Wilson Mutual Insurance Company v. Robert Falk

2014 WI 136
SUPREME COURT OF WISCONSIN
CASE NO.: 2013AP691 & 2013AP776
COMPLETE TITLE: Wilson Mutual Insurance Company,
Plaintiff-Respondent-Petitioner,
v.
Robert Falk and Jane Falk,
Defendants-Appellants,
State of Wisconsin Department of Natural
Resources, Lee
Laatsch, Michael Jante, Jessica Jante, Ruth
Hetzel, Jeff
Wiedmeyer, Kimber Wiedmeyer, Paul Lorge, Tammy
Lorge, Paul
Wilkins, Addicus Jante and Trilogy Health
Insurance Inc.,
Defendants.
------------------------------------------------
Wilson Mutual Insurance Company,
Plaintiff-Respondent-Petitioner,
v.
Robert Falk, Jane Falk, State of Wisconsin
Department of
Natural Resources, Lee Laatsch, Ruth Hetzel,
Paul Wilkins
and Trilogy Health Insurance, Inc.,
Defendants,
Michael Jante, Jessica Jante, Jeff Wiedmeyer,
Kimber Wiedmeyer, Paul Lorge, Tammy Lorge and
Addicus Jante,
Defendants-Appellants.
REVIEW OF A DECISION OF THE COURT OF APPEALS
(Reported at 352 Wis. 2d 461, 844 N.W.2d 380)
(Ct. App. 2014 – Published)
PDC No.: 2014 WI App 10
OPINION FILED: December 30, 2014
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: September 12, 2014
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Washington
JUDGE: Todd K. Martens
JUSTICES:
CONCURRED: BRADLEY, J., concurs. (Opinion filed.)
DISSENTED: ABRAHAMSON, C.J., dissents. (Opinion filed.)
NOT PARTICIPATING: PROSSER, J., did not participate.
ATTORNEYS:
For the plaintiff-respondent-petitioner, there were briefs
by Ryan R. Graff and Nash, Spindler, Grimstad & McCracken LLP,
Manitowoc. Oral argument by Ryan R. Graff.
For defendants-appellants Robert and Jane Falk, there was a
brief by Ronald R. Ragatz and DeWitt Ross & Stevens S.C.,
Madison. Oral argument by Ronald R. Ragatz.
For defendants-appellants-respondents Michael Jante,
Jessica Jante, Addicus Jante, Jeff Wiedmeyer, Kimber Wiedmeyer,
Paul Lorge, and Tammy Lorge, there was a brief by Ryan J. Hetzel
and Hetzel & Nelson, LLC, West Bend. Oral argument by Ryan J.
Hetzel.
An amicus curiae brief was filed by Laura A. Foggan and
Wiley Rein LLP, Washington, D.C.; and Robert C. Burrell, Joshua
B. Cronin, and Borgelt, Powell, Peterson & Frauen, S.C.,
Milwaukee, on behalf of Complex Insurance Claims Litigation
Association.
An amicus curiae brief was filed by Timothy M. Barber and
Axley Brynelson LLP, Madison, on behalf of Wisconsin Insurance
Alliance.
2
2014 WI 136
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2013AP691 & 2013AP776
(L.C. No. 2011CV1448)
STATE OF WISCONSIN : IN SUPREME COURT
Wilson Mutual Insurance Company,
Plaintiff-Respondent-Petitioner,
v.
Robert Falk and Jane Falk,
Defendants-Appellants,
State of Wisconsin Department of Natural FILED
Resources, Lee
DEC 30, 2014
Laatsch, Michael Jante, Jessica Jante, Ruth
Hetzel, Jeff Diane M. Fremgen
Clerk of Supreme Court
Wiedmeyer, Kimber Wiedmeyer, Paul Lorge, Tammy
Lorge, Paul
Wilkins, Addicus Jante and Trilogy Health
Insurance Inc.,
Defendants.
REVIEW of a decision of the Court of Appeals. Reversed and
cause remanded.
No. 2013AP691 & 2013AP776
¶1 MICHAEL J. GABLEMAN, J. We review a published
decision of the court of appeals1 reversing the Washington County
circuit court's order granting declaratory judgment in favor of
Wilson Mutual Insurance Company ("Wilson Mutual").2 The circuit
court concluded that Wilson Mutual had no duty to defend or
indemnify Robert and Jane Falk ("the Falks") against allegations
that in 2011 they negligently spread manure3 on their property
and thereby polluted their neighbors' wells because the Wilson
Mutual policy contained an exclusion for pollution.4 The court
of appeals reversed, concluding that a reasonable farmer would
consider cow manure to be "liquid gold" and not a pollutant when
applied to a farm field. Wilson Mut. Ins. Co. v. Falk, 2014 WI
App 10, ¶¶1, 3, 352 Wis. 2d 461, 844 N.W.2d 380.
1
Wilson Mut. Ins. Co. v. Falk, 2014 WI App 10, 352 Wis. 2d
461, 844 N.W.2d 380.
2
The Honorable Todd K. Martens, presiding.
3
The injured parties further alleged that nitrates and
bacteria from the cow manure were also found in their wells.
4
The circuit court concluded Wilson Mutual had no duty to
defend or indemnify the Falks because "[a] reasonable person in
the position of the Falks would understand cow manure to be
waste," and thus the pollution exclusion excluded coverage. The
circuit court further concluded (1) the Farm Chemicals Liability
Endorsement did not provide coverage because the endorsement was
designed to cover injury to property caused by chemicals, and
manure is not a chemical; (2) the endorsement "covers only
physical injury to property;" thus, "it would not cover any
injures to Addicus Jante" and would not cover "contamination of
water in the wells" because the policy excludes coverage from
loss of use damages;" and (3) "even if contamination of well
water did qualify as physical injury to property" the "costs of
clean up, new wells, replacement water, [and] remediation are
all the types of costs specially covered by the" exclusion.
2
No. 2013AP691 & 2013AP776
¶2 Three issues are presented for our consideration:
1) whether a pollution exclusion in Wilson Mutual's General Farm
Coverage Liability policy excludes coverage for harm caused by
the seepage of cow manure into wells; 2) whether the Farm
Chemicals Limited Liability Endorsement provides coverage for
physical injury to property caused by the seepage of cow manure
into wells; and 3) whether the incidental coverages section of
Wilson Mutual's General Farm Coverage Liability policy provides
indemnity coverage for and a duty to defend against harm caused
by the seepage of cow manure into wells.
¶3 We hold that the pollution exclusion clause in Wilson
Mutual's General Farm Coverage Liability policy issued to the
Falks unambiguously excludes coverage for well contamination
caused by the seepage of cow manure. First, we conclude that
cow manure falls unambiguously within the policy's definition of
"pollutants" when it enters a well. Second, we conclude the
Farm Chemicals Limited Liability Endorsement likewise excludes
coverage for "physical injury to property" resulting from
pollutants. Finally, we conclude that the "Damage to Property
of Others" clause under the incidental coverages section
provides incidental coverage up to $500 for each unique well
that has allegedly been contaminated by the Falks' manure, and
Wilson Mutual has a duty to defend. Accordingly, the decision
of the court of appeals is reversed, and we remand to the
circuit court for further proceedings consistent with our
holding.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
3
No. 2013AP691 & 2013AP776
¶4 The Falks are owners and operators of a dairy farm in
West Bend, Wisconsin, located in Washington County. Paul
Wilkens, Karen Wilkens, Lee Laatsch, Ruth Hetzel, Michael Jante,
Jessica Jante, Addicus Jante, James Wiedmeyer, Kim Wiedmeyer,
Paul Lorge, and Tammy Lorge (collectively the "injured parties")
are all neighbors of the Falks.
¶5 In early 2011, the Falks spread liquid cow manure onto
their farm fields for the purpose of fertilization. In an
attempt to safely apply the manure, the Falks obtained a
nutrient management plan prepared by a certified crop agronomist
and approved by the Washington County Land and Water
Conservation Department.
¶6 In a letter dated May 23, 2011, the Wisconsin
Department of Natural Resources ("DNR") informed the Falks it
had received several well contamination complaints from the
Falks' neighbors. The DNR investigated the matter and concluded
that manure from the Falks' farm leeched into and contaminated
wells owned by the injured parties. The contamination made the
injured parties' private wells unusable and the water
undrinkable. The injured parties alleged that manure, nitrates,
and bacteria, including E. coli,5 seeped into their wells.
5
"Escherichia coli (abbreviated as E. coli) are a large and
diverse group of bacteria. Although most strains of E. coli are
harmless, others can make you sick. Some kinds of E. coli can
cause diarrhea, while others cause urinary tract infections,
respiratory illness and pneumonia, and other illnesses." E.
Coli (Escherichia coli), Ctrs. for Disease Control,
http://www.cdc.gov/ecoli/ (last visited Oct. 15, 2014) (emphasis
omitted).
4
No. 2013AP691 & 2013AP776
Additionally, Addicus Jante, a minor, claimed that he contracted
bacterium avium6 from drinking the contaminated water and, as a
result, was hospitalized and underwent surgery.
¶7 The DNR used grant money to provide temporary clean
water to Laatsch and Hetzel and to replace their wells. The DNR
subsequently requested reimbursement from the Falks for these
expenses. The Lorges, Jantes, and Wiedmeyers did not qualify
for a DNR grant, and had to pay out of pocket. The Wilkens paid
out of pocket to replace their well and do not seek repayment
from the Falks.
¶8 Wilson Mutual sold two farmowner policies to the
Falks, the first insuring the period from April 10, 2010, to
April 10, 2011, and the second insuring the period from April
10, 2011, to April 10, 2012. The policies were identical in all
material respects and we therefore will refer to the policies
collectively as "the Wilson Mutual policy." The Wilson Mutual
policy was titled: "Personal Liability Coverage (Farm)" and was
designed for owners and operators of farms.
¶9 The Wilson Mutual policy excluded general liability
coverage for both "bodily injury" and/or "property damage"
"which results from the actual, alleged, or threatened
discharge, dispersal, seepage, migration, release, or escape of
6
Bacterium avium is a pulmonary disease. Mycobacterium
avium Complex, Ctrs. for Disease Control, (Oct. 12, 2005)
http://www.cdc.gov/ncidod/dbmd/diseaseinfo/mycobacteriumavium_t.
htm.
5
No. 2013AP691 & 2013AP776
'pollutants' into or upon land, water, or air." The policy
stated:
"We" [Wilson Mutual] do not pay for a loss if one or
more of the following excluded events apply to the
loss, regardless of other causes or events that
contribute to or aggravate the loss, whether such
causes or events act to produce the loss before, at
the same time as, or after the excluded event.
. . .
l. "bodily injury" or "property damage" which results
from the actual, alleged, or threatened discharge,
dispersal, seepage, migration, release, or escape of
"pollutants" into or upon land, water, or air . . .
¶10 "Pollutant" is defined earlier in the policy as: "any
solid, liquid, gaseous, thermal, or radioactive irritant or
contaminant, including acids, alkalis, chemicals, fumes, smoke,
soot, vapor, and waste. 'Waste' includes materials to be
recycled, reclaimed, or reconditioned, as well as disposed of."
¶11 In addition to general liability coverage, the Wilson
Mutual policy also included an endorsement for "Farm Chemicals
Limited Liability" and an "Incidental Coverages" section.
