Two Farms Inc. v. Greenwich Insurance Company

Filing 89

OPINION AND ORDER re: 103854 69 MOTION for Partial Summary Judgment. filed by Two Farms Inc., 72 MOTION for Summary Judgment. filed by Greenwich Insurance Company. For the foregoing reasons, the UST Sublimit unambiguously limits to $1,000,0 00 coverage for the losses that Two Farms incurred as a result of the Discharge. Therefore, the plaintiff's motion for partial summary judgment on the issue of liability is denied and the defendant's motion for summary judgment on all clai ms against it is granted. The Clerk is directed to enter judgment dismissing this action and closing the case. The Clerk is also directed to close all pending motions. (Signed by Judge John G. Koeltl on 1/6/2014) (djc) Modified on 1/7/2014 (djc). Modified on 1/7/2014 (ca).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
────────────────────────────────────
TWO FARMS, INC.,
Plaintiff,

12 Civ. 0050 (JGK)
OPINION AND ORDER

- against –
GREENWICH INSURANCE COMPANY,
Defendant.
────────────────────────────────────
JOHN G. KOELTL, District Judge:
These are cross-motions for partial summary judgment in a
dispute between the plaintiff, Two Farms, Inc., (“Two Farms”),
and the defendant, Greenwich Insurance Company (“Greenwich”).
The dispute concerns the meaning of a provision in an insurance
policy that Greenwich issued to Two Farms.

The clause at issue

limits to $1,000,000 coverage for losses sustained because of
underground storage tanks and associated piping that Two Farms
uses at its gas stations.

Greenwich contends that the

limitation applies to losses that Two Farms incurred because of
a gasoline discharge at one of its facilities and thus that
Greenwich fulfilled its obligations under the policy by paying
$1,000,000 to Two Farms.

Two Farms contends that the limitation

is inapplicable to the over $5,000,000 in losses allegedly
sustained because of the gasoline discharge.

Two Farms thus

seeks a judgment in its favor and against Greenwich for at least

$4,000,000, the remaining difference that Two Farms claims is
owed under the policy.
Greenwich moves for summary judgment dismissing all claims
under Rule 56 of the Federal Rules of Civil Procedure.

Two

Farms cross-moves for partial summary judgment on the issue of
liability under the same rule.

This Court has jurisdiction

pursuant to 28 U.S.C. § 1332 based on diversity of citizenship.
For the reasons explained below, the provision at issue
unambiguously limits the plaintiff’s coverage to $1,000,000 for
the loss at issue in this dispute.

Accordingly, the plaintiff’s

motion for partial summary judgment is denied and the
defendant’s motion for summary judgment is granted.

I.
The following facts are undisputed unless otherwise
indicated.

A.
Greenwich is a Delaware corporation with its principal
place of business in Stamford, Connecticut.

Two Farms is a

Maryland corporation with its principal place of business in
Baltimore, Maryland.

Two Farms does business under the name

Royal Farms and owns a network of gas stations and convenience
stores, as well as a dairy production plant in Maryland.

2

B.
In April 2008, Two Farms purchased from Greenwich Pollution
and Remediation Legal Liability Policy No. PEC000906403 (“the
Policy”).

(Pl.’s Rule 56.1 Stmt. at ¶ 4; Def.’s Resp. to Pl.’s

Rule 56.1 Stmt. at ¶ 4.)

The Policy was effective from April

16, 2008, through April 16, 2010.

(Certification of Charles

Stoia (“Stoia Cert.”) Ex. C (“2008 Policy”).)

The Policy

provides coverage for pollution conditions and remediation
expenses for such conditions “on, at, under, or emanating from
the location(s)” specified in the Policy’s Pollution Legal
Liability Schedule and Remediation Legal Liability Schedule.
(2008 Policy at 1.)

Two Farms’s facility at 7950 Pulaski

Highway in Baltimore, Maryland (the “Pulaski Highway Facility”)
is listed on both schedules.

(2008 Policy at Endorsement 4.)

Although the Policy covers losses arising from pollution
conditions and remediation expenses, it enumerates fourteen
exclusions from coverage.

(2008 Policy at 4-7.)

Several of the

exclusions also contain exceptions that restore some or all of
the excluded coverage.

