Any good trial lawyer will tell you that the law is about telling stories.
Once upon a time, Timothy and Stacy Creamer bought a house. Only after they closed did they realize that some strategically placed rugs were hiding the evidence that, “up from the ground come a bubblin’ crude.”
Unlike Jed Clampett, rather than finding themselves millionaires, the Creamers found themselves with a million dollar liability – literally.
This being a law story, of course the sellers were bankrupt. The Creamers thus pursued the sellers’ insurer. The case ended up in the Appeals Court, which held that the Creamers could pursue their claims under the policy.
The insurer, Arbella, made three arguments in support of its summary judgment motion. The Court rejected them all. In order, the Court held that:
- The property damage was caused by an occurrence. Arbella argued that the damage was caused by the sellers’ fraud, not by the original release of oil. However, as the Court pointed out, the Creamers’ had claims based on Chapter 21E, the Commonwealth’s superfund law. Since Chapter 21E is a strict liability statute, the Creamers’ damages were caused by the release, not by the sellers’ fraud. (But see number 3, below!)
- The loss occurred during the policy period. Following precedent, the Court concluded that, so long as the property damage occurred during the policy period, it did not matter that the harm to the claimant did not occur until later.
- At least some of the damage was not “expected or intended.” This is the most significant part of the case. While preserving Creamers’ claims, the Court split the baby on this one. It held that the original release was not expected or intended, but that, once the sellers discovered the spill without doing anything about it, any further damage was “expected” by the seller. The Court thus remanded for a determination by the Superior Court how much of the total property damage was “expected.”
The Creamers will thus get their day in court, but, depending on when the sellers learned of the contamination, their recovery could be significantly limited. They certainly will not get enough to move to Beverly Hills. No swimming pools or movie stars for the Creamers.
Thanks for writing this Seth. This sad but too often true “story” could have been much less daunting if the Creamers and/or the sellers had a homeowners insurance policy that specifically included coverage for home heating oil spills.
Most homeowners are unaware that, unless they actively “opt in” for the coverage, residential property insurance rarely automatically covers home heating oil spills. As a result, when a devastating event occurs, as it did for the Creamers, homeowners are typically caught without insurance. In addition to the damage to their home, under M.G.L. c. 21E and the Massachusetts Contingency Plan regulations, property owners are responsible for the oil cleanup, including environmental impacts to soil and groundwater.
Licensed Site Professionals (LSPs), attorneys, state regulators at the Massachusetts Department of Environmental Protection (MassDEP), and the LSP Association (LSPA) hear regularly from homeowners who are overwhelmed and desperate about how they will afford to clean up their properties to meet the requirements of state environmental regulations.
According to MassDEP, there are over 100 residential home heating oil spills reported annually in Massachusetts. Cleanup costs can range from $20,000 to $50,000 for simple releases, to more than $300,000 for complex releases that impact both soil and groundwater. And only approximately 5% of all homes heated with oil have specialized liquid fuel release insurance coverage.
The current law (M.G.L. c. 175, sec. 4D) only requires homeowners insurers to “make available” so-called “liquid fuel” riders to homeowners seeking environmental cleanup coverage. The current cost to homeowners for spill cleanup insurance is under $100 per year; however most homeowners don’t know to ask for this coverage and many insurers don’t actively advertise it. When facing a spill, homeowners are often shocked to learn that their insurance does not cover this situation as it would for a fire, explosion, or another disaster.
The LSPA has authored legislation to enhance the current law by requiring that insurers provide coverage to all homeowners and raising coverage limits to keep pace with rising remediation cleanup costs. The LSPA’s bill, Senate Bill 594, is sponsored by Senator Anne Gobi of Spencer, Senate Chair of the Joint Committee on Environment, Natural Resources, and Agriculture.
By requiring insurance coverage for liquid fuel releases, Senate Bill 594 will ensure that funds are available for environmental cleanups and will help prevent homeowners from ignoring spills (as the Creamers’ seller did), going to court (as the Creamers did), funding the environmental cleanups with their retirement funds or children’s college funds, or having no means whatsoever to fund the cleanup, leaving them with an environmentally-impaired property of significantly reduced value
Thanks for the comment. Good reminder about the availability of the rider.