A Case of Mistaken Delivery

Occasionally, the FC&S editors do not come to the exact same conclusion on the questions we receive, but we can usually come to an agreement on what the best answer is—even if there is room for argument. 

For instance, we received the following question regarding gasoline being delivered to the wrong tank: 

We have an insured that is a common carrier for the transportation of gasoline. He has an All Risk Transportation form, which covers the product (gasoline) during transportation. The form states that the coverage applies ‘from the time the goods leave the premises at initial point of shipment, and covers thereafter continuously, in due course of transportation, until the goods are unloaded at destination.’ 

This policy also has a pollution-exclusion endorsement, which states: ‘This insurance does not apply to loss or damages caused by or resulting from any of the following: discharge, dispersal, seepage, migration, release or escape of pollutants.’ 

Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed. 

The insured was delivering gasoline at a gas station and poured the gasoline in the wrong underground tank—one in which diesel fuel was stored, damaging both the gasoline and the diesel when the products were mixed together in this tank.

The insured argues that there is coverage for this loss since the process of delivering the gasoline was stopped once he found out that he was pouring the gasoline in the wrong tank, thus the unloading of the gasoline was not completed, activating coverage under the form. What is your opinion on when the process of unloading at destination ends?

The FC&S editors agreed that the pollution exclusion would not apply in regards to first-party property coverage for the gasoline. It was not damaged or lost by the dispersal of a pollutant; it was delivered to the wrong place.