Petroleum Realty II, LLC v. Commerce and Industry Insurance Company

Filing 1

COMPLAINT with Jury Demand filed by Petroleum Realty V, LLC.. Consent form to proceed before U.S. Magistrate and pretrial instructions provided. ( Filing fee $ 350.00 receipt number 113E-3531638.) (Attachments: # 1 Exhibit -A, # 2 Exhibit -B, # 3 Exhibit -C, # 4 Exhibit -D, # 5 Exhibit -E, # 6 Exhibit -F, # 7 Exhibit -G, # 8 Exhibit -H, # 9 Exhibit -I, # 10 Exhibit -J, # 11 Exhibit -K, # 12 Exhibit -L, # 13 Exhibit -M, # 14 Exhibit -N, # 15 Exhibit -O, # 16 Exhibit -P, # 17 Exhibit -Q, # 18 Exhibit -R, # 19 Exhibit -S, # 20 Exhibit -T, # 21 Exhibit -U, # 22 Exhibit -V, # 23 Exhibit -W, # 24 Exhibit -X, # 25 Exhibit -Y, # 26 Civil Cover Sheet)(eop) Please visit our website at http://www.gand.uscourts.gov to obtain Pretrial Instructions. [Transferred from Georgia Northern on 11/3/2011.]

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
PETROLEUM REALTY V, LLC,
Plaintiff
v.
COMMERCE AND INDUSTRY
INSURANCE COMPANY,
Defendant.

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CIVIL ACTION FILE
NO. _______________________

COMPLAINT
Plaintiff PETROLEUM REALTY V, LLC (“Pet Realty”) hereby files this
Complaint against Defendant COMMERCE AND INDUSTRY INSURANCE
COMPANY (“C&I”) as follows:
BACKGROUND AND STATEMENT OF THE CASE
1.

Pet Realty brings an action for breach of contract, declaratory

judgment, attorneys’ fees, and bad faith against C&I for its failure to provide
insurance coverage for petroleum releases from underground storage tanks
(“USTs”) at stores owned by Pet Realty. Pet Realty is a named insured under C&I
environmental insurance policy number 7788317 (the “Policy”) that covers
“Clean-Up Costs” and “Loss” related to releases from USTs at the stores identified
in Paragraph 2 below.

2.

The stores at issue are Store 902 at 5022 Old National Highway,

Atlanta, Georgia (“Store 902”); Store 904 at 1417 Highway 138, Conyers, Georgia
(“Store 904”); Store 915 at 1836 Mountain Industrial Blvd., Tucker, Georgia
(“Store 915”); Store 918 at 4160 Fulton Industrial Blvd., Atlanta, Georgia (“Store
918”); and Store 924 at 809 Thornton Road, Lithia Springs, Georgia (“Store 924”)
(collectively, “Stores”).
3.

Pet Realty is a real estate and investment financing company that

acquired an ownership interest in the USTs at the Stores in October 2006 when the
previous owner of the USTs, Trico V Petroleum, Inc., defaulted on its lease
obligations. After acquiring ownership of the USTs, the Georgia Environmental
Protection Division (EPD) required Pet Realty to investigate and remediate certain
releases from the USTs at each of the Stores (“UST Releases”). Therefore, Pet
Realty notified C&I of the claims for each Store and sought coverage for related
“Clean-Up Costs” and “Loss” under the terms of the Policy.
4.

Since that time, Pet Realty has cooperated with EPD to investigate

and clean up the UST Releases. To date, Pet Realty has spent over $628,000 at the
Stores under the direction of EPD to address the UST Releases, and anticipates
EPD will require additional measures that could cost over $1,000,000 to
implement.

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5.

C&I has, without justification, continued to refuse to acknowledge or

accept coverage or pay Pet Realty’s “Clean-Up Costs” and “Loss.” The Policy
clearly covers the UST Releases. C&I’s actions and prolonged delay constitute a
bad faith denial of coverage and breach of its duties and obligations under the
Policy. Pet Realty is seeking to recover any and all damages and costs permitted
under the Policy and as otherwise allowed by law arising from C&I’s breach and
bad faith conduct.
THE PARTIES
6.

