COURT OF APPEALS DECISION DATED AND RELEASED May 7, 1996 |
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No. 95-1531
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT I
ALBERT TROSTEL &
SONS COMPANY and
ALBERT TROSTEL
PACKINGS, LTD.,
Plaintiffs-Appellants,
v.
EMPLOYERS INSURANCE OF
WAUSAU,
a Mutual Company,
ALLSTATE INSURANCE
COMPANY,
SENTRY INSURANCE,
a Mutual Company and
NORTHWESTERN NATIONAL
INSURANCE COMPANY,
Defendants-Respondents.
APPEAL from judgments of
the circuit court for Milwaukee County:
PATRICK J. MADDEN, Judge. Affirmed.
Before Wedemeyer, P.J.,
Sullivan and Schudson, JJ.
WEDEMEYER, P.J. Albert Trostel & Sons Company and
Albert Trostel Packings, Ltd. (collectively “Trostel”) appeal from judgments granting summary judgment to
Employers Insurance of Wausau, Allstate Insurance Company, Sentry Insurance,
and Northwestern National Insurance Company.
Trostel claims that: (1) the trial court erred in concluding that
this case was analogous to City of Edgerton v. General Casualty Co.,
184 Wis.2d 750, 517 N.W.2d 463 (1994), resulting in its conclusion that Trostel
did not have insurance coverage under any of the policies involved in the
instant case; (2) the insurance companies breached their duty to defend
and, therefore, are estopped from contesting coverage; (3) choice of law
principles precludes the application of Wisconsin law; and (4) it is
entitled to costs it incurred to defend the case up until the point in time
when the coverage issue was decided. Because
this case is governed by Edgerton, because the insurers did not
breach their duty to defend, because Wisconsin law applies, and because Trostel
is not entitled to costs incurred prior to the coverage determination, we
affirm.
I. BACKGROUND
Trostel filed suit in
the Milwaukee County Circuit Court seeking damages for breach of contract and a
declaration that Employers, Allstate, Sentry, and Northwestern National are
obligated to defend and indemnify Trostel for costs it incurred or will incur
with respect to environmental contamination caused by Trostel at eleven
separate sites. The insurers filed a
motion for summary judgment. The trial
court, applying Wisconsin law, granted the insurers' motion for summary
judgment, finding that none of the eleven sites involved “suits for damages” as
those terms are used in comprehensive general liability policies as interpreted
by Edgerton. Trostel now
appeals.
The sites involved.
The eleven sites and
relevant facts relating to each are:
The first site is
Commerce Street, Milwaukee, Wisconsin.
This site, which was formerly owned by Trostel, was sold to the
state. When the state tried to sell the
property, it discovered soil and groundwater contamination. By letter dated January 25, 1989, the
Wisconsin Department of Administration notified Trostel of the contamination. Trostel agreed to purchase the property from
the state and remediate the site. No
lawsuit was ever filed against Trostel relating to the contamination at this site.
The second site is
Thermo-Chem, Inc./Thomas Solvent Superfund, Muskegon, Michigan. Trostel received a “PRP” letter dated
June 4, 1986, from the EPA regarding this site.[1] After a study of the site was conducted, the
EPA issued a Record of Decision, which set forth its position as to what type
of remediation was required to clean up the site. In May 1992, the EPA issued an administrative order under section
106 of the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA), 42 U.S.C. § 9601, et al, directing that the Record of Decision
be implemented. No lawsuit was filed
against Trostel relating to this site.
The third site is West
KL Avenue Landfill Superfund, Kalamazoo, Michigan. This site did involve a lawsuit by the EPA against certain
potentially responsible parties.
Trostel's unincorporated division—Eagle Ottawa Leather Company—was not
named as an original defendant, but brought in later as a third-party
defendant. The claim against Eagle
Ottawa was based exclusively on its alleged liability for response costs under
CERCLA.
The fourth site is
Organic Chemical Superfund, Grandville, Michigan. In April 1991, the EPA advised Eagle Ottawa in a PRP letter
regarding contamination discovered at this site. No lawsuit was ever filed.
The fifth site is Four
County Landfill, Fulton County, Indiana.
Eagle Ottawa received a PRP letter regarding this site from the Indiana
Department of Environmental Management.
No lawsuit was ever filed.
