy expired, and this ordered cleanup was not a continuation of an earlier voluntary cleanup claim. Allowing a claim triggering one insuring agreement to implicate coverage under one of the other insuring agreements would torture the clear and unambiguous policy language and extend coverage that was never intended by the insurance company. Furthermore, the insuring agreement, under which the company is trying to obtain coverage, only applies to voluntary cleanup cost reimbursement, not to government-ordered cleanup, as is the case here.

The court also holds that the company abandoned its cause of action for bad-faith refusal to pay benefits. The company initially argued in its complaint that the insurance company failed to affirmatively provide notice of the passage of the 1990 amendments. However, in a supplemental brief opposing the insurer's motion for summary judgment, by changing its argument to say that the insurer's failure to volunteer coverage in 1990 was not a denial of coverage, the company was no longer asserting a bad-faith claim.

Counsel for Plaintiff
David E. Rothstein
Nexsen, Pruet, Jacobs & Pollard
1441 Main St., 15th Fl., Columbia SC 29202
(803) 771-8900

Counsel for Defendant
Laura J. Hanson
Meagher & Geer
4200 Multifoods Tower
33 S. 6th St., Minneapolis MN 55402
(612) 338-0661

Before Wilkinson and Russell, JJ.