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COURT OF APPEALS
DECISION
DATED AND FILED
June 17, 2010
David
R. Schanker
Clerk of Court of Appeals
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NOTICE
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This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official
Reports.
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See Wis. Stat. § 808.10 and Rule 809.62.
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Appeal No.
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STATE OF WISCONSIN
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IN COURT OF
APPEALS
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DISTRICT IV
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Watertown Tire
Recyclers, LLC,
Plaintiff-Appellant,
United States Environmental Protection Agency
and Thomas Springer,
Involuntary-Plaintiffs,
v.
James W. Nortman and Robertson Ryan & Associates, Inc.,
Defendants-Respondents,
ACE Property and Casualty Insurance Company,
Defendant.
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APPEAL
from a judgment of the circuit court for Dodge County: JOHN
R. STORCK, Judge. Affirmed.
Before Vergeront, Lundsten and Higginbotham, JJ.
¶1 LUNDSTEN, J. This appeal concerns a
negligence claim by Watertown Tire Recyclers against an insurance agent for the
agent’s alleged failure to procure a policy that protected Watertown against a substantial and
anticipated risk, a stockpile tire fire.
More specifically, Watertown
alleged that the agent negligently procured a policy with a broad pollution
exclusion that resulted in a denial of coverage after a serious accidental tire
fire. After determining that the policy
would have precluded coverage regardless of the alleged negligence, the circuit
court granted summary judgment in favor of the agent. We affirm.
Background
¶2 Watertown
operated a large tire recycling facility on leased property. In July 2005, a stockpile tire fire started
and burned for five days. Firefighters used
an estimated ten million gallons of water to extinguish the fire. Watertown was
covered by a commercial general liability policy from ACE Property and Casualty
Insurance Company, procured by Watertown’s
insurance agent, James Nortman.
¶3 The fire left Watertown’s
leased property contaminated with debris and pools of fire suppression water. Wisconsin’s
Department of Natural Resources and the United States Environmental Protection
Agency (EPA) required Watertown to remove the on-site
debris and contaminated fire suppression water to address risks posed to the public
groundwater and the nearby Rock River. Watertown
contracted to have the debris removed and agreed to have the EPA treat the
contaminated water. Watertown then sought reimbursement for these
clean-up expenses from its insurer, ACE.
¶4 ACE denied coverage based on the policy’s “absolute pollution
exclusion,” which states that the insurance “does not apply to any injury,
damage, [etc.,] arising out of or in any way related to pollution, however
caused.” Watertown
then sued its insurance agent, Nortman, and his employer, Robertson Ryan &
Associates, Inc. (collectively, Nortman), alleging that, unbeknownst to Nortman,
the ACE policy contained the absolute pollution exclusion and that Nortman was
negligent in procuring the ACE policy because it “did not cover [Watertown’s] known and
ongoing fire-related risks.”
¶5 Nortman moved for summary judgment. Among other arguments, Nortman contended that
the ACE policy would have precluded coverage of the clean-up expenses regardless
of the alleged negligence because other exclusions precluded coverage, in
particular, the owned property exclusion.
In argument before the circuit court, Watertown clarified that its theory of
negligence was that, unlike prior policies, the ACE policy Nortman procured in
the year before the fire contained an absolute pollution exclusion. Watertown did
not argue that Nortman was negligent because the policy, viewed as a whole, did
not cover Watertown’s
clean-up expenses. Indeed, Watertown maintained as
its sole position that, absent the pollution exclusion, the ACE policy did
provide coverage. The circuit court
agreed with Nortman that the alleged negligence did not affect coverage
because, regardless of the pollution exclusion, the ACE policy did not provide
coverage. The court granted summary
judgment in favor of Nortman. Watertown appeals.
Discussion
¶6 Watertown
argues that it was injured by a lack of coverage caused by agent Nortman’s negligent
act of procuring a policy with an absolute pollution exclusion. Watertown
contends that the circuit court erred when it granted summary judgment in favor
of Nortman and dismissed Watertown’s
negligence claim against Nortman.
¶7 We review summary judgment de novo, applying the same standards as the circuit court. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315, 401
N.W.2d 816 (1987). A party is entitled
to summary judgment if there is no genuine issue as to any material fact and
that party is entitled to judgment as a matter of law. Wis.
Stat. § 802.08(2) (2007-08).
Applying this standard, we affirm the circuit court.
A. The
Owned Property Exclusion
¶8 In moving for summary judgment, Nortman argued that any
alleged negligence with respect to the absolute pollution exclusion was non-causal
because, regardless of the pollution exclusion, the ACE policy did not provide
coverage. In particular, Nortman argued
that clean-up costs were excluded by the owned property exclusion. The circuit court agreed, observing that the same
owned property exclusion language found in the ACE policy was also contained in
prior policies.
