Case 1:10-cv-02162-WSD Document 11-1 Filed 11/01/10 Page 1 of 27

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION

RACETRAC PETROLEUM, INC., )

A Georgia Corporation, )
) CIVIL ACTION FILE
Plaintiff, ) NO. 1:10-cv-2162-WSD
)
vs. )
)
ACE AMERICAN INSURANCE )
COMPANY, a Pennsylvania )
corporation, )
)
Defendant. )

BRIEF I SUPPORT OF DEFEDAT ACE AMERICA

ISURACE COMPAY'S MOTIO TO DISMISS COMPLAIT
Defendant ACE American Insurance Company (hereinafter “ACE”),

pursuant to Federal Rule of Civil Procedure 12(b)(6), respectfully moves this

Court to dismiss the complaint for declaratory relief filed by plaintiff

RaceTrac Petroleum, Inc. (hereinafter “RaceTrac”), because it fails to state a

claim upon which relief can be granted.

I. FACTUAL BACKGROUD

Plaintiff’s lawsuit is a declaratory judgment action seeking a judicial

declaration about whether there is any liability insurance coverage for

RaceTrac under ACE’s two excess liability insurance policies for allegations

of personal injury brought against RaceTrac in two separate lawsuits

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(hereinafter “the underlying lawsuits’) filed by Jacqueline Sheree Bunns,

Dakota Bunns, Harley Bunns, and Lisa Williams (hereinafter “the

underlying plaintiffs”), all of whom are former employees of a RaceWay

service station leased from RaceTrac.

A. The Underlying Lawsuits

In 2009, the underlying plaintiffs filed the two underlying lawsuits in

the state courts of Mississippi (hereinafter “the Bunns lawsuit” and “the

Williams lawsuit”), alleging that the underlying plaintiffs sustained personal

injuries from exposure to benzene from gasoline vapors in the stores during

their employment at a RaceWay service station between 2005 and 2007.

[Doc. 1, Exhibits “D” and “E”].

B. The ACE Excess Policies

ACE issued an excess commercial general liability policy to

RaceTrac, number XSL-G20593854, which was effective from June 1, 2005

through June 1, 2006. [Doc. 1, Exhibit “A”]. ACE subsequently issued an

excess commercial general liability policy to RaceTrac, number XSL-

G21732850, which was effective from June 1, 2006 through June 1, 2007.

[Doc. 1, Exhibit “B”].

Both of the insurance policies provide coverage for “the ‘ultimate net

loss’ in excess of the ‘retained limit’ shown in the declarations’ that the

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insured becomes legally obligated to pay as damages because of ‘bodily

injury’ or ‘property damage’ to which this insurance applies,” subject to the

insurance contracts’ terms, conditions, limitations and exclusions.

Paragraph I(A)(1)(a), Excess Commercial General Liability Policy, XS-

6U91c (07/02), p. 1 [Doc. 1, Exhibits “A” and “B”].

C. The Pollution Exclusion

Both of the ACE policies contain an absolute pollution exclusion for

“any injury … arising out of or in any way related to pollution, however

caused.” The term “pollution” is defined in the policies as “the actual,

alleged or potential presence in or introduction into the environment of any

substance if such substance has, or is alleged to have, the effect of making

the environment impure, harmful, or dangerous. Environment includes any

air, land, structure or the air therein, watercourse or water, including

underground water.” Endorsement 9, XS-6W35 (09/95) [Doc. 1, Exhibit

“A”]; Endorsement 10, XS-6W35 (09/95) [Doc. 1, Exhibit “B”].

After RaceTrac provided notice to ACE of the Bunns lawsuit, ACE

denied coverage for that lawsuit based on the excess liability policies’

pollution exclusion. [Doc. 1, Exhibit F”]. ACE never received any notice

from RaceTrac of the Williams lawsuit until this declaratory judgment

action was filed. [Doc. 3, ¶¶ 37-40].

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D. RaceTrac’s Declaratory Judgment Action

On July 13, 2010, RaceTrac filed its complaint seeking declaratory

relief and attorneys fees. [Doc. 1]. In its complaint, RaceTrac alleged that

the ACE excess liability insurance policies provide coverage for the Bunns

and Williams lawsuits because RaceTrac may become obligated to pay an

“ultimate net loss” and “loss adjustment expenses” in excess of each policy’s

$500,000.00 retained limit resulting from “bodily injuries” caused by an

“occurrence” within the “coverage territory” during the policy periods.

[Doc. 1, ¶ 35].

