RINs Were Not Property Covered by Policies, Illinois District Court Concludes

A federal district court in Illinois has ruled that “renewable identification numbers” (“RINs”) were not property covered by various insurance policies issued to a company that had purchased biodiesel fuel with RINs.

The Case

Superior Fuels, Inc., alleged in the lawsuit that it filed against e-Biofuels, LLC, that it had purchased biodiesel fuel from e-Biofuels that was purported to be B100 fuel with RINs and that it sold the fuel and RINs to its own customers. Superior Fuels asserted that the U.S. Environmental Protection Agency (“EPA”) subsequently deemed a series of RINs attached to the purchased biofuel invalid or fraudulent, and that Superior Fuels received claims from its own customers seeking compensation for the invalidated RINs.

Superior Fuels sought coverage for its customers’ claims from its insurer, Nationwide Agribusiness Insurance Company. Nationwide declined to defend Superior Fuels, and Superior Fuels filed a declaratory judgment action.

Nationwide moved for summary judgment, arguing that it owed no duty to defend or indemnify Superior Fuels with respect to the sale of the invalidated RINs.

The District Court’s Decision

The district court granted Nationwide’s motion for summary judgment.

In its decision, the district court explained that RINs were the “currency” of the federal renewable fuel standard program and that they could be bought, sold, or traded separately or with the batch of fuel to which they were assigned. Fuel producers, the district court added, generated RINs and market participants traded RINs by entering a transaction record in the EPA’s system, which then was checked by the EPA before the RINs were transferred between accounts.

The district court ruled that, because RINs represented intangible property, RINs were not “covered property” under Nationwide’s commercial property policy. Rather, it determined, they fell within the definition of “securities.”

Accordingly, it declared, the claims against Superior Fuels were beyond the coverage provided by Nationwide’s commercial property policy.

For the same reason, the district court also found that Nationwide had no obligation to defend Superior Fuels under the commercial general liability and commercial liability umbrella insurance policies that had been issued by Nationwide. The district court ruled that “property damage” under these policies excluded intangible property and did not apply to RINs.

The case is Superior Fuels, Inc. v. Nationwide Agribusiness Ins. Co., No. 14-cv-1420-SMY-PMF (S.D. Ill. Aug. 16, 2016).