Most of us don’t give much thought to contaminated gasoline and the tremendous property damage it can cause to vehicle engines and other equipment. But when an insurance company must pay out tens of thousands of dollars as a result of tainted fuel, all thoughts must immediately turn to subrogation.
One question which precedes any claim payments for tainted fuel damage is whether damage caused by contaminated gas covered by automobile or marine insurance? Mechanical breakdowns are never covered by insurance. Clearly, in order for damage from contaminated gas to be covered, you must at least carry collision and comprehensive coverage in order to be covered. But your boat, equipment, or vehicle wasn’t in a collision—so an insured won’t be able to claim under his collision insurance. Comprehensive coverage, on the other hand, does cover your vehicle for certain situations that are the result of “other than collision.” It usually comes into play in cases of theft, fire, glass breakage and vandalism. but will also usually cover a few other types of situations — it depends upon the specific terms of your car insurance policy. An insurance company could take the position that such damage is a mechanical issue which wasn’t caused by a listed covered peril. The policy might even contain language saying, “there is no coverage for fuel-related issues.” An insured might be covered but he may have to provide the insurance company with specific details about where the gasoline was purchased and possibly even some chemical testing to prove that it was, in fact, contaminated. Once a claim is paid, however, all eyes turn toward the subrogation department.
There are a myriad of different types of fuel contamination. Abrasives are one of the most damaging contaminants and consist of dust and/or dirt which can corrode and degrade engines quickly. Asphaltenes are hard, insoluble particles less than 2 microns in size, and emerge because of changes in temperature and oxidation of gas. They normally appear as sludge in the bottom of your gas tank and can collect and block engine filters. While fuels are “sterile” after they are initially refined, they frequently become contaminated with microbes that are ever-present in air and water. The microbes living in middle distillate fuels include bacteria, yeasts, and fungi. As these microorganisms grow, they form a cell-based matter known as biomass, which can clog fuel filters and produce acidic by-products that cause structural metal corrosion of tanks.
Water is one of the most common types of contaminants. It results from condensation while storing fuel, rainwater, or inadequate pipes or seals. Water in the gas tank attracts and feeds bacteria. Emulsified water is the most damaging of all and occurs when the volume of water is beyond the point of saturation and has already entered the fuel system. The low-end limit of water in fuel is 0.05%. When a gas station’s fuel supply is contaminated with unacceptable amounts of water, the culprit could be any one of several things. Water could enter during the delivery of the gasoline and transfer to the underground storage tank (UST). A “spill bucket” is receptacle buried in the ground at the end of the main drop tube, which traps any excess fuel remaining in the truck’s hose once the transfer is complete and the hose is disconnected from the fill adapter cap. The product captured in it can then be flushed inwards to the storage tank via an internal valve. But if there is water in the spill bucket; it may well end up in the UST.
The delivery of gasoline is an art that is governed by a number of detailed rules and regulations, and which requires detailed record-keeping. For example, in Wisconsin liquid fuel wholesalers/transporters are required by law to document the following:
- The receipt date. Wis. Admin. Code § ATCP 94.330(2).
- Name or grade of fuel. Wis. Admin. Code § ATCP 94.300(3)(a).
- Quantity of fuel delivered. Wis. Stat. Ch. § 98.246(2).
- Certification of automotive fuel rating for deliveries to a retail outlet. Certification of automotive fuel rating for deliveries to a retail outlet as Wis. Admin. Code § ATCP 94.300(3)(a).
These records must be kept for ten (10) years. There must also be a delivery ticket printed from the meter’s ticket printer for any gasoline, kerosene, fuel oil, diesel fuel, or alternative fuels.
The laws differ from state to state; but gasoline purchased from a gas station is a defective product and should be covered by a state’s product liability laws. It will be the subrogated insurance company’s responsibility to prove that the fuel was tainted at the time of purchase (as opposed to being contaminated while in the vehicle) and that the contamination caused the covered damage.