RaceTrac alleged in its complaint that the pollution exclusion in the

ACE excess policies does not preclude coverage for the Bunns and Williams

lawsuits because the pollution exclusion is unenforceable as against the

public policy of the state of Georgia. [Doc. 1, ¶¶ 43-55]. In its answer,

ACE denied RaceTrac’s allegations that the claims asserted in the Bunns and

Williams lawsuits are covered under the excess liability insurance policies,

and denied that the policies’ pollution exclusion violates the public policy of

the state of Georgia. [Doc. 3].

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II. LEGAL ARGUMET

ACE moves this Court to dismiss this declaratory judgment action

because RaceTrac’s complaint fails to state a claim upon which relief can be

granted. Specifically, the complaint fails to set forth plausible facts which, if

proven true, would be sufficient to show that RaceTrac is entitled to

coverage under the ACE excess liability insurance policies. The pollution

exclusion in the policies plainly and unambiguously precludes coverage for

both the Bunns and Williams lawsuits.

RaceTrac’s complaint also fails to set forth plausible facts which, if

proven true, would be sufficient to support its allegation that the pollution

exclusion is unenforceable as against the public policy of Georgia.

Moreover, ACE submits that the pollution exclusion is valid and enforceable

and that as a matter of law it does not violate the public policy of the state of

Georgia.

Under the Federal Rules of Civil Procedure, a complaint must contain

“a short and plain statement of the claim showing that the pleader is entitled

to relief.” Fed. R. Civ. P. 8(a)(2). Until recently, a complaint was required

to be dismissed under Fed. R. Civ. P. 12(b)(6) for failure to state a claim

upon which relief can be granted when it appeared “beyond doubt that the

plaintiff can prove no set of facts in support of his claim which would entitle

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him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d

80 (1957). However, in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127

S. Ct. 1955, 167 L.Ed.2d 929 (2007), the United States Supreme Court

recently replaced the “no set of facts” standard with the “plausibility

standard,” which requires that factual allegations “raise the right to relief

above the speculative level.” Id. at 555; ADA v. Cigna Corp., 605 F.3d

1283, 1288-1289 (11th Cir. 2010). The “plausibility standard” does not

impose a probability requirement at the pleading stage; it simply calls for

enough facts to raise a reasonable expectation that discovery will reveal

evidence” supporting the claim. Id. at 556, 127 S. Ct. at 1974; ADA v.

Cigna Corp., supra at 1289; Dege v. ationwide Ins. Co., 2008 U.S. Dist.

LEXIS 41487 at [*2-*3] (N.D. Ga. May 22, 2008).

In assessing a motion to dismiss under Rule 12(b)(6), a court typically

limits its consideration to the complaint, the written instruments attached to

it as exhibits, documents incorporated into the complaint by reference, and

matters of which a court may take judicial notice. Tellabs, Inc. v. Makor

Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S. Ct. 2499, 168 L. Ed. 2d

179 (2007); Grossman v. ationsbank, A., 225 F.3d 1228, 1231 (11th Cir.

2000); Breckenridge Crest Apartments, Ltd. v. Citicorp Mortgage, Inc.,

826 F. Supp. 460, 464. Determining whether a complaint states a plausible

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claim for relief is a context-specific task that requires the reviewing court to

draw on its judicial experience and common sense. Ashcroft v. Iqbal, 556

U.S. --- , 129 S. Ct. 1937, 1950, 173 L. Ed. 2d 868 (2009). The United

States Supreme Court has suggested that courts considering motions to

dismiss adopt a “two-pronged approach”: 1) eliminate any allegations in the

complaint that are merely legal conclusions; and 2) where there are well-

pleaded factual allegations, “assume their veracity and then determine

whether they plausibly give rise to an entitlement to relief.” Id.; ADA v.

Cigna Corp., 605 F.3d at 1290. A complaint must be dismissed under Fed.

R. Civ. P. 12(b)(6) if the facts as pled do not “state a claim for relief that is

plausible on its face.” Twombly, 550 U.S. at 570, 127 S. Ct. at 1974, 167

L.Ed.2d 929; Edwards v. Prime Inc., 602 F.3d 1276, 1291 (11th Cir. 2010);

Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th Cir. 2009).

A. The Absolute Pollution Exclusion In The Ace Insurance Contracts

Precludes Coverage For The Bunns And Williams Lawsuits.

Under Georgia law, insurance policies are a matter of contract and are

interpreted by ordinary rules of contract construction in order to ascertain the

intention of the parties, who are bound by its plain and unambiguous terms.