¶12 The Farm Chemicals Endorsement reads, in relevant
part:
Farm Chemicals Limited Liability. "We" pay those sums
which an "insured" becomes legally obligated to pay as
damages for physical injury to property if:
1. The injury is caused by the discharge, dispersal,
release, or escape of chemicals, liquids, or gases
into the air from the "insured premises". The injury
must be caused by chemicals, liquids, or gases that
the "insured" has used in the normal and usual
"farming" operation; and
6
No. 2013AP691 & 2013AP776
2. The chemicals, liquids, or gases have not been
discharged, dispersed, or released from an aircraft.
. . .
Physical injury does not include indirect or
consequential damages such as loss of use of soil,
animals, crops, or other property or loss of market.
This coverage does not apply to physical injury to
property arising out of "farming" operations that are
in violation of an ordinance or law.
This coverage does not apply to any loss, cost, or
expense arising out of any requests, demands, orders,
claims, or suits that the "insured" or others test
for, monitor, clean up, remove, contain, treat,
detoxify, neutralize, or in any way respond to or
assess the effects of pollutants, chemicals, liquids,
or gases.
¶13 "Damage to Property of Others" under the incidental
coverages section reads, in relevant part:
1. Damage to Property of Others—Regardless of an
"insured's" legal liability, "we" pay for property of
others damaged by an "insured", or "we" repair or
replace the property to the extent practical, with
property of like kind or quality. "Our" limit for
this coverage is $500 per occurrence.
¶14 On December 5, 2011, Wilson Mutual filed a declaratory
judgment motion in the Washington County circuit court against
the Falks, the injured parties, and the DNR to determine whether
the Wilson Mutual policy covered the manure contamination
alleged by the DNR and the injured parties. On August 29, 2012,
Wilson Mutual filed a motion for declaratory judgment claiming
it had a duty to neither defend the Falks, nor provide coverage
with respect to the injured parties' well contamination. On
October 2, 2012, the Falks filed a motion for summary judgment,
arguing that Wilson Mutual had a duty to defend and indemnify
7
No. 2013AP691 & 2013AP776
the Falks against claims arising from the alleged groundwater
contamination.
¶15 On January 23, 2013, the circuit court issued a
decision and order granting Wilson Mutual's motion for
declaratory judgment, concluding that the Wilson Mutual policy
did not provide coverage for the Falks' manure contamination.
Based on dictionary definitions of "waste" and "pollutant," the
trial court determined that manure is unambiguously a pollutant.
The circuit court explained:
Indeed, [spreading manure] is a form of recycling—one
of the actions performed on "waste," a named pollutant
as defined in the Policies. . . . Many substances
serve useful purposes in many contexts, yet can be
characterized as pollutants in another. Bleach cleans
and disinfects a countertop; yet when poured into a
stream it is deadly to the fish living in the water.
DDT was an effective pesticide; yet it poisoned
raptors who ate rodents exposed to it. . . . A
reasonable person in the position of the Falks would
understand cow manure to be waste.
¶16 The circuit court also found that the Farm Chemicals
Limited Liability Endorsement did not apply because "the
Endorsement was designed to cover injury to property caused by
chemicals, not manure." "A reasonable person in the position of
the Falks would not have understood cow manure to be a
chemical." Moreover, "the endorsement covers only physical
injury to property, so it would not cover any injuries to
Addicus Jante." Likewise, "contamination of the water in the
wells does not qualify as physical injury to property, but is
instead, 'indirect or consequential damages such as loss of
use.'" Finally, the circuit court concluded "even if
8
No. 2013AP691 & 2013AP776
contamination of well water did qualify as physical injury to
property" the "costs of clean up, new wells, replacement water,
[and] remediation are all the types of costs specially covered
by the" exclusion. The circuit court did not address whether
the incidental coverages section provided coverage.
¶17 On March 22, 2013, both the Falks and the injured
parties appealed this decision. On December 11, 2013, the court
of appeals reversed the circuit court's judgment and concluded
that manure was not a pollutant. Falk, 352 Wis. 2d 461, ¶3.
The court of appeals reasoned that precedent required the court
"to 'consider the nature of the substance involved' [in order]
to determine whether a pollution exclusion precluded coverage."
Id., ¶13 (quoting Langone v. Am. Family Mut. Ins. Co., 2007 WI
App 121, ¶17, 300 Wis. 2d 742, 731 N.W.2d 334). The court
recognized that, based on the insurance policy's language alone,
manure might be a "pollutant" because manure can be both an
irritant and a contaminant. Id., ¶10. However, "[the] supreme
court has instructed that we must do more than rely on this
'undeniably broad' and 'virtually boundless' language, 'for
there is virtually no substance or chemical in existence that
would not irritate or damage some person or property.'" Id.
(quoting Hirschhorn v. Auto-Owners Ins. Co., 2012 WI 20, ¶30,
338 Wis. 2d 761, 809 N.W.2d 529).
¶18 Accordingly, the court of appeals concluded manure is
not a pollutant because manure "has long been a normal and
necessary part of the operation of a dairy farm," and to a
reasonable farmer manure is "liquid gold." Id., ¶¶1, 15. "Used
9
No. 2013AP691 & 2013AP776
improperly, both manure and milk can cause irritation or
contamination. The fact that milk can cause irritation or
contamination in certain circumstances does not equate to a
reasonable person defining milk as a 'pollutant.' A reasonable
farmer likewise does not see manure as either 'waste' or a
'pollutant.'" Id., ¶3. The court of appeals did not address
any other issues because its determination that the Falks'
manure is not a pollutant was dispositive. Id., ¶17.
¶19 Wilson Mutual petitioned this court for review, which
we granted on April 17, 2014.
II. STANDARD OF REVIEW
¶20 The interpretation of an insurance contract is a
question of law that this court reviews independently. Siebert
v. Wis. Am. Mut. Ins. Co., 2011 WI 35, ¶28, 333 Wis. 2d 546, 797
N.W.2d 484.
III. DISCUSSION
¶21 We first consider whether the pollution exclusion
contained in the Wilson Mutual policy unambiguously excludes
coverage for well contamination caused by the seepage of cow
manure, and conclude that it does. We then address whether the
Farm Chemicals Limited Liability Endorsement also excludes
coverage, and conclude that it does as well. Finally, we
examine whether the incidental coverages section provides
indemnity coverage and a duty to defend and conclude that it
does. We therefore reverse the court of appeals.
A. The Pollution Exclusion Contained in the Wilson Mutual
Policy's General Farm Liability Coverage Excludes Coverage.
10
No. 2013AP691 & 2013AP776
¶22 This case requires us to interpret the pollution
exclusion clause as it applies to manure and identify whether
manure is a pollutant within the meaning of the Wilson Mutual
pollution exclusion.
i. Applicable Legal Principles
¶23 Our goal in interpreting an insurance policy is to
ascertain and carry out the parties' intentions. Id., ¶31. "To
that end, we interpret policy language according to its plain
and ordinary meaning as understood by a reasonable person in the
position of the insured." Hirschhorn, 338 Wis. 2d 761, ¶22
(citations omitted).
¶24 Terms or phrases in an insurance contract are
ambiguous only "if they are fairly susceptible to more than one
reasonable interpretation." Id., ¶23; Peace ex rel. Lerner v.
Nw. Nat'l Ins. Co., 228 Wis. 2d 106, 121, 596 N.W.2d 429 (1999).
If policy language is ambiguous, the contract will be narrowly
construed against the insurer as its drafter.7 State Farm Mut.
Auto. Ins. Co. v. Langridge, 2004 WI 113, ¶46, 275 Wis. 2d 35,
683 N.W.2d 75. However, an ambiguity exists only where a policy
is subject to more than one reasonable interpretation. Id.,
¶48. We will not embrace any plausible interpretation created
7
This is known as the doctrine of contra proferentem.
Contra proferentem is Latin for "against the offeror," and means
that when "interpreting documents, ambiguities are to be
construed unfavorably to the drafter." Black's Law Dictionary
337 (9th ed. 2009); see also Donaldson v. Urban Land Interests,
Inc., 211 Wis. 2d 224, 230, 564 N.W.2d 728 (1997).
11
No. 2013AP691 & 2013AP776
by an insured for the purposes of litigation. Hirschhorn, 338
Wis. 2d 761, ¶23. Similarly, "[t]he mere fact that a word has
more than one dictionary meaning, or that the parties disagree
about the meaning, does not necessarily make the word ambiguous
if the court concludes that only one meaning applies in the
context and comports with the parties' objectively reasonable
expectations." Ruff v. Graziano, 220 Wis. 2d 513, 524, 583
N.W.2d 185 (Ct. App. 1998) (quoting Sprangers v. Greatway Ins.
Co., 182 Wis. 2d 521, 537, 514 N.W.2d 1 (1994)). Likewise, the
fact that different courts have come to different conclusions
regarding a term in a policy does not render a term ambiguous,
or else "only the first interpretation by a court would count."
Peace, 228 Wis. 2d at 136.
¶25 Absent a finding of ambiguity, this court will not
apply the rules of construction to rewrite the language of an
insurance policy to bind an insurer to a risk which it did not
contemplate and for which it did not receive a premium.
Hirschhorn, 338 Wis. 2d 761, ¶24. As such, an insurance
policy's pollution exclusion clause is ambiguous if a reasonable
insured could expect coverage. Langone, 300 Wis. 2d 742, ¶21.
ii. The Occurrence for Which the Falks Seek Coverage is the
Seepage of Manure into Wells.
¶26 In determining whether coverage exists under an
insurance policy, we follow three steps. First, we must examine
the facts of the insured's claim to determine whether the policy
makes an initial grant of coverage. Am. Family Mut. Ins. Co. v.
Am. Girl, Inc., 2004 WI 2, ¶24, 268 Wis. 2d 16, 673 N.W.2d 65.
12
No. 2013AP691 & 2013AP776
The analysis ends there if the policy clearly does not cover the
claim. Id. Second, if the claim triggers an initial grant of
coverage we examine whether any of the policy's exclusions
preclude coverage. Id. Third, if an exclusion precludes
coverage, we analyze exceptions to the exclusion to determine
whether any reinstate coverage. Id.
¶27 Coverage is triggered by an occurrence. We determine
an insurer's duty to defend "by comparing the allegations of the
complaint to the terms of the insurance policy." Estate of
Sustache v. Am. Family Mut. Ins. Co., 2008 WI 87, ¶20, 311
Wis. 2d 548, 751 N.W.2d 845. In doing so, we focus on the
nature rather than the merits of the claim. Id. Thus,
identifying the occurrence is important because there must be an
occurrence under the policy for there to be coverage and the
policy's language controls what constitutes an "occurrence."
Plastics Eng'g Co. v. Liberty Mut. Ins. Co., 2009 WI 13, ¶30,
315 Wis. 2d 556, 759 N.W.2d 613.
¶28 The Falks do not seek coverage for the over
application of cow manure to their farmland. Rather, the Falks
seek coverage for each unique well that has been contaminated.
Therefore, the occurrence is not the spreading of manure as
fertilizer; rather, there was an occurrence each time a unique
well was contaminated by manure.
