In Cain Petroleum Inc. v. Zurich American Insurance Company, A134133 (Or. Ct. App. Dec. 3, 2008), a company that operated gasoline stations sought coverage for a contaminant release under its “Storage Tank System Third Party Liability and Cleanup Policy,” which provided coverage for environmental cleanup costs and third party liability caused by releases from a “scheduled storage tank system” at 17 “scheduled location[s]” after a specific “retroactive date.” When the insurer denied coverage, the company sought a declaratory judgment that it was entitled to coverage. On cross-motions for summary judgment, the trial court ruled for the insurer. The insured company appealed, and the Oregon Court of Appeals refused to extend coverage to underground storage tanks (“USTs”) that were not in the scheduled system.
The company and its insurer agreed that the contaminated site was a scheduled location at which three scheduled tanks had been installed in 1994. They also agreed that the contamination did not come from any of the three scheduled USTs. The retroactive date of the policy was 1991.
The insured claimed that the policy was “irremediably ambiguous” because its treatment of the retroactive date made no sense. The insured argued that the retroactive date was meaningless since it preceded the tanks’ installation. It also contended that a covered release might have occurred at the location before the tanks were installed. The insured then posited that, owing to this ambiguity, the policy should be interpreted as covering every release that occurred after the retroactive date, regardless of whether it came from the scheduled storage tank system.
The Oregon Court of Appeals rejected this argument. The Court found that the interpretation proposed by the insured directly contradicted the plain policy language, which was location and storage tank specific. That contradiction made the insured’s interpretation unreasonable. The Court therefore found that the policy was not ambiguous and affirmed the summary judgment in favor of the insurer, denying coverage for the contamination.