PUBLISHED OPINION
������������������������������������������������������������
Case Nos.:��� ���� 95-1572
& 95-1917
������������������������������������������������������������
�������� � Petition
for Review Filed
Complete Title
of Case:
SPIC AND SPAN, INC.
����������������������� ����������������������� ����������� Plaintiff-Appellant,
����������� ����������� v.
CONTINENTAL CASUALTY COMPANY,
AMERICAN CASUALTY COMPANY OF
READING, PENNSYLVANIA and
HARTFORD ACCIDENT & INDEMNITY
COMPANY,
����������������������� ����������������������� ����������� Defendants-Respondents.
�
____________________________________
SPIC AND SPAN, INC.,
����������������������� ����������������������� ����������� Plaintiff-Appellant,
����������� ����������� v.
NORTHWESTERN NATIONAL INSURANCE
COMPANY OF MILWAUKEE, WISCONSIN,
����������������������� ����������������������� ����������� Defendant-Respondent.
Oral Argument:���� April 10, 1996
������������������������������������������������������������
��
COURT������ ����������� COURT OF APPEALS OF WISCONSIN
Opinion Released:���� June 25, 1996
Opinion Filed: ���� June
25, 1996
���������������������������������������������������������� ��
Source of APPEAL��������������� Appeal from judgments and
order
Full Name JUDGE��������������� COURT:���� Circuit
Lower Court.������ ��������������� COUNTY:���� Milwaukee
(If
"Special",�������� ��������������� JUDGE:���� LAURENCE C. GRAM, JR.
so indicate)
������������������������������������������������������������
JUDGES:���� Sullivan, Fine and Schudson, JJ.
��������������� Concurred:�� ---
��������������� Dissented:�� ---
������������������������������������������������������������
Appellant
ATTORNEYSFor the plaintiff-appellant there were briefs by Foley
& Lardner, with Thomas C. Ewing and Michael D. Flanagan
of Milwaukee; oral argument by Michael D. Flanagan.
Respondents
ATTORNEYSFor the defendants-respondents Continental Casualty
Company, and American Casualty Company of Reading, Pennsylvania there were
briefs by Godfrey, Braun & Hayes, with Edward A. Hannan of
Milwaukee, and Long & Levit, with Martin T. Lee of Los
Angeles, California; oral argument by Martin T. Lee.
For the
defendants-respondents Hartford Accident & Indemnity Company there were
briefs by Otjen, Van Ert, Stangle, Lieb & Weir, S.C., with Paul
J. Pytlik and Monte E. Weiss of Milwaukee; oral argument by Monte
E. Weiss.
For the
defendants-respondents Northwestern National Insurance Company of Milwaukee,
Wisconsin there were briefs by Kasdorf, Lewis & Swietlik, S.C., with
Kevin A. Christensen of Milwaukee; oral argument by Kevin A.
Christensen.
|
������ COURT OF
APPEALS ��������������� DECISION �� DATED AND
RELEASED �������������� June
25, 1996 |
����������������� NOTICE |
|
A party may file with the Supreme Court a petition to review an
adverse decision by the Court of Appeals.�
See � 808.10 and Rule
809.62, Stats. |
This opinion is subject to further editing.� If published, the official version will appear in the bound
volume of the Official Reports. |
Nos.� 95-1572
������� 95-1917
STATE OF WISCONSIN�������������� IN
COURT OF APPEALS
����������������������� �������������
�����������������������������������������������������������������������������������������������������������������������
SPIC
AND SPAN, INC.
����������������������� ����������������������� ����������� Plaintiff-Appellant,
����������� ����������� v.
CONTINENTAL
CASUALTY COMPANY,
AMERICAN
CASUALTY COMPANY OF
READING,
PENNSYLVANIA and
HARTFORD
ACCIDENT & INDEMNITY
COMPANY,
����������������������� ����������������������� ����������� Defendants-Respondents.
____________________________________
SPIC
AND SPAN, INC.,
����������������������� ����������������������� ����������� Plaintiff-Appellant,
����������� ����������� v.