¶29 The Wilson Mutual policy's General Farm Liability
Coverage defined an occurrence as "an accident, including
repeated exposures to similar conditions, that results in
'bodily injury' or 'property damage' during the policy period."
13
No. 2013AP691 & 2013AP776
"Bodily injury" was defined in the policy as "bodily harm to a
person and includes sickness, disease, or death." "Property
damage" was defined as "physical injury to tangible property.
This includes loss of use." The Wilson Mutual policy further
states "'we' pay, up to 'our' 'limit,' all sums for which an
'insured' is liable by law because of 'bodily injury' or
'property damage' caused by an 'occurrence' to which this
coverage applies." Thus, for there to be an occurrence, there
must be an accident resulting in "bodily injury" or "property
damage."
¶30 The Wilson Mutual policy does not define "accident."
When a policy does not define a term, we look to the term's
common, everyday meaning. U.S. Fire Ins. Co. v. Ace Baking Co.,
164 Wis. 2d 499, 505, 476 N.W.2d 280 (Ct. App. 1991). The
common definition of an "accident" is "'[a]n unexpected,
undesirable event' or 'an unforeseen incident' which is
characterized by a 'lack of intention.'" Doyle v. Engelke, 219
Wis. 2d 277, 289, 580 N.W.2d 245 (1998) (quoting The American
Heritage Dictionary of the English Language 11 (3d ed. 1992)).
The unexpected and undesirable event for which the Falks seek
coverage is well contamination.
¶31 The conclusion that the occurrence here is the well
contamination is in accord with our precedent. In Plastics, an
insurance policy defined "occurrence" as "an accident, including
continuous or repeated exposure to conditions, which results in
bodily injury or property damage neither expected nor intended
from the standpoint of the insured." Plastics, 315 Wis. 2d 556,
14
No. 2013AP691 & 2013AP776
¶12. In Plastics, the insurance company argued that the
manufacture and sale of asbestos-containing products without
warning constituted one occurrence regardless of the number of
people injured by the asbestos. Id., ¶29. The insured argued
there was an occurrence each time a person was exposed to the
asbestos-containing products. Id. We held the occurrence was
not the manufacture, sale, or installation of the asbestos-
containing products. Id., ¶31. Rather, we explained there was
an occurrence under the policy each time a unique person was
exposed to the asbestos because without exposure, no bodily
injury could take place. Id., ¶¶29, 31.
¶32 Wisconsin is in the jurisdictional majority in
defining an occurrence as unexpected or unintended resultant
damage.8 Indeed, Couch on Insurance states that the majority of
jurisdictions follow the rule that "[t]here is an occurrence
when the insured did not expect or intend the resultant damage."
9 Steven Plitt et al., Couch on Ins. § 127:4 (3d ed. 2008).
Here, the accident that resulted in "bodily injury" and
8
E.g., Wakefield Pork, Inc. v. Ram Mut. Ins. Co., 731
N.W.2d 154, 159 (Minn. Ct. App. 2007), review denied, (Aug. 7,
2007) (holding that where a policy defined an occurrence as
something unintentional, and the insured clearly did not intend
to harm its neighbors or their property by the pig manure odors,
which emanated from the insured's farm, the damage from the
odors was an "accident" and thus an "occurrence" under the
policy).
15
No. 2013AP691 & 2013AP776
"property damage" was the seepage of manure9 into the neighboring
wells. Seepage into the water supply was neither expected nor
intended. The Wilson Mutual policy defined an "occurrence" as
"an accident, including continuous or repeated exposure to
similar conditions, that results in 'bodily injury' or 'property
damage' during the policy period." This language is nearly
identical to that in Plastics, and we see no reason why the same
analysis should not apply here. Further, the Falks admit in
their brief that they neither "expected nor intended" their
manure to get into the groundwater. In other words, the well
contamination was an accident.10
¶33 We conclude the Wilson Mutual policy makes an initial
grant of coverage because the exposure of manure to each unique
well constituted an occurrence under the Wilson Mutual policy.
9
Manure application can cause excess nitrates to form. The
Environmental Protection Agency ("EPA") has warned that the
amount of nitrates in the ground water that result from manure
"can reach unhealthy levels. Infants up to three months of age
are particularly susceptible to high nitrate levels and may
develop Blue Baby Syndrome (methemoglobinemia), an often fatal
blood disorder." What's the Problem?, U.S. Envtl. Prot. Agency,
http://epa.gov/region9/animalwaste/problem.html (last updated
June 2, 2011) [hereinafter What's the Problem?]. The most
common pathogens of concern that can result from livestock
manure are E. Coli, campylobacter, salmonella, and
cryptosporidium. U.S. Envtl. Prot. Agency, Literature Review of
Contaminants in Livestock and Poultry Manure and Implications
for Water Quality 13, 25 (July 2013) [hereinafter Literature
Review].
10
Had the Falks sought coverage for harm to the fields as a
result of manure over-application, then the occurrence would
have been over-application on the field.
16
No. 2013AP691 & 2013AP776
Am. Girl, 268 Wis. 2d 16, ¶24. Further, as we conclude in
subsection C below, five occurrences took place: each time there
was "property damage" to a unique well, there was an occurrence.
iii. The Pollution Exclusion Bars Recovery for Manure in a Well.
¶34 After identifying the five unique occurrences, we must
determine whether an exclusion precludes coverage. Id. ("If the
claim triggers the initial grant of coverage in the insuring
agreement, we next examine the various exclusions to see whether
any of them preclude coverage of the present claim."). We need
to determine only whether manure is a pollutant at the point it
entered the injured parties' wells. The injured parties
suffered no harm until the manure seeped into their wells;
therefore, the grant of coverage arose at that point. Wilson
Mutual argues the General Farm Liability Coverage pollution
exclusion precludes coverage. When analyzing whether a
pollution exclusion precludes coverage we first must determine
whether the substance——in this case manure——is unambiguously a
pollutant within the policy's definition. Hirschhorn, 338
Wis. 2d 761, ¶25; Peace, 228 Wis. 2d at 119. We conclude that a
reasonable insured would consider manure that seeped into a well
to unambiguously be a pollutant.
¶35 Then we must determine whether the alleged loss
resulted from the "discharge, release, escape, seepage,
migration or dispersal" of the substance under the plain terms
of the pollution exclusion clause. Hirschhorn, 338 Wis. 2d 761,
¶25; Peace, 228 Wis. 2d at 119; Donaldson v. Urban Land
Interests, Inc., 211 Wis. 2d 224, 229, 564 N.W.2d 728 (1997).
17
No. 2013AP691 & 2013AP776
The circuit court implicitly found that the alleged loss so
resulted when it concluded that "the pollutant exclusion to the
Policies applies to the cow manure spread on the Falks' property
which allegedly contaminated the aquifer which supplied water to
the Defendants." The pollution exclusion could not apply
without such a finding. Peace, 228 Wis. 2d at 119; Donaldson,
211 Wis. 2d at 229. None of the parties have contested or
appealed this aspect of the circuit court's decision to either
this court, or the court of appeals; and as in Preisler v. Gen.
Cas. Ins. Co., 2014 WI 135, ¶30, __ Wis. 2d __, __ N.W.2d __,
there does not appear to be any dispute that this requirement
has been satisfied.11 See Waushara Cnty. v. Graf, 166 Wis. 2d
442, 451, 480 N.W.2d 16 (1992) (concluding that arguments not
specifically raised on appeal will not be considered or
decided).
¶36 As such, the sole disputed issue with regard to the
General Farm Liability Coverage pollution exclusion is whether
manure is a pollutant. We conclude that manure is unambiguously
a pollutant when it seeps into a well.
¶37 Like many commercial and non-commercial insurance
policies, the Wilson Mutual policy's General Farm Liability
Coverage had a pollution exclusion. The pollution exclusion
clause excludes from coverage any "bodily injury" or "property
damage" which results from the "actual, alleged or threatened
11
Further, Wilson Mutual briefed this issue at the circuit
court and neither the Falks nor the injured parties responded.
18
No. 2013AP691 & 2013AP776
discharge, dispersal, seepage, migration, release, or escape of
'pollutants' into or upon land, water, or air." The policy
defines pollutants as "any solid, liquid, gaseous, thermal, or
radioactive irritant or contaminant, including acids, alkalis,
chemicals, fumes, smoke, soot, vapor, and waste. Waste includes
materials to be recycled, reclaimed, or reconditioned, as well
as disposed of." As such, we must determine whether cow manure
falls unambiguously within the definition of "pollutants."
¶38 Whether a substance is a pollutant is evaluated from
the standpoint of a reasonable insured. Our line of pollution
exclusion cases reveals that a reasonable insured would consider
a substance to be a pollutant if (1) the substance is largely
undesirable and not universally present in the context of the
occurrence that the insured seeks coverage for; and (2) a
reasonable insured would consider the substance causing the harm
involved in the occurrence to be a pollutant.
¶39 When a substance is "universally present and generally
harmless in all but the most unusual instances," we have
concluded that the substance is not a pollutant. Donaldson, 211
Wis. 2d at 234. However, a substance can be a pollutant if the
harm is caused by "a unique and largely undesirable substance
that is commonly understood to be harmful." Hirschhorn, 338
Wis. 2d 761, ¶37.
¶40 We most recently analyzed a pollution exclusion in
Hirschhorn and concluded that a reasonable insured would view
19
No. 2013AP691 & 2013AP776
bat guano as a pollutant as guano is undesirable inside a home.12
Id., ¶¶33, 37. There, the insureds' vacation home became
pervaded with bat guano, so much so that the home had to be
demolished and rebuilt because of the "penetrating and offensive
odor emanating from the home." Id., ¶¶8-10. The policy at
issue defined "pollutant" to include irritants, contaminants,
and waste. Id., ¶5. We concluded that a reasonable insured
would understand bat guano to be a pollutant because bat guano
is a unique and largely undesirable substance that is commonly
understood to be harmful when released into a home. Id., ¶37.
The harm caused by the bat guano constituted pollution as the
bat guano (1) was a contaminant because it made the home "impure
[and] unclean;" (2) was an irritant because it could cause
"inflammation, soreness, or irritability" in a person's lungs
and skin if they were to stay in the home; and (3) was waste
because it was a combination of feces and urine that had
12
Though not addressed by this court, this was despite the
fact that bat guano can act as a beneficial fertilizer. See
Nikki Phipps, How to Use Bat Guano as a Fertilizer,
gardeningknowhow.com,
http://www.gardeningknowhow.com/composting/manures/bat-guano-
fertilizer.htm (last updated Oct. 31, 2014) ("Bat guano, or
feces, has a long history of use as a soil enricher. It is
obtained from only fruit and insect-feeding species. Bat dung
makes an excellent fertilizer. It’s fast-acting, has little
odor, and can be worked into the soil prior to planting or
during active growth.") Both bat guano and cow manure can be
repurposed for a beneficial use. Simply because a substance is
beneficial in one context does not prevent it from being a
pollutant in another. U.S. Fire Ins. Co. v. Ace Baking Co., 164
Wis. 2d 499, 505, 476 N.W.2d 280 (Ct. App. 1991).
20
No. 2013AP691 & 2013AP776
permeated into the home.13 Id., ¶¶33, 34. Thus, Hirschhorn
shows that we must view a substance in the context of the
occurrence that the insureds seek coverage for; and in doing so
we concluded that, on and in a home, bat guano was a largely
undesirable and not universally present substance that a
reasonable insured would unambiguously consider a pollutant.
