948 N.W.2d 45
S.D.2020Background
- South Dakota created the Petroleum Release Compensation Fund (Fund) in 1988 to reimburse eligible UST owners/operators (up to $1M less $10K deductible) for cleanup of petroleum leaks; the Fund is financed by per‑gallon fees on bulk gasoline importers/marketers.
- Between 1990–2002 BP applied for and received about $3.1 million for cleanup at 27 South Dakota UST sites (contamination reported 1987–1998); BP’s applications represented no available insurance and claimed self‑insurance.
- BP maintained CGL policies with very high self‑insured retentions (SIRs) that rose to $5 million by 1972; pollution exclusions (and absolute exclusions by 1985) and owned‑property exclusions limited CGL coverage for gradual UST leaks.
- In the 1990s BP sued its London Market insurers over coverage for large industrial sites; settlement negotiations included a Settlement Report that discussed a “single occurrence” theory to aggregate many UST claims pre‑1985, but insurers rejected valuing USTs and settlements covered industrial sites only.
- The Fund sued BP in 2010 seeking recovery of payments to BP for the 27 sites and recovery for 19 “indirect” sites (payments made to third parties) on theories including statutory subrogation, fraud, unjust enrichment, strict liability; lower court granted summary judgment to BP on most indirect claims (statute‑barred), then on remaining claims (no coverage/indemnity); sanctions for destroyed 1990 list were denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fund can recover payments to BP for 27 UST sites (subrogation, fraud, unjust enrichment) | Fund: BP had potential insurance coverage or received insurer settlement value that indemnified these USTs; Fund stands in BP’s shoes and can recover. | BP: No BP CGL policy provided indemnity for these sites (SIRs and exclusions); BP did not receive settlement proceeds attributable to these USTs. | Court: Summary judgment for BP; Fund failed to identify any policy that would have covered or indemnified BP for the 27 sites and record shows SIRs/ exclusions preclude coverage. |
| Whether indirect claims (19 sites) are timely | Fund: Limitations did not begin until Fund knew BP was responsible; accrual is fact‑bound. | BP: Limitations began when contamination was reported to Fund. | Court: 18 of 19 indirect claims time‑barred; statute began when Fund had notice of leaks (six‑year bar). |
| Whether claim for site 6197 survives | Fund: Expert suggests contamination might predate 1986 removal of BP tanks, creating dispute. | BP: Undisputed record shows no reported leaks until ~2004; new tanks installed by purchaser; DENR found purchaser responsible. | Court: Summary judgment for BP; Fund’s expert speculation insufficient, DENR determination and undisputed facts show BP not responsible. |
| Whether discovery sanctions should have been imposed for destruction of 1990 UST list | Fund: Destruction violated litigation hold and prejudiced Fund’s ability to identify indirect claims. | BP: Destruction was inadvertent; BP produced a complete 509‑site list and was not prejudiced. | Court: Denial of sanctions affirmed; destruction was inadvertent and BP had produced comprehensive records—no abuse of discretion. |
Key Cases Cited
- Heitmann v. Am. Family Mut. Ins. Co., 883 N.W.2d 506 (standard of review for summary judgment is de novo)
- Swenson v. Auto Owners Ins. Co., 831 N.W.2d 402 (insurance policy interpretation is a question of law)
- Schuldt v. State Farm Mut. Auto. Ins. Co., 238 N.W.2d 270 (subrogation claimant stands in insured’s shoes)
- Gades v. Meyer Modernizing Co., 865 N.W.2d 155 (statute of limitations accrues when plaintiff first knows facts prompting inquiry)
- Krueger v. Grinnell Mut. Reinsurance Co., 921 N.W.2d 689 (review of discovery‑sanctions decisions is for abuse of discretion)