Boardman Petroleum v. Federated Mut. Ins. Co., 269 Ga. 326, 498 S.E.2d

492 (1998); Grange Mut. Ins. Co. v. DeMoonie, 227 Ga. App. 812, 490

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S.E.2d 451 (1997); Progressive Preferred Ins. Co. v. Brown, 261 Ga. 837,

838, 413 S.E.2d 430 (1992); Richards v. Hanover Ins. Co., 250 Ga. 613,

299 S.E.2d 561 (1983). In construing an insurance contract, a court must

consider it as a whole, giving effect to each provision. York Ins. Co. v.

Williams Seafood of Albany, Inc., 273 Ga. 710, 544 S.E.2d 156 (2001).

An insurer’s duty to indemnify, or provide coverage to, an insured

party is triggered only when the insured is determined to be liable for

damages within the policy's coverage. See Util. Serv. Co. v. St. Paul

Travelers Ins. Co., 2007 U.S. Dist. LEXIS 4634 (M.D. Ga. Jan. 22, 2007);

Erie Indem. Co. v. Acuity, 2006 U.S. Dist. LEXIS 52590 (N.D. Ga. July 19,

2006); Safeco Ins. Co. v. Atlanta Metro Leasing, Inc., 1993 U.S. Dist.

LEXIS 21468 (N.D. Ga. May 11, 1993). In this case, the complaint filed by

RaceTrac seeks coverage for damages that it may become liable to pay for

the bodily injuries in the Bunns and Williams lawsuits which are alleged to

have resulted from exposure to benzene from gasoline vapors. [Doc. 1, ¶

45]. However, both of the ACE excess liability insurance policies contain

absolute pollution exclusions which plainly preclude coverage for the

injuries alleged in the Bunns and Williams lawsuits.

The bodily injury and property damage liability coverage provided

under the ACE excess liability insurance policies is subject to a number of

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exclusions, including a pollution exclusion. The policies initially provided,

in pertinent part:

2. Exclusions

This insurance does not apply to:

* * *
f. Pollution

Any injury, damage, expense, cost, loss, liability or

legal obligation arising out of or in any way related
to “pollution”, however caused.

Paragraph I(A)(2)(f), Excess Commercial General Liability Policy, XS-

6U91c (07/02), pp. 2-3 [Doc. 1, Exhibits “A” and “B”]. However, that

pollution exclusion was superseded by the pollution exclusion contained in

Endorsement No. 9 of the ’05-’06 policy and Endorsement No. 10 of the

‘06-’07 policy, which state, in pertinent part:

Exclusion 2.f of Section I, Coverage A is replaced by the

following:

f. Any injury, damage, expense, cost, loss, liability or legal

obligation arising out of or in any way related to
pollution, however caused.

Pollution includes the actual, alleged or potential

presence in or introduction into the environment of any
substance if such substance has, or is alleged to have, the
effect of making the environment impure, harmful, or
dangerous. Environment includes any air, land, structure
or the air therein, watercourse or water, including
underground water.

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Endorsement 9, XS-6W35 (09/95) [Doc. 1, Exhibit “A”]; Endorsement 10,

XS-6W35 (09/95) [Doc. 1, Exhibit “B”].

1. The pollution exclusion is valid and enforceable.

It is well-settled that an insurance company may fix the terms of its

policies as it wishes, provided they are not contrary to law, and it may insure

against certain risks and exclude others. Reed v. Auto-Owners Inc. Co., 284

Ga. 286, 667 S.E.2d 90 (2008); Payne v. Twiggs County School District,

269 Ga. 361, 496 S.E.2d 690 (1998); Continental Cas. Co. v. HSI Fin.

Serv. Inc., 266 Ga. 260, 466 S.E.2d 4 (1996). Terms in an insurance policy

are given their ordinary and common meaning, unless otherwise defined in

the contract. Claussen v. Aetna Casualty & Surety Co., 259 Ga. 333, 380

S.E.2d 686 (1989). No construction of an insurance contract is required or

even permissible when the language is plain, unambiguous, and capable of

only one reasonable interpretation. Boardman Petroleum v. Federated

Mut. Ins. Co., supra; Giles v. ationwide Mut. Fire Ins. Co., 199 Ga. App.

483, 405 S.E.2d 112 (1991).

The Georgia courts repeatedly have held that absolute pollution

exclusions similar to the pollution exclusion in the ACE excess liability

insurance policies are unambiguous and enforceable. Reed v. Auto-Owners

Ins. Co., supra (claim for injury from fumes fell within clear language of

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absolute pollution exclusion); Truitt Oil & Gas Co. v. Ranger Ins. Co., 231

Ga. App. 89, 498 S.E.2d 572 (1998) (absolute pollution exclusion not

ambiguous because “pollutants” defined in policy as including “any liquid or

gaseous contaminant” and included damages from leakage of gasoline);

Perkins Hardwood Lumber Co. v. Bituminous Casualty Corp., 190 Ga.