Id., ¶37.
¶41 Similarly, in Peace, we concluded lead paint that had
flaked, chipped, and otherwise become dispersed from a wall in a
residential rental home was a pollutant. Peace, 228 Wis. 2d at
147-48. We concluded no reasonable insured could view flaked
lead paint in a home as anything but a pollutant based upon the
multitude of studies indicating the dangerous nature of lead
paint.14 Id. at 147. Indeed, we concluded that when lead paint
chips, flakes, or dusts off the walls of a home, it is "widely,
13
The insureds in Hirschhorn argued that a reasonable
insured would not consider bat guano to be waste because the
policy, in listing examples of irritants and contaminants,
listed industrial pollutants. Hirschhorn v. Auto-Owners Inc.
Co., 2012 WI 20, ¶35, 338 Wis. 2d 761, 809 N.W.2d 529. We
rejected that argument, explaining that pollution exclusion
clauses do not apply to only industrial type pollutants. Id.;
Peace ex rel. Lerner v. Nw. Nat'l Ins. Co., 228 Wis. 2d 106,
138-44, 596 N.W.2d 429 (1999).
14
We concluded the lead paint was a pollutant despite the
fact that lead can have a beneficial use when added to paint.
See Why Use Lead in Paint?, Royal Soc'y of Chemistry, (Aug. 21,
2007),
http://www.rsc.org/chemistryworld/news/2007/August/21080701.asp
(explaining that lead is often added to paint to increase the
paint's color, opacity, toughness, and protection against
water).
21
No. 2013AP691 & 2013AP776
if not universally, understood to be dangerous and capable of
producing lead poisoning[, as t]he toxic effects of lead have
been recognized for centuries." Id. at 137-38. As such, lead
paint that has become detached from a wall in a home is
dangerous in any quantity. Id. Those flakes, chips, and dust
particles are largely undesirable and not universally present in
a home, so any harm caused by ingesting or inhaling them is
unambiguously pollution. Id.
¶42 In Ace Baking, the court of appeals concluded that
linalool in ice cream cones was a pollutant. Ace Baking, 164
Wis. 2d at 505. In Ace Baking, linalool, a valuable ingredient
in fabric softener, contaminated ice cream cones, causing the
cones to taste like soap. Id. at 501. In response, Ace Baking
sought coverage under the insurance policy it purchased from
United States Fire. Id. at 500. The contamination occurred
because the fabric softener and ice cream cones were stored in
the same warehouse. Id. at 501. The occurrence was the
linalool "foul[ing]" Ace Baking's products, as linalool was a
unique and harmful foreign substance with respect to ice cream
cones. Id. at 505. Therefore, Ace Baking analyzed the
substance's effect on ice cream cones, not whether linalool was
beneficial in a different context. Id.
¶43 Thus, the prior pollution exclusion cases require us
to first analyze whether a substance is largely undesirable and
not universally present as to the occurrence for which coverage
is sought. Although manure may not be a pollutant when applied
to a farm field, the Falks do not seek coverage for that;
22
No. 2013AP691 & 2013AP776
rather, they seek coverage for harm done to their neighbors'
wells. In relation to a well, manure is largely undesirable,
commonly understood to be harmful, and is not universally
present. See Hirschhorn, 338 Wis. 2d 761, ¶37.
¶44 Despite the contaminating nature of manure, the Falks
and injured parties argue that to a reasonable farmer, manure is
a universally present, desirable, and generally harmless
substance. While when safely and beneficially applied, manure
may be a universally present, desirable, and generally harmless
substance on a farm field, this ignores the occurrence for which
the Falks seek coverage. In Donaldson, abnormally high carbon
dioxide levels were not a pollutant because carbon dioxide is
universally present and generally harmless in normal
concentrations in an office building. Donaldson, 211 Wis. 2d at
234. A generally benign and common substance like carbon
dioxide is not a contaminant because it is "universally present
and generally harmless in all but the most unusual instances."
Id. Thus, any harm caused by an unusually high concentration of
carbon dioxide was not unambiguously pollution. Id. Similarly
in Langone, the court of appeals concluded that abnormally high
carbon monoxide concentrations in a rental property were not a
pollutant because carbon monoxide is an omnipresent substance
that people are exposed to on a daily basis. Langone, 300
Wis. 2d 742, ¶26. Thus, any harm caused by an unusually high
concentration of carbon monoxide was not unambiguously
pollution. Id.
23
No. 2013AP691 & 2013AP776
¶45 The same cannot be said for manure. Like bat guano in
a home and lead paint chips in a home, manure is a unique and
largely undesirable substance commonly understood to be harmful
when present in a well.15 A reasonable insured would not view
15
Indeed, a reasonable insured understands the dangerous
and polluting nature of manure. Myriad sources show how
dangerous livestock manure can be. See Wis. Admin. Code NR
§ 243.01(2) (stating that improperly managed manure can cause
groundwater or surface water pollution); U.S. Envtl. Prot.
Agency, Literature Review, supra note 9, at 1 (warning that
though a resource, livestock manure can "degrade environmental
quality, particularly surface and ground water if not managed
appropriately. . . . Runoff related to manure is considered a
primary contributor to widespread nutrient water quality
pollution in the U.S."); U.S. Envtl. Prot. Agency, What's the
Problem?, supra note 9 ("When contaminants from animal waste
seep into underground sources of drinking water, the amount of
nitrate in the ground water supply can reach unhealthy levels");
R.K. Hubbard & R.R. Lowrance, U.S. Dep't of Agric., Management
of Dairy Cattle Manure, in Agricultural Utilization of
Municipal, Animal and Industrial Wastes, 92, 92 (Robert J.
Wright et al. eds., 1998) (warning by the USDA that "surface
runoff from dairy feedlots and holding areas have the highest
potential to cause water pollution [and] mismanagement in the
land application of diary cattle manure has been documented as a
cause of water pollution"); Lee Bergquist, Former DNR Regulator
Raises Concerns About Runoff From Large Dairy Operations,
Milwaukee J. Sentinel, Nov. 29, 2013
http://www.jsonline.com/news/wisconsin/former-dnr-regulator-
raises-concerns-about-runoff-from-large-dairy-operations-
b99153075z1-233855981.html ("[T]here is a 'general awareness
[among farmers] that agriculture is in fact a source of water
pollution'"). While manure is certainly beneficial when safely
applied, when it ends up in the wrong place, it pollutes.
24
No. 2013AP691 & 2013AP776
manure as universally present and generally harmless when
present in a well.16
¶46 After concluding that manure is largely undesirable,
commonly understood to be harmful, and not universally present
in a well, we next must examine whether a reasonable insured
would consider the substance causing the harm involved in the
occurrence to be a pollutant. A substance is not a pollutant
merely because it is largely undesirable and not universally
present where the occurrence happened. A pollution exclusion
bars coverage for an occurrence only if a reasonable insured
would necessarily consider the substance causing the harm
involved in the occurrence to be a pollutant under the policy.
See Donaldson, 211 Wis. 2d at 232-33; Hirschhorn, 338 Wis. 2d
761, ¶30 ("everyday incidents [should not] be characterized as
pollution.").
¶47 For example, a pollution exclusion clause would not bar
coverage for harm that results from slipping on the spilled
contents of a bottle of Drano. Donaldson, 211 Wis. 2d at 232
(quoting Pipefitters Welfare Educ. Fund v. Westchester Fire Ins.
16
While it is true that some concentration of nitrates is
commonly found in water, Basic Information about Nitrate in
Drinking Water, U.S. Envtl. Prot. Agency,
http://water.epa.gov/drink/contaminants/basicinformation/nitrate
.cfm, (last updated Feb. 5, 2014) [hereinafter Basic
Information], a high concentration of nitrates is especially
harmful. See Preisler v. Gen. Cas. Ins. Co., 2014 WI 135, ¶46,
__ Wis. 2d __, __ N.W.2d __. Further, according to the DNR,
the injured parties were exposed to potentially lethal
pollutants, and the Jantes alleged their well was contaminated
with E. coli from the manure.
25
No. 2013AP691 & 2013AP776
Co., 976 F.2d 1037, 1043 (7th Cir. 1992)). Although Drano may
"'cause, under certain conditions, bodily injury or property
damage, one would not ordinarily characterize [slipping on
Drano] as pollution.'" Id. (quoting Pipefitters, 976 F.2d at
1043). Further, while Drano may be a unique and largely
undesirable substance on a floor, that fact alone does not
transform Drano into a pollutant. In other words, in the
hypothetical Drano example, the Drano caused harm by causing
someone to slip, not by contaminating or irritating someone
through pollution. See id. (holding harm caused by inhaling
excessive carbon dioxide is not pollution because a reasonable
insured would not consider that harm to be pollution).
¶48 The Wilson Mutual policy does not define "irritant,
"contaminant," or "waste." In Hirschhorn, a nearly identical
pollution exclusion did not define these terms either.
Hirschhorn, 338 Wis. 2d 761, ¶28. As such, we looked to
definitions used in prior pollution exclusion cases. Id., ¶29.
A substance is an irritant if it causes "inflammation, soreness,
or irritability of a bodily organ or part." Peace, 228 Wis. 2d
at 122 (quoting American Heritage Dictionary, supra, at 954). A
substance is a contaminant if it "make[s] [something] impure or
unclean by contact or mixture." Id. (quoting American Heritage
Dictionary, supra, at 406).
¶49 A reasonable insured may not consider manure safely
applied on a field to be a pollutant; however, a reasonable
insured would consider manure in a well to be a pollutant. Just
because manure may be beneficial when spread on a field, does
26
No. 2013AP691 & 2013AP776
not mean it is not a pollutant. Manure is a contaminant as it
makes water impure or unclean when it comes into contact with or
mixes with water. The injured parties and the DNR allege that
the wells were contaminated and polluted by manure, bacteria,
and nitrates, requiring the drilling of new wells, as the wells
were unusable and the water undrinkable. See also Preisler, __
Wis. 2d __, ¶46 (explaining large concentrations of nitrates
make well water unusable). Further, as fecal matter, manure
fits within the ordinary definition of "waste," and waste is a
type of pollutant under the Wilson Mutual policy's General Farm
Liability Coverage. See Hirschhorn, 338 Wis. 2d, ¶¶34-35. The
Falks realize that manure has the potential to contaminate and
pollute wells, which is why they filed a nutrient management
plan, seeking to safely apply manure.17 Therefore, a reasonable
insured would consider manure to be a largely undesirable and
not universally present substance in a well, and would also
consider cow manure to be a pollutant; thus, manure is
unambiguously a pollutant under these circumstances.
¶50 The Falks and injured parties further argue that it
was the nitrates, not the manure, that caused the harm.
17
Wisconsin Admin. Code NR § 151.07(3) requires that
farmers who spread manure obtain a nutrient management plan to
"limit or reduce the discharge of nutrients to waters of the
state." Washington County further recognizes the dangerousness
of improperly stored manure: "[I]mproper management of animal
waste storage facilities, including improper land application of
stored animal waste, may cause pollution of the ground and
surface waters." Washington County Code Chapter 16.01(3)(b).
