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RACETRAC PETROLEUM v ACE - ACE Motion to Dismiss Brief

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Case 1:10-cv-02162-WSD Document 11-1
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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION RACETRAC PETROLEUM, INC., A Georgia Corporation, Plaintiff, vs. ACE AMERICAN INSURANCE COMPANY, a Pennsylvania corporation, Defendant. ) ) ) CIVIL ACTION FILE ) NO. 1:10-cv-2162-WSD ) ) ) ) ) ) ) )
BRIEF I SUPPORT OF DEFE DA T ACE AMERICA I SURA CE COMPA Y'S MOTIO TO DISMISS COMPLAI T Defendant ACE American Insurance Company (hereinafter “ACE”), pursuant to Federal Rule of Civil Procedure 12(b)(6), respectfully moves this Court to dismiss the complaint for declaratory relief filed by plaintiff RaceTrac Petroleum, Inc. (hereinafter “RaceTrac”), because it fails to state a claim upon which relief can be granted. I. FACTUAL BACKGROU D Plaintiff’s lawsuit is a declaratory judgment action seeking a judicial declaration about whether there is any liability insurance coverage for RaceTrac under ACE’s two excess liability insurance policies for allegations of personal injury brought against RaceTrac in two separate lawsuits
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(hereinafter “the underlying lawsuits’) filed by Jacqueline Sheree Bunns, Dakota Bunns, Harley Bunns, and Lisa Williams (hereinafter “the underlying plaintiffs”), all of whom are former employees of a RaceWay service station leased from RaceTrac. A. The Underlying Lawsuits
In 2009, the underlying plaintiffs filed the two underlying lawsuits in the state courts of Mississippi (hereinafter “the Bunns lawsuit” and “the Williams lawsuit”), alleging that the underlying plaintiffs sustained personal injuries from exposure to benzene from gasoline vapors in the stores during their employment at a RaceWay service station between 2005 and 2007. [Doc. 1, Exhibits “D” and “E”]. B. The ACE Excess Policies
ACE issued an excess commercial general liability policy to RaceTrac, number XSL-G20593854, which was effective from June 1, 2005 through June 1, 2006. [Doc. 1, Exhibit “A”]. ACE subsequently issued an excess commercial general liability policy to RaceTrac, number XSLG21732850, which was effective from June 1, 2006 through June 1, 2007. [Doc. 1, Exhibit “B”]. Both of the insurance policies provide coverage for “the ‘ultimate net loss’ in excess of the ‘retained limit’ shown in the declarations’ that the
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insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies,” subject to the insurance contracts’ terms, conditions, limitations and exclusions.
Paragraph I(A)(1)(a), Excess Commercial General Liability Policy, XS6U91c (07/02), p. 1 [Doc. 1, Exhibits “A” and “B”]. C. The Pollution Exclusion
Both of the ACE policies contain an absolute pollution exclusion for “any injury … arising out of or in any way related to pollution, however caused.” The term “pollution” is defined in the policies as “the actual, alleged or potential presence in or introduction into the environment of any substance if such substance has, or is alleged to have, the effect of making the environment impure, harmful, or dangerous. Environment includes any air, land, structure or the air therein, watercourse or water, including underground water.” Endorsement 9, XS-6W35 (09/95) [Doc. 1, Exhibit “A”]; Endorsement 10, XS-6W35 (09/95) [Doc. 1, Exhibit “B”]. After RaceTrac provided notice to ACE of the Bunns lawsuit, ACE denied coverage for that lawsuit based on the excess liability policies’ pollution exclusion. [Doc. 1, Exhibit F”]. ACE never received any notice from RaceTrac of the Williams lawsuit until this declaratory judgment action was filed. [Doc. 3, ¶¶ 37-40].
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D.
RaceTrac’s Declaratory Judgment Action
On July 13, 2010, RaceTrac filed its complaint seeking declaratory relief and attorneys fees. [Doc. 1]. In its complaint, RaceTrac alleged that the ACE excess liability insurance policies provide coverage for the Bunns and Williams lawsuits because RaceTrac may become obligated to pay an “ultimate net loss” and “loss adjustment expenses” in excess of each policy’s $500,000.00 retained limit resulting from “bodily injuries” caused by an “occurrence” within the “coverage territory” during the policy periods. [Doc. 1, ¶ 35]. RaceTrac alleged in its complaint that the pollution exclusion in the ACE excess policies does not preclude coverage for the Bunns and Williams lawsuits because the pollution exclusion is unenforceable as against the public policy of the state of Georgia. [Doc. 1, ¶¶ 43-55]. In its answer, ACE denied RaceTrac’s allegations that the claims asserted in the Bunns and Williams lawsuits are covered under the excess liability insurance policies, and denied that the policies’ pollution exclusion violates the public policy of the state of Georgia. [Doc. 3].