When damage to an automobile, airplane, boat, or other motorized equipment is suspected to have been caused by tainted fuel, the subrogation professional must immediately arrange for, obtain, and document the chain of custody of fuel samples from the vehicle and the suspected source. These samples must be promptly tested and documented. Two common types of tests for tainted fuel are (1) CFU Growth Tests, and (2) Immunoassay antibody testing. The former can be performed on-site or off-site but can take up to a week or more to obtain the results. The latter is a fast, on-site test with no equipment required.
Contaminated gas can also originate at the refinery and not be the fault of the gas station. The subrogated carrier will have the burden of proving how, when, and where the gas became contaminated—no small feet given that the instrumentalities of contamination are all within the exclusive control of the refinery, the delivery company, and the gas station.
TAKING SUBROGATION ACTION
Subrogation professionals should immediately put all suspected tortfeasors on notice and contact the state authority responsible for overseeing bad fuel, In Wisconsin, for example, that would be the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP). They will conduct an investigation to determine if the water at the bottom of the tank exceeds state requirements, phase separation has occurred in an ethanol gasoline blend tank, or if there is an unknown source of contaminated fuel. If so, the DATCP Weights and Measure official must supervise the pump out, sample and test the fuel before fuel sales can resume after a pump out and investigate and ensure elimination of the source of water or other contaminate. Such action can often provide the subrogated carrier with the public reports necessary to meet its burden of proof.
Vehicle engines can be damaged by a number of causes other than bad gas. Therefore, it is also important to save all damaged truck parts, locate and immediately contact a fuel contamination expert, and possibly even an automotive expert. Take hundreds of photographs or have your expert take them for you. Early and thorough investigation is the key. If retained quickly, your fuel expert may be able to participate in onsite analysis and testing if brought on board early enough. He or she will ensure the proper collection and preservation of fuel samples in approved containers per industry standards. They will also participate in the following:
- Collection, documentation, and preservation of evidence,
- Examination and testing items involved in the litigation,
- Professional evaluation of technical data compiled by authorities,
- Reporting of opinions by technical experts,
- Review of the opposition’s expert’s opinion,
- Preparation and delivery of deposition, and
- Trial preparation and expert testimony
ASTM D975 is the Standard Specification for Diesel Fuel Oils. It is not one test, but rather, it is the specification that describes 13 tests and their acceptable limits, which a diesel fuel must meet at the time of delivery. ASTM currently stands for ASTM International but was originally an acronym for American Society for Testing and Materials. ASTM is an organization that defines and publishes technical standards related to the quality of materials that can be used in the manufacturing of various products and pieces of equipment.
Proving that contaminated gas was the cause of the engine damage is also critical, and may require engaging an automotive expert with a background in mechanical engineering or automotive engineering. Most fuel contamination claims will already involve a repair shop, dealership, or other automotive repair facility whose written reports might already document the damage caused by the bad fuel. But it is important to make certain that this person is qualified to provide an opinion under oath and in court and has physically reviewed the vehicle in question. Always assume your case will end up in front of a judge or jury and it is critical that the expert you choose will not be disqualified from testifying. If you have any doubts, consider engaging an engine failure expert who can rely on the observations of the garage mechanics who actually inspected the vehicle and its components.
Involve subrogation counsel immediately if the claim is going to be sizeable. All receipts for repairs, parts, towing, hotel, rental, etc. should be retained in the claim file and passed on to subrogation counsel. Be prepared to spend more time on the subrogation side of the loss than on the claims side. Anything less could jeopardize your right of recovery.
Subrogation opportunities in bad fuel cases are often overlooked or not pursued because appear wearing overalls, carrying a lunch pail, and looking like hard work. For questions about contaminated fuel subrogation, contact Ashton Kirsch at firstname.lastname@example.org.
Ashton T. Kirsch is an insurance litigation attorney and shareholder with the law firm of Matthiesen, Wickert & Lehrer, S.C. Ashton has been with MWL’s Hartford office since 2015, concentrating his practice on litigation of subrogation cases involving large loss casualty, commercial auto, transportation and cargo, and workers’ compensation. He has built and grown the MWL commercial auto and cargo/transportation group into the thriving sector of our firm’s subrogation practice.