In its recent decision in Stoddard Equipment Co., Inc. v. American Safety Indemnity Co., 2013 U.S. Dist. LEIS 170701 (W.D. Mo. Dec. 4, 2013), the United States District Court for the Western District of Missouri had occasion to consider whether property damage occurred during the policy period of a pollution liability policy.
American Safety’s insured, Stoddard, was named as a defendant in an underlying suit for its alleged negligent installation of a gas pipeline running from a storage tank to a marina where the gasoline was dispensed. Stoddard completed the work in early October 2009. The underlying plaintiff alleged that during the evening of September 2, 2011, the entire contents of its tank leaked into the surrounding soils and waters. Plaintiff alleged that Stoddard’s negligent installation of the pipe in 2009 is what caused the release in 2011.
Stoddard sought coverage under various policies for the underlying suit, including a contractors’ pollution liability policy issued by American Safety for the period November 3, 2008 to November 3, 2009. The policy’s insuring agreement provided coverage for property damage, but only to the extent the property damage occurred during the policy period. American Safety denied coverage to Stoddard on the basis that the property damage, i.e., the damage caused by the release of the storage tank’s contents, happened in its entirety nearly two years after the expiration of its policy. Stoddard nevertheless maintained that because the pipe was negligently installed during the time the American Safety policy was in effect, the property damage should be considered progressive in nature, spanning several policy periods.
On motion to dismiss, the court rejected Stoddard’s argument, distinguishing the gasoline release from matters involving property damage happening over a lengthy period of time, such as at issue in the Missouri Supreme Court case D.R. Sherry Const., Ltd. v. American Fam. Mut. Ins. Co., 316 S.W.3d 899 (Mo. 2010), which involved structural damage to a home over a period of years as a result of an unstable foundation. The underlying complaint contained no allegation that the pipe installed by Stoddard began leaking prior to November 3, 2009, but instead alleged that the entirety of the leak happened during a one night period in September 2011. The court further reasoned that no inference could be drawn from the complaint that any hole developed in the pipe prior to the expiration of the American Safety policy. In reaching its holding, the court cited to the line of Missouri law “that draws a distinction between the occurrence of negligent act during the policy period and the occurrence of physical damage that results from the commission of a negligent act during the policy period.” While the court agreed that Stoddard’s alleged negligence happened while the American Safety policy was in force, the resulting damage happened in its entirety after the expiration of the policy and thus fell outside of that policy’s scope of coverage.