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II.
LEGAL ARGUME T
ACE moves this Court to dismiss this declaratory judgment action because RaceTrac’s complaint fails to state a claim upon which relief can be granted. Specifically, the complaint fails to set forth plausible facts which, if proven true, would be sufficient to show that RaceTrac is entitled to coverage under the ACE excess liability insurance policies. The pollution exclusion in the policies plainly and unambiguously precludes coverage for both the Bunns and Williams lawsuits. RaceTrac’s complaint also fails to set forth plausible facts which, if proven true, would be sufficient to support its allegation that the pollution exclusion is unenforceable as against the public policy of Georgia. Moreover, ACE submits that the pollution exclusion is valid and enforceable and that as a matter of law it does not violate the public policy of the state of Georgia. Under the Federal Rules of Civil Procedure, a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Until recently, a complaint was required to be dismissed under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted when it appeared “beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle
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him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). However, in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007), the United States Supreme Court recently replaced the “no set of facts” standard with the “plausibility standard,” which requires that factual allegations “raise the right to relief above the speculative level.” Id. at 555; ADA v. Cigna Corp., 605 F.3d 1283, 1288-1289 (11th Cir. 2010). The “plausibility standard” does not impose a probability requirement at the pleading stage; it simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence” supporting the claim. Id. at 556, 127 S. Ct. at 1974; ADA v. Cigna Corp., supra at 1289; Dege v. ationwide Ins. Co., 2008 U.S. Dist.
LEXIS 41487 at [*2-*3] (N.D. Ga. May 22, 2008). In assessing a motion to dismiss under Rule 12(b)(6), a court typically limits its consideration to the complaint, the written instruments attached to it as exhibits, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S. Ct. 2499, 168 L. Ed. 2d 179 (2007); Grossman v. ationsbank, A., 225 F.3d 1228, 1231 (11th Cir. 2000); Breckenridge Crest Apartments, Ltd. v. Citicorp Mortgage, Inc., 826 F. Supp. 460, 464. Determining whether a complaint states a plausible
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claim for relief is a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. Ashcroft v. Iqbal, 556 U.S. --- , 129 S. Ct. 1937, 1950, 173 L. Ed. 2d 868 (2009). The United States Supreme Court has suggested that courts considering motions to dismiss adopt a “two-pronged approach”: 1) eliminate any allegations in the complaint that are merely legal conclusions; and 2) where there are wellpleaded factual allegations, “assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id.; ADA v. Cigna Corp., 605 F.3d at 1290. A complaint must be dismissed under Fed. R. Civ. P. 12(b)(6) if the facts as pled do not “state a claim for relief that is plausible on its face.” Twombly, 550 U.S. at 570, 127 S. Ct. at 1974, 167 L.Ed.2d 929; Edwards v. Prime Inc., 602 F.3d 1276, 1291 (11th Cir. 2010); Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th Cir. 2009). A. The Absolute Pollution Exclusion In The Ace Insurance Contracts Precludes Coverage For The Bunns And Williams Lawsuits. Under Georgia law, insurance policies are a matter of contract and are interpreted by ordinary rules of contract construction in order to ascertain the intention of the parties, who are bound by its plain and unambiguous terms. Boardman Petroleum v. Federated Mut. Ins. Co., 269 Ga. 326, 498 S.E.2d 492 (1998); Grange Mut. Ins. Co. v. DeMoonie, 227 Ga. App. 812, 490
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S.E.2d 451 (1997); Progressive Preferred Ins. Co. v. Brown, 261 Ga. 837, 838, 413 S.E.2d 430 (1992); Richards v. Hanover Ins. Co., 250 Ga. 613, 299 S.E.2d 561 (1983). In construing an insurance contract, a court must consider it as a whole, giving effect to each provision. York Ins. Co. v. Williams Seafood of Albany, Inc., 273 Ga. 710, 544 S.E.2d 156 (2001). An insurer’s duty to indemnify, or provide coverage to, an insured party is triggered only when the insured is determined to be liable for damages within the policy's coverage. See Util. Serv. Co. v. St. Paul
Travelers Ins. Co., 2007 U.S. Dist. LEXIS 4634 (M.D. Ga. Jan. 22, 2007); Erie Indem. Co. v. Acuity, 2006 U.S. Dist. LEXIS 52590 (N.D. Ga. July 19, 2006); Safeco Ins. Co. v. Atlanta Metro Leasing, Inc., 1993 U.S. Dist. LEXIS 21468 (N.D. Ga. May 11, 1993). In this case, the complaint filed by RaceTrac seeks coverage for damages that it may become liable to pay for the bodily injuries in the Bunns and Williams lawsuits which are alleged to have resulted from exposure to benzene from gasoline vapors. [Doc. 1, ¶ 45]. However, both of the ACE excess liability insurance policies contain absolute pollution exclusions which plainly preclude coverage for the injuries alleged in the Bunns and Williams lawsuits. The bodily injury and property damage liability coverage provided under the ACE excess liability insurance policies is subject to a number of
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exclusions, including a pollution exclusion. The policies initially provided, in pertinent part: 2. Exclusions This insurance does not apply to: * Pollution * *
f.