App. 231, 378 S.E.2d 407 (1989) (no ambiguity as to scope of pollution

exclusion); Owners Ins. Co. v. Farmer, 173 F. Supp. 2d 1330 (N.D. Ga.

2001) (absolute pollution exclusion unambiguously excluded all pollutants

regardless of source or location); orth Georgia Petroleum Co. v.

Federated Mut. Ins. Co., 68 F. Supp. 2d 1321 (N.D. Ga. 1999)

(absolute pollution exclusion not ambiguous); Damar, Inc. v. United States

Fire Ins. Co., 856 F. Supp. 679 (N.D. Ga. 1993), aff’d, 21 F.3d 1126 (11th

Cir. 1994) (absolute pollution exclusion unambiguously excluded liability

coverage for all liabilities arising out of pollution).

Indeed, courts around the country that have construed absolute

pollution exclusions like the one at issue here routinely enforced such

exclusions to clearly and unambiguously preclude coverage for losses

caused by pollution. See, inter alia, Madison Constr. Co. v. Harleysville

Mut. Ins. Co., 451 Pa. Super. 136, 678 A.2d 802 (1996); Cook v. Evanson,

83 Wn. App. 149, 920 P.2d 1223 (1996); Crescent Oil Co. v. Federated

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Mut. Ins. Co., 20 Kan. App. 2d 428, 888 P.2d 869(1995); Apana v. TIG Ins.

Co., 504 F. Supp. 2d 998 (D. Haw. 2007); Maska U.S., Inc. v. Kansa Gen.

Ins. Co., 198 F.3d 74 (2d Cir. 1999); Stamford Wallpaper Co. v. TIG Ins.,

138 F.3d 75 (2d Cir. 1998); Union Mut. Fire Ins. Co. v. Hatch, 835 F.

Supp. 59 (D.N.H. 1993); Bureau of Engraving v. Federal Ins. Co., 793 F.

Supp. 209 (D. Minn. 1992), aff’d, 5 F.3d 1175 (8th Cir. 1993); Alcolac, Inc.

v. California Union Ins. Co., 716 F. Supp. 1546 (D. Md. 1989).

The mere fact that the ACE excess liability insurance policies do not

list the specific substances covered under the absolute pollution exclusion

does not mean that the exclusion is ambiguous. A contract is not rendered

ambiguous by the mere fact that the contract does not define a term, Da

Cunha v. Standard Fire Ins. Company/Aetna Flood Ins. Program, 129

F.3d 581 (11th Cir. 1997), or that the parties may not agree upon the proper

construction to be given it. Wile v. Paul Revere Life Ins. Co., 410 F. Supp.

2d 1313 (N.D. Ga. 2005). As other courts have noted, the fact that a large

number of solids, liquids or gases may qualify as irritants or contaminants is

evidence of the absolute pollution exclusion’s far-reaching scope, not its

ambiguity. Owners Ins. Co. v. Chadd's Lake Homeowners Ass'n, 2004

U.S. Dist. LEXIS 30675 at [* 17] (N.D. Ga. Dec. 28, 2004). For these

reasons, the pollution exclusion in the ACE excess liability insurance

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policies is valid and enforceable.

2. Benzene is a “pollutant” within the plain language of the

policies’ pollution exclusion.

The pollution exclusion in the ACE excess liability insurance policies

defines “pollution” to include “the actual, alleged or potential presence in or

introduction into the environment of any substance if such substance has, or

is alleged to have, the effect of making the environment impure, harmful, or

dangerous.” Benzene specifically is designated by the federal government

as a “hazardous air pollutant” in The Clean Air Act and a “toxic pollutant”

in the Environmental Protection Agency’s (“EPA”) List of Hazardous

Substances. 42 U.S.C. § 7412(b)(1); 40 C.F.R. § 401.15(8). In addition,

courts in other jurisdictions have ruled that benzene is a pollutant within the

meaning of an insurance policy’s absolute pollution exclusion. See

orthbrook Indem. Ins. Co. v. Water Dist. Management Co., 892 F. Supp.

170 (S.D. Tex. 1995) (claims for bodily injury arising out of discharge of

chemicals including benzene fell within insurance policies’ pollution

exclusion); Gotham Ins. Co. v. GLX, Inc., 1993 U.S. Dist. LEXIS 10891

(S.D.N.Y. Aug. 6, 1993) (claims of injury and damages arising from release

of benzene solution precluded from coverage by insurance policy’s pollution

exclusion).

When the language of an insurance policy defining the extent of the

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insurer's liability is unambiguous and capable of but one reasonable

construction, the court must enforce the contract as made by the parties.