NORTHWESTERN
NATIONAL INSURANCE
COMPANY
OF MILWAUKEE, WISCONSIN,
����������������������� ����������������������� ����������� Defendant-Respondent.
����������������������������������������������������������������������������������������������������������������������
����������������������� APPEAL
from judgments and an order of the circuit court for Milwaukee County:� LAURENCE C. GRAM, JR., Judge.� Affirmed in part; reversed in part and
cause remanded.
����������������������� Before
Sullivan, Fine and Schudson, JJ.
����������������������� SCHUDSON,
J.� Spic and Span, Inc., appeals from the
judgments and order granting summary judgment in favor of its insurers,
Continental Casualty Co., American Casualty Co., Hartford Accident &
Indemnity Co., and Northwestern National Insurance Co.� The trial court concluded that, under City
of Edgerton v. General Casualty Co., 184 Wis.2d 750, 517 N.W.2d 463
(1994), cert. denied, 115 S. Ct. 1360 (1995) and cert. denied
sub. nom., 115 S. Ct. 2615 (1995),�
the insurers did not have a duty to defend or indemnify Spic and Span in
an underlying federal suit.� Spic and
Span also challenges the trial court's conclusion that California law governs
the calculation of defense attorney compensation in the underlying
litigation.� We conclude that Spic and
Span waived its challenge to the choice of California law.� We agree with Spic and Span, however, that
the trial court erred in its determination of the duty to defend.
����������������������� The
facts relevant to this appeal are undisputed.�
On September 10, 1970, Spic and Span and T & F, Inc., entered into
an agreement in which Spic and Span became the sublessee of a portion of a
building in Westminster, California, for operation of its dry cleaning business
(through its subsidiary, S & S Enterprises).� Spic and Span operated in that location from 1970 to June 22,
1987.
����������������������� In
1986, Los Angeles Land Company entered into a ground lease with T & F,
Inc., obtained an assignment of Spic and Span's sublease, and, in 1987, assigned
its interests in any leases concerning the property to ShopWest Partners,
Ltd.� Spic and Span terminated its lease
with ShopWest in June 1987 and, shortly thereafter, Los Angeles Land Company
began developing a shopping center on the property.� During the course of preliminary site preparation for the
shopping center, Los Angeles Land Company discovered that the soil and
groundwater had been contaminated with perchloroethylene (�perc�), a hazardous
toxic substance used by dry cleaners.�
The Orange County Health Care Agency required Los Angeles Land Company
and ShopWest to remediate the property.
����������������������� Los
Angeles Land Company and ShopWest (collectively, �L.A. Land�) subsequently
filed suit against Spic and Span in the United States District Court, Central
District of California, presenting numerous statutory and common law claims,[1]
and seeking, inter alia, actual, punitive, and exemplary damages
allegedly resulting from groundwater and soil contamination.� Spic and Span tendered the defense to its
insurers who either denied coverage or accepted the defense under a reservation
of rights.[2]
����������������������� This
appeal arises from the subsequent suit Spic and Span filed in Wisconsin circuit
court against its insurers alleging breach of contract and seeking a
declaratory judgment that the insurers had a duty to defend and indemnify Spic
and Span in the underlying suit under the terms of the several comprehensive
general liability policies.� Spic and
Span filed a motion for partial summary judgment; the insurers filed
cross-motions for summary judgment maintaining that, under Edgerton,
they had no duty to defend or indemnify Spic and Span.
����������������������� The
insurers, at different times, each provided Spic and Span comprehensive general
liability coverage while it operated the dry cleaning business on the L.A. Land
property.� The duty to defend language
of the policies was virtually the same and similar to the CGL policy language
examined in Edgerton.[3]� A representative duty to defend clause from
one of the insurers' policies reads:
The Company will pay on behalf of the insured all sums
which the insured shall become legally obligated to pay as damages because of
... property damage ... caused by an occurrence, and the company shall have the
right and duty to defend any suit against the insured seeking damages ....
Concluding �[t]hat the remediation costs are not
damages� and that Edgerton controlled, the trial court granted
summary judgment to the insurance companies.