The sixth site is Berlin
and Farro, Swartz Creek, Michigan. This
site did involve a lawsuit brought by the United States and the State of
Michigan pursuant to the provisions of CERCLA.
Consent decrees required Eagle Ottawa to fund and/or conduct certain
response activities at the site.
The seventh site is Lake
Geneva, Lake Geneva, Wisconsin. Trostel
discovered contamination at this site and notified the Wisconsin Department of
Natural Resources. The DNR responded by
letter advising Trostel of its responsibility to clean up the contamination
pursuant to Wisconsin statute. No
lawsuit was ever filed.
The eighth site is Grand
Haven Brass, Grand Haven, Michigan.
Eagle Ottawa reported contamination at this site to the EPA and the
Michigan DNR. It stated its intention
to remediate the site and clean up the hazardous waste. No lawsuit was ever filed.
The ninth site is A-1
Disposal, Plainwell, Michigan. The
Michigan DNR sued Eagle Ottawa for contamination at this site. The complaint sought recovery of past
response costs and an injunction requiring remediation at the site.
The tenth site is
Sunrise Landfill, Allegan County, Michigan.
This site involved a lawsuit similar to the lawsuit involving the ninth
site.
The eleventh site is
Marina Cliffs Barrel, South Milwaukee, Wisconsin. The Wisconsin DNR sent Trostel a PRP letter regarding this
site. No lawsuit was ever filed.
Trostel, which is a
Wisconsin corporation, secured comprehensive general liability insurance
policies and umbrella policies for the work it performed at each of these
sites. Trostel alleged that
Northwestern National provided coverage for the Commerce Street, Lake Geneva
and Marina Cliffs sites. Trostel
alleged that Wausau provided coverage for the Commerce Street, Organic
Chemical, Lake Geneva and Marina Cliffs sites.
Sentry and Allstate allegedly provided coverage for the remaining sites,
i.e., Thermo-Chem, Inc., West KL, Four County Landfill, Berlin and Farro, Grand
Haven Brass, A-1, and Sunrise Landfill.
The relevant policy language.
The Wausau policies
granting primary coverage provide in pertinent part:
The company will pay on behalf of the
insured all sums which the insured shall become legally obligated to pay as
damages because of
Coverage
A. Personal Injury or
Coverage
B. Property Damage
to
which this policy applies, caused by an occurrence, and the company shall have
the right and duty to defend any suit against the insured seeking damages on
account of such personal injury or property damage.
The Wausau policy
granting excess coverage provides in pertinent part:
I. COVERAGE. To
pay on behalf of the insured all sums which the insured shall become obligated
to pay, either by adjudication or compromise, by reason of the liability
imposed upon the insured by law or assumed by the insured under any contract
for damages because of personal injury and property damage.
Although there is some
dispute at to whether Northwestern National actually issued any insurance
policy to Trostel, it is conceded that if it did, the pertinent policy language
would provide as follows:
Insurer
will pay on behalf of the insured all sums which the insured shall become
legally obligated to pay as damages because of ... property damage ..., and
[the insurer] shall have the right and duty to defend any suit against the
insured seeking damages on account of such ... property damage.
The Allstate policies
granting primary coverage provide in pertinent part:
Allstate
will pay on behalf of the Insured all sums which the Insured shall become
legally obligated to pay as damages because of ... property damage ... to which
this insurance applies, ... and Allstate shall have the right and the duty to
defend any suit ... seeking damage on account of such ... property damage.
The Allstate umbrella
policies at issue provide:
Allstate will indemnify the Insured for
all sums which the Insured shall be legally obligated to pay as ultimate net
loss because of ... property damage.
“Ultimate
net loss” means the sum actually expended or payable in cash to procure
settlement or satisfaction of the Insured's legal obligation for damages either
by (1) final adjudication or (2) compromise with the written consent
of Allstate.
The Sentry policies
provide in pertinent part:
The Company, hereby agrees to indemnify
the insured for all sums which the insured shall be obligated to pay by reason
of liability for damages imposed upon the insured by law or assumed under any
contract, if such liability results from personal injury, property damage or
advertising injury to which this policy applies, caused by an occurrence.
The
Company also agrees to indemnify the insured for all reasonable expenses
incurred by the insured in connection with the investigation, negotiation,
adjustment, settlement and defense of any claims or suits alleging personal
injury, property damage or advertising injury and covered by this policy.