Any injury, damage, expense, cost, loss, liability or legal obligation arising out of or in any way related to “pollution”, however caused. Paragraph I(A)(2)(f), Excess Commercial General Liability Policy, XS6U91c (07/02), pp. 2-3 [Doc. 1, Exhibits “A” and “B”]. However, that pollution exclusion was superseded by the pollution exclusion contained in Endorsement No. 9 of the ’05-’06 policy and Endorsement No. 10 of the ‘06-’07 policy, which state, in pertinent part: Exclusion 2.f of Section I, Coverage A is replaced by the following: f. Any injury, damage, expense, cost, loss, liability or legal obligation arising out of or in any way related to pollution, however caused. Pollution includes the actual, alleged or potential presence in or introduction into the environment of any substance if such substance has, or is alleged to have, the effect of making the environment impure, harmful, or dangerous. Environment includes any air, land, structure or the air therein, watercourse or water, including underground water.
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Endorsement 9, XS-6W35 (09/95) [Doc. 1, Exhibit “A”]; Endorsement 10, XS-6W35 (09/95) [Doc. 1, Exhibit “B”]. 1. The pollution exclusion is valid and enforceable.
It is well-settled that an insurance company may fix the terms of its policies as it wishes, provided they are not contrary to law, and it may insure against certain risks and exclude others. Reed v. Auto-Owners Inc. Co., 284 Ga. 286, 667 S.E.2d 90 (2008); Payne v. Twiggs County School District, 269 Ga. 361, 496 S.E.2d 690 (1998); Continental Cas. Co. v. HSI Fin. Serv. Inc., 266 Ga. 260, 466 S.E.2d 4 (1996). Terms in an insurance policy are given their ordinary and common meaning, unless otherwise defined in the contract. Claussen v. Aetna Casualty & Surety Co., 259 Ga. 333, 380 S.E.2d 686 (1989). No construction of an insurance contract is required or even permissible when the language is plain, unambiguous, and capable of only one reasonable interpretation. Boardman Petroleum v. Federated
Mut. Ins. Co., supra; Giles v. ationwide Mut. Fire Ins. Co., 199 Ga. App. 483, 405 S.E.2d 112 (1991). The Georgia courts repeatedly have held that absolute pollution exclusions similar to the pollution exclusion in the ACE excess liability insurance policies are unambiguous and enforceable. Reed v. Auto-Owners Ins. Co., supra (claim for injury from fumes fell within clear language of
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absolute pollution exclusion); Truitt Oil & Gas Co. v. Ranger Ins. Co., 231 Ga. App. 89, 498 S.E.2d 572 (1998) (absolute pollution exclusion not ambiguous because “pollutants” defined in policy as including “any liquid or gaseous contaminant” and included damages from leakage of gasoline); Perkins Hardwood Lumber Co. v. Bituminous Casualty Corp., 190 Ga. App. 231, 378 S.E.2d 407 (1989) (no ambiguity as to scope of pollution exclusion); Owners Ins. Co. v. Farmer, 173 F. Supp. 2d 1330 (N.D. Ga. 2001) (absolute pollution exclusion unambiguously excluded all pollutants regardless of source or location); orth Georgia Petroleum Co. v.