(See, e.g., 2008 Policy at 5, 7.)

This action pertains to Exclusion 13—the Underground
Storage Tank(s) Exclusion (the “UST Exclusion”)—to the 2008
Policy.

The UST Exclusion excludes coverage for claims “based

upon or arising out of the existence of any underground storage
tank(s) and associated piping.”

(2008 Policy at 4, 7.)

3

However, the UST Exclusion also contains an exception, which
provides in relevant part that the Exclusion “does not apply to
the underground storage tank(s) or associated
piping . . . listed in the Underground Storage Tank(s) and
Associated Piping Schedule, if any.”

(2008 Policy at 7.)

The

underground storage tank and associated piping at the Pulaski
Highway Facility is listed on the Underground Storage Tank(s)
and Associated Piping Schedule.

(2008 Policy at Endorsement

10.)
The 2008 Policy also contains Endorsement 7, titled the
“Dedicated UST Sublimit Endorsement” (the “UST Sublimit”).

The

UST Sublimit applies annual sublimits of liability “to all
Underground Storage Tanks and Associated Piping scheduled to
[the] Policy.”

(2008 Policy at Endorsement 7.)

The UST

Sublimit caps the coverage amount for each loss or remediation
expense at $1,000,000 and caps the total coverage for such
expenses at $5,000,000.

(2008 Policy at Endorsement 7.)

The

term “underground storage tanks and associated piping” is not
defined in the UST Sublimit or anywhere else in the Policy.

C.
In September of 2008, after the Policy issued, Two Farms
requested through its insurance broker that Greenwich provide
quotes for additional coverage for leaks from its underground

4

storage tanks.

(Stoia Cert. Ex. U.)

provided Two Farms with four quotes.

In response, Greenwich
(Stoia Cert. Ex. U.)

One

of the offered quotes would have increased the UST Sublimit to
$5,000,000 for each pollution condition or remediation expense,
while leaving the annual sublimit at $5,000,000.
Ex. U.)

(Stoia Cert.

Another would have increased the UST Sublimit to

$10,000,000 for each pollution condition and remediation expense
and also increased the yearly sublimit on liability to that
amount.

(Stoia Cert. Ex. U.)

Two Farms rejected all four

quotes, electing not to upgrade its coverage.

(Stoia Cert. Exs.

Z, AA.)
In December of 2009, Two Farms discovered that thousands of
gallons of gasoline had been discharged into the area
surrounding its Pulaski Highway Facility (the “Discharge”).
(Second Am. Compl. At ¶ 11.)

The Discharge was caused at least

in part by a defective “O-Ring.”

(Pl.’s Rule 56.1 Stmt. at

¶ 17; Def.’s Resp. to Pl.’s Rule 56.1 Stmt. at ¶ 17.)

The O-

Ring is a component of the submersible turbine pump, a device
that draws gasoline out of an underground storage tank (“UST”).
(Ex. 2 to Pl.’s Mem. Supp. Pl.’s Mot. for Summ. J. at 5.)

The

O-ring is located in a “containment sump” that sits on top of an
UST.

(Stoia Cert. Ex. B.)

In this case, the defective O-Ring

permitted gasoline to leak into the containment sump.

(Pl.’s

Rule 56.1 Stmt. at ¶ 17; Def.’s Resp. to Pl.’s Rule 56.1 Stmt.

5

at ¶ 17.)

Gas then leaked from the containment sump into the

ground because of a loose electric conduit coupling connection.
(Pl.’s Rule 56.1 Stmt. at ¶ 18; Def.’s Resp. to Pl.’s Rule 56.1
Stmt. at ¶ 18.)

Two Farms alleges that the absence of leak

detection equipment in the containment sump also proximately
caused the Discharge.

(Pl.’s Rule 56.1 Stmt. at ¶ 21.)

D.
Two Farms filed with Greenwich an insurance claim for the
losses and expenses that resulted from the Discharge at the
Pulaski Highway Facility, losses which now allegedly exceed
$5,000,000.

(Second Am. Compl. ¶ 14-15.)

Greenwich paid Two Farms $1,000,000.

To settle the claim,

(Second Am. Compl. ¶ 16.)1

Greenwich maintained that because of the UST Sublimit, it was
not required to make any additional payments under the Policy.
(Second Am. Compl. ¶ 16.)