II. DISCUSSION
Our standard of review
of summary judgments is de novo.
Park Bancorporation, Inc. v. Sletteland, 182 Wis.2d 131,
140, 513 N.W.2d 609, 613 (Ct. App. 1994).
Moreover, interpretation of an insurance policy is a question of law
that this court decides independently of the trial court. Smith v. Atlantic Mut. Ins. Co.,
155 Wis.2d 808, 810, 456 N.W.2d 597, 598 (1990).
A. Edgerton Application.
Trostel argues that the Edgerton
case can be distinguished. The trial
court disagreed, concluding that Edgerton applies. We agree with the trial court's
determination.
In Edgerton,
the Wisconsin Supreme Court concluded that a comprehensive general liability
insurer is not obligated to defend or provide coverage in a situation where
federal and state agencies are demanding that the insured conduct an
environmental cleanup, unless there is an actual “suit seeking damages.” Edgerton, 184 Wis.2d at 786,
517 N.W.2d at 479. The policy language
at issue in Edgerton provided:
The company will pay on behalf of the
insured all sums which the insured shall become legally obligated to pay as
damages because of
A. bodily
injury or
B. property
damage
to
which this insurance applies, caused by an occurrence, and the company shall
have the right and duty to defend any suit against the insured seeking
damages on account of such bodily injury or property damage, even if any of
the allegations of the suit are groundless, false, or fraudulent, and may make
such investigation and settlement of any claim or suit as it deems expedient,
but the company shall not be obligated to pay any claim or judgment or to
defend any suit after the applicable limit of the company's liability has been
exhausted by payment of judgments or settlements.
Id. at
769-70, 517 N.W.2d at 472 (emphasis in original). The court's opinion discusses at length both the definition of
“suit” and the definition of “damages” as used in the CGL policies. Id. at 766-86, 517 N.W.2d at 471-79. The court held that a suit is:
[A]ny
proceeding by one person or persons against another or others in a court of law
in which the plaintiff pursues, in such court, the remedy which the law affords
him for the redress of an injury or the enforcement of a right, whether at law
or equity.
Id. at
774, 517 N.W.2d 474. The key factor is
whether the parties to the action are involved in “actual court proceedings,
initiated by the filing of a complaint.”
Id. at 775, 517 N.W.2d 474.
Wausau and Northwestern National
The policy language with
respect to both Wausau's and Northwestern National's policies is identical or
substantially similar to the policy language at issue in Edgerton
in that both companies require the existence of a “suit” before the duty to
defend is triggered. As noted above,
the sites allegedly covered by Wausau and Northwestern National are the
Commerce Street, Lake Geneva, Marina Cliffs, and Organic Chemical sites. None of these sites involves a “suit” as
that term has been defined by Edgerton. Accordingly, our analysis with respect to these two insurers ends
here. The policies have language
identical to or substantially similar to the language at issue in Edgerton,
and none of the sites attributed to these insurers involve suits. Hence, the trial court was correct to grant
summary judgment to Wausau and Northwestern National.[2]
Sentry and Allstate
The analysis for Sentry
and Allstate, however, extends further.
We conclude from our review of the pertinent language of both Sentry's
and Allstate's policies that these policies are also similar to the policies at
issue in Edgerton regarding use of the term “suits for
damages.” Nevertheless, four of the
sites at issue with respect to these two insurers did involve actual
suits. This, however, does not
automatically trigger the duty to defend because Edgerton's
analysis required that the suit involved actually be a suit for damages. Id. at 782-86, 517 N.W.2d at
477-79.
Edgerton
defined damages as that term is used in insurance policies to mean “legal
damages” and specifically held that “[r]esponse costs assigned either under
CERCLA or [state statutes] are by definition, considered to be equitable
relief.” Id. at 784, 517
N.W.2d at 478. The court concluded that
“as an equitable form of relief, response costs were not designed to compensate
for past wrongs; rather, they were intended to deter any future contamination
by means of injunctive action, while providing for remediation and cleanup of
the affected site.” Id.
at 785, 517 N.W.2d at 478. Hence, the
court held that this type of damage did not constitute “legal damages,” and,
therefore, was not covered under the policies.
Id.