Federated Mut. Ins. Co., 68 F. Supp. 2d 1321 (N.D. Ga. 1999) (absolute pollution exclusion not ambiguous); Damar, Inc. v. United States Fire Ins. Co., 856 F. Supp. 679 (N.D. Ga. 1993), aff’d, 21 F.3d 1126 (11th Cir. 1994) (absolute pollution exclusion unambiguously excluded liability coverage for all liabilities arising out of pollution). Indeed, courts around the country that have construed absolute pollution exclusions like the one at issue here routinely enforced such exclusions to clearly and unambiguously preclude coverage for losses caused by pollution. See, inter alia, Madison Constr. Co. v. Harleysville Mut. Ins. Co., 451 Pa. Super. 136, 678 A.2d 802 (1996); Cook v. Evanson, 83 Wn. App. 149, 920 P.2d 1223 (1996); Crescent Oil Co. v. Federated
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Mut. Ins. Co., 20 Kan. App. 2d 428, 888 P.2d 869(1995); Apana v. TIG Ins. Co., 504 F. Supp. 2d 998 (D. Haw. 2007); Maska U.S., Inc. v. Kansa Gen. Ins. Co., 198 F.3d 74 (2d Cir. 1999); Stamford Wallpaper Co. v. TIG Ins., 138 F.3d 75 (2d Cir. 1998); Union Mut. Fire Ins. Co. v. Hatch, 835 F. Supp. 59 (D.N.H. 1993); Bureau of Engraving v. Federal Ins. Co., 793 F. Supp. 209 (D. Minn. 1992), aff’d, 5 F.3d 1175 (8th Cir. 1993); Alcolac, Inc. v. California Union Ins. Co., 716 F. Supp. 1546 (D. Md. 1989). The mere fact that the ACE excess liability insurance policies do not list the specific substances covered under the absolute pollution exclusion does not mean that the exclusion is ambiguous. A contract is not rendered ambiguous by the mere fact that the contract does not define a term, Da Cunha v. Standard Fire Ins. Company/Aetna Flood Ins. Program, 129 F.3d 581 (11th Cir. 1997), or that the parties may not agree upon the proper construction to be given it. Wile v. Paul Revere Life Ins. Co., 410 F. Supp. 2d 1313 (N.D. Ga. 2005). As other courts have noted, the fact that a large number of solids, liquids or gases may qualify as irritants or contaminants is evidence of the absolute pollution exclusion’s far-reaching scope, not its ambiguity. Owners Ins. Co. v. Chadd's Lake Homeowners Ass'n, 2004 U.S. Dist. LEXIS 30675 at [* 17] (N.D. Ga. Dec. 28, 2004). For these reasons, the pollution exclusion in the ACE excess liability insurance
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policies is valid and enforceable. 2. Benzene is a “pollutant” within the plain language of the policies’ pollution exclusion.
The pollution exclusion in the ACE excess liability insurance policies defines “pollution” to include “the actual, alleged or potential presence in or introduction into the environment of any substance if such substance has, or is alleged to have, the effect of making the environment impure, harmful, or dangerous.” Benzene specifically is designated by the federal government as a “hazardous air pollutant” in The Clean Air Act and a “toxic pollutant” in the Environmental Protection Agency’s (“EPA”) List of Hazardous Substances. 42 U.S.C. § 7412(b)(1); 40 C.F.R. § 401.15(8). In addition, courts in other jurisdictions have ruled that benzene is a pollutant within the meaning of an insurance policy’s absolute pollution exclusion. See
orthbrook Indem. Ins. Co. v. Water Dist. Management Co., 892 F. Supp. 170 (S.D. Tex. 1995) (claims for bodily injury arising out of discharge of chemicals including benzene fell within insurance policies’ pollution exclusion); Gotham Ins. Co. v. GL X, Inc., 1993 U.S. Dist. LEXIS 10891 (S.D.N.Y. Aug. 6, 1993) (claims of injury and damages arising from release of benzene solution precluded from coverage by insurance policy’s pollution exclusion). When the language of an insurance policy defining the extent of the -13-