Two Farms, believing that the UST

Sublimit was inapplicable to the losses sustained at the Pulaski
Highway facility, filed this action and now seek damages of at
least $4,000,000.

(Second Am. Compl. ¶ 22.)

1

Greenwich also paid Two Farms $250,000 to cover legal expenses
arising from the Discharge. (Second Am. Compl. ¶ 16.)
6

E.
After Two Farms commenced this action on January 4, 2012,
Greenwich filed a motion to dismiss the Complaint and Two Farms
was granted leave to file an amended complaint.
Regarding Amended Complaint, Apr. 10, 2012.)

(Stipulation

After Two Farms

filed its Amended Complaint, the parties made pre-discovery
motions for summary judgment and partial summary judgment.
Those motions were denied on January 15, 2013.
2013.)

(Order, Jan. 15,

Two Farms then filed a Second Amended Complaint and the

parties completed discovery.

Greenwich now moves for summary

judgment on all claims, and Two Farms moves for partial summary
judgment on the issue of liability.

II.
The standard for granting summary judgment is well
established. “The [C]ourt shall grant summary judgment if the
movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477
U.S. 317, 322–23 (1986); Gallo v. Prudential Residential Servs.
L.P., 22 F.3d 1219, 1223 (2d Cir. 1994).

“[T]he trial court’s

task at the summary judgment motion stage of the litigation is
carefully limited to discerning whether there are genuine issues
of material fact to be tried, not to deciding them.

7

Its duty,

in short, is confined at this point to issue-finding; it does
not extend to issue-resolution.”

Gallo, 22 F.3d at 1224.

The moving party bears the initial burden of “informing the
district court of the basis for its motion” and identifying the
matter that “it believes demonstrate[s] the absence of a genuine
issue of material fact.”

Celotex, 477 U.S. at 323.

The

substantive law governing the case will identify those facts
that are material and “[o]nly disputes over facts that might
affect the outcome of the suit under the governing law will
properly preclude the entry of summary judgment.”

Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
In determining whether summary judgment is appropriate, a
court must resolve all ambiguities and draw all reasonable
inferences against the moving party.

See Matsushita Elec.

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587–88 (1986);
see also Gallo, 22 F.3d at 1223.

Summary judgment is improper

if there is any evidence in the record from any source from
which a reasonable inference could be drawn in favor of the
nonmoving party.

See Chambers v. TRM Copy Ctrs. Corp., 43 F.3d

29, 37 (2d Cir. 1994).

If the moving party meets its burden,

the nonmoving party must produce evidence in the record and “may
not rely simply on conclusory statements or on contentions that
the affidavits supporting the motion are not credible . . . .”
Ying Jing Gan v. City of New York, 996 F.2d 522, 532 (2d Cir.

8

1993); see also Scotto v. Almenas, 143 F.3d 105, 114–15 (2d Cir.
1998) (collecting cases).

If there are cross-motions for

summary judgment, the Court must assess each of the motions and,
drawing all reasonable inferences against the party whose motion
is under consideration, determine whether either party is
entitled to judgment as a matter of law.

Law Debenture Trust

Co. of New York v. Maverick Tube Corp., 595 F.3d 458, 468 (2d
Cir. 2010).

III.
The Policy must be interpreted under New York law because
it contains a New York choice of law provision.
11.)

(2008 Policy at

“Under New York law, insurance policies are interpreted

according to general rules of contract interpretation.”

Olin

Corp. v. Am. Home Assurance Co., 704 F.3d 89, 99 (2d Cir. 2012).
Courts must “give effect to the intent of the parties as
expressed in the clear language of their contract.”

Ment Bros.

Iron Works Co., Inc. v. Interstate Fire & Cas. Co., 702 F.3d
118, 122 (2d Cir. 2012).

Accordingly, summary judgment on the

meaning of an insurance policy is appropriate when the terms of
a policy are unambiguous.

Seiden Assocs., Inc. v. ANC Holdings,

Inc., 959 F.2d 425, 428 (2d Cir. 1992).
“The determination of whether an insurance policy is
ambiguous is a matter of law for the court to decide.”