Horace Mann Ins. Co. v. Drury, 213 Ga. App. 321, 445 S.E.2d 272 (1994);

Burnette v. Georgia Life & Health Ins. Co., 190 Ga. App. 485, 379 S.E.2d

188 (1989). Under the plain language of the pollution exclusion, the ACE

excess liability insurance policies provide no coverage for the injuries and

damages alleged in the Bunns and Williams lawsuits.

B. The Absolute Pollution Exclusion In The ACE Excess Liability

Insurance Policies Does ot Violate Georgia Public Policy.

Plaintiff’s contention – that application of the pollution exclusion in

this case would violate public policy – is not supported by Georgia law.

Competent parties are free to choose and insert whatever provisions they

desire in a contract, unless prohibited by statute or public policy.

Department of Transp. v. Brooks, 254 Ga. 303, 328 S.E.2d 705 (1985);

Empire Fire & Marine Ins. Co. v. Dobbins, 205 Ga. App. 700, 423 S.E.2d

396 (1992); Donaldson v. Pilot Life Ins. Co., 177 Ga. App. 748, 41 S.E.2d

279 (1986); Simmons v. Select Ins. Co., 183 Ga. App. 128, 358 S.E.2d 288

(1987). Under Georgia law, a “contract cannot be said to be contrary to

public policy unless the General Assembly has declared it to be so, or unless

the consideration of the contract is contrary to good morals and contrary to

law, or unless the contract is entered into for the purpose of effecting an

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illegal or immoral agreement or doing something which is in violation of

law.” Department of Transp. v. Brooks, supra at 312; State Farm Mut.

Auto. Ins. Cos. v. Walker, 234 Ga. App. 101, 103, 505 S.E.2d 828 (1998);

Hartford Ins. Co. of Southeast v. Franklin, 206 Ga. App. 193, 195, 424

S.E.2d 803 (1992); Fournier v. Hartford Fire Ins. Co., 862 F. Supp. 357,

382 (N.D. Ga. 1994).

The courts must exercise extreme caution in declaring a contract, or

any portion of a contract, void as against public policy, and should do so

only where the case is free from doubt and where an injury to the public

interest clearly appears. Emory Univ. v. Porubiansky, 248 Ga. 391, 282

S.E.2d 903 (1981); Precision Planning, Inc. v. Richmark Cmtys., Inc., 298

Ga. App. 78, 679 S.E.2d 43 (2009); Baldwin v. State Farm Fire & Cas. Co.,

264 Ga. App. 229, 590 S.E.2d 206 (2003); Piedmont Arbors Condominium

Ass'n v. BPI Constr. Co., 197 Ga. App. 141, 397 S.E.2d 611 (1990); Harris

v. ational Evaluation System, Inc., supra at 1083. The Georgia courts

have found an exclusion in an insurance contract to be unenforceable

because it violates public policy only when the legislature has statutorily

mandated that an insurance contract provide the particular coverage sought

to be excluded by the policy provision at issue. American Home Assurance

Co. v. Smith, 218 Ga. App. 536, 462 S.E.2d 441(1995) (Emphasis added);

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Hartford Ins. Co. of Southeast v. Franklin, 206 Ga. App. 193, 424 S.E.2d

803 (1992); orth Georgia Petroleum Co. v. Federated Mut. Ins. Co., 68 F.

Supp. 2d 1321 (N.D. Ga. 1999).

Each case requiring public policy considerations must be weighed

carefully on its own merits, and apply the appropriate legal guideline to the

particular facts presented to the court. Collier v. State Farm Mut. Auto. Ins.

Co., 249 Ga. App. 865, 549 S.E.2d 810 (2001); ational Consultants, Inc.

v. Burt, 186 Ga. App. 27, 366 S.E.2d 344 (1988); Harris v. ational

Evaluation System, Inc., 719 F. Supp. 1081 (N.D. Ga. 1989).

The absolute pollution exclusion contained in the ACE excess liability

insurance policies cannot be against Georgia public policy because the

Georgia legislature never has required that liability insurance policies

provide coverage for injuries or damage caused by pollution. Because

Georgia law does not require liability insurance in every case, exclusions are

not per se prohibited but must be individually evaluated to determine

whether they are against public policy. Southern Guaranty Ins. Co. v.

Preferred Risk Mut. Ins. Co., 257 Ga. 355, 359 S.E.2d 665 (1987); Hoque

v. Empire Fire & Marine Ins. Co., 281 Ga. App. 810, 637 S.E.2d 465

(2006). No Georgia court or statute ever has declared the pollution

exclusion per se unenforceable in all circumstances.