27
No. 2013AP691 & 2013AP776
However, this argument interprets the pollution exclusion so
narrowly that our adoption of it would render the exclusion
almost meaningless. Nitrates of this quantity found in a well
could not occur but for excess nitrates that had formed as the
result of manure application. U.S. Envtl. Prot. Agency, Basic
Information, supra note 16. Under a causation analysis, the
nitrates could not have seeped into the well, had the manure not
been applied. No one would look at well water contaminated by
nitrates and conclude that the well is anything but polluted.
This argument further overlooks the fact that harmful bacteria
were also found in the injured parties' wells. When manure
infiltrates a well, it renders the well impure, unclean, and
contaminates the water.18
18
Our holding that manure found in a well is a pollutant is
in accord with other jurisdictions. The New York Appellate
Division held manure in a well was a pollutant. Space v. Farm
Family Mut. Ins. Co., 652 N.Y.S.2d 357 (N.Y. App. Div. 1997).
The plaintiffs operated a dairy farm and applied liquid manure
to their fields as fertilizer. Id. at 358. Their neighbors
brought a suit for the alleged contamination of their well due
to the over-application of manure. Id. The plaintiffs'
insurance policy excluded coverage for property damage arising
out of the discharge of pollutants. Id. The plaintiffs argued a
natural organic fertilizer that has been purposely and
beneficially applied to cropland is not a pollutant. Id. The
court explained that although the plaintiffs may have been
correct that liquid manure is not a "pollutant" when properly
applied and confined to cropland, the time and place of the
manure's initial discharge or application was not relevant. Id.
The "subsequent leachate of intentionally deposited waste
materials" was the occurrence and thus the manure was a
pollutant. Id. The court explained liquid manure is a
pollutant when "the substance has leached into the groundwater
and contaminated a well." Id. Further, even though the policy
was a "special farm package" "ordinary businessmen in the
(continued)
28
No. 2013AP691 & 2013AP776
¶51 Contrary to the Falks' argument, our holding that
manure in a well is a pollutant is in accord with Ace Baking.
Ace Baking indicated that things with a beneficial use, like
linalool in fabric softener, can be pollutants when found in
other items (such as ice cream cones). Many substances have
beneficial uses when properly applied, but can still pollute.
¶52 Finally, the Falks and injured parties argue that the
well contamination is the result of an everyday activity gone
slightly, but not surprisingly, awry. Donaldson, 211 Wis. 2d at
233 (explaining that a pollution exclusion should not apply for
everyday incidents gone slightly, but not surprisingly, awry);
Langone, 300 Wis. 2d 742, ¶19 (explaining that concentrated
carbon monoxide levels were a normal condition gone awry).
Manure in a well is not an everyday incident gone slightly awry.
Like many of the Falks' arguments, this one also focuses on the
spreading of manure on to a field, which was not the occurrence.
No reasonable insured could characterize manure seepage into a
well as anything but pollution. Viewed in light of the
occurrence for which the Falks seek coverage, well contamination
is not an everyday activity gone slightly, but not surprisingly,
farming community" would understand that "damages resulting from
the application of manure to cropland may be excluded from
coverage under the policy." Id. See also Weber v. IMT Ins.
Co., 462 N.W.2d 283, 286 (Iowa 1990) (explaining hog manure that
spilled onto a road and contaminated nearby crops was
unambiguously "waste material" and a "pollutant" within the
meaning of a pollution exclusion); Wakefield Pork, Inc. v. Ram
Mut. Ins. Co., 731 N.W.2d 154 (Minn. Ct. App. 2007) (holding
that the odor from pig manure was unambiguously a pollutant).
29
No. 2013AP691 & 2013AP776
awry. A reasonable insured would therefore understand manure to
be a pollutant.19
B. The Pollution Exclusion in the Farm Chemicals Limited
Liability Endorsement Also Excludes Coverage.
¶53 We must next determine whether the Farm Chemicals
Limited Liability Endorsement provides coverage. We conclude
the endorsement does not make an initial grant of coverage for
Addicus Jante's bodily injury, and further conclude the well
contamination is excluded under this endorsement because the
Falks are being asked to respond to the effects of "pollutants."
¶54 As we noted before, "[f]irst, we examine the facts of
the insured's claim to determine whether the policy's insuring
agreement makes an initial grant of coverage. If it is clear
that the policy was not intended to cover the claim asserted,
the analysis ends there." Am. Girl, 268 Wis. 2d 16, ¶24. The
policy issued by Wilson Mutual contains an endorsement titled
"Farm Chemicals Limited Liability." The endorsement provides
coverage and will:
[P]ay those sums which an "insured" becomes legally
obligated to pay as damages for physical injury to
19
Typically, our third step is to examine whether the
exclusion has an exception: "if a particular exclusion applies,
we then look to see whether any exception to that exclusion
reinstates coverage. An exception pertains only to the
exclusion clause within which it appears; the applicability of
an exception will not create coverage if the insuring agreement
precludes it or if a separate exclusion applies." Am. Family
Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, ¶24, 268 Wis. 2d 16,
673 N.W.2d 65. Because no one argues an exception applies, we
need not address it.
30
No. 2013AP691 & 2013AP776
property if: 1. The injury is caused by the discharge,
dispersal, release, or escape of chemicals, liquids,
or gases into the air from the "insured premises".
The injury must be caused by chemicals, liquids, or
gases that the insured has used in the normal and
usual "farming" operations; and 2. The chemicals,
liquids, or gases have not been discharged, dispersed,
or released from an aircraft. [The endorsement also
explains] [t]he physical injury must be caused by an
"occurrence" during the policy period.
¶55 The endorsement's plain text covers only "physical
injury to property" (emphasis added). Thus, the endorsement
does not cover bodily injury to Addicus Jante.
¶56 We then turn to whether there is an initial grant of
coverage for the well contamination. First, we examine whether
the well contamination is physical injury to property. Wilson
Mutual argues the well contamination is loss of use, rather than
physical injury to property because the policy states
"[p]hysical injury does not include indirect or consequential
damages such as loss of use of soil, animals, crops, or other
property or loss of market." We are unconvinced and conclude
well contamination is physical injury to property. See Soc'y
Ins. v. Town of Franklin, 2000 WI App 35, ¶9, 233 Wis. 2d 207,
607 N.W.2d 342 (discussing contamination of property that
occurred due to seepage as the physical injury to property);
State v. City of Rhinelander, 2003 WI App 87, ¶¶11, 12, 263
Wis. 2d 311, 661 N.W.2d 509 (explaining that where property
damage was defined as "'injury to or destruction of tangible
property.' . . . Both the on-and off-site [groundwater]
contamination are 'property damage'"); Hellenbrand v. Hilliard,
2004 WI App 151, ¶¶33, 35, 275 Wis. 2d 741, 687 N.W.2d 37
31
No. 2013AP691 & 2013AP776
(explaining replacement damages are distinct from loss-of-use
damages). Therefore, the well contamination is physical injury
to property.20
¶57 Second, the endorsement covers physical injury to
property caused by the seepage of liquids into wells.21 Wilson
Mutual argues that, given the endorsement's title "Farm
Chemicals Limited Liability," the endorsement applies only to
farm chemicals. Although the endorsement's title does not
mention liquids, the text does and controls over the title. See
Aiello v. Vill. Of Pleasant Prairie, 206 Wis. 2d 68, 73, 556
N.W.2d 697 (1996) (explaining text controls over title when
interpreting a statute). The endorsement's plain text provides
coverage for "physical injury to property" caused by "chemicals,
liquids, or gases." Thus, the endorsement's plain text covers
liquids, which is the form in which the manure was applied, and
may trigger an initial grant of coverage.
¶58 However, that does not end the inquiry. "If the claim
triggers the initial grant of coverage in the insuring
agreement, we next examine the various exclusions to see whether
any of them preclude coverage of the present claim." Am. Girl,
268 Wis. 2d 16, ¶24.
20
It is undisputed that the injured parties claim damages,
as required by the endorsement.
21
It is also undisputed that the liquid manure was released
into the air from the insured premises using a manure spreader,
and that the liquid manure was used in normal and usual farming
operations.
32
No. 2013AP691 & 2013AP776
¶59 The Farm Chemicals Endorsement does have exclusions,
two of which Wilson Mutual contends are applicable. The first
exclusion states the coverage does not apply to "physical injury
to property arising out of 'farming' operations that are in
violation of an ordinance or law." The second provides:
This coverage does not apply to any loss, cost, or
expense arising out of any requests, demands, orders,
claims, or suits that the "insured" or others test
for, monitor, clean up, remove, contain, treat,
detoxify, neutralize, or in any way respond to or
assess the effects of pollutants, chemicals, liquids,
or gases.
¶60 The endorsement's exclusion barring coverage for a law
violation does not apply. Wilson Mutual has not shown that the
Falks violated a law, and the Falks correctly argue Wilson
Mutual bears the burden of proving that an exclusion applies.
Day v. Allstate Indem. Co., 2011 WI 24, ¶26, 332 Wis. 2d 571,
798 N.W.2d 199. Wilson Mutual cites to no authority for the
proposition that an unsupported allegation of a violation of law
triggers the law-violation exclusion in an insurance policy.
See State v. Boyer, 198 Wis. 2d 837, 842 n.4, 543 N.W.2d 562
(Ct. App. 1995) (stating an appellate court will not consider an
argument not supported by legal theory).
¶61 However, we conclude that the endorsement's pollution
exclusion bars coverage for harm incurred by the contamination
of the neighboring wells. Individual terms are not defined
under each endorsement, and unlike the term "pollutant"
elsewhere in the policy, "pollutant" in the endorsement is not
in quotation marks. The policy plainly states: "[r]efer to the
33
No. 2013AP691 & 2013AP776
Definitions for words and phrases that have special meaning.
These words and phrases are shown in quotation marks or bold
type." "Pollutants" in the endorsement is neither in quotation
marks or bold type. Thus, we conclude a reasonable insured
would not consider the term "pollutant" to have special meaning
with regard to the endorsement.
¶62 However, the lack of a definition does not render the
term ambiguous. In Ace Baking, "pollutant" was not defined in
the policy, even though it was placed inside quotation marks.
Ace Baking, 164 Wis. 2d at 502. The court looked to the
dictionary definition of "pollutant" and defined a pollutant as
"'something that pollutes: a polluting substance, medium, or
agent,' and 'pollute' as, inter alia, 'to make physically impure
or unclean.'" Id. at 505 (internal citations omitted). This
definition of pollutant is substantially similar to the
definition of pollutant analyzed above. Thus, our analysis here
is the same as above, and we conclude a reasonable insured would
consider manure to be a pollutant when found in a well.
¶63 Finally, the exclusion applies because the Falks seek
coverage for a loss, cost, and expense, that arose out of
requests and demands on behalf of the DNR and the injured
parties that the Falks respond to the effects of manure. The
words "requests," "claims," and "suits" contradict the Falks'
argument that this pollution exclusion applies only to costs
incurred as a result of remediation ordered by the government;
such requests can come from any person or entity. The phrase
"in any way respond to" is also broad enough to include costs to
34
No. 2013AP691 & 2013AP776
redrill wells and to reimburse the DNR for the grant money and
temporary clean water it provided to some of the Falks'
neighbors.22 As such, we conclude that although the endorsement
applies to liquids used in farming operations, pollutants cannot
find coverage under the Farm Chemicals Limited Liability
Endorsement just because they are also liquids.