Petroleum Realty V, LLC is a Delaware limited liability company

with its principal place of business at 801 Arthur Godfrey Road, Miami Beach, FL
33140. Pet Realty is authorized to transact business in the State of Georgia.
7.

C&I is a New York corporation with its principal place of business at

175 Water Street, 18th Floor, New York, NY 10038. C&I is authorized to transact
business in the State of Georgia. C&I’s registered agent for service of process is
Corporation Service Company, 40 Technology Parkway South, Norcross, GA
30092.
JURISDICTION AND VENUE
8.

This court has jurisdiction of this action pursuant to 28 U.S.C. §§

1332, 2201, and 2202. Complete diversity of citizenship exists between the

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parties, and the amount in controversy exceeds $75,000 (Seventy-Five Thousand
Dollars), exclusive of interest and costs.
9.

Venue is proper in this District pursuant to 28 U.S.C. § 1391.
STORE 902

10.

Pet Realty acquired ownership of Store 902 in July 2000.

11.

Releases from these USTs occurred in 1996 and 2005 and were

reported to EPD.
12.

Following the 1996 release, EPD required the submittal of a

Corrective Action Plan Part A (“CAP A”) to investigate the release.
13.

The CAP A was approved by EPD in May 1998.

14.

A Corrective Action Plan Part B (“CAP B”) was developed to address

the 1996 release and submitted to EPD, and recommended continued groundwater
monitoring.
15.

The CAP B was approved by EPD on June 18, 2004.

16.

On May 11, 2005, EPD granted a “No Further Action” required

(“NFA”) determination for the 1996 release, and concurred that a new release had
occurred in March 2005.
17.

On May 12, 2005, EPD required remediation and submission of

monitoring reports.

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18.

On January 31, 2006, the site operator at that time notified EPD that

the monitoring wells had been abandoned.
19.

Pet Realty acquired ownership of the UST system in October 2006.

20.

On March 7, 2007, EPD ordered Pet Realty to prepare a CAP A for

the 2005 release, which was to include the installation of new monitoring wells,
and Pet Realty complied.
21.

To date, Pet Realty has incurred “Clean-Up Costs” and related

expenses of approximately $155,614.53 covered by the Policy in connection with
Store 902.
22.

Pet Realty expects to incur additional “Clean-Up Costs” covered by

the Policy in connection with Store 902.
STORE 904
23.

Pet Realty acquired ownership of Store 904 in July 2000.

24.

A release from a UST was detected and reported to EPD in 1998.

25.

A CAP A was prepared on April 22, 1999, and submitted to EPD.

26.

Eighteen monitoring wells and six product recovery wells were

installed.
27.

EPD then required the preparation of a CAP B, which was submitted

on February 20, 2001.

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28.

The CAP B recommended the installation of additional monitoring

wells and a fluid recovery system with a vapor extraction system, but these were
never installed by the then-owner of the UST system.
29.

Pet Realty acquired ownership of the UST system in October 2006.

30.

On March 7, 2007, EPA directed Pet Realty to prepare a CAP B

Monitoring Report and a schedule for future assessment and remediation.
31.

To date, Pet Realty has incurred “Clean-Up Costs” and related

expenses of approximately $107,915.89 covered by the Policy in connection with
Store 904.
32.

Realty expects to incur additional “Clean-Up Costs” covered by the

Policy in connection with Store 904.
STORE 915
33.

Pet Realty acquired ownership of Store 915 on July 2000.

34.

Releases from these USTs occurred in 1998 and 2001, and were

reported to EPD.
35.

A report was submitted to EPD in August 2001 regarding a

groundwater monitoring program.
36.

EPD responded in October 2001 requesting the continuation of the

groundwater monitoring program and the submittal of a CAP A.

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37.

Remediation efforts followed for a number of years, with contaminant

levels remaining high.
38.

Pet Realty acquired ownership of the UST system in October 2006.

39.

On March 7, 2007, EPD directed Pet Realty to conduct a groundwater

gauging and sampling event, prepare a CAP B Monitoring Report, and submit a
schedule for future assessment and remediation of the property.
40.