¶9 Watertown
argues that the owned property exclusion in the ACE policy does not affect
coverage because, in general, owned property exclusions do not apply when an
insured’s property threatens public groundwater or a natural resource. In support, Watertown points to United
Cooperative v. Frontier FS Cooperative, 2007 WI App 197, 304 Wis. 2d 750, 738 N.W.2d
578, review denied, 2009 WI 23, 315
Wis. 2d 721, 764 N.W.2d 531 (No. 2006AP2704), and other cases holding that
owned property exclusions did not remove coverage under similar circumstances. This argument is flawed because there is no
such general rule that applies regardless of specific policy language, and the owned
property exclusion language in the cases Watertown
relies on differs from the language at issue here. In the following paragraphs, we first examine
the ACE owned property exclusion. We
then explain why the cases Watertown
relies on are inapposite.
¶10 The ACE owned property exclusion states:
This insurance does not apply
to:
….
“Property damage” to:
(1) Property
you own, rent, or occupy, including any costs or expenses incurred by you, or
any other person, organization or entity, for repair, replacement, enhancement,
restoration or maintenance of such property for
any reason, including prevention of injury to a person or damage to another’s property ....
(Emphasis added.) The plain language of this exclusion precludes
coverage because the clean-up expenses claimed by Watertown were for restoring the
damaged rented property for a reason specified in the exclusion—the “prevention
of ... damage to another’s property.”
¶11 Watertown
does not address this specific policy language in its brief-in-chief and, instead,
first makes arguments on this topic in its reply brief. Therefore, Watertown
has effectively conceded that the particular language of the ACE owned property
exclusion precludes coverage for Watertown’s
clean-up expenses. See State v. Mechtel, 176 Wis.
2d 87, 100, 499 N.W.2d 662 (1993) (“We do not generally address arguments
raised for the first time in reply briefs.”).
We note, however, that, even if we were to address Watertown’s arguments based on the specific
language in the ACE policy, we would reject those arguments because they lack
merit. We discuss one representative
argument.
¶12 Focusing on the “repair, replacement, enhancement, restoration
or maintenance” language in the exclusion, Watertown equates “repaired” with fixed,
“replaced” with substituted, “enhanced” with improved, “restored” with renewed,
and “maintained” with preserved, and argues that the cleanup of its polluted
property does not fit any of these terms.
That is plainly incorrect.
¶13 Watertown
incurred its expenses when it complied with DNR and EPA directives that it
remove contaminated on-site debris and water.
Watertown’s
insurance claims were for the bills from these clean-up projects. Giving the term “restoration” its ordinary meaning,
it is apparent that returning contaminated property to something much closer to
its former non-contaminated state is “restoration” or, as Watertown would have it, “renewal.” The dictionary definition of “restoration” is
“an act of restoring … a bringing back to or putting back into a former
position or condition.” Webster’s Third New International Dictionary
1936 (unabr. ed. 1993). The definition
of “restore” includes “to bring back to a healthy state: cause to recover.” Id. These definitions are apt descriptions of Watertown’s clean-up
activities.
¶14 We turn our attention to the case law Watertown relies on.
¶15 Watertown argues that United
Cooperative, 304 Wis.
2d 750, stands for a general proposition—that owned property exclusions do not
remove coverage when expenses relate to the public’s groundwater. This assertion misapprehends the analysis in United
Cooperative, which was limited to interpreting the specific language in
that case.
¶16 In United Cooperative, the owned property exclusion stated that
coverage did not apply to “property damage to … property owned or occupied by
or rented to the insured.” We held that this language did not exclude
from coverage clean-up costs related to groundwater contamination because
groundwater is not “owned property.” Id., ¶¶24,
28. In contrast, the ACE owned property
exclusion has additional language making it clear that the exclusion extends to
cleanup for purposes of preventing damage to another’s property.
¶17 Watertown’s
reliance on other cases is similarly misplaced.
In each instance the language at issue was narrower than the ACE owned
property exclusion here. See Patz
v. St. Paul Fire & Marine Ins. Co., 817 F. Supp. 781, 782-83 (E.D.
Wis. 1993) (owned property exclusion precluding coverage for “property owned or
occupied by or rented to the Insured” did not preclude coverage for groundwater
contamination because it “was not damage to property owned by [the insured]”), aff’d, 15 F.3d 699 (7th Cir. 1994); City
of Edgerton v. General Cas. Co. of Wis., 172 Wis. 2d 518, 554, 493 N.W.2d
768 (Ct. App. 1992) (paraphrasing the owned property language excluding “property
damage to property owned or used by the insured” and stating that it does not apply
to “natural resources belonging to the people of the state”), rev’d in part on other grounds, 184 Wis.
2d 750, 786, 517 N.W.2d 463 (1994).
¶18 Finally, we note that Watertown criticizes Nortman’s reliance
on State
v. City of Rhinelander, 2003 WI App 87,
263 Wis. 2d
311, 661 N.W.2d 509, a case in which we concluded, as we do here, that an owned
property exclusion barred coverage for the cost of remediating damage to
groundwater. See id., ¶¶6-7,
11-13. Watertown points out that the specific policy
language at issue in City of Rhinelander is different
than the disputed language here. Watertown’s criticism is curious because, as we have just
explained, Watertown
itself asks us to rely on the bottom-line holding in cases that address
different policy language. Regardless,
we do not join in Watertown’s
criticism. Nortman’s reliance on City
of Rhinelander is a response to Watertown’s argument that
there is some sort of general rule based on concern for groundwater. Nortman accurately explains that Watertown’s proposition conflicts with the holding in City
of Rhinelander,
where an owned property exclusion was interpreted as removing coverage for
expenses relating to the off-site remediation of damage to groundwater. Id.,
¶12. Thus, Nortman demonstrates his understanding
of the need to look at the specific policy language at issue.