9

Law

Debenture Trust, 595 F.3d at 465-66 (collecting cases); accord
In re Prudential Lines Inc., 158 F.3d 65, 77 (2d Cir. 1998)
(citation omitted).

Policy terms are unambiguous where they

provide “a definite and precise meaning, unattended by danger of
misconception in the purport of the contract itself, and
concerning which there is no reasonable basis for a difference
of opinion.”

Olin, 704 F.3d at 99 (citation and internal

quotation marks omitted).

Where, on the other hand, contract

terms are “capable of more than one meaning when viewed
objectively by a reasonably intelligent person who has examined
the context of the entire integrated agreement and who is
cognizant of the customs, practices, usages and terminology as
generally understood in the particular trade or business,” the
contract terms are ambiguous and summary judgment is
inappropriate.
omitted).

Id. (citation and internal quotation marks

“[W]here consideration of the contract as a whole

will remove the ambiguity created by a particular clause, there
is no ambiguity.”

Law Debenture Trust, 595 F.3d at 467 (quoting

Readco, Inc. v. Marine Midland Bank, 81 F.3d 295, 300 (2d Cir.
1996)); see also Hudson-Port Ewen Assocs., L.P. v. Kuo, 578
N.E.2d 435, 435 (N.Y. 1991).
“If a contract is unambiguous, courts are required to give
effect to the contract as written and may not consider extrinsic
evidence to alter or interpret its meaning.”

10

Consarc Corp. v.

Marine Midland Bank, N.A., 996 F.2d 568, 573 (2d Cir. 1993);
accord Int’l Multifoods Corp. v. Commercial Union Ins. Co., 309
F.3d 76, 83 (2d Cir. 2002); W.W.W. Assocs., Inc. v.
Giancontieri, 566 N.E.2d 639, 642 (N.Y. 1990).

If the meaning

of contractual language is otherwise plain, the language “does
not become ambiguous merely because the parties urge different
interpretations in the litigation.”
F.3d at 467 (collecting cases).

Law Debenture Trust, 595

Instead, each party’s

interpretation must be reasonable.

Id.

An interpretation is

not reasonable if it strains the policy language “beyond its
reasonable and ordinary meaning.”

Id. (citing Bethlehem Steel

Co. v. Turner Constr. Co., 141 N.E.2d 590, 593 (N.Y. 1957)).

A.
The issue in this case is the amount of coverage to which
Two Farms is entitled under the Policy for losses it incurred as
a result of the Discharge at the Pulaski Highway Facility.

The

Policy provides coverage for pollution conditions and
remediation expenses for such conditions.

That coverage is

limited by the UST Exclusion, which precludes coverage for all
claims “based upon or arising out of the existence of any
underground storage tank(s) and associated piping.” (2008 Policy
at 4,7.)

However, the UST Exclusion contains an exception that

restores coverage for the “underground storage tank(s) or

11

associated piping . . . listed in the Underground Storage
Tank(s) and Associated Piping Schedule . . .”2
7, Endorsement 10.)

(2008 Policy at

There is no dispute that the Underground

Storage Tanks and Associated Piping at the Pulaski Highway
Facility were on the attached schedule.3

Under the Policy,

coverage is also limited by the UST Sublimit, which applies “to
all Underground Storage Tanks and Associated Piping scheduled to
[the] Policy” and caps the coverage amount for “each loss or
remediation expense” at $1,000,000.

(2008 Policy at Endorsement

7.)
Greenwich argues that the broad language of the UST
Exclusion is applicable to the Discharge, and that coverage for
the Discharge can be restored under the exception to the UST
Exclusion only if the term “underground storage tanks and
associated piping” is construed to include the equipment that
malfunctioned at the Pulaski Highway Facility.

While Greenwich

admits that the term “underground storage tanks and associated
piping” should be construed to restore coverage, it maintains

2

The parties agree that, although the introduction to the UST
exception refers to “underground storage tank(s) or associated
piping,” and then refers to the “Underground Storage Tank(s) and
Associated Piping Schedule,” (emphasis added in both
quotations), there is no significance to the use of the term
“or” rather than “and.” Therefore, this opinion will refer to
the term “underground storage tanks and associated piping.”
3
While several underground storage tanks at the Pulaski Highway
Facility appear on the Schedule, it is undisputed that the
Discharge emanated from only one.
12

that the term must have the same meaning when used in the UST
Sublimit, and thus that the UST Sublimit unambiguously limits to
$1,000,000 Greenwich’s liability for the losses that Two Farms
incurred as a result of the Discharge.
Two Farms argues that the UST Sublimit should be
interpreted independently of the UST Exclusion and its attendant
exception and that so interpreted the UST Sublimit is an
ambiguous liability limiting provision that must be construed
against Greenwich, the insurer.