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insurer's liability is unambiguous and capable of but one reasonable construction, the court must enforce the contract as made by the parties. Horace Mann Ins. Co. v. Drury, 213 Ga. App. 321, 445 S.E.2d 272 (1994); Burnette v. Georgia Life & Health Ins. Co., 190 Ga. App. 485, 379 S.E.2d 188 (1989). Under the plain language of the pollution exclusion, the ACE excess liability insurance policies provide no coverage for the injuries and damages alleged in the Bunns and Williams lawsuits. B. The Absolute Pollution Exclusion In The ACE Excess Liability Insurance Policies Does ot Violate Georgia Public Policy. Plaintiff’s contention – that application of the pollution exclusion in this case would violate public policy – is not supported by Georgia law. Competent parties are free to choose and insert whatever provisions they desire in a contract, unless prohibited by statute or public policy. Department of Transp. v. Brooks, 254 Ga. 303, 328 S.E.2d 705 (1985); Empire Fire & Marine Ins. Co. v. Dobbins, 205 Ga. App. 700, 423 S.E.2d 396 (1992); Donaldson v. Pilot Life Ins. Co., 177 Ga. App. 748, 41 S.E.2d 279 (1986); Simmons v. Select Ins. Co., 183 Ga. App. 128, 358 S.E.2d 288 (1987). Under Georgia law, a “contract cannot be said to be contrary to public policy unless the General Assembly has declared it to be so, or unless the consideration of the contract is contrary to good morals and contrary to law, or unless the contract is entered into for the purpose of effecting an -14-
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illegal or immoral agreement or doing something which is in violation of law.” Department of Transp. v. Brooks, supra at 312; State Farm Mut. Auto. Ins. Cos. v. Walker, 234 Ga. App. 101, 103, 505 S.E.2d 828 (1998); Hartford Ins. Co. of Southeast v. Franklin, 206 Ga. App. 193, 195, 424 S.E.2d 803 (1992); Fournier v. Hartford Fire Ins. Co., 862 F. Supp. 357, 382 (N.D. Ga. 1994). The courts must exercise extreme caution in declaring a contract, or any portion of a contract, void as against public policy, and should do so only where the case is free from doubt and where an injury to the public interest clearly appears. Emory Univ. v. Porubiansky, 248 Ga. 391, 282 S.E.2d 903 (1981); Precision Planning, Inc. v. Richmark Cmtys., Inc., 298 Ga. App. 78, 679 S.E.2d 43 (2009); Baldwin v. State Farm Fire & Cas. Co., 264 Ga. App. 229, 590 S.E.2d 206 (2003); Piedmont Arbors Condominium Ass'n v. BPI Constr. Co., 197 Ga. App. 141, 397 S.E.2d 611 (1990); Harris v. ational Evaluation System, Inc., supra at 1083. The Georgia courts
have found an exclusion in an insurance contract to be unenforceable because it violates public policy only when the legislature has statutorily mandated that an insurance contract provide the particular coverage sought to be excluded by the policy provision at issue. American Home Assurance Co. v. Smith, 218 Ga. App. 536, 462 S.E.2d 441(1995) (Emphasis added);
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Hartford Ins. Co. of Southeast v. Franklin, 206 Ga. App. 193, 424 S.E.2d 803 (1992); orth Georgia Petroleum Co. v. Federated Mut. Ins. Co., 68 F. Supp. 2d 1321 (N.D. Ga. 1999). Each case requiring public policy considerations must be weighed carefully on its own merits, and apply the appropriate legal guideline to the particular facts presented to the court. Collier v. State Farm Mut. Auto. Ins. Co., 249 Ga. App. 865, 549 S.E.2d 810 (2001); ational Consultants, Inc. ational
v. Burt, 186 Ga. App. 27, 366 S.E.2d 344 (1988); Harris v. Evaluation System, Inc., 719 F. Supp. 1081 (N.D. Ga. 1989).
The absolute pollution exclusion contained in the ACE excess liability insurance policies cannot be against Georgia public policy because the Georgia legislature never has required that liability insurance policies provide coverage for injuries or damage caused by pollution. Because
Georgia law does not require liability insurance in every case, exclusions are not per se prohibited but must be individually evaluated to determine whether they are against public policy. Southern Guaranty Ins. Co. v. Preferred Risk Mut. Ins. Co., 257 Ga. 355, 359 S.E.2d 665 (1987); Hoque v. Empire Fire & Marine Ins. Co., 281 Ga. App. 810, 637 S.E.2d 465 (2006). No Georgia court or statute ever has declared the pollution
exclusion per se unenforceable in all circumstances.