����������������������� The
methodology for reviewing summary judgment motions has been recited many times
and need not be repeated here.� Our
review is de novo.� See Park
Bancorporation, Inc. v. Sletteland, 182 Wis.2d 131, 140, 513 N.W.2d
609, 613 (1994).� The interpretation of
an insurance policy presents a question of law that we review independently of
the trial court.� Smith v.
Atlantic Mut. Ins. Co., 155 Wis.2d 808, 810, 456 N.W.2d 597, 598
(1990).
����������������������� Spic
and Span argues that: (1) Edgerton establishes that coverage
exists where, as here, the underlying suit expressly includes claims for legal
damages; and (2) remediation costs are legal damages, which under Nischke
v. Farmers & Merchants Bank & Trust, 187 Wis.2d 96, 522 N.W.2d
542 (Ct. App. 1994), and its progeny, are recoverable from third parties.� Spic and Span is correct.
����������������������� A
CGL policy does not provide coverage for an insured's costs of remediating
environmental contamination unless there is an underlying �suit seeking
damages.�� Edgerton, 184
Wis.2d at 786, 517 N.W.2d at 479.� Spic
and Span and the insurers agree that in this case, unlike Edgerton,
the underlying federal court action in California is a �suit.�� Thus, we need only decide whether the
underlying suit seeks �damages� requiring the insurers to defend and indemnify
Spic and Span.
����������������������� The
Wisconsin Supreme Court has explained that �damages� in insurance policies
�unambiguously means legal damages.� It
is legal compensation for past wrongs or injuries and is generally pecuniary in
nature.�� Shorewood School Dist.
v. Wausau Ins. Cos., 170 Wis.2d 347, 368, 488 N.W.2d 82, 89
(1992).� The insurers argue, therefore,
that, under Shorewood and Edgerton, �damages� are
not being sought because �all of the claims� against Spic and Span are �for the
government mandated remediation.�� Thus,
the insurers characterize the underlying federal action as one merely �seeking
indemnification from Spic and Span for response costs.�
����������������������� The
insurers are wrong.� As counsel for Spic
and Span explained at oral argument before this court, �If Spic and Span owned
the property that was at issue here, and the contamination had not migrated off
of the property that Spic and Span owned, ... it would fall within the scope of
Edgerton.�� In the federal
suit, however, L.A. Land is suing Spic and Span for remediation costs and
additional damages allegedly suffered because of Spic and Span's operations
allegedly resulting in �contamination in both the soil and groundwater at the
Property.�� The complaint and its
exhibits clarify that �at the Property� includes areas apart from the portion
of the building occupied by Spic and Span.
����������������������� Citing
Nischke, Spic and Span contends that a landowner may recover the
remediation costs from a tortfeasor who inflicts damages on that landowner's
property.� The insurers correctly
respond that Nischke did not address the issue of �damages� and
does not resolve the instant case.�
However, in Wisconsin Public Service Corp. v. Heritage Mutual
Insurance Co., No. 95‑2109 (Wis. Ct. App. March 12, 1996,
ordered published April 30, 1996), we built upon the logic of Nischke,
stating:
In Nischke,
we recognized that where a landowner's action was based in negligence, the
landowner could recover from a tortfeasor the costs to remediate a site in
response to letters from the DNR.�
Additionally, we held that because the landowner had a legal duty to
restore the property, she could recover the cost of repair from the tortfeasor
even though such cost exceed the diminishment in her property's value.� The landowner in Nischke
received legal compensation from the tortfeasor for past wrongs, or legal
damages, which, according to Edgerton are what the term �damages�
as used in insurance policies unambiguously means.
In Nischke,
we did not address whether the tortfeasor's insurer would be required to
indemnify the tortfeasor; the issue presented was whether the landowner could
recover from the tortfeasor.� However, Nischke
is instructive because it stands for the proposition that when a landowner
spends money in response to a government directive to remediate, the money can
be recovered as legal damages from the tortfeasor.
Id., majority slip op. at 7-8 (citations omitted).� Significantly, we explained that Edgerton
does not �preclude an insurer's obligation to defend and indemnify its insured,
the tortfeasor, in those cases where the government has ordered the landowner
to clean up the negligently-damaged property.��
Id., slip op. at 11.