Two Farms’s argument is

unpersuasive.

1.
Greenwich correctly argues that the broad UST Exclusion
applies to the losses that Two Farms sustained because of the
Discharge.

Under New York law, Greenwich, the insurer, “bear[s]

the burden of proving that an exclusion [to insurance coverage]
applies.”

Ment Bros., 702 F.3d at 121.

Accordingly, Greenwich

must demonstrate that the UST Exclusion is applicable to the
Discharge at the Pulaski Highway Facility.
The UST Exclusion provides that Greenwich is not liable for
any claims “based upon or arising out of the existence of any
underground storage tank(s) and associated piping.” (2008 Policy
at 4, 7.)

It is well settled that under New York law the terms

“arising out of” and “based upon” must be construed broadly.

13

See, e.g., Liberty Mut. Ins. Co. v. Tap Elec. Contracting Serv.,
Inc., 475 F. Supp. 2d 400, 409 (S.D.N.Y. 2007) (citations
omitted).

When the phrases “arising out of” or “based upon”

appear in an insurance policy, courts must apply a “but for”
test to determine liability.

See, e.g., Jewish Cmty. Ctr. of

Staten Island v. Trumbull Ins. Co., -- F. Supp. 2d --, No. 09
Civ. 2028, 2013 WL 3936204 at *9 (E.D.N.Y. July 22, 2013); Mount
Vernon Fire Ins. Co. v. Creative Hous. Ltd., 668 N.E.2d 404, 405
(N.Y. 1996) (citing U.S. Underwriters Ins. Co. v. Val-Blue
Corp., 647 N.E.2d 1342 (N.Y. 1995)).
Courts interpreting contracts pursuant to New York law are
required to give each word and phrase in a contract its plain
meaning and avoid rendering the terms or provisions of a
contract superfluous.

See, e.g., LaSalle Bank Nat. Ass’n v.

Nomura Asset Cap. Corp., 424 F.3d 195, 206 (2d Cir. 2005); Shaw
Grp., Inc. v. Triplefine Int’l Corp., 322 F.3d 115, 121 (2d Cir.
2003).

The UST Exclusion states that Greenwich is not liable

for any claims arising out of or based upon “the existence” of
any underground storage tanks and associated piping.

As a

result, the proper inquiry in this case is whether the Discharge
could have occurred but for the existence of any underground
storage tanks and associated piping.

See Law Debenture Trust,

595 F.3d at 468 (“[C]ourts may not by construction add or excise
terms . . . and thereby make a new contract for the parties

14

under the guise of interpreting the writing.” (quoting Bailey v.
Fish & Neave, 868 N.E.2d 956, 959 (N.Y. 2007)).
The parties agree that the Discharge was caused by defects
in the containment sump, a device that sits above the
underground storage tank.

More particularly, there was a pinch

in the “O-Ring,” a component of the check valve on the
submersible turbine pump that pulls gasoline from the
underground storage tank.
for Summ. J. at 5.)

(Ex. 2 to Pl.’s Mem. Supp. Pl.’s Mot.

The “O-Ring” is located in the containment

sump, and the plaintiff alleges that the gasoline drained out of
the containment sump through an electric conduit coupling
connection and into the surrounding soil because the electrical
connection was not tight.

(Pl.’s Rule 56.1 Stmt. at ¶ 18;

Def.’s Resp. to Pl.’s Rule 56.1 Stmt. at ¶ 18.)

The plaintiff

also alleges that the leakage would not have occurred if there
had been operable leak detection equipment in the containment
sump.
Greenwich correctly argues that the broad UST Exclusion
applies to the Discharge.

This is so because it is clear that

the Discharge could not have occurred but for the “existence” of
an underground storage tank and associated piping, given that
the sole function of the containment sump was to contain the
equipment used to transfer the gasoline from the underground
storage tank to the associated piping.

