Hunton Insurance Recovery Blog

The Court of Appeals of Georgia recently found an excess insurer liable for environmental costs related to a leak in an insured’s pipeline.  In doing so, the court rejected the insurer’s argument that liability for the costs should be spread among policies issued by other insurers spanning nearly three decades.  The opinion is available here.

In 1976, Plantation Pipe Line Company discovered that fuel had leaked from one of its pipelines.  Although Plantation cleaned up the leak and settled a landowner’s claim related to the spill without resorting to insurance, lingering contamination traceable to the 1976 leak was found more than 30 years later, in 2007.  Thereafter, Plantation settled additional third party claims and took steps to remediate the affected areas at a cost that could reach $8.6 million.

At the time of the 1976 leak, Plantation was insured under an excess liability policy issued by Columbia Casualty Company.  The policy was excess to Plantation’s $1 million CGL policy and a $1 million umbrella policy issued by Lexington.  Columbia Casualty denied coverage for the loss, contending that the loss did not trigger its excess coverage because the loss was continuing in nature and, thus, implicated primary policies through at least 2007.  Columbia Casualty urged the court to adopt a “continuous trigger” of coverage that would, in turn, require horizontal exhaustion of approximately 30 years of primary liability coverage.  Under this theory, Columbia Casualty’s 1976 policy would not have been implicated.

The trial court granted summary judgment in Plantation’s favor.  The Court of Appeals affirmed.  The court reasoned that, because the Columbia Casualty policy was occurrence-based and did not specifically limit coverage to property damage taking place during the policy period, allocation among multiple policy years was unnecessary.  The Court of Appeals held that because an occurrence took place during the policy period and resulted in property damage in excess of the attachment point of the Columbia Casualty policy, the plain terms of that policy supported the finding that Columbia Casualty was responsible to pay all loss resulting from the 1976 leak (up to available policy limits).

The Columbia Casualty decision is significant, particularly to those in Georgia or operating under policies governed by Georgia law, because the decision offers guidance against a relative dearth of Georgia authority concerning trigger of coverage in the context of long-tail losses.  Policyholders and insurers alike continue to await a definitive proclamation from the Supreme Court of Georgia on the trigger of coverage issue.  Columbia Casualty has indicated its intent to seek certiorari to the Supreme Court of Georgia.  We will continue to monitor this case.