Stoddard Equipment Company, Inc. v. American Safety Indemnity Company
ORDER granting 16 Motion to Dismiss for Failure to State a Claim. This action is dismissed at to dft American Safety Indemnity Co. Signed on 12/4/13 by District Judge J. Frederick Motz. (Attachments: # 1 Opinion) (Anderson, Christy)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
STODDARD EQUIPMENT CO, INC.
* Civil No. JFM-13-3271
AMERICAN SAFETY INDEMNITY CO., *
Stoddard Equipment Company, Inc. (“Stoddard”) has instituted this action against
American Safety Indemnity Company (“American Safety”), Berkley Regional Specialty
Insurance Company (“Berkley Specialty”), and Lead Hill Recreational and Real Estate, L.L.C.
(“Lead Hill”), seeking a declaratory judgment that American Safety and Berkley Specialty have
a duty to defend it in an action filed by Lead Hill against Stoddard in Missouri state court.
Berkley Specialty has filed an answer and counterclaim. Lead Hill has filed an answer, stating
that its position is identical to that of Stoddard. American Safety has filed a motion to dismiss.
The motion will be granted.
In its suit against Stoddard, Lead Hill alleges that Stoddard was negligent in installing a
gasoline pipe leading from a gasoline holding tank to a marina on Lead Hill’s property where
gasoline was sold. Specifically, Lead Hill claims that Stoddard (which had an installation
contract with Lead Hill) was negligent in not burying the gas pipe deeply enough and using
improperly large backfill material. Stoddard completed work on the installation of the gasoline
pipe by early October, 2009.
According to the allegations contained in a second amended complaint filed by Lead Hill
against Stoddard, on September 2, 2011, the gasoline holding tank was full but on the following
morning, September 3, 2011, after Lead Hill unsuccessfully attempted to dispense gasoline at the
marina, Lead Hill discovered that the gasoline holding tank was empty and that the soil around
the pipe was saturated with gasoline. Approximately 500 gallons of gasoline spilled into the soil
and the waters of an adjacent lake. According to Lead Hill, the spillage was due to Stoddard’s
negligence in installing the gasoline pipe.
American Safety issued a commercial insurance policy to Stoddard, with an effective
date from November 3, 2008 through November 3, 2009. The policy provided coverage only for
property damage that “occur[ed] during the policy period.”
American Safety argues that it owes no duty to defend Stoddard in the underlying
litigation because any damage caused by the spillage clearly happened outside the policy period.
I find this argument persuasive. According to the allegations in the second amended complaint
filed by Lead Hill against Stoddard, it is undisputed that any damage to the property surrounding
the gasoline pipe did not happen until after the policy issued by American Safety to Stoddard had
Stoddard’s reliance upon D.R. Sherry Const., Ltd. v. American Fam. Mut. Ins. Co., 316
S.W. 3d 899 (Mo. 2010), is misplaced. There, an insurer was held to be obligated to provide
coverage to a contractor that had built a house in which structural damage occurred because the
soil on which the house was constructed was incapable of providing adequate support, causing it
to be out of level by eight inches when it was inspected. At least implicit in the court’s holding
was the fact that the structural damage began to occur at the outset of construction during the
policy period. Therefore, in D.R. Sherry, the doctrine of “progressive injury” applied. In
contrast, in the instant case there is no allegation or evidence of any leakage or spillage from the
gasoline pipe until early September, 2011.1 Indeed, there is no allegation that any hole in the
gasoline pipe (which presumably coincided in time with leakage or spillage from the pipe)
developed before November 3, 2009 – the expiration date of the American Safety policy.2
Moreover, given the fact that only a month elapsed between the completion of the installation of
the pipe (early October, 2009) and the expiration of the policy (November 3, 2009) and given the
nature of the allegedly negligent installation (too shallow a tunnel and the use of improper
backfill), it cannot be reasonably inferred that any hole developed in the pipe during the life of
the policy. In that regard, it is also noteworthy that according to an allegation in the second
amended complaint filed by Lead Hill against Stoddard, it was not until August, 2011, shortly
before the major spillage happened, that Lead Hill first discovered that the gasoline pump at its
boat dock was not receiving fuel from the gasoline storage tank.
In D.R. Sherry the pertinent language of the insurance policy was virtually identical to the
language of the policy in this case. The court focused upon whether an “occurrence,” rather than
“property damage” had happened during the life of the policy. What is important, however, is
that the court’s holding turned on evidence of “progressive injury,” which cannot be alleged
The second amended complaint filed by Lead Hill against American Safety is careful not to
allege the specific date on which any spillage occurred. According to the second amended
complaint, “the spillage of gasoline was due to physical damage to the gasoline pipe which
occurred at some unknown time prior to the afternoon of September 11 .” Technically, this
allegation is immaterial because the occurrence of some physical damage to the pipe, short of the
development of a hole that one can reasonably infer immediately caused spillage or leakage,
clearly was not covered by the policy. An exclusion in the policy provided that
“[t]his insurance does not apply to . . . ‘property damage’ to ‘your product’ arising out of it or
any part of it [and] ‘property damage’ to ‘your work’ arising out if it or any part of it . . . .”
Nevertheless, the allegation is important because it highlights the inability of Lead Hill (and
derivatively Stoddard) to identify the date on which spillage or leakage first happened.
I am fully cognizant that this action involves only a duty to defend, not the final question
of coverage. Nevertheless, based upon the allegations in Lead Hill’s second amended complaint
against Stoddard, I cannot find that even a duty to defend exists. My ruling is in accord with
Missouri law that draws a distinction between the occurrence of a 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. See Nationwide Ins. Co. v. Cent. Missouri Elec. Co-op., Inc., 278 F.3d
742, 747 (8th Cir. 2001) (“Missouri law is clear on this matter: insurance coverage restricted to
an occurrence during the policy period limit[s] an insurance policy to injuries arising during the
policy period and . . . exclude[s] from coverage injuries which occur subsequent to that period,
even though the injuries may have been caused by acts done while the policy was in effect.”
(internal citations and quotation marks omitted)); Shaver v. Ins. Co. of N. Am., 817 S.W.2d 654,
657 (Mo. Ct. App. 1991) (“It is well settled that the time of the occurrence of an accident within
the meaning of an indemnity policy is not the time the alleged wrongful act was committed, but
is the time when the complaining party was actually damaged.” (internal citation omitted)). In
this case, the negligent installation occurred during the policy period, but the property damage
from the spillage occurred outside the policy period. Therefore, American Safety does not have
a duty to defend Stoddard in the underlying litigation.
A separate order granting American Safety’s motion to dismiss is being entered herewith.
Date: December 4, 2014
J. Frederick Motz
United States District Judge
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