15

The equipment that

caused the Discharge would be entirely unnecessary if Two Farms
did not have the underground storage tank and associated piping
to which that equipment was attached.

Accordingly, the

Discharge arose out of or was based on the existence of the
underground storage tank and associated piping and the broad UST
Exclusion is applicable in this case.

2.
Because the UST Exclusion applies to the losses that Two
Farms sustained as a result of the Discharge, Two Farms is
entitled to coverage for those losses only if coverage is
restored by the exception to the UST Exclusion.

Greenwich

argues correctly that coverage for the Discharge can be restored
under the exception to the UST Exclusion only if the term
“underground storage tanks and associated piping” is construed
to include the equipment that malfunctioned at the Pulaski
Highway Facility.
The exception provides that the exclusion does not apply to
specifically listed “underground storage tanks and associated
piping” such as the underground storage tank and associated
piping at the Pulaski Highway Facility.

Accordingly, the

exception restores coverage for the losses that Two Farms
suffered in this case only if the term “underground storage

16

tanks and associated piping” includes the equipment that
proximately caused the Discharge.
Two Farms agrees that the exception to the UST Exclusion
confirms that the Discharge in this case is covered by the
Policy.

Because the parties agree that the exception to the UST

Exclusion is applicable to this case—and because the exception
can be applicable only if the equipment that malfunctioned in
this case is included in the term “underground storage tanks and
associated piping”—the term must be so construed.

Accordingly,

the term “underground storage tanks and associated piping,” as
used in the exception to the UST Exclusion, has a definite and
precise meaning concerning which there is no reasonable basis
for a difference of opinion.

Olin, 704 F.3d at 99.

3.
Greenwich argues that any coverage restored pursuant to the
exception to the UST Exclusion is necessarily subject to the UST
Sublimit.

Two Farms replies that the scope of the UST Sublimit

is ambiguous and thus that the UST Sublimit cannot be construed
to limit liability.

The UST Sublimit provides that “[t]he

following dedicated annual sublimit of liability shall apply to
all Underground Storage Tanks and Associated Piping Scheduled to
this Policy.”

(2008 Policy at Endorsement 7.)

The provision

then specifies that the applicable sublimits are $1,000,000 for

17

each particular loss and $5,000,000 annually.
Endorsement 7.)

(2008 Policy at

Whether the UST Sublimit restricts the

plaintiff’s right to recover damages in excess of $1,000,000 for
the losses underlying this action depends on the meaning of the
term “underground storage tanks and associated piping” as that
term is used in the UST Sublimit.
Greenwich argues that the term as used in the UST Sublimit
must be construed in the same way that it is used in the
exception.

Greenwich points out that the term should be

construed broadly because that broad construction is the only
basis for Two Farms to bring itself within the exception to the
exclusion and obtain any coverage at all.
In response, Two Farms asserts that the UST Sublimit should
be interpreted independently of the exception and that Greenwich
bears the burden of demonstrating that the UST Sublimit, which
limits recovery, is applicable to its losses.

According to Two

Farms, Greenwich has not satisfied that burden because the term
“underground storage tanks and associated piping” can refer
either to underground storage tanks and associated piping alone,
or to underground storage tanks, associated piping, and other
equipment that comprises the UST system.

Two Farms therefore

argues that the term “underground storage tanks and associated
piping” is ambiguous as used in the UST Sublimit, and concludes

18

that this ambiguity must be construed against Greenwich, the
insurer.
The maxim that ambiguity should be construed against the
drafter is inapplicable to an insurance policy when the policy
is made clear by its terms and structure.

Atlantic Cas. Inc.

Co. v. Value Waterproofing, Inc., 918 F. Supp. 2d 243, 253
(S.D.N.Y. 2013) (citing In re Prudential Lines Inc., 158 F.3d at
77).

In this case, the structure of the Policy makes plain that

the term “underground storage tanks and associated piping” must
be interpreted broadly.
The term “underground storage tanks and associated piping”
must be interpreted broadly in order to effectuate the parties’
intent that Two Farms receive coverage for losses incurred
because of the Discharge; namely, losses that result from
defects in the UST system.