To date, Pet Realty has incurred “Clean-Up Costs” and related

expenses of approximately $131,496.54 covered by the Policy in connection with
Store 915.
41.

Pet Realty expects to incur additional “Clean-Up Costs” covered by

the Policy in connection with Store 915.
STORE 918
42.

Pet Realty acquired ownership of Store 918 on July 2000.

43.

Releases from these USTs occurred in 1993 and 1998 and were

reported to EPD.
44.

A CAP A was submitted to EPD in May 1999.

45.

EPD requested a groundwater monitoring report and a plan for

preparing a CAP B.
46.

Pet Realty acquired ownership of the UST system in October 2006.

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47.

As a result of Pet Realty’s efforts, EPD issued an NFA letter stating

“no further action is required for the referenced release” on February 3, 2011.
48.

To date, Pet Realty has incurred “Clean-Up Costs” and related

expenses of approximately $85,037.09 covered by the Policy in connection with
Store 918.
STORE 924
49.

Pet Realty acquired ownership Store 924 on July 2000.

50.

A release from these USTs was reported to EPD in 1988.

51.

Additional releases may have occurred onsite in conjunction with the

removal of a UST in 1995.
52.

A CAP A was prepared in 1999 and submitted to EPD.

53.

Pet Realty acquired ownership of the UST system in October 2006.

54.

To date, Pet Realty has incurred “Clean-Up Costs” and related

expenses of approximately $148,851.54 covered by the Policy in connection with
Store 924.
55.

Pet Realty expects to incur additional “Clean-Up Costs” covered by

the Policy in connection with Store 924.
THE C&I ENVIRONMENTAL INSURANCE POLICY
56.

C&I issued the Policy, a true and correct copy of the material terms of

which is attached as Exhibit A to this Complaint.
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57.

The Policy has a “Policy Period” of September 29, 1999, through

September 29, 2009.
58.

Pet Realty is a “Named Insured” under the Policy.

59.

The Stores were added to the Policy as “Insured Properties” effective

July 18, 2000, through July 18, 2010.
60.

The Policy provides limits of liability in the amount of $2,000,000 for

“Each Incident” and $25,000,000 for all claims.
61.

Coverage A of the Policy covers “Clean-Up Costs” and “Loss”

sustained by Pet Realty for “Pollution Conditions” that commenced prior to
September 29, 1999, but that Pet Realty discovered during the “Policy Period”
(“Pre-Existing Conditions”), provided that the “Pollution Conditions” were
reported to C&I during the “Policy Period” or within thirty days thereafter and that
the “Pollution Conditions” were reported to the appropriate government agency,
and provided coverage is not otherwise excluded.
62.

Coverage B of the Policy covers “Clean-Up Costs” and “Loss”

sustained by Pet Realty for “Pollution Conditions” that commenced on or after
September 29, 1999, and that Pet Realty discovered during the “Policy Period”
(“New Conditions”), provided that the “Pollution Conditions” were reported to
C&I during the “Policy Period” or within thirty days thereafter and that the

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“Pollution Conditions” were reported to the appropriate government agency, and
provided coverage is not otherwise excluded.
63.

“Clean-Up Costs” means expenses “incurred in the investigation,

removal, remediation including monitoring, or disposal of soil, surfacewater,
groundwater or other contamination…”
64.

“Loss” means “(1) monetary awards or settlements of compensatory

damages for bodily injury or property damage; (2) costs, charges and expenses
incurred in the defense, investigation or adjustment of claims for such
compensatory damages or for Clean-Up Costs; or (3) Clean-Up Costs.’”
65.

“Pollution Conditions” means “the discharge, dispersal, release or

escape of any solid, liquid, gaseous or thermal irritant or contaminant, including
smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, medical waste and
waste materials into or upon land, or any structure on land, the atmosphere or any
watercourse or body of water, including groundwater…”
66.

The Policy’s notice requirements provide that Pet Realty “shall give

notice of Claims as soon as practicable, but in any event during the Policy
Period…”
NOTICE TO C&I
67.