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The only Georgia court to specifically address the issue of whether

pollution exclusions are against Georgia public policy came to the same

conclusion – i.e., that pollution exclusions do not violate Georgia public

policy. orth Georgia Petroleum Co. v. Federated Mut. Ins. Co., 68 F.

Supp. 2d 1321 (N.D. Ga. 1999). In that case, the insured argued that the

absolute pollution exclusion in a commercial general liability policy violated

public policy because “approval of the clause by the Georgia Insurance

Commissioner was induced by the insurance industry's representation that

the clause merely ‘clarified’ the scope of existing coverage.” Id. at 1327.

The court in orth Georgia Petroleum recognized that, “[u]nder Georgia

law, an exclusion in an insurance contract is unenforceable because it

violates public policy only if the legislature has statutorily mandated that an

insurance contract provide that particular coverage.” Id. at 1327 (citing,

inter alia, Horace Mann Ins. Co. v. Drury, 213 Ga. App. 321, 445 S.E.2d

272 (1994), and Hartford Ins. Co. of Southeast v. Franklin, 206 Ga. App.

193, 424 S.E.2d 803 (1992) (Emphasis added).

The court in orth Georgia Petroleum then considered the case of

Hulstzman v. State Farm Fire & Cas. Co., 188 Ga. App. 12, 372 S.E.2d 9

(1988), which held that “in those cases where restrictions or limitations have

been imposed by the courts on the right of an insurer to define and limit the

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risk or liability assumed under the terms of a policy, it has been on the basis

of mandatory statutory provisions specifying the minimum coverage to be

provided.” Id. at 1328. The orth Georgia Petroleum court then held:

Although no Georgia courts have addressed whether pollution

exclusions are against public policy, this court finds that the
rationale used in cases considering other exclusions in
insurance contracts would be extended by Georgia courts to
pollution exclusions. Applying this analysis, the court cannot
find that the Georgia Constitution or Code requires coverage for
these types of claims, nor have the parties pointed the court to
any such provision.

Id.

RaceTrac argues that it would violate Georgia public policy to allow

ACE to sell a liability insurance policy to RaceTrac which contains an

exclusion for damages resulting from gasoline or one of its constituent parts

because, RaceTrac contends, “the primary product sold, handled and

distributed by RaceTrac is unleaded gasoline, which contains a small amount

of benzene.” [Doc. 1, ¶¶ 49, 54].1 The policies upon which RaceTrac relies

for its allegations contradict these contentions. ACE insured RaceTrac for

potential liability arising out of more than simply RaceTrac acting as a

1
The methods used to calculate the premium charged for the policies is irrelevant, even if such calculation
is based upon the nature of the insured’s business, and does not override the express language of the
pollution exclusion. See W. Am. Ins. Co. v. Johns Bros., 435 F. Supp 2d 511, 519 (E.D. Va. 2006)
(“…[E]ven if the court considers the fact that the policy premium was based in part on the nature of
defendant's business, such fact does not override the express language of the pollution exclusion…. it is
clearly not within the purview of the court to analyze the complex factors that impact an insurance
company's underwriting calculation. Likewise, the court will not require plaintiff to justify its motivations
behind the premium charged to Johns Brothers as the underwriting process does not create coverage, the
language of the policy and its applicable exclusions do.”)

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handler and purveyor of gasoline. The ACE excess policies on their face

reflect that RaceTrac’s business is “Convenience Store” [Doc. 1, Exhibits

“A” and “B”]. In the insuring sections of the policies, ACE insured

RaceTrac for potential liability for “bodily injury” or “property damage”

caused by an “occurrence” that takes place in the “coverage territory”

occurring within the “policy period,” subject to any applicable exclusions,

one of which was the pollution exclusion. Paragraph I(A)(1)(b), Excess

Commercial General Liability Policy, XS-6U91c (07/02), p. 1 [Doc. 1,

Exhibits “A” and “B”]. In other words, ACE insured RaceTrac for liability

for bodily injuries arising out of slip-and-falls on the premises, and other

potential liabilities associated with RaceTrac’s business as a convenience

store operator.

This alleged basis of RaceTrac’s claim for relief already has been

rejected for an insured which found itself in a similar position in Tech.

Coating Applicators, Inc. v. U.S. Fid. & Guar. Co., 157 F.3d 843 (11th Cir.

1998). In that case, the Eleventh Circuit held that the absolute pollution

exclusion did not nullify the essential coverage provided by the policies

because the policies continued to provide coverage for a wide variety of

accidents and mishaps associated with the business of the insured. Id. at

846.

