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Spartan Petroleum Co. v. Federated Mut. Ins. Co.

Citation: 29 ELR 20393
(01/13/1999)

The court holds that under South Carolina law, an insurer must indemnify its insured for gasoline damage caused to a third-party claimant's property if the insured's third-party liability policy was still in effect when the underground gasoline leak reached the claimant's property. The leak was discovered at another property before it was discovered at the claimant's property. The district court held that the injury to the neighboring property where the leak was first discovered during the policy period was the injury-in-fact that triggered coverage under the policy.

The court first holds that under South Carolina law, in cases involving a standard comprehensive general liability policy and progressive damage affecting multiple properties, the injury-in-fact trigger requires an insured to demonstrate that during the policy period, an injury that caused the underlying "occurrence" occurred to the property that is the subject of the underlying third-party action. Once an injury-in-fact has triggered coverage as to that property, coverage is triggered continuously thereafter to allow coverage under all policies in effect from the time of injury-in-fact during the progressive damage to that property. Accordingly, the district court erred in combining the claimant's property and the neighboring property for purposes of triggering coverage. Under the policy's language, "property damage" means "damage to the property of the underlying claimant." In addition, the well-established distinction between coverage for damage to the insured's property and coverage for damage to the property of third parties suggests that the former should not trigger the latter. It would be nonsensical to say there is coverage for the third party before any event creating the insured's liability to a third party has occurred. Moreover, the district court distorted the policy's language in suggesting that an occurrence rather than actual damage to the third-party property triggers coverage under the third-party liability policy. Although this is understandable in cases involving one property, it leads to error when multiple properties are involved. In addition, case law outside South Carolina reinforces the conclusion that the determinative date under an injury-in-fact trigger is when the claimant's property was damaged.

The court then holds that further proceedings will be required on remand because both sides have offered evidence regarding the date of migration and because this issue of fact is the central question for coverage. The claimant's expert is not deficient simply because he could not pinpoint the date of migration. Further, property does not suffer an injury only when the contamination levels exceed the maximum allowed by the state environmental agency. The court also holds that if, on remand, the district court concludes that the contamination did reach the claimant's property during the insurance policy period, it must allocate a pro rata share of liability to the insurance company, with the insured bearing the loss for any self-insured periods.

Counsel for Plaintiff
Kevin A. Dunlap
Parker, Poe, Adams & Bernstein
101 W. St. John St., Ste. 203, Spartanburg SC 29306
(864) 591-2030

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

Before Butzner and Thornburg, JJ.