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The only Georgia court to specifically address the issue of whether pollution exclusions are against Georgia public policy came to the same conclusion – i.e., that pollution exclusions do not violate Georgia public policy. orth Georgia Petroleum Co. v. Federated Mut. Ins. Co., 68 F.
Supp. 2d 1321 (N.D. Ga. 1999). In that case, the insured argued that the absolute pollution exclusion in a commercial general liability policy violated public policy because “approval of the clause by the Georgia Insurance Commissioner was induced by the insurance industry's representation that the clause merely ‘clarified’ the scope of existing coverage.” Id. at 1327. The court in orth Georgia Petroleum recognized that, “[u]nder Georgia
law, an exclusion in an insurance contract is unenforceable because it violates public policy only if the legislature has statutorily mandated that an insurance contract provide that particular coverage.” Id. at 1327 (citing, inter alia, Horace Mann Ins. Co. v. Drury, 213 Ga. App. 321, 445 S.E.2d 272 (1994), and Hartford Ins. Co. of Southeast v. Franklin, 206 Ga. App. 193, 424 S.E.2d 803 (1992) (Emphasis added). The court in orth Georgia Petroleum then considered the case of
Hulstzman v. State Farm Fire & Cas. Co., 188 Ga. App. 12, 372 S.E.2d 9 (1988), which held that “in those cases where restrictions or limitations have been imposed by the courts on the right of an insurer to define and limit the
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risk or liability assumed under the terms of a policy, it has been on the basis of mandatory statutory provisions specifying the minimum coverage to be provided.” Id. at 1328. The orth Georgia Petroleum court then held: Although no Georgia courts have addressed whether pollution exclusions are against public policy, this court finds that the rationale used in cases considering other exclusions in insurance contracts would be extended by Georgia courts to pollution exclusions. Applying this analysis, the court cannot find that the Georgia Constitution or Code requires coverage for these types of claims, nor have the parties pointed the court to any such provision. Id. RaceTrac argues that it would violate Georgia public policy to allow ACE to sell a liability insurance policy to RaceTrac which contains an exclusion for damages resulting from gasoline or one of its constituent parts because, RaceTrac contends, “the primary product sold, handled and distributed by RaceTrac is unleaded gasoline, which contains a small amount of benzene.” [Doc. 1, ¶¶ 49, 54].1 The policies upon which RaceTrac relies for its allegations contradict these contentions. ACE insured RaceTrac for potential liability arising out of more than simply RaceTrac acting as a
The methods used to calculate the premium charged for the policies is irrelevant, even if such calculation is based upon the nature of the insured’s business, and does not override the express language of the pollution exclusion. See W. Am. Ins. Co. v. Johns Bros., 435 F. Supp 2d 511, 519 (E.D. Va. 2006) (“…[E]ven if the court considers the fact that the policy premium was based in part on the nature of defendant's business, such fact does not override the express language of the pollution exclusion…. it is clearly not within the purview of the court to analyze the complex factors that impact an insurance company's underwriting calculation. Likewise, the court will not require plaintiff to justify its motivations behind the premium charged to Johns Brothers as the underwriting process does not create coverage, the language of the policy and its applicable exclusions do.”)
1
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handler and purveyor of gasoline. The ACE excess policies on their face reflect that RaceTrac’s business is “Convenience Store” [Doc. 1, Exhibits “A” and “B”]. In the insuring sections of the policies, ACE insured
RaceTrac for potential liability for “bodily injury” or “property damage” caused by an “occurrence” that takes place in the “coverage territory” occurring within the “policy period,” subject to any applicable exclusions, one of which was the pollution exclusion. Paragraph I(A)(1)(b), Excess Commercial General Liability Policy, XS-6U91c (07/02), p. 1 [Doc. 1, Exhibits “A” and “B”]. In other words, ACE insured RaceTrac for liability for bodily injuries arising out of slip-and-falls on the premises, and other potential liabilities associated with RaceTrac’s business as a convenience store operator. This alleged basis of RaceTrac’s claim for relief already has been rejected for an insured which found itself in a similar position in Tech. Coating Applicators, Inc. v. U.S. Fid. & Guar. Co., 157 F.3d 843 (11th Cir. 1998). In that case, the Eleventh Circuit held that the absolute pollution exclusion did not nullify the essential coverage provided by the policies because the policies continued to provide coverage for a wide variety of accidents and mishaps associated with the business of the insured. Id. at 846.
