A storied Washington hotel’s insurer faces a federal lawsuit over millions in alleged unpaid claims after a catastrophic gasoline leak forced the property’s closure.
Marcus Whitman Holdings LLC, owner of the Marcus Whitman Hotel in Walla Walla, has filed a complaint against The Hanover American Insurance Company, alleging the insurer refused to pay more than $2.8 million in covered losses after a sudden environmental event closed the hotel. The complaint, filed in the United States District Court for the Western District of Washington, details events that began on Sept. 14, 2023, when explosive and toxic gasoline fumes filled the hotel, prompting an evacuation.
According to the complaint, the gasoline originated from a defective underground storage tank at a gas station across the street. Investigators found the leak resulted from faulty installation, years of truck traffic, and dipstick strikes. The hotel was evacuated for an extended period, with Marcus Whitman Holdings alleging it incurred over $1.6 million in extra expenses to contain the fumes and make the hotel safe to reopen. The complaint states business income losses were estimated at $2,073,308 by the plaintiff’s forensic accountant.
Marcus Whitman Holdings alleges it promptly sought coverage under its commercial property insurance policy with Hanover, Policy No. ZZ2 J2655892 02. The complaint states Hanover acknowledged that at least one of the causes of the loss was covered and agreed to provide coverage under the policy. However, Hanover paid only $704,529 for business income losses and $125,000 for extra expenses, citing sublimits of $100,000 for pollutant cleanup and removal and $25,000 for emergency evacuation costs. The plaintiff disputes these limitations, arguing that the policy’s primary coverage grant should apply to the full losses.
The complaint notes that Hanover’s forensic accountant, J.S. Held, estimated the business income loss at $704,529, while the plaintiff’s forensic accountant, Tiffany Couch at Accuity Forensics, estimated the loss at $2,073,308. This left, according to the complaint, a shortfall of $1,368,779 for business income losses and $1,486,371 for extra expenses.
Marcus Whitman Holdings further alleges Hanover breached its duty of good faith and fair dealing by conducting an unreasonable investigation, unreasonably delaying its coverage decision, unreasonably denying coverage, improperly applying policy terms, failing to fully disclose available policy benefits and coverages, placing its own financial interests ahead of Marcus Whitman’s, failing to comply with the Washington Administrative Code, and refusing to participate in good-faith mediation after a request was made.
The complaint asserts violations of the Washington Insurance Fair Conduct Act and the Consumer Protection Act, seeking declaratory judgment, damages, enhanced damages, and attorney fees. It references Washington’s public policy favoring mediation in environmental insurance disputes and the state’s “paramount interest” in ensuring insurance coverage remains available for environmental claims.
All allegations remain to be proven in court, and no final decision has been made.
