Quote of the Day - It's all about how much your pocketbook can afford. You can take a higher deductible, but if you have an accident, you are going to pay a little more. - Loretta Worters
Spin The Bottle For Insurance Deductibles
How does MTBE contamination in different geographical areas, different types of spills, different leaks in different plaintiffs all arise from one occurrence under an insurance policy?
When you're in the Third Circuit, and you're in the case of Sunoco Inc. and Sunoco Inc. v. Illinois National Insurance Co.
Let me offer a bit of an explanation. Sunoco had a $5 million self-insured retention under its insurance policy, and it was facing seventy-seven different lawsuits. That's $380 million of a total deductible, which is a lot, even for a big oil company. Practically speaking then, Sunoco would likely not have been able to undertake the cleanup of the contamination.
In fact, the combined deductible was greater than the $50 million policy written by Illinois National Insurance Company.
The court made this ruling, which binds only Sunoco and Illinois National, based on its logic that each of the 76* lawsuits allege the same cause of action. It went on, arguing that the suits essentially each claimed injuries from Sunoco's production of gasoline containing MTBE and the company's failure to warn users. The court finally determined that each plaintiff was exposed to the same general harmful condition (the MTBE additive), which and resulted in the same injury: contaminated groundwater.
The ruling, however, presents a two-edged sword. Absent some stroke of genius on the Third Circuit, there's also only one $50 million policy limit covering these 76 suits.
But stranger rulings have been issued before.
*Yes, careful readers will have caught what at first appears to be a typo: 77 vs. 76 lawsuits. The Third Circuit remanded the case to the District Court to deal with an issue not covered here. You'll have to read the decision to see what that issue is about - I covered a different topic in this post, one not readily apparent in the opinion, but nonetheless a consequence of it.