On April 6, 2007, within the Policy Period, Pet Realty provided notice

to C&I of the claims relating to the releases from the USTs at the Stores, via a
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Notice of Loss/Notice of Claim form (“UST Release Claims”). A copy of said
notices are attached as Exhibits B to F. On information and belief, C&I received
notice on behalf of Pet Realty even earlier than April 6, 2007, with regard to some
or all of the claims at issue in this Complaint.
C&I’S DENIAL OF COVERAGE
68.

In a September 19, 2006, letter pertaining to Store 924, AIG Domestic

Claims, Inc. (“AIG”) denied coverage for the 1988 release and the 1995 UST
removal but requested additional information as to any other claims. A true and
correct copy of C&I’s September 19, 2006, letter pertaining to Store 924 is
attached as Exhibit G.
69.

In a September 27, 2006, letter pertaining to Store 918, AIG denied

coverage on behalf of C&I for the 1993 and 1998 releases but requested additional
information. A true and correct copy of C&I’s September 27, 2006, letter
pertaining to Store 918 is attached as Exhibit H.
70.

In an April 6, 2007, letter pertaining to Store 902, AIG denied

coverage for the 1996 release and requested additional information regarding the
2005 release. A true and correct copy of C&I’s April 6, 2007, letter pertaining to
Store 902 is attached as Exhibit I.
71.

In an April 6, 2007, letter pertaining to Store 915, AIG denied

coverage for the 1998 release and requested additional information regarding the
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2001 release. A true and correct copy of C&I’s April 6, 2007, letter pertaining to
Store 915 is attached as Exhibit J.
72.

AIG requested additional information regarding Pet Realty’s UST

Release Claims for each Store via e-mail on April 30, 2007.
73.

Pet Realty responded to C&I’s request on May 22, 2007, providing

information on site ownership and ownership history, documentation that EPD was
holding Pet Realty responsible for the releases, and other insurance information.
74.

In a series of letters dated April 8, 2009, pertaining to Stores 902, 915,

918, and 924, AIG requested that Pet Realty “provide the information noted in the
Notice Requirements section of policy PLS 7788317 so that we may determine
what claim is being made.” True and correct copies of said letters are attached as
Exhibits K to N.
75.

In a letter dated April 9, 2009, pertaining to Store 904, AIG denied

coverage of the 1998 release under the Pre-Existing Conditions section of the
Policy but concluded “it is premature to determine coverage under Policy PLS
7788317” as it relates to other conditions. A true and correct copy of C&I’s April
9, 2009, letter pertaining to Store 904 is attached as Exhibit O.
76.

In the April 9, 2009, letter pertaining to Store 904, AIG also requested

the same additional information as requested in the April 6, 2007, letters, plus “the
information required per the Notice Provision.”
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77.

On June 23, 2011, Pet Realty, via its attorneys, submitted letters

pertaining to each Store to AIG (now known as Chartis Claims, Inc.) (“Chartis”).
True and correct copies of said letters are attached, exclusive of their enclosed
invoices, as Exhibits P to T.
78.

In its June 23, 2011, letters, Pet Realty reasserted its demand for

coverage and provided additional discussion of the basis for its assertion that the
UST Release Claims are covered by the Policy.
79.

In its June 23, 2011, letters, Pet Realty also provided notice under

O.C.G.A. § 33-4-6(b) that Pet Realty would seek sanctions for bad faith in the
event of nonpayment within 60 days.
80.

Chartis responded on August 10, 2011, with requests for extensive

additional information related to each of the Pet Realty Stores at issue in this
litigation but without agreeing to pay amounts owed or otherwise acknowledging
coverage. A true and correct copy of Chartis’ August 10, 2011, letters are attached
as Exhibits U to Y.
81.

C&I has no factual or legal basis for denying coverage for the “Clean-

Up Costs” and “Loss” associated with the UST Release Claims. Therefore, C&I
has breached the terms and conditions of the Policy and is liable for all damages as
a result therefrom, including a bad faith penalty pursuant to O.C.G.A. § 33-4-6.

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COUNT I
BREACH OF CONTRACT
82.