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The facts alleged in RaceTrac’s complaint, which facts misstate the

plain terms of the ACE excess liability insurance policies, are not

“plausible” because they are clearly incorrect as shown by the policies which

are attached as exhibits to the complaint. RaceTrac is seeking a declaration

that it is entitled to insurance coverage based upon the terms of the ACE

policies. This Court should not consider misstatements of the policies’

terms when deciding whether RaceTrac’s complaint states a claim upon

which relief can be granted.

RaceTrac’s argument appears to be based upon the recent Georgia

Court of Appeals decision in Barrett v. at'l Union Fire Ins. Co., 304 Ga.

App. 314, 696 S.E.2d 326 (2010). In Barrett, the court considered whether a

lawsuit for injuries suffered by an employee of a company that installed

natural gas pipelines was dismissed properly under a commercial general

liability policy’s absolute pollution exclusion. In reversing the dismissal of

the complaint, the court in Barrett held that the policy’s absolute pollution

exclusion did not apply because (a) natural gas was not a pollutant within the

meaning of the policy, (b) it would violate public policy to permit the insurer

to sell a liability policy containing an exclusion for damages from natural

gas when the insured’s main product was natural gas, and (c) there was a

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 Case 1:10-cv-02162-WSD Document 11-1 Filed 11/01/10 Page 21 of 27

question about whether the injuries arose from the natural gas discharge or

dispersal, rather than from the negligence of the insured's employees. Id.

The decision in Barrett is distinguishable from this case and therefore

not controlling. As an initial matter, Barrett involved a claim for physical

injuries caused by the negligence of the gas company’s employees, rather

than a claim for physical injuries caused by a pollutant as defined by the

policy, as in this case. The court in Barrett held,

As a threshold matter…the Barretts have not alleged that

Barrett was “poisoned” by natural gas or that he was harmed
merely by the release of natural gas from the tap. Rather, their
complaint asserts that because of the negligence of AGL
employees, the natural gas released from the tap was allowed to
accumulate, thereby creating an oxygen-deprived atmosphere,
and that it was the lack of oxygen that injured Barrett.

Id. at 318-319. By way of contrast, the Bunns and Williams lawsuits allege

physical injuries caused by benzene vapors. [Doc. 1, ¶¶ 45-46].

The decision in Barrett also is distinguishable from this case because

it involved a substance, natural gas, which was not a pollutant within the

meaning of the policy. The court in Barrett noted:

There is nothing in the current record showing that natural gas

is generally defined or viewed as an irritant or contaminant.
Indeed, the allegations of the complaint indicate that exposure
to natural gas is not necessarily dangerous and does not
automatically result in injury so long as the supply of oxygen is
not impeded. In the absence of any such evidence, we have no
basis for concluding that natural gas is a pollutant under the
terms of the Policy.

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 Case 1:10-cv-02162-WSD Document 11-1 Filed 11/01/10 Page 22 of 27

Id. at 319.

Unlike natural gas, benzene specifically is designated in The Federal

Clean Air Act as a “hazardous air pollutant,” 42 U.S.C. § 7412(b)(1), and is

included in the EPA’s List of Hazardous Substances as a “toxic pollutant,”

40 C.F.R. § 401.15(8), and therefore it falls within the absolute pollution

exclusion in the ACE excess liability insurance policies.

The decision in Barrett is therefore distinguishable from this case

because, in Barrett, regardless of whether natural gas was a pollutant within

the meaning of the policy, the record did not show that the injuries arose out

of the “discharge, dispersal, seepage, migration, release, or escape of”

natural gas as required by the policy’s pollution exclusion. Id. at 320-321.

In contrast, RaceTrac’s complaint alleges that the injuries to the Bunns and

Williams plaintiffs arose from benzene. [Doc. 1, ¶¶ 45-46] This clearly

falls within the ACE excess liability insurance policies’ absolute pollution

exclusion.

The court in Barrett utterly failed to evaluate whether the legislature

had statutorily mandated the inclusion of coverage for pollution, which is

necessary to establish that a policy exclusion for pollution is against Georgia

public policy. Instead, the court in Barrett summarily concluded without

applying the criteria set by Georgia law that it “would violate the public

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 Case 1:10-cv-02162-WSD Document 11-1 Filed 11/01/10 Page 23 of 27

policy of Georgia to allow [the insurer] to sell a liability policy to cover

AGL whose main product is natural gas, which policy contains an exclusion

for damages resulting from such natural gas.” Id. at 319.

The holding in Barrett was premised upon the misapplied rule that

“Georgia public policy disfavors insurance provisions that ‘permit[] the

insurer, at the expense of the insured, to avoid the risk for which the insurer

has been paid’ and for which the insured reasonably expects it is covered.”