¶19 In sum, we agree with Nortman and the circuit court that the
owned property exclusion in the ACE policy precludes coverage because Watertown’s expenses were
incurred when it restored the damaged rented property to prevent damage to “another’s
property,” namely, groundwater and nearby surface water.
B. Concurrent Causation
¶20 Watertown
argues for the first time on appeal that, regardless of the owned property
exclusion’s effect, summary judgment in this case was improper. Because Watertown
makes this argument for the first time on appeal, we conclude that the argument
is forfeited, and reject it on that basis.
See Gruber v. Village of North Fond du Lac, 2003 WI App 217, ¶27,
267 Wis. 2d 368, 671 N.W.2d 692 (“Although this court engages in summary
judgment review de novo, we nonetheless may apply waiver to arguments presented
for the first time on appeal.”); see also
Hopper
v. City of Madison, 79 Wis. 2d 120, 137, 256 N.W.2d 139 (1977) (“It is
the practice of this court not to consider issues raised for the first time on
appeal since the trial court has had no opportunity to pass upon them.”).
¶21 We observe, however, that, even if we were to address the
merits of Watertown’s
causation argument, we would reject it. Watertown contends that it does not need to prove that
Nortman’s negligence is the sole cause of Watertown’s
injury, but rather that it is a cause. More specifically, Watertown relies on Merco
Distributing Corp. v. Commercial Police Alarm Co., 84 Wis. 2d 455, 458-59, 267 N.W.2d 652 (1978),
for the proposition that the element of causation in a negligence claim does
not require proof that the tortfeasor’s negligence is the sole cause of an injury,
but rather what is required is that the alleged negligence be “a” substantial
causal factor.
¶22 Watertown
likens the situation here to two motorcyclists who simultaneously pass a
plaintiff’s horse, which is frightened and runs away. Each motorcyclist has caused the result and “‘neither
can be absolved from responsibility upon the ground that the harm would have
occurred without it, or there would be no liability at all.’” Chapnitsky v. McClone, 20 Wis. 2d 453, 466, 122
N.W.2d 400 (1963) (quoting Prosser, Law
of Torts (2d ed.), at 220-21, § 44). According to Watertown, the situation here is like the two
motorcyclists who frighten a horse—the absolute pollution exclusion is like one
of the motorcyclists and the owned property exclusion is like the other. This analogy is inapt for at least two reasons.
¶23 First, the “causes” in this case are not concurrent in a
temporal sense. Although the ACE policy
was the first to contain an absolute pollution exclusion, it was not the first
to contain the coverage-killing owned property exclusion. As the circuit court noted, the immediately
preceding policy contained identical owned-property-exclusion language. Accordingly, when Nortman committed the
allegedly negligent act of procuring a policy with the absolute pollution
exclusion, the status quo was that Watertown
did not have coverage for the clean-up expenses it incurred.
¶24 Second, Watertown’s
theory was and is that Nortman was negligent “when he procured the [ACE] policy
with an Absolute Pollution Exclusion Endorsement.” Notably, Watertown does not argue more generally that
Nortman was negligent in failing to procure a policy that covered the risk of a
major stockpile tire fire. Thus, the
comparison inherent in Watertown’s
formulation of the issue is this:
1) Nortman procuring the ACE policy without
the pollution exclusion, and
2) Nortman procuring the ACE policy with the
pollution exclusion.
Under this theory of
negligence, no reasonable jury could conclude that Nortman’s actions with
respect to the pollution exclusion were a substantial cause of the loss of
coverage because there was no coverage to start with. See Cefalu v. Continental Western
Ins. Co., 2005 WI App 187, ¶9, 285 Wis. 2d 766, 703 N.W.2d 743 (“Whether
negligence was a cause-in-fact of an injury is a factual question for the jury
if reasonable people could differ on the issue, and the question only becomes
one of law for judicial decision if reasonable people could not disagree.”).
¶25 Finally, we note that it is apparent that Watertown initially
pursued a narrow theory of negligence—based on the inclusion of the absolute
pollution exclusion—because that was the reason ACE gave for denying Watertown’s
claim. What is less clear is why Watertown did not broaden
its negligence argument after Nortman presented his defense based on the owned
property exclusion. It may be that there
are proof problems with a more general claim that Nortman’s negligence was in
failing to procure a policy that covered all of Watertown’s clean-up
expenses. Whatever the reason, we have limited
our discussion to the arguments made by Watertown.
We do not address whether dismissal of
the complaint was in error because the complaint can be construed as stating
the more general negligence claim.
By the Court.—Judgment
affirmed.
Not recommended for publication in the official reports.