Pet Realty incorporates herein and realleges, as if fully set forth in this

paragraph, the allegations contained in Paragraphs 1 through 81 above.
83.

Pet Realty has complied with all material and relevant terms and

conditions of the Policy concerning the UST Release Claims.
84.

Because C&I has wrongfully denied coverage for the UST Release

Claims, C&I is in breach of the Policy.
85.

Moreover, by not accepting coverage under its policy after covered

“Clean-Up Costs” and “Loss” have been incurred by Pet Realty, C&I has breached
that Policy.
86.

As a direct and proximate result of C&I’s breach of its contractual

obligations under the Policy, Pet Realty has suffered damages, which are ongoing
and continuing.
COUNT II
DECLARATORY RELIEF REGARDING COVERAGE
87.

Pet Realty incorporates herein and realleges, as if fully set forth in this

paragraph, the allegations contained in Paragraphs 1 through 86 above.
88.

C&I’s continued denial of coverage under the Policy and failure to

pay Pet Realty’s “Clean-Up Costs” and “Loss” relating to the UST Releases have
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generated an actual and justiciable case or controversy that should be resolved by
this Court.
89.

A declaration of rights pursuant to 28 U.S.C. § 2201 would alleviate

the uncertainty currently facing Pet Realty with respect to insurance coverage for
“Clean-Up Costs” and “Loss” Pet Realty has incurred and will continue to incur as
a result of the UST Releases.
90.

Pet Realty is entitled to a declaration that the Policy covers the

“Clean-Up Costs” and “Loss” that Pet Realty has incurred and will continue to
incur as a result of the UST Releases.
COUNT III
ATTORNEYS’ FEES UNDER NEW YORK LAW
91.

Pet Realty incorporates herein and realleges, as if fully set forth in this

paragraph, the allegations contained in Paragraphs 1 through 90 above.
92.

The Policy contains a choice of law provision making New York law

93.

Under New York law, an insured is entitled to reasonable attorneys’

apply.

fees and costs if it prevails in a declaratory judgment or coverage case against its
insurer.
94.

Pet Realty is entitled to its reasonable attorneys’ fees and costs for this

litigation.
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COUNT IV
BAD FAITH UNDER GEORGIA LAW
95.

Pet Realty incorporates herein and realleges, as if fully set forth in this

paragraph, the allegations contained in Paragraphs 1 through 94 above.
96.

Although New York law governs the terms of the Policy, C&I’s

conduct in unreasonably refusing to pay amounts owed is subject to sanctions
under Georgia law.
97.

On June 23, 2011, Pet Realty submitted an insurance bad-faith

demand letter to C&I pursuant to O.C.G.A. § 33-4-6.
98.

C&I failed to pay amounts owed under the Policy within 60 days of

Pet Realty’s notice that C&I’s refusal to pay was in bad faith.
99.

C&I’s failure to provide coverage has been in bad faith, warranting

the imposition of a 50% penalty plus attorneys’ fees, pursuant to O.C.G.A. § 33-46.

WHEREFORE, Pet Realty respectfully makes its DEMAND FOR A JURY
TRIAL on all issues so triable and respectfully requests that the Court enter
judgment in its favor on all Counts contained in its Complaint as follows:
(a)

Find and declare that C&I has a duty to cover the cleanup costs and
losses associated with the release of petroleum products at the Stores;
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(b)

Award Pet Realty damages for C&I’s breach of its contract with Pet
Realty in an amount to be proven at trial;

(c)

Award Pet Realty attorneys’ fees;

(d)

Award Pet Realty statutory damages for bad faith pursuant to
O.C.G.A. § 33-4-6; and

(e)

Grant such other and further relief as is just, equitable, and proper.

Jury Trial Demanded.

This 26th day of September, 2011.

KAZMAREK GEIGER & LASETER LLP

/s/ W. Scott Laseter
W. Scott Laseter
Georgia Bar No. 438515
Jennifer A. Simon
Georgia Bar No. 636946
3490 Piedmont Road NE, Suite 350
Atlanta, GA 30305
404-812-0843
Fax: [phone]
E-mail:
[e-mail]
[e-mail]
Attorneys for Plaintiff

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