In its recent decision Bradford Oil Company, Inc. v. Stonington Ins. Co., 2011 Vt. LEXIS 102 (Vt. Sept. 11, 2011), the Supreme Court of Vermont had occasion to revisit the issue of whether a time-on-the-risk allocation methodology should apply to pollution condition that occurred over a period of several decades.
The site in Bradford Oil was a filing station that was the source of an underground petroleum leak believed to have commenced in the 1960s or 1970s and continued through the 1990s. The station was placed on the Vermont Hazardous Waste Sites List in 1997 when the petroleum contamination was first discovered. The insured undertook an investigation and clean up, the majority of which costs were paid through the Vermont Petroleum Cleanup Fund (“VPCF”). Bradford had four general liability policies through Stonington covering the period 1994 through 1997. While Stonington agreed that the policies provided coverage for the cleanup, a coverage dispute arose as to extent of coverage afforded under the policies.
In the ensuing coverage litigation, in which the State of Vermont was a party, Stonington argued that based on the decision in Towns v. Northern Security Ins. Co., 964 A.2d 1150 (Vt. 2008), the proper methodology for allocation in Vermont is time-on-the-risk. As such, Stonington contended that based on a simple time-on-the-risk allocation, it should only be responsible for 4/27, or 15% of total cleanup costs. The State, however, argued that a joint and several liability methodology should apply, leaving Stonington responsible for the all cleanup costs up to the limits of its policies. Specifically, the State contended that Towns should not apply to a situation where the insured’s liability, by statute, is joint and several. The State also claimed that Towns should not apply where the VPCF is a party to the litigation. The Vermont Supreme Court rejected both of the State’s arguments.
First, the court refused to expand the policies’ coverage merely because the insured’s statutory liability was joint and several. The court concluded that because the policies required that the “property damage” occur during the policy periods, it would be an inequitable result if Stonington was held responsible for cleanup costs associated with contamination pre-dating the policies. Further, the mere fact that the insured’s liability was described by the statute as joint and several was irrelevant, since “the contribution of insurers is different from the tort concept of contribution among joint tortfeasors.” The court also rejected the State’s position that Towns should not apply when the VPCF is the plaintiff in interest, explaining that coverage is based on the terms of the policy, not any statutory or public policy rationale. In passing, the court held that the insurer should not have the burden of showing that the insured elected to be self-insured for any gaps in coverage rather than placing the burden on the insured to show that it could not obtain coverage for such periods. In doing so, the court explained “we do not want to adopt a methodology that rewards inaction, failure to obtain appropriate coverage, or failure to keep track of insurance policies.”