This is the analysis
that we must apply with respect to Sentry and Allstate and the four sites that
actually involved lawsuits.[3]
The four sites include Sunrise, A-1,
Berlin and Farro and West KL. The
Sunrise suit sought recovery of past response costs and an injunction requiring
addition response actions. The A-1 suit
sought recovery of past response costs and an injunction requiring that the
responsible parties remediate contamination at the site. The Berlin and Farro suit required
responsible parties to fund and/or conduct certain response activities at the
site. The West KL suit sought only
response costs from Eagle Ottawa.
Based on the foregoing,
we conclude that the damages sought in each of these four lawsuits do not
satisfy the definition of damages set forth in the Edgerton
case. The damages in each of these four
suits consist of response costs, other response activity, and injunctive
relief. These types of damages are
insufficient to trigger coverage under the CGL policies. Edgerton specifically held
that response costs and other forms of equitable relief do not constitute
damages under the terms of the CGL policies. Id. at 785, 517 N.W.2d at 478. Therefore, even the four sites that did
involve suits, did not actually involve “suits seeking damages.”[4] Because the sites did not involve suits
seeking damages as required by Edgerton, and because the policy
language of Sentry and Allstate's policies are substantially similar to the
policies in the Edgerton case, we conclude that both insurers are
entitled to summary judgment.[5]
B. Duty
to Defend.
Trostel next argues that
all four insurers breached their duty to defend and, therefore, each insurer
has waived the right to contest coverage.
The trial court determined that there was not a breach of the duty
because the duty was never triggered.
We agree.
The duty to defend was
never triggered in this case because none of the sites involved “suits for
damages.” Edgerton, 184
Wis.2d at 766-86, 517 N.W.2d at 471-79.
Because the duty to defend never arose, it logically follows that the
insurers did not breach that duty.
C. Choice
of Law.
Trostel also argues that
Wisconsin law does not apply. Trostel
argues that Michigan law should apply because many of the sites were located in
Michigan; or that Illinois law should apply because Allstate is headquartered
in Illinois. The trial court rejected
Trostel's choice of law arguments. We
must do the same.
In engaging in a choice
of law analysis, we begin with the premise that the law of the forum state
generally governs, especially when the forum is chosen by the insured. Hunker v. Royal Indem. Co., 57
Wis.2d 588, 598-600, 204 N.W.2d 897, 902-03 (1973). This presumption applies unless non-forum contacts are of greater
significance. Id.
In the instant case, the
insured, Trostel, chose Wisconsin circuit court as the forum for resolution of
this case. It is undisputed that
Trostel is a Wisconsin corporation. It
is undisputed that Wausau, Northwestern National and Sentry are Wisconsin
corporations. Moreover, although
Allstate is headquartered in Illinois, it engages in substantial business in
Wisconsin. It is also undisputed that
all of the contaminated sites which Northwestern National is allegedly
responsible for are located in Wisconsin and that three of the four sites
attributed to Wausau are located in Wisconsin.
Further, Trostel alleged in its complaint that the policies were sold,
issued and delivered in Wisconsin.
Based on all of these
factors, as well as the fact that the issue in this case is the scope of
insurance coverage, the fact that many of the sites are located outside of
Wisconsin is not of great significance.
See American Family Mut. Ins. Co. v. Powell, 169
Wis.2d 605, 609-10, 486 N.W.2d 537, 538-39 (Ct. App. 1992) (if contract of
insurance has significant contact with Wisconsin, Wisconsin law will apply even
if events giving rise to liability occurred in other states).
The record demonstrates
that the insurance contracts at issue in this case have significant contact
with Wisconsin. The insured was a
Wisconsin corporation. The insurers
(with the exception of Allstate) were Wisconsin corporations. The policies were negotiated, sold, issued
and delivered to Trostel in Wisconsin.
We conclude that any choice of law analysis decidedly favors choosing
Wisconsin law as the law applicable to this case.
D. Costs.
Finally, Trostel claims
it is entitled to costs incurred prior to the date of coverage
determination. We do not agree.
Trostel cites Kenefick
v. Hitchcock, 187 Wis.2d 218, 522 N.W.2d 261 (Ct. App. 1994) in support
of his argument. Kenefick
stands for the proposition that when coverage is contested, an insured is
entitled to recover defense costs up to the time of the coverage determination if
there was an ongoing duty to defend up until that time. Id. at 235-36, 522 N.W.2d at
268.