Id., quoting Davis v. Kaiser Foundation Health Plan, Inc., 271 Ga. 508,

510, 521 S.E.2d 815 (1999). However, the decision is Davis was based

upon a specific statute, O.C.G.A. § 33-24-56.1, which caused the court in

Davis to hold that, “It is now clear that the public policy of this State will not

permit insurers to require an insured to agree to a provision that permits the

insurer, at the expense of the insured, to avoid the risk for which the insurer

has been paid by requiring the insured to reimburse the insurer whether or

not the insured was completely compensated for the covered loss.” Davis,

supra (Emphasis added).

In the case at hand, unlike Davis, no Georgia statute requires liability

insurance coverage for injuries resulting from pollution. Thus, the ACE

pollution exclusions are not contrary to public policy.

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 Case 1:10-cv-02162-WSD Document 11-1 Filed 11/01/10 Page 24 of 27

In summary, RaceTrac’s complaint fails to state a claim upon which

relief can be granted with respect to RaceTrac’s allegation that the ACE

excess liability insurance policies violate Georgia public policy. As a matter

of Georgia law, the absolute pollution exclusion contained in the ACE

excess policies is not against the public policy of Georgia, and no plausible

set of facts has been set forth by RaceTrac that prove otherwise.

III. COCLUSIO

The complaint filed by RaceTrac against ACE fails to state a claim

upon which relief can be granted. Plaintiff’s complaint against ACE does

not set forth facts stating a claim for relief that is plausible on its face

because the absolute pollution exclusions in the ACE excess liability

insurance policies preclude coverage for the claims asserted in the Bunns

and Williams lawsuits. The pollution exclusions are valid and enforceable,

and they do not violate the public policy of the state of Georgia.

WHEREFORE, ACE American Insurance Company respectfully

requests that this Court (1) grant this motion to dismiss; (2) dismiss

plaintiff’s complaint; and (3) grant such other and further relief as is just and

appropriate.

Respectfully submitted this 1st day of November, 2010.

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 Case 1:10-cv-02162-WSD Document 11-1 Filed 11/01/10 Page 25 of 27

/s/ Wayne D. Taylor

WAYNE D. TAYLOR
Georgia State Bar No. 701275
RUTH M. PAWLAK
Georgia Bar No. 045810

MOZLEY, FINLAYSON & LOGGINS LLP

One Premier Plaza, Suite 900
5605 Glenridge Drive
Atlanta, Georgia 30342
Tel: (404) 256-0700
Fax: (404) 250-9355

Attorneys for Defendant

ACE American Insurance Company

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 Case 1:10-cv-02162-WSD Document 11-1 Filed 11/01/10 Page 26 of 27

CERTIFICATIO PURSUAT TO RULE 7.1

Counsel for defendant ACE American Insurance Company hereby

certifies that this pleading has been prepared using Times New Roman 14

point, one of the font and point selections approved by the Court in L.R.

5.1C.

Respectfully submitted this 1st day of November, 2010.

/s/ Ruth M. Pawlak

WAYNE D. TAYLOR
Georgia Bar No. 701275
RUTH M. PAWLAK
Georgia Bar No. 045810

MOZLEY, FINLAYSON & LOGGINS, LLP

One Premier Plaza, Suite 900
5605 Glenridge Drive
Atlanta, Georgia 30342
Tel: (404) 256-0700
Fax: (404) 250-9355

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 Case 1:10-cv-02162-WSD Document 11-1 Filed 11/01/10 Page 27 of 27

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION

RACETRAC PRETROLEUM, INC., )

A Georgia Corporation, )
) CIVIL ACTION FILE
Plaintiff, ) NO. 1:10-cv-2162-WSD
)
vs. )
)
ACE AMERICAN INSURANCE )
COMPANY, a Pennsylvania )
corporation, )
)
Defendant. )

CERTIFICATE OF SERVICE

I hereby certify that I electronically filed the forgoing DEFEDAT

ACE AMERICA ISURACE COMPAY'S MOTIO TO
DISMISS COMPLAIT using the Court’s CM/ECF System, which will
automatically send a copy of same to the following counsel of record:
Michael S. French, Esq.
Ryan D. Watstein, Esq.
WARGO & FRENCH LLP
1170 Peachtree Street N.E., Suite 2020
Atlanta, Georgia 30309
mfrench@wargofrench.com
rwatstein@wargofrench.com
This 1st day of November, 2010.

/s/ Ruth M. Pawlak

RUTH M. PAWLAK
Georgia Bar No. 045810
rpawlak@mfllaw.com

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