Columbia Casualty Co. v. Plantation Pipe Line Co.

In April 1976, Appellee Plantation Pipe Line Company (“Plantation”) had a pipeline leak in Cabarrus County, North Carolina, resulting in the spill of a then-unknown amount of turbine fuel. Plantation repaired the pipeline and cleaned up the spill within the first 24 hours and paid the only affected landowner $50. However, more than 30 years later, during regular maintenance of the pipeline, a Plantation employee discovered more contaminated soil traced back to the 1976 leak. By the time of this discovery, the chemical discharge had reached flowing groundwater and the water table resulting in a chemical plume that affected multiple landowners. Plantation alleged remediation would extend to the year 2030 and that costs for the remediation, in combination with settlement of third party claims, would total in the range of $5.6 – $8.6 million. Plantation tendered its claims for these costs to its insurers, including Appellant Columbia Casualty Company (“Columbia”).

In 1976, Columbia issued to Plantation a second layer excess CGL policy, which attached over $2 million of primary and excess insurance, as well as a $100,000 SIR. Columbia denied Plantation’s tender of indemnity, based in part on the fact that Plantation had yet to exhaust all underlying insurance over the 31 year period by which the chemical plume had caused injury. In 2012, Plantation filed an action against Columbia and four other excess insurers seeking reimbursements of costs incurred to settle third party claims and to remediate the contamination. Columbia and Plantation filed competing motions for summary judgment in that matter, with Plantation prevailing, resulting in this appeal.

On appeal, Columbia argued that its policy had yet to be triggered by Plantation’s claims, because the contamination represented a continuous, progressive injury that extended over 30+ years of insurance coverage. As such, the primary and first level excess insurers that had issued policies during this timeframe were responsible for a pro rata allocation of Plantation’s remediation and settlement costs, before Columbia’s policy could ever be triggered. In effect, Columbia was arguing for the adoption of the continuous trigger theory for an insurer’s duty to indemnify and the horizontal exhaustion theory of allocation of indemnity obligations among multiple insurers, all of whom had issued policies over successive years in which injury or property damage was alleged.

A skeptical Court of Appeals noted that continuous trigger and horizontal exhaustion theories have been criticized for reading into an insurance policy what was arguably a restriction on coverage – usually restrictions must be in written form and interpreted narrowly. However, the court punted on these issues and focused on the insuring language at issue in Columbia’s policy. Noting that the Columbia policy was generally “follow form” in nature, the Court highlighted that although the Columbia policy insured against “injury or destruction taking place during the policy period,” it also had a substitute provision stating that in the event the underlying policies insured against “occurrences,” the “injury or destruction” language of the Columbia policy would be replaced with “occurrence.” Looking to the underlying first layer excess policy issued by Lexington Insurance Company (“Lexington”), the Court indeed found policy language stating that Lexington would insure “occurrences taking place during its policy period.” Lexington’s definition of “occurrence” included the following:

“(An) event, including continuous or repeated exposures to conditions, which result in property damage neither expected nor intended from the standpoint of the insured. All such exposure to substantially the same general conditions shall be deemed one occurrence.”

Thus, Columbia was stuck with Lexington’s broad insuring provision, which both included continuous exposures for coverage and allowed the relation back of those continuing exposures to one event within the policy period. The Court noted that Columbia could have limited the broad scope of Lexington’s coverage by simply adding to Columbia’s insuring provision the restrictive qualifier “to the extent of injury taking place during the policy period,” but failed to do so. The result was that any damage or injury arising from the initial chemical discharge in 1976, regardless of the manifestation or trigger date of that damage, could be related back to the discharge, thereby obligating the 1976 column of insurers to indemnify Plantation for its losses.