The instant case is distinguishable
from Kenefick because in the instant case, the duty to defend
never arose. The duty never arose
because none of the underlying claims ever involved a “suit seeking
damages.” Because the duty never arose,
there is no basis on which to hold the insurers liable for Trostel's defense
costs incurred prior to the coverage determination. Accordingly, we reject Trostel's request.
By the Court.—Judgments
affirmed.
Not recommended for
publication in the official reports.
No. 95-1531 (C)
SCHUDSON, J. (concurring). I write separately to emphasize that we have
not rejected Trostel's cogent argument regarding Wausau's excess policy and
Sentry's umbrella policy. There may be
a significant difference between a policy that applies not only to “suits,” but
also to “claims or suits.” There also
may be a significant difference between a policy that covers not only
“damages,” but also, “expenses incurred ... in connection with the
investigation, negotiation, adjustment, settlement ....” As the majority notes, however, Trostel
failed to argue this theory in the trial court. See Leon's Frozen Custard, Inc. v. Leon Corp.,
182 Wis.2d 236, 246 n.2, 513 N.W.2d 636, 641 n.2 (Ct. App. 1994) (“Appellate
courts are not at liberty to reverse cases on appeal based on theories of law
never argued in the trial court.”).
[1] A “PRP” letter is a notification by a federal or state environmental agency to a potentially responsible party of an environmentally contaminated piece of property. The letter identifies the recipient as a potentially responsible party and gives the PRP three options: “(1) do nothing and wait for the government to recover the costs of the cleanup; (2) clean up the affected site or join with other PRPs to effect a cleanup; or (3) litigate with the government so as to possibly secure a more favorable future result.” See City of Edgerton v. General Casualty Co., 184 Wis.2d 750, 757 n.4, 517 N.W.2d 463, 467 n.4 (1994).
[2] Trostel also argues that Wausau's excess insurance policy should apply even if its underlying policies do not because the excess policy contains language that triggers coverage. Trostel makes this argument for the first time on appeal, and therefore, we decline to address it. See Wirth v. Ehly, 93 Wis.2d 433, 443-44, 287 N.W.2d 140, 145-46 (1980) (appellate court will generally not review issue raised for the first time on appeal).
[3] Our conclusion
regarding Sentry and Allstate with respect to the sites attributable to them,
where no suits were ever filed, is identical to our conclusion regarding Wausau
and Northwestern National. That is, if
there is no suit, pursuant to the Edgerton case, the insurer's
duty is not triggered.
Moreover, we reject Trostel's argument that an EPA order under § 106(e) of CERCLA should be considered a “suit.” An EPA order, without an accompanying court proceeding to enforce the order, does not satisfy Edgerton's definition of a suit. Id. at 778-81, 517 N.W.2d at 476-77.
[4] Trostel
argues that certain costs it incurred do constitute damages as that term is
used in Edgerton. It
directs our attention to this court's recent pronouncement in Nischke v.
Farmers & Merchants Bank & Trust, 187 Wis.2d 96, 522 N.W.2d 542
(Ct. App. 1994), which held that a property owner can recover remediation costs
from a third party as legal damages.
Trostel's situation, however, is very different from the situation in Nischke. Trostel seeks coverage under its CGL
policies for contamination to property it owned or occupied and which was
caused by its own actions. This
situation is analogous to Edgerton, but not Nischke. In Nischke, a landowner sought
to recover for costs it incurred to clean up contamination caused by a
negligent third party. Id.
at 103-04, 522 N.W.2d at 545.
Because of this significant difference, Trostel's case is governed by Edgerton, not by Nischke. See also, General Casualty Co. v. Hills, No. 95-2261, (Wis. Ct. App. March 12, 1996, ordered published, April 30, 1996); Wisconsin Public Serv. Corp. v. Heritage Mut. Ins. Co., No. 95-2109, (Wis. Ct. App. March 12, 1996, ordered published, April 30, 1996) (both cases distinguishing the Edgerton holding when contamination was caused by negligent third party).
[5] Trostel also argues that Sentry's umbrella policies should apply even if its underlying policies do not because the umbrella policy contains language that triggers coverage. Trostel makes this argument for the first time on appeal, and therefore, we decline to address it. See Wirth v. Ehly, 93 Wis.2d 433, 443-44, 287 N.W.2d 140, 145-46 (1980) (appellate court will generally not review issue raised for the first time on appeal).