C. The Incidental Coverages Section Provides Coverage.
¶64 Finally, we must address whether the incidental
coverages section of the Falks' policy provides coverage. We
conclude the "Damage to Property of Others" clause under the
incidental coverages section requires Wilson Mutual to indemnify
the Falks up to $500 for each unique well that was allegedly
contaminated by the Falks' manure and that Wilson Mutual has a
duty to defend the Falks.
¶65 The "Damage to Property of Others" clause under the
incidental coverages section of the Wilson Mutual policy
provides that "[r]egardless of an 'insured's' legal liability,
'we' [Wilson Mutual] pay for property of others damaged by an
'insured', or 'we' repair or replace the property, to the extent
practical, with property of like kind and quality. 'Our'
'limit' for this coverage is $500 per 'occurrence.'" The
incidental coverage section states: "The following coverages are
subjected to all the 'terms' of Coverage[] L," but the "Damage
22
The endorsement also does not apply to losses arising out
of requests to respond to the effects of liquids. The Falks'
liquid manure allegedly contaminated the wells, and as such,
even if the manure was not a pollutant, it was a liquid.
35
No. 2013AP691 & 2013AP776
to Property of Others" clause further explains, "[t]he
exclusions that apply to Coverage[] L . . . do not apply to this
coverage." Coverage L provides: "'We' will defend a suit
seeking damages if the suit resulted from 'bodily injury' or
'property damage' not excluded under this coverage. 'We' may
make investigations and settle claims or suits that 'we' decide
are appropriate." The policy further states "'We' do not have
to provide a defense after 'we' have paid an amount equal to
'our' 'limit' as a result of a judgment, or after 'our' 'limit'
has been tendered for settlement." Wilson Mutual agrees that
coverage exists under the "Damage to Property of Others" clause;
however, it argues that it is obligated to pay only up to $500
total because there was only one occurrence. Wilson Mutual
further argues no duty to defend exists under the incidental
coverages section.
¶66 Wisconsin has adopted the "cause theory" to determine
the number of occurrences. Plastics, 315 Wis. 2d 556, ¶35.
Under the cause theory, "where a single, uninterrupted cause
results in all of the injuries and damage, there is but one
'accident' or 'occurrence.'" Welter v. Singer, 126 Wis. 2d 242,
250, 376 N.W.2d 84 (Ct. App. 1985). "If the cause is
interrupted or replaced by another cause, the chain of causation
is broken and there has been more than one accident or
occurrence." Id. (citing Olsen v. Moore, 56 Wis. 2d 340, 349,
202 N.W.2d 236 (1972)). Where the cause and result are "so
simultaneous or so closely linked in time and space as to be
36
No. 2013AP691 & 2013AP776
considered by the average person as one event," only a single
occurrence has taken place. Id. at 251.
¶67 Because the occurrence under the Wilson Mutual policy
is well contamination, not manure application, there was an
occurrence each time manure seeped into a unique well. As such,
an "average person" would not consider the well contamination to
be one event because manure had to seep into each individual
well for the alleged contamination to occur. Further, because
the manure had to seep into each individual well, rather than
seep into one well which "fed" the other wells, it cannot be
said the seepage was "so simultaneous or so closely linked in
time and space as to be considered by the average person as one
event." Id. Similar to Plastics, where we rejected the
argument that the manufacture, sale, and installation of
asbestos containing products, without warning, constituted one
occurrence, and concluded each individual's repeated exposure to
asbestos constituted a unique occurrence, we likewise reject the
argument that the spreading of manure constituted one
occurrence, and conclude each well's exposure to manure
constituted a unique occurrence.
¶68 The "Damage to Property of Others" clause under the
incidental coverages section requires Wilson Mutual to indemnify
the Falks up to $500 for each well contaminated by the Falks'
manure. Thus, there is a $500 indemnification for each unique
well allegedly contaminated by the Falks.
¶69 The incidental coverages section also requires Wilson
Mutual defend the Falks. "The duty of defense depends on the
37
No. 2013AP691 & 2013AP776
nature of the claim and has nothing to do with the merits of the
claim." Elliott v. Donahue, 169 Wis. 2d 310, 321, 485 N.W.2d
403 (1992). "'The insurer is under an obligation to defend only
if it could be held bound to indemnify the insured, assuming
that the injured person proved the allegations of the complaint,
regardless of the actual outcome of the case.'" Grieb v.
Citizens Cas. Co., 33 Wis. 2d 552, 558, 148 N.W.2d 103 (1967)
(internal citation omitted). "If there is any doubt about the
duty to defend, it must be resolved in favor of the insured."
Elliott, 169 Wis. 2d at 321. Where an insurer's policy provides
coverage for even one claim made in a lawsuit, that insurer is
obligated to defend the entire suit. See Doyle, 219 Wis. 2d at
284-85; Atl. Mut. Ins. Co., v. Badger Med. Supply Co., 191
Wis. 2d 229, 242, 528 N.W.2d 486 (Ct. App. 1995).
¶70 Thus, because the Wilson Mutual policy provides
coverage for manure seepage-related claims through the
incidental coverages section, Wilson Mutual has a duty to defend
the entire suit. However, the Wilson Mutual policy clearly
states Wilson Mutual has no duty to provide a defense once it
has paid its limit, either because of a judgment, or because of
a settlement. Wilson Mutual has the right, under the policy, to
settle. While we take no position on whether Wilson Mutual
should settle, if Wilson Mutual decides to settle each claim for
$500, the policy language plainly states its duty to defend is
complete, as no other policy provision would indemnify the
Falks.
IV. CONCLUSION
38
No. 2013AP691 & 2013AP776
¶71 We hold that the pollution exclusion clause in Wilson
Mutual's General Farm Coverage Liability policy issued to the
Falks unambiguously excludes coverage for well contamination
caused by the seepage of cow manure. First, we conclude that
cow manure falls unambiguously within the policy's definition of
"pollutants" when it enters a well. Second, we conclude the
Farm Chemicals Limited Liability Endorsement likewise excludes
coverage for "physical injury to property" resulting from
pollutants. Finally, we conclude that the "Damage to Property
of Others" clause under the incidental coverages section
provides incidental coverage up to $500 for each unique well
that has allegedly been contaminated by the Falks' manure, and
Wilson Mutual has a duty to defend. Accordingly, the decision
of the court of appeals is reversed and we remand to the circuit
court for further proceedings consistent with our holding.
By the Court.-The decision of the court of appeals is reversed,
and the cause is remanded to the circuit court for further
proceedings consistent with this opinion.
¶72 DAVID T. PROSSER, J., did not participate.
39
No. 2013AP691 & 2013AP776.awb
¶73 ANN WALSH BRADLEY, J. (concurring). I agree with
the majority that "Wisconsin is in the jurisdictional majority
in defining an occurrence as unexpected or unintended resultant
damage." Majority op., ¶32. I further agree with the
application of that definition. Id., ¶¶33-34.
¶74 We part ways, however, when the majority strays from
its original occurrence analysis and inconsistently states that
"Wisconsin has adopted a 'cause theory.'" Id., ¶66.
Additionally, for the reasons set forth in the dissent, I do not
agree with the majority's interpretation of the Farm Chemicals
Limited Liability Endorsement. Dissent, ¶131. Accordingly, I
respectfully concur.
1
No. 2013AP691 & 2013AP776.ssa
¶75 SHIRLEY S. ABRAHAMSON, C.J. (dissenting). I would
affirm the decision of the court of appeals.
¶76 This case requires us to interpret a standard
pollution exclusion clause in the insurance policy titled
"FARMOWNERS policy" issued to Robert and Jane Falk. The issue
is whether cow manure that the Falks spread over their land that
caused damage to nearby wells is a "pollutant" under the
pollution exclusion clause in their FARMOWNERS policy.
¶77 If the pollution exclusion clause bars coverage, then
the court must interpret two other policy provisions: the
incidental coverages section and the Farm Chemicals Limited
Liability Endorsement.
¶78 The extent of Wilson Mutual's liability under the
incidental coverages section depends on how many "occurrences"
there were.
¶79 Whether Wilson Mutual is liable under the Farm
Chemicals Limited Liability Endorsement depends on whether the
endorsement's remediation exclusion is applicable.
¶80 The majority opinion concludes that "manure is
unambiguously a pollutant when it seeps into a well."1 The
majority opinion's approach to this issue unnecessarily departs
from precedent, undercuts the limiting principles our prior
cases have applied, and further confuses this murky area of the
law.
1
Majority op., ¶36.
1
No. 2013AP691 & 2013AP776.ssa
¶81 The majority opinion further concludes that the Falks
are covered under the incidental coverages section, which
obligates Wilson Mutual to pay $500 per occurrence. The
majority opinion determines that there were "five unique
occurrences" in this case: "[E]ach time there was 'property
damage' to a unique well, there was an occurrence."2 In
discussing the number of occurrences, the majority opinion
contradicts itself and assumes facts not established in the
summary judgment record.
¶82 Furthermore, the majority opinion's discussions of
what constitutes an occurrence and of whether a substance is a
pollutant are inconsistent with the court's approach to those
issues in Preisler v. General Casualty Insurance Co., 2014 WI
135, ___ Wis. 2d ___, ___ N.W.2d ___, mandated on this same
date. I write on substantially similar issues in my dissent in
Preisler. My dissents in Preisler and in the instant case
should be read together.
¶83 Finally, the majority opinion determines that coverage
is barred under an exclusion within the Farm Chemicals Limited
Liability Endorsement. This interpretation of the exclusion
renders the endorsement illusory and superfluous.
¶84 I conclude that a reasonable person in the position of
the Falks, farmers insured under a FARMOWNERS policy, would not
consider manure a pollutant under the policy's pollution
exclusion clause. Thus, I would not bar coverage.
2
Id., ¶33, 34.
2
No. 2013AP691 & 2013AP776.ssa
¶85 If the majority is unwilling to adhere to our
longstanding practice of honoring the expectations of the
reasonable insured, then I would remand the cause to the circuit
court so the parties can produce evidence regarding the Falks'
expectations of coverage and the objective reasonableness of
those expectations. Summary judgment should not be granted
before the parties have that opportunity.
¶86 If coverage is barred by the pollution exclusion
clause, I would find coverage under both the incidental
coverages section and the endorsement.
¶87 Accordingly, I dissent.
I
¶88 Robert and Jane Falk, the insureds in this case, are
dairy farmers. They own roughly 600 head of cattle and more
than 1,670 acres of land. Like countless other dairy farmers in
this state, the Falks fertilize their fields with liquid manure
from their dairy cows. Farmers must spread manure to ensure the
success of their crops, which are their livelihood. Manure is
"universally present and generally harmless" on farmland.3
¶89 In early 2011, the Falks spread liquid manure on their
farm as they had done in previous years. Shortly thereafter,
the Falks' neighbors discovered that manure had contaminated
their wells. The Department of Natural Resources confirmed that
manure spread by the Falks had seeped into five neighbors'
wells, contaminating the water.
3
See Donaldson v. Urban Land Interests, Inc., 211
Wis. 2d 224, 234, 564 N.W.2d 728 (1997).
