Thursday, July 6, 2017
Court of Appeal Holds:
Puncture of Underground Storage Unit Wasn’t an Insured ‘Collapse’
Opinion Leaves Unresolved Whether an Subterranean Fuel Tank at a Gas Station Constitutes A ‘Building’ or a ‘Fixture,’ Affording Coverage for Damage Under an Insurance Policy
By a MetNews Staff Writer
The Court of Appeal for this district has agreed with an insurer that its policy covering the “collapse” of a “building” or portion of it did not apply to a gas station’s damaged underground fuel storage tank, but its opinion does not decide whether the insurance company was right in in asserting that the subterranean vessel isn’t a building or an extension of it.
The policy issued to the owner of a gas station and mini-market in Palm Springs provides that the policyholder will be reimbursed for damage “caused by a collapse of a building or any part of a building insured under this policy” if that damage results from any of the enumerated causes. It applies, under the terms, to “outdoor fixtures” that are “[p]ermanently installed,” as well as to “[m]achinery” and “[e]quipment.”
Mid-Century Insurance Company denied coverage when one of two of its insured’s underground storage tanks—denominated in the opinion “UST-1”—became unusable when its fiberglass sheath split. In explaining its decision to its insured, it said that UST-1 was not a “building” and that the puncturing of the tank, through movement of the earth—by a rock it was negligently set atop 16 years earlier by a contractor—was not a “collapse.”
Los Angeles Superior Court Judge Michael M. Johnson’s Nov. 6, 2015 summary judgment in favor of Mid-Century addressed both of the insurer’s bases. Rejecting its contention that the UST was not a “building,” he said:
“The insurance policy defines buildings as including outdoor fixtures and permanently installed equipment…Plaintiff has submitted evidence that the USTs were connected to the mini-mart building and pumps by fiberglass piping and electrical conduits….It is undisputed that the USTs were installed several feet beneath the ground, and Defendant has submitted no evidence that the USTs were anything other than permanent equipment that was essential to the ordinary use of the premises.
“This is sufficient to establish that the USTs were covered fixtures or buildings under the insurance policy.”
Johnson agreed with Mid-Western, however, that no “collapse” occurred. He cited Doheny West Homeowners’ Association v. American Guarantee & Liability Insurance Co., decided in 1997 by Div. Five of this district’s Court of Appeal.
There, a policy excluded coverage for “settling, cracking, shrinkage, bulging or expansion.” The court held that under the policy, a “collapse”—while extending to an “imminent” collapse—did not include a “substantial impairment of structural integrity.”
The judge observed the language of the gas station’s policy was narrower than in that case, and coverage would apparently encompass only “actual” collapse.
“Plaintiff failed to submit evidence that UST-1 suffered a complete change in structure and lost its distinctive character as a UST.
“…Plaintiff only argued that UST-1 was no longer usable until it was repaired….This evidence shows that UST-1 suffered an impairment of structural integrity, but not an actual collapse as covered by Plaintiff’s insurance policy.”
Hoffstadt Explains Affirmance
In Monday’s opinion affirming the judgment, Justice Brian Hoffstadt of Div. Two said that Johnson “correctly concluded that plaintiff has not raised a triable issue of fact regarding coverage.”
He said the “undisputed facts show that the damage to UST-1 constituted at most a ‘substantial impairment of [its] structural integrity,’ ” and because “the Policy excludes ‘settling’ and the like,” this fails, as a matter of law, to constitute a “collapse.”
Having concluded that there was no “collapse,” Hoffstadt said, in a footnote, that his court has “no occasion to examine whether UST-1 qualifies as a ‘building’ under the policy.”
He added that there is no need to decide if a “collapse,” if it had occurred, would have been the result of one of the causes which, under the policy, would give rise to coverage.
Hoffstadt found that there is no meaningful weight to the insured’s contentions that holdings in other states point to a contrary result, that the conclusion in Doheny that “collapse” does not include a “substantial impairment of structural integrity” is wrong, or that Johnson failed to accord proper deference to its expert’s testimony that there was a “collapse.”
Issue Not Conceded
He went on to say:
“Nor did defendant concede the issue of collapse. Although defendant in its opposition to plaintiff’s motion for summary adjudication stated, in one sentence, that ‘[t]he damaged tank, UST-1, along with its fiberglass jacket collapsed down onto the rock due to the improper installation of the tank,’ this sentence is not, as plaintiff urges, a concession to the meaning of the term collapse in the Policy that defendant is now judicially estopped from denying. In the very same filing, defendant argued at length that the damage to UST-1 was not a collapse within the meaning of the Policy. At best, the sentence at issue used the term collapse in its colloquial sense to describe what happened; at worst, the sentence is a misstatement.”
Hoffstadt said there was no triable issue of fact as to whether the rock hit the tank or the tank hit the rock, given that it would not affect the result.
The case is Tustin Field Gas & Food, Inc. v. Mid-Century Insurance Company, B268850.
Murray M. Sinclair represented the insured, and Timothy D. Lake and Eric B. Kunkel of Tharpe & Howellt argued for the insurer.
Copyright 2017, Metropolitan News Company