Grey Rock’s investigation uncovered that the oil contamination could be traced back to one of its providers, Phoenix Oil and Firebird Bulk Carriers. The oil trader wasted no time in informing Liberty Mutual of this loss and even took measures to mitigate the damage by selling the contaminated oil at distressed prices.
However, Grey Rock claims that Liberty Mutual failed in its obligations by not conducting a timely investigation and refusing to make a swift decision regarding coverage and payment.
The Basis for Denial
Liberty Mutual’s denial of coverage was grounded in the perils and property exclusion clause. This clause specifically precludes coverage for “loss or damage due to any process or while the property is actually being worked upon.”
Grey Rock countered, alleging that Liberty Mutual’s interpretation of the term “process” is overly restrictive, which led to the denial of their contamination-related claims. Grey Rock urged a broader reading of the exclusion clause, arguing that it should not extend to mere storage and mixing of oils in tanks, as it would render the entire policy contradictory.
The Nature of the Event
Grey Rock emphatically rejected Liberty Mutual’s argument that the oil contamination was caused by an inherent defect or latent vice. To substantiate their claim, they cited lab analysis reports demonstrating that the oil was uncontaminated before being introduced to Phoenix oil.