This interpretation of the term

“underground storage tanks and associated piping” is
appropriately applied across provisions of the Policy because “a
word used by the parties in one sense will be given the same
meaning throughout the contract in the absence of countervailing
reasons,” and no countervailing reasons are apparent in this
case.

Iroquois Master Fund, Ltd. v. Quantum Fuel Sys. Tech.

Worldwide Inc., No. 13 Civ. 3860, 2013 WL 4931649, at *2
(S.D.N.Y. September 12, 2013) (quoting 11 Williston on Contracts
§ 32:6 (4th ed.); Cf. Cohen v. Chubb Indem. Ins. Co., 729

19

N.Y.S.2d 105, 106 (App. Div. 2011) (“The use of the same term to
mean more than one thing in the same insurance policy invites
confusion, especially where the alternative usage is
unaccompanied by an explicit definition.”)

The parties could

have made clear that the term “underground storage tanks and
associated piping” was intended to have distinct meanings in
distinct provisions of their Policy by defining the term in each
section, but the parties failed to do so.

Instead, the parties

constructed a policy in which the term “underground storage
tanks and associated piping” appears in the exclusion, the
exception, and the UST Sublimit, without once suggesting the
term should have a different meaning.
Moreover, the structure of the Policy contains no
indication that the parties intended the term “underground
storage tanks and associated piping” to have different meanings
in the exception and the UST Sublimit.

To the contrary, the

term as used in the UST Sublimit necessarily carries the same
meaning as the term when used in the exception to the UST
Exclusion.

The exception to the UST Exclusion provides that

coverage is restored for “underground storage tank(s) and
associated piping . . . listed in the Underground Storage
Tank(s) and Associated Piping Schedule . . .”
7.)

(2008 Policy at

The UST Sublimit provides that its restrictions are

applicable to “underground storage tanks and associated piping”

20

listed in the same schedule.

(2008 Policy at Endorsement 7.)

Accordingly, the plaintiff’s construction of the Policy requires
that the term “underground storage tanks and associated piping”
have different meanings in the exception and the UST Sublimit
even though the term is the same and the provisions refer to the
same schedule.

This reading is unreasonable because it strains

the policy language “beyond its reasonable and ordinary meaning”
and “distort[s] the meaning” of the terms that the parties
negotiated.

Law Debenture Trust, 595 F.3d at 467-68.

The plaintiffs supply no reason for construing the term
“underground storage tanks and associated piping” differently in
the exception and the UST Sublimit.

Indeed, the structure of

the Policy makes it clear that the terms should be construed in
the same way.

The exception allows coverage for damages from

“underground storage tanks and associated piping,” which would
otherwise be excluded, but the coverage that was added back by
the exception was limited by the UST Sublimit which used exactly
the same term.4

Once the term underground storage tanks and

4

On the parties’ pre-discovery motions for summary judgment and
partial summary judgment, the Court found the term “underground
storage tanks and associated piping” as used in the UST Sublimit
ambiguous because the term was not defined in the Policy and
because the parties each offered apparently reasonable
explanations of the term’s meaning. However, when the parties
argued their initial motions for summary judgment, the parties
focused narrowly on the meaning of the term “underground storage
tanks and associated piping” without fully contextualizing their
use of the term. In briefing their current cross motions for
21

associated piping is understood to include the equipment that
formed part of the underground storage tank and associated
piping, the UST Sublimit is unambiguous.

Olin, 704 F.3d at 99.

The UST Sublimit plainly limits to $1,000,000 Greenwich’s
liability for losses that occur because of underground storage
tanks, associated piping, or other components of the UST system.
See, e.g. Law and Debenture Trust, 595 F.3d at 467 (“If
consideration of the contract as a whole will remove the
ambiguity created by a particular clause, there is no
ambiguity.”)
Because the losses that Two Farms incurred as a result of
the Discharge were caused by defects in components of the UST
system at the Pulaski Highway Facility, and because the UST
Sublimit plainly limits to $1,000,000 Greenwich’s liability for
losses that result from those components, Greenwich is not
liable for any damages beyond the $1,000,000 it has already paid
to Two Farms.

Accordingly, no genuine issues of material fact

remain and this action is appropriately resolved as a matter of
law.