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The facts alleged in RaceTrac’s complaint, which facts misstate the plain terms of the ACE excess liability insurance policies, are not “plausible” because they are clearly incorrect as shown by the policies which are attached as exhibits to the complaint. RaceTrac is seeking a declaration that it is entitled to insurance coverage based upon the terms of the ACE policies. This Court should not consider misstatements of the policies’ terms when deciding whether RaceTrac’s complaint states a claim upon which relief can be granted. RaceTrac’s argument appears to be based upon the recent Georgia Court of Appeals decision in Barrett v. at'l Union Fire Ins. Co., 304 Ga.
App. 314, 696 S.E.2d 326 (2010). In Barrett, the court considered whether a lawsuit for injuries suffered by an employee of a company that installed natural gas pipelines was dismissed properly under a commercial general liability policy’s absolute pollution exclusion. In reversing the dismissal of the complaint, the court in Barrett held that the policy’s absolute pollution exclusion did not apply because (a) natural gas was not a pollutant within the meaning of the policy, (b) it would violate public policy to permit the insurer to sell a liability policy containing an exclusion for damages from natural gas when the insured’s main product was natural gas, and (c) there was a
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question about whether the injuries arose from the natural gas discharge or dispersal, rather than from the negligence of the insured's employees. Id. The decision in Barrett is distinguishable from this case and therefore not controlling. As an initial matter, Barrett involved a claim for physical injuries caused by the negligence of the gas company’s employees, rather than a claim for physical injuries caused by a pollutant as defined by the policy, as in this case. The court in Barrett held, As a threshold matter…the Barretts have not alleged that Barrett was “poisoned” by natural gas or that he was harmed merely by the release of natural gas from the tap. Rather, their complaint asserts that because of the negligence of AGL employees, the natural gas released from the tap was allowed to accumulate, thereby creating an oxygen-deprived atmosphere, and that it was the lack of oxygen that injured Barrett. Id. at 318-319. By way of contrast, the Bunns and Williams lawsuits allege physical injuries caused by benzene vapors. [Doc. 1, ¶¶ 45-46]. The decision in Barrett also is distinguishable from this case because it involved a substance, natural gas, which was not a pollutant within the meaning of the policy. The court in Barrett noted: There is nothing in the current record showing that natural gas is generally defined or viewed as an irritant or contaminant. Indeed, the allegations of the complaint indicate that exposure to natural gas is not necessarily dangerous and does not automatically result in injury so long as the supply of oxygen is not impeded. In the absence of any such evidence, we have no basis for concluding that natural gas is a pollutant under the terms of the Policy. -21-
Case 1:10-cv-02162-WSD Document 11-1
Filed 11/01/10 Page 22 of 27
Id. at 319. Unlike natural gas, benzene specifically is designated in The Federal Clean Air Act as a “hazardous air pollutant,” 42 U.S.C. § 7412(b)(1), and is included in the EPA’s List of Hazardous Substances as a “toxic pollutant,” 40 C.F.R. § 401.15(8), and therefore it falls within the absolute pollution exclusion in the ACE excess liability insurance policies. The decision in Barrett is therefore distinguishable from this case because, in Barrett, regardless of whether natural gas was a pollutant within the meaning of the policy, the record did not show that the injuries arose out of the “discharge, dispersal, seepage, migration, release, or escape of” natural gas as required by the policy’s pollution exclusion. Id. at 320-321. In contrast, RaceTrac’s complaint alleges that the injuries to the Bunns and Williams plaintiffs arose from benzene. [Doc. 1, ¶¶ 45-46] This clearly falls within the ACE excess liability insurance policies’ absolute pollution exclusion. The court in Barrett utterly failed to evaluate whether the legislature had statutorily mandated the inclusion of coverage for pollution, which is necessary to establish that a policy exclusion for pollution is against Georgia public policy. Instead, the court in Barrett summarily concluded without applying the criteria set by Georgia law that it “would violate the public -22-
Case 1:10-cv-02162-WSD Document 11-1
Filed 11/01/10 Page 23 of 27
policy of Georgia to allow [the insurer] to sell a liability policy to cover AGL whose main product is natural gas, which policy contains an exclusion for damages resulting from such natural gas.” Id. at 319. The holding in Barrett was premised upon the misapplied rule that “Georgia public policy disfavors insurance provisions that ‘permit[] the insurer, at the expense of the insured, to avoid the risk for which the insurer has been paid’ and for which the insured reasonably expects it is covered.” Id., quoting Davis v. Kaiser Foundation Health Plan, Inc., 271 Ga. 508, 510, 521 S.E.2d 815 (1999). However, the decision is Davis was based upon a specific statute, O.C.G.A. § 33-24-56.1, which caused the court in Davis to hold that, “It is now clear that the public policy of this State will not permit insurers to require an insured to agree to a provision that permits the insurer, at the expense of the insured, to avoid the risk for which the insurer has been paid by requiring the insured to reimburse the insurer whether or not the insured was completely compensated for the covered loss.” Davis, supra (Emphasis added). In the case at hand, unlike Davis, no Georgia statute requires liability insurance coverage for injuries resulting from pollution. Thus, the ACE pollution exclusions are not contrary to public policy.
