The Appellate Division, Third Department in White v. Rhodes tackled an interesting fact pattern regarding insurance coverage.    The plaintiff sought to recover for property damages sustained when the defendant Michelle G. Rhodes, while pulling out of a parking lot crashed into one of two, interconnected, above-ground home heating oil storage tanks located on the plaintiff’s property.  The impact caused the tank to rupture and the fuel oil from both tanks approximately 500 gallons to spill out onto the plaintiff’s land and into her dwelling.

The plaintiff had obtained a dwelling fire insurance policy with an extended coverage rider from defendant New York Mutual Insurance Company.  She sought coverage under that policy; however, the insurer denied the claim and canceled the plaintiff’s policy. 

The policy stated in pertinent part:  "We do not pay for these costs: 1) To extract pollutants from land or water; or 2) to remove, restore or replace polluted land or water."  Further, the policy specifically stated that it did not cover "land, including the land on which the property is located.   This includes costs of excavating, removing, grading or filling land, or water in or on that land." However, under the optional, extended coverage purchased by plaintiff, the policy insures:

"against direct physical loss or damage by these causes of loss: . . .

6. Vehicles – including loss or damage caused by impact by a vehicle, or an object thrown by it, with the covered property."

The Court rejected the insurer’s argument that the coverage afforded against "direct physical loss or damage" caused by a vehicle impact did not include the loss of market value to plaintiff’s property due to the oil contamination.  The Court recognized that the physical damage clearly did occur to the oil tanks and to the ground and ground water when the oil spilled from the tanks; thus, the vehicle impact clause standing alone would appear to cover the damage.  The Court agreed with the defendant, however, that it was not liable for the full loss in market value caused by the oil spill.  Thus, the Court concluded that if a loss in market value was used to measure the damages recoverable by plaintiff, only the loss in market value of the premises which was attributable to damage, if any, to the house, personal property and/or structures on the premises may be considered.