Greenwich’s motion for summary judgment on all claims is

granted and Two Farms’s motion for partial summary judgment on
the issue of liability is denied.

summary judgment, the parties have explained how the term
“underground storage tanks and associated piping” should be
understood in light of the entire Policy.
22

B.
The terms of the Policy are unambiguous and thus require
that the Court give legal effect to the contract as written.
See, e.g., Consarc Corp., 996 F.2d at 573; Int’l Multifoods
Corp., 309 F.3d at 83; W.W.W. Assocs., Inc., 566 N.E.2d at 642.
The extrinsic evidence developed by the parties in the course of
discovery does not suggest a different result and indeed
supports Greenwich’s interpretation of the Policy.
Lee Schmelz, an insurance broker who helped procure the
Policy for Two Farms, testified that he understood the term
“underground storage tanks and associated piping” to refer to
the entire UST system when he used the term in a summary of the
Policy that he prepared for Two Farms.5

5

(Stoia Cert. Ex. T

The exact testimony was as follows:
Counsel: I show you what has been marked as Exhibit 2 and
ask you to take a look at that document, please.
Lee Schmelz: Okay.
Counsel: What is this?
Lee Schmelz: This is a summary of insurance that I
prepared. This is part of a summary of insurance that I
prepared for Two Farms.
Counsel: Now, here it talks about –- now this is dated for
the policy April 16, 2008, to April 16, 2010, correct?
Lee Schmelz: Correct.
*

*

*

23

(“Schmelz Dep.”) at 18-19.)

Two Farms also employed the

services of David Resch in procuring the Policy.

Resch

negotiated the Policy for Two Farms and testified that he
understood the term “underground storage tank and associated
piping” to have the same meaning when used in the exception to
the UST Exclusion and the UST Sublimit.6

(Stoia Cert. Ex. H

(“Resch Dep.”) at 96-97.)

Counsel: [The summary] has underground
pollution legal liability, remediation
transportation. And it has $1 million
million annual total all loss. Do you

storage tanks –
and contingent
each loss; $5
see that?

Lee Schmelz: Yes.
Counsel: Now, in regard to where this says, underground
storage tank, were you referring to the shell of the
underground storage tank itself or the entire underground
tank system?
Lee Schmelz: The entire system.
(Schmelz Dep. 18:6-19:19.)
6

The exact testimony was as follows:

Counsel: Now, in the underground storage -– if you’ll go to
Endorsement 7.
David Resch: Okay.
Counsel: We’ve several times gone over the first sentence
here which says that the following dedicated annual
sublimit of liability shall apply to all underground
storage tanks and associated piping scheduled to the
policy. At any time, did you have any understanding that
the term “underground storage tanks and associated piping”
used in that sentence meant anything different than
“underground storage tank or associated piping” used in the
exception to the UST exclusion?
24

The understandings of both Schemlz and Resch are properly
imputed to Two Farms because both insurance brokers were acting
on behalf of Two Farms.

See, e.g., Gelb v. Autom. Ins. Co. of

Hartford, Conn., 168 F.2d 774, 775 (2d Cir. 1948); Ribacoff v.
Chubb Grp. of Ins. Co., 770 N.Y.S.2d 1, 2 (App. Div. 2003).
Accordingly, Two Farms was aware when the Policy was negotiated
that the UST Sublimit limited to $1,000,000 the company’s
potential recovery for losses incurred because of the UST
system.

CONCLUSION
For the foregoing reasons, the UST Sublimit unambiguously
limits to $1,000,000 coverage for the losses that Two Farms
incurred as a result of the Discharge.

Therefore, the

plaintiff’s motion for partial summary judgment on the issue of
liability is denied and the defendant’s motion for summary
judgment on all claims against it is granted.

The Clerk is

David Resch: I would say no.
Counsel: So when you assisted in the purchase of this
policy, you understood that “underground storage tank or
associated piping” as used in the exception to the UST
exclusion meant the same thing as “underground storage
tanks and associated piping” used in the first sentence of
the dedicated UST sublimit endorsement?
David Resch: Yes.
(Resch Dep. 96:17-97:16.)
25

directed to enter judgment dismissing this action and closing
the case.

The Clerk is also directed to close all pending

motions.
SO ORDERED.
Dated:

New York, New York
January _6, 2014

___________/s/______________
John G. Koeltl
United States District Judge

26