3
No. 2013AP691 & 2013AP776.ssa
¶90 During this time, the Falks were insured under a
FARMOWNERS policy issued by Wilson Mutual. Wilson Mutual
contends that manure is a "pollutant" and thus that coverage for
this incident is barred by the policy's pollution exclusion
clause. The Falks argue that manure is not a pollutant and thus
that the FARMOWNERS policy should cover their liability for the
well contamination.
II
¶91 The following principles govern the court's
interpretation of the insurance policy provisions at issue, as
they govern interpretation of all insurance contract provisions.4
• Words and phrases in insurance contracts are subject
to the same rules of construction that apply to
contracts generally.
• The primary objective in interpreting and construing a
contract is to ascertain and carry out the true intent
of the parties.
• If the language of an insurance policy is unambiguous,
a court will not rewrite the policy by construction
and will interpret the policy according to its plain
and ordinary meaning to avoid imposing contract
obligations that the parties did not undertake.
• Words and phrases in an insurance policy are ambiguous
when they are so imprecise and elastic as to lack any
certain interpretation or are susceptible to more than
4
See Frost ex rel. Anderson v. Whitbeck, 2002 WI 129, ¶¶15-
22, 257 Wis. 2d 80, 654 N.W.2d 225.
4
No. 2013AP691 & 2013AP776.ssa
one reasonable construction. Terms of an insurance
policy may be inherently ambiguous or may be ambiguous
when considered in the context of the insurance policy
as a whole. Whether ambiguity exists in an insurance
policy is a question of law.
• Ambiguous terms are to be construed against the
insurance company that drafted the policy. Ambiguous
terms are to be construed in favor of coverage, and
exclusions are to be narrowly construed against the
insurance company.
• Language in an insurance policy is construed as
understood by a reasonable person in the position of
the insured rather than as intended by the insurance
company. The insured's reasonable expectations of
coverage should be furthered by the interpretation
given.
• Furthermore, in construing an insurance policy as it
is understood by a reasonable person in the position
of the insured, a court may consider the purpose or
subject matter of the insurance contract, the
situation of the parties, and the circumstances
surrounding the creation of the contract.
• A construction of an insurance policy that gives
reasonable meaning to every provision of the policy is
preferable to one leaving part of the language useless
or meaningless.
5
No. 2013AP691 & 2013AP776.ssa
¶92 I now apply these interpretive principles to the three
policy provisions at issue.
III
¶93 I begin with the pollution exclusion clause.
¶94 The "Personal Liability Coverage (Farm)" section of
the Falks' FARMOWNERS policy includes the following exclusion:
"We" do not pay for a loss if one or more of the
following excluded events apply to the loss,
regardless of other causes or events that contribute
to or aggravate the loss, whether such causes or
events act to produce the loss before, at the same
time as, or after the excluded event.
. . . .
l. "bodily injury" or "property damage" which results
from the actual, alleged, or threatened discharge,
dispersal, seepage, migration, release, or escape of
"pollutants" into or upon land, water, or air.
¶95 The policy defines "pollutant" as "any solid, liquid,
gaseous, thermal, or radioactive irritant or contaminant,
including acids, alkalis, chemicals, fumes, smoke, soot, vapor
and waste. Waste includes materials to be recycled, reclaimed,
or reconditioned, as well as disposed of."
¶96 Pollution exclusion clauses present a particular
interpretive challenge, as this court has acknowledged.5 The
5
In some cases, courts have viewed similarly worded
pollution exclusion clauses ambiguous and thus have not barred
recovery. See, e.g., Donaldson, 211 Wis. 2d at 235 (the
insurance policy's definition of "pollutant" was ambiguous;
thus, the landlord insured could recover for damage caused by
carbon dioxide).
(continued)
6
No. 2013AP691 & 2013AP776.ssa
language of a standard pollution exclusion clause is "virtually
boundless, for there is virtually no substance or chemical in
existence that would not irritate or damage some person or
property."6 Thus, this court has concluded that "[w]ithout some
limiting principle, the pollution exclusion clause would extend
far beyond its intended scope, and lead to some absurd results."7
¶97 Because the court construes insurance policy
provisions as would a reasonable insured, this court has held
that pollution exclusion clauses do not bar coverage when
"injuries result[] from everyday activities gone slightly, but
not surprisingly, awry."8
¶98 To dairy farmers like the Falks, spreading manure is
indisputably an everyday activity. Manure is a substance with
which the Falks routinely work in the course of their ordinary
farming operations.
In other cases, courts have viewed similarly worded
pollution exclusion clauses as unambiguous and barred recovery.
See, e.g., Hirschhorn v. Auto-Owners Ins. Co., 2012 WI 20, ¶47,
338 Wis. 2d 761, 809 N.W.2d 529 (bat guano unambiguously falls
within the policy's definition of "pollutants," thereby
precluding coverage); Peace ex rel. Lerner v. N.W. Nat'l Ins.
Co., 228 Wis. 2d 106, 136, 596 N.W.2d 429 (1999) (the policy's
definition of "pollutant" was unambiguous, lead paint was a
pollutant, and coverage was properly denied).
6
Donaldson, 211 Wis. 2d at 232 (quoting Pipefitters Welfare
Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037, 1043
(7th Cir. 1992)).
7
Donaldson, 211 Wis. 2d at 232 (quoting Pipefitters, 976
F.2d at 1043).
8
See Donaldson, 211 Wis. 2d at 233.
7
No. 2013AP691 & 2013AP776.ssa
¶99 In addition, farmers like the Falks apply manure to
their land precisely in order to have it seep into the soil.
Seepage is the whole point. Seepage into neighbors' wells, the
injury in the present case, thus resulted from an everyday
activity "gone slightly, but not surprisingly, awry."9
¶100 A court keeps the underlying purpose and subject
matter of the insurance in mind when construing policy
provisions. The Falks purchased this FARMOWNERS policy to cover
their liability for injury to the person or property of others
caused by their farming operations. A reasonable insured would
not consider manure a pollutant under a FARMOWNERS policy it
purchased specifically to cover its liability for injury to the
person or property of others caused by farming operations.
Rather, as the court of appeals put it, a reasonable insured in
the position of the Falks would view manure as "liquid gold."10
¶101 A pollution exclusion clause is ambiguous when the
insured could reasonably expect coverage under the facts of the
case.11 The FARMOWNERS policy's failure to identify manure
specifically as a pollutant made the pollution exclusion clause
ambiguous in the context of this FARMOWNERS policy. Ambiguous
clauses are construed against the insurance company. Thus, the
9
Id.
10
Wilson Mut. Ins. Co. v. Falk, 2014 WI App 10, ¶15, 352
Wis. 2d 461, 844 N.W.2d 380.
11
Donaldson, 211 Wis. 2d at 233.
8
No. 2013AP691 & 2013AP776.ssa
pollution exclusion clause should be construed against the
insurance company.12
¶102 In sum, I conclude that a reasonable insured in the
position of the Falks would expect coverage under their
FARMOWNERS policy for damage caused by manure that they spread
as fertilizer on their farmland. The insured's reasonable
expectations of coverage must be honored. Thus, I conclude that
the pollution exclusion clause does not bar coverage in the
present case.
¶103 Many cases in other jurisdictions similarly limit the
scope of pollution exclusion clauses by adhering to the
reasonable insured's expectations of coverage. See, for
example, the following cases:
• Meridian Mut. Ins. Co. v. Kellman, 197 F.3d 1178,
1183 (6th Cir. 1999) (reasonable person in the
position of insured construction contractor would
expect coverage for injuries suffered by employee
who breathed fumes from chemicals the contractor
sprayed a few feet away despite pollution exclusion
clause in construction contractor's insurance
policy);
• Reg'l Bank of Colo., N.A. v. St. Paul Fire & Marine
Ins. Co., 35 F.3d 494, 498 (10th Cir. 1994) (insured
landlord would not characterize carbon monoxide
12
For cases using similar reasoning, see W. Alliance Ins.
Co. v. Gill, 686 N.E.2d 997 (Mass. 1997) (reasonable insured
restaurant owner would expect coverage for patron's carbon
monoxide poisoning, which was caused by a defective oven,
despite pollution exclusion); Hocker Oil Co. v. Barker-Phillips-
Jackson, Inc., 997 S.W.2d 510, 518 (Mo. Ct. App. 1999)
(reasonable person in the position of insured gasoline
transporting company would not consider gasoline that spilled a
pollutant).
9
No. 2013AP691 & 2013AP776.ssa
emitted from a malfunctioning residential heater as
"pollution");
• W. Alliance Ins. Co. v. Gill, 686 N.E.2d 997 (Mass.
1997) (reasonable insured restaurant owner would
expect coverage for patron's carbon monoxide
poisoning, which was caused by a defective oven,
despite the pollution exclusion);
• Hocker Oil Co. v. Barker-Phillips-Jackson, Inc., 997
S.W.2d 510, 518 (Mo. Ct. App. 1999) (reasonable
person in the position of insured gasoline
transporting company would not consider gasoline a
pollutant);
• Island Assocs., Inc. v. Eric Grp., Inc., 894
F. Supp. 200, 203 (W.D. Pa. 1995) (reasonable person
in the position of insured asbestos abatement
subcontractor would not consider cleaning supply
fumes pollutants);
• Langone v. Am. Family Mut. Ins. Co., 2007 WI App
121, ¶28, 300 Wis. 2d 742, 731 N.W.2d 334
(reasonable person in the position of insured
landlord would expect coverage for tenant's death
caused by carbon monoxide poisoning from a poorly
installed boiler despite pollution exclusion clause
in landlord's insurance policy).
¶104 The majority opinion fails to adhere to the
longstanding practice in this and many other courts of honoring
the expectations of the reasonable insured in interpreting a
pollution exclusion clause.
¶105 The majority's interpretation of the pollution
exclusion clause is unpersuasive. It sets forth the following
test for whether a substance is a pollutant:
Whether a substance is a pollutant is evaluated from
the standpoint of a reasonable insured. Our line of
pollution exclusion cases reveals that a reasonable
insured would consider a substance to be a pollutant
if (1) the substance is largely undesirable and not
universally present in the context of the occurrence
that the insured seeks coverage for; and (2) a
reasonable insured would consider the substance
10
No. 2013AP691 & 2013AP776.ssa
causing the harm involved in the occurrence to be a
pollutant.13
¶106 Despite the majority opinion's claim that this test is
grounded in precedent, in fact it sharply diverges from
precedent. Part (1) of the test takes a far narrower view of
what constitutes a pollutant than the court has taken in past
cases. Part (2) of the test simply restates the premise that we
construe the pollution exclusion clause from the perspective of
the reasonable insured.
¶107 Regarding part (1) of its test, the majority opinion
concludes that "[w]hile when safely and beneficially applied,
manure may be a universally present, desirable, and generally
harmless substance,"14 it is nevertheless a "largely undesirable
substance commonly understood to be harmful when present in a
well."15
¶108 Regarding part (2) of its test, the majority concludes
that "[a] reasonable insured would consider manure in a well to
be a pollutant."16 Who wouldn't?
¶109 The essence of the majority's analysis is that manure
is a pollutant when it pollutes. Using this reasoning, every
substance that pollutes is a pollutant. This reasoning simply
begs the question.
