The court found that stacking of interruption coverages was allowed based up the language of the policy. Lion Oil Co. v. Nat'l Union Fire Ins. Co., 2015 U.S. Dist. LEXIS 148261 (W.D. Ark. Nov. 2, 2015).
The insured's oil line was ruptured, causing an interruption of crude oil delivery service. The insured held policies issued by National Union.
The policies included multiple time element extensions. One extension related to Service Interruption which promised to insure against loss for:
Service Interruption: electrical, steam, gas, water, sewer, incoming or outgoing voice, data, or video, or an other utility or service transmission lines and related plants, substations and equipment situated on or outside of the premises.
Both parties agreed that the service interruption provision was unambiguous and that the court should give effect to the plain language of the policy.
None of the terms found in the service interruption provision, however, were defined by the policies. The insured argued that the ordinary meaning of the term "transmission line" included a crude oil pipeline and that the ordinary meaning of the term "service" included the delivery of oil. Therefore, the rupture triggered the service interruption provision because its losses resulted from the interruption of crude oil delivery service via the transmission line.
The court agreed with the proposed meaning of "transmission line." A crude oil pipeline transmitted oil from one place to another. Thus, the plain and ordinary meaning of "transmission line" included a crude oil pipeline. The plain and ordinary meaning of "service," however, was more complex. "Service" could mean "useful labor that does not provide a tangible commodity," which would support the insured's interpretation of the service interruption provision. "Service" could also mean "a facility supplying some public demand," which would support National Union's interpretation. Because the term "service" was susceptible to more than one reasonable interpretation, the Court found that the service interruption provision's language was ambiguous.
Accordingly, the terms "transmission lines" and "service" included a crude oil pipeline and the delivery of oil. Thus, the service interruption provision covered losses resulting from the interruption of crude oil delivery service to the insured's refinery.
Turning to the stacking issue, in addition to the time element extension that covered service interruption, the policies also provided an extension that covered contingent business interruption. The issue was whether the policies, which provide service interruption coverage of $25 million and contingent business interruption coverage of $25 million, provided an aggregate coverage of $50 million or a coverage limited solely to $25 million.
The policies did not contain an anti-stacking provision. There was no language that restricted the number of coverage grants or sub-limits that applied to a given occurrence. National Union argued that stacking the two coverages would allow a double recovery for the same damages. But the insured suffered a net margin loss that was more than $50 million. Thus, stacking the two coverages would not allow a double recovery because the insured was not seeking to recover an amount that was greater than its actual loss.
The court was unaware of any case from Arkansas or any other jurisdiction that addressed the propriety of stacking coverages in an all-risk policy. National Union could have prevented the stacking of coverages by including an anti-stacking provision in the policies, but did not do so.
Therefore, the service interruption coverage and contingent business interruption coverage in the policies could be "stacked" to provide an aggregate coverage of $50 million.