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Case 1:10-cv-02162-WSD Document 11-1
Filed 11/01/10 Page 24 of 27
In summary, RaceTrac’s complaint fails to state a claim upon which relief can be granted with respect to RaceTrac’s allegation that the ACE excess liability insurance policies violate Georgia public policy. As a matter of Georgia law, the absolute pollution exclusion contained in the ACE excess policies is not against the public policy of Georgia, and no plausible set of facts has been set forth by RaceTrac that prove otherwise. III. CO CLUSIO
The complaint filed by RaceTrac against ACE fails to state a claim upon which relief can be granted. Plaintiff’s complaint against ACE does not set forth facts stating a claim for relief that is plausible on its face because the absolute pollution exclusions in the ACE excess liability insurance policies preclude coverage for the claims asserted in the Bunns and Williams lawsuits. The pollution exclusions are valid and enforceable, and they do not violate the public policy of the state of Georgia. WHEREFORE, ACE American Insurance Company respectfully requests that this Court (1) grant this motion to dismiss; (2) dismiss plaintiff’s complaint; and (3) grant such other and further relief as is just and appropriate. Respectfully submitted this 1st day of November, 2010.
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/s/ Wayne D. Taylor WAYNE D. TAYLOR Georgia State Bar No. 701275 RUTH M. PAWLAK Georgia Bar No. 045810 MOZLEY, FINLAYSON & LOGGINS LLP One Premier Plaza, Suite 900 5605 Glenridge Drive Atlanta, Georgia 30342 Tel: (404) 256-0700 Fax: (404) 250-9355 Attorneys for Defendant ACE American Insurance Company
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Case 1:10-cv-02162-WSD Document 11-1
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CERTIFICATIO PURSUA T TO RULE 7.1 Counsel for defendant ACE American Insurance Company hereby certifies that this pleading has been prepared using Times New Roman 14 point, one of the font and point selections approved by the Court in L.R. 5.1C. Respectfully submitted this 1st day of November, 2010.
/s/ Ruth M. Pawlak WAYNE D. TAYLOR Georgia Bar No. 701275 RUTH M. PAWLAK Georgia Bar No. 045810 MOZLEY, FINLAYSON & LOGGINS, LLP One Premier Plaza, Suite 900 5605 Glenridge Drive Atlanta, Georgia 30342 Tel: (404) 256-0700 Fax: (404) 250-9355
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Case 1:10-cv-02162-WSD Document 11-1
Filed 11/01/10 Page 27 of 27
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION RACETRAC PRETROLEUM, INC., A Georgia Corporation, Plaintiff, vs. ACE AMERICAN INSURANCE COMPANY, a Pennsylvania corporation, Defendant. ) ) ) ) ) ) ) ) ) ) ) )
CIVIL ACTION FILE NO. 1:10-cv-2162-WSD
CERTIFICATE OF SERVICE I hereby certify that I electronically filed the forgoing DEFE DA T ACE AMERICA I SURA CE COMPA Y'S MOTIO TO
DISMISS COMPLAI T using the Court’s CM/ECF System, which will automatically send a copy of same to the following counsel of record: Michael S. French, Esq. Ryan D. Watstein, Esq. WARGO & FRENCH LLP 1170 Peachtree Street N.E., Suite 2020 Atlanta, Georgia 30309 mfrench@wargofrench.com rwatstein@wargofrench.com This 1st day of November, 2010.
/s/ Ruth M. Pawlak
RUTH M. PAWLAK Georgia Bar No. 045810 rpawlak@mfllaw.com
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