13
Majority op., ¶38.
14
Id., ¶44.
15
Id., ¶45.
16
Id., ¶49 (emphasis in original).
11
No. 2013AP691 & 2013AP776.ssa
¶110 The point this court has made again and again in cases
involving pollution exclusion clauses is that "there is
virtually no substance or chemical in existence that would not
irritate or damage some person or property."17 Thus, "[t]he
reach of the pollution exclusion clause must be circumscribed by
reasonableness, lest the contractual promise of coverage be
reduced to a dead letter."18
¶111 By contending that at the moment the substance
contaminates it becomes a pollutant under the policy, the
majority opinion allows the pollution exclusion clause to extend
far beyond the limited scope we have permitted in prior cases,
leading to absurd results.
¶112 If the majority is unwilling to apply our general
rules for interpreting insurance policies, which honor the
expectations of the reasonable insured, then the majority should
remand the case to the circuit court to allow the parties to
develop a factual record regarding the reasonable expectations
of the insured.
¶113 The parties are here on summary judgment. The Falks
contend that they expected coverage. It is unclear what
representations Wilson Mutual may have made to the Falks about
their coverage. Summary judgment is inappropriate when the
Falks have not had a chance to prove their expectations and the
17
Donaldson, 211 Wis. 2d at 232 (quoting Pipefitters, 976
F.2d at 1043).
18
Donaldson, 211 Wis. 2d at 233.
12
No. 2013AP691 & 2013AP776.ssa
objective reasonableness of those expectations. Remanding the
matter would conform to prior cases that have explored the
subjective expectations of the insured.
IV
¶114 Because the majority opinion concludes that coverage
is barred under the pollution exclusion clause, it considers
whether the incidental coverages section provides some lesser
coverage. This section of the FARMOWNERS policy states in
relevant part:
The following coverages . . . do not increase the
"limits" stated for the Principal Coverages.
1. Damage to Property of Others – Regardless of an
"insured's" legal liability, "we" pay for property of
others damaged by an "insured", or "we" repair or
replace the property, to the extent practical, with
property of the like kind and quality. "Our" "limit"
for this coverage is $500 per "occurrence."
(Emphasis added.)
¶115 In my view, the incidental coverages section is not an
issue in the present case because the pollution exclusion clause
does not bar coverage under the principal coverages section. If
the pollution exclusion bars coverage, I agree that the Falks
can recover $500 per occurrence under the incidental coverages
section. I disagree, however, with the majority opinion's
approach to determining the number of occurrences.
¶116 The majority correctly notes the policy's definition
of "occurrence" ("an accident, including repeated exposures to
similar conditions, that results in 'bodily injury' or 'property
damage' during the policy period"), but its application of that
definition is problematic for at least two reasons.
13
No. 2013AP691 & 2013AP776.ssa
¶117 First, the majority opinion contradicts itself.
¶118 The majority opinion initially states that "Wisconsin
is in the jurisdictional majority in defining an occurrence as
unexpected or unintended resultant damage."19 The majority
opinion then concludes that "the exposure of manure to each well
constituted an occurrence"20 because the damage in this case was
"seepage of manure into the neighboring wells."21
¶119 Later on, the majority opinion states that "Wisconsin
has adopted the 'cause theory,'" which holds that "where a
single, uninterrupted cause results in all of the injuries and
damage, there is but one accident or occurrence."22
19
Majority op., ¶32.
20
Id., ¶33.
21
Id., ¶32.
22
Majority op., ¶66 (citing Plastics Eng'g Co. v. Liberty
Mut. Ins. Co., 2009 WI 13, ¶67, 315 Wis. 2d 556, 759 N.W.2d 613;
quoting Welter v. Singer, 126 Wis. 2d 242, 250, 376 N.W.2d 84).
Plastics Engineering, 315 Wis. 2d 556, ¶38, states:
The general rule is that an occurrence is determined
by the cause or causes of the resulting injury. . . .
The fact that there were multiple injuries and that
they were of different magnitudes and that injuries
extended over a period of time does not alter our
conclusion that there was a single occurrence. As
long as the injuries stem from one proximate cause,
there is a single occurrence.
(Quoting Welter, 126 Wis. 2d at 250-51).
14
No. 2013AP691 & 2013AP776.ssa
¶120 Was the cause of the damage or the damage itself the
occurrence in this case? The majority opinion does not provide
a clear answer to this question.
¶121 The majority opinion's discussion of "occurrence" is
inconsistent with the discussion of occurrence in the majority
opinion in Preisler v. General Casualty Insurance Co., 2014 WI
135, ¶¶24-28, ___ Wis. 2d ___, ___ N.W.2d ___. In her
concurring opinion in Preisler, Justice Bradley persuasively
explains that the majority opinion's discussion of occurrence in
Preisler is unnecessary, internally contradictory,23 and
inconsistent with the instant case. I join Justice Bradley's
criticisms of the discussion of occurrence in Preisler. These
criticisms apply to the majority opinion in the instant case, as
well.
¶122 Second, the majority opinion assumes facts not
established in the summary judgment record.
¶123 The majority opinion determines there were five
occurrences in this case because five wells were contaminated.
It appears to assume that manure seeped into each well just
once, and thus that there was only one cause or incidence of
damage per well. The record does not support this conclusion.
The majority opinion overlooks the fact that a single piece of
23
"It is unclear whether the majority is embarking on a
cause approach or damage approach in determining what
constitutes an occurrence." Preisler v. Gen. Cas. Ins. Co.,
2014 WI 135, ¶___, ___ Wis. 2d ___, ___ N.W.2d ___ (Bradley, J.,
concurring).
15
No. 2013AP691 & 2013AP776.ssa
property can be damaged multiple times and that there can be
different causes for each incidence of damage.
¶124 The majority opinion further overlooks the ambiguity
in the record regarding what the "accident" was. It concludes
the accident was seepage of manure into the well. However, if
the Falks over-applied or otherwise misapplied manure to their
farmland, the accident might instead be considered that
misapplication. If the accident was the Falks' misapplication
of manure to their farmland, then there may have been just one
occurrence in this case. The record does not reveal how many
times the Falks fertilized their land in early 2011 or whether
it was one particular application of fertilizer, or the
cumulative effect of multiple applications over a period of
time, that caused manure to seep into their neighbors' wells.
¶125 These are fact questions that the summary judgment
record does not resolve. Summary judgment should not be granted
on this issue before the parties have the opportunity to further
develop the factual record.
V
¶126 I turn to the Farm Chemicals Limited Liability
Endorsement. The endorsement states in relevant part:
"We" pay those sums which an "insured" becomes legally
obligated to pay as damages for physical injury to
property if:
1. The injury is caused by the discharge, dispersal,
release, or escape of chemicals, liquids, or gases
into the air from the "insured premises". The injury
must be caused by chemicals, liquids, or gases that
the "insured" has used in the normal and usual
"farming" operations[.]
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¶127 The endorsement includes various exclusions, as well.
The exclusion relevant here is as follows:
This coverage does not apply to any loss, cost, or
expense arising out of any requests, demands, orders,
claims, or suits that the "insured" or others test
for, monitor, clean up, remove, contain, treat,
detoxify, neutralize, or in any way respond to or
assess the effects of pollutants, chemicals, liquids,
or gases.
¶128 On its face, this exclusion can be read to negate all
coverage provided by the endorsement, rendering the endorsement
useless.
¶129 The endorsement first states that Wilson Mutual will
pay "damages for physical injury to property . . . caused by the
discharge, dispersal, release, or escape of chemicals, liquids,
or gases into the air . . . ." The endorsement then excludes
from coverage "any loss, cost, or expense arising out of any
requests . . . or suits that the 'insured' or others . . . in
any way respond to or assess the effects of pollutants,
chemicals, liquids, or gases."
¶130 Manure used as fertilizer is indisputably a liquid.
If a lawsuit against the Falks seeking money damages constitutes
a "suit that the 'insured' . . . in any way respond to . . . the
effects of" manure, then the endorsement provides no coverage at
all.
¶131 The majority opinion adopts this literal
interpretation, concluding that "well contamination is excluded
under this endorsement because the Falks are being asked to
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No. 2013AP691 & 2013AP776.ssa
respond to the effects of 'pollutants.'"24 The majority opinion
violates the rule that "[a] construction of an insurance policy
that gives reasonable meaning to every provision of the policy
is preferable to one leaving part of the language useless or
meaningless."25 The majority opinion also ignores the principles
that "ambiguous terms are to be construed in favor of coverage"
and that "exclusions are to be narrowly construed against an
insurer."26
¶132 Although the text of the endorsement could be clearer,
a careful reading of the text and a review of case law shows
that the exclusion at issue bars coverage only when the insured
has been ordered to undertake remediation.27 The exclusion does
not bar coverage when, as in the instant case, the claimants
seek to recover money damages.28 By overlooking this
distinction, the majority opinion renders the endorsement
illusory and mere surplusage.
¶133 In sum, I conclude that a reasonable person in the
position of the Falks, insured farmers, would not consider
24
Majority op., ¶53.
25
Frost, 257 Wis. 2d 80, ¶21.
26
Id., ¶19.
27
See Gen. Cas. Co. of Wis. v. Hills, 209 Wis. 2d 167, 180,
561 N.W.2d 718 (1997) (when parties other than the EPA and DNR
sought compensatory monetary damages for past injuries insured
allegedly inflicted, suit was brought against insured for
damages under the policy).
28
Hills, 209 Wis. 2d at 185.
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No. 2013AP691 & 2013AP776.ssa
manure a pollutant under the pollution exclusion clause of the
FARMOWNERS policy. Thus, I would not bar coverage.
¶134 If the majority is unwilling to adhere to this court's
longstanding practice of honoring the expectations of the
reasonable insured, then I would remand the cause to the circuit
court so the parties can produce evidence regarding the Falks'
expectations of coverage and the objective reasonableness of
those expectations. Summary judgment should not be granted
before the parties have that opportunity.
¶135 If coverage is barred by the pollution exclusion
clause, coverage is available to the Falks under both the
incidental coverages section and the endorsement. However,
because there are insufficient facts in the summary judgment
record to determine what the occurrence was or what the number
of occurrences were in this case, I would leave that issue for
the circuit court to decide after further development of the
factual record.
¶136 In conclusion, I note that on the same day the court
heard argument on the instant case, it heard argument on another
case involving damage caused by septage and a substantially
similar pollution exclusion clause. See Preisler v. Gen. Cas.
Ins. Co., 2014 WI 135, ___ Wis. 2d ___, ___ N.W.2d ___. As a
result of our new procedure for opinion preparation and mandate,
Preisler and Wilson Mutual were on different orbits of
circulation with different deadlines, there was no conference to
discuss the draft opinions, and it was difficult to make the two
opinions consistent. Even upon their release, the opinions
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No. 2013AP691 & 2013AP776.ssa
remain inconsistent. The core function of courts is, of course,
consistent and reliable application of the law. I set forth the
new procedure for opinion preparation and mandate in full in my
concurring opinion in State v. Gonzalez, 2014 WI 124, ¶¶25-40,
___ Wis. 2d ___. ___ N.W.2d ___ (Abrahamson, C.J., concurring).
¶137 For the reasons set forth, I dissent.
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