����������������������� General
Casualty Co. v. Hills, No.
95-2261 (Wis. Ct. App. March 12, 1996, ordered published April 30, 1996),
provides the additional factual and legal links to the instant case.� Hills, a gas station owner, had arranged for
the transport of his station's waste to a refinery that recycled used oil.� The United States Environmental Protection
Agency sued the refinery to remediate contamination �at or near� the
refinery.� Id., slip op.
at 2.� Although Hills's station was
nowhere near the refinery, and although Hills had done nothing to directly
cause any damage, the refinery sued Hills as one of numerous third-party
defendants for the �alleged contribution to the contamination,� id.,
slip op. at 9, thus leading Hills to seek coverage from his insurance
company.� We concluded that �Hills [was]
entitled to indemnification for his contribution to the contamination on [the
refinery's] property, even if the property damage is cleaned up in response to
a government directive.�� Id.,
slip op. at 11.
����������������������� Although
similar to Hills in most respects, the instant case offers at
least one factual distinction that again advances the Edgerton
evolution.� Unlike Hills
who neither occupied nor controlled the refinery, Spic and Span occupied and,
arguably, controlled a portion of L.A. Land's building.� We conclude, however, that this factual
distinction is not dispositive to our analysis.� The more salient consideration is that the alleged contamination
reached L.A. Land's property and perhaps beyond.� As we pointed out in both Wisconsin Public Service Corp.,
and in Hills, ��A hallmark of the comprehensive general liability
policy is that it insures against injury done to a third party's
property.��� Wisconsin Public
Serv., slip op. at 9; Hills, slip op. at 11 (citation
omitted).
����������������������� Accordingly,
we conclude that the rationale of Hills extends to these
circumstances; that the federal action is a suit seeking damages and,
therefore, that Spic and Span's insurers have a duty to defend the underlying
suit.� Thus, we reverse the trial
court's grant of summary judgment in favor of the insurers and its denial of
Spic and Span's motion for partial summary judgment, and we direct the trial
court to enter partial summary judgment for Spic and Span.[4]
����������������������� Spic
and Span also argues that the trial court erred in deciding that California law
governs the calculation of compensation for Spic and Span's attorneys in the
underlying suit.� The trial court
resolved the choice of law issue by applying Wisconsin law to the duty to
defend and other questions, but �carved out� an exception for the calculation
of defense compensation.� The trial
court concluded that because the underlying litigation was taking place in
California, the judge in California �should have control over the compensation
of attorneys,� and such control �belongs under California law.�
����������������������� On
appeal, Spic and Span argues that �California's limitation on independent
counsel selected by the insured would undermine Wisconsin policy and the
intentions and expectations of the parties to insurance policies negotiated,
sold and issued in Wisconsin.�� We need
not address Spic and Span's concern, however, because the record reflects Spic
and Span's tacit acceptance of California law for the calculation of defense
compensation.
����������������������� The
underlying federal action was filed in January, 1988.� In a letter dated June 1, 1988, CNA Insurance Companies[5]
informed counsel for Spic and Span that it was accepting the tender of defense
�under a full reservation of rights.��
The letter also informed counsel that although Spic and Span's
assignment of the defense was to a Los Angeles law firm �not on our regular
panel ... in accordance with the Cumis Decision as well as the Civil Liability
Reform Act of 1987,[6] there is a
possibility that the continued use of the counsel of your choice will be in
order and acceptable to us.�� The letter
then stated, �Such use, of course, will be subject to all aspects of the Civil
Liability Reform Act of 1987.�
����������������������� The
next reference to any possible dispute on this issue is found in CNA's
September 20, 1988[7] letter to
counsel for Spic and Span.� The letter
begins:
As you can see by the enclosed correspondence
to Mr. Taylor, I have forwarded our check for payment of that portion of his
billing to be considered as owed in accordance with the Civil Code Section
2860.� In our recent telephone
conversation you had indicated that you were in disagreement as to whether that
section applies in this case.
At this time I
also wish to advise you that that section indicates any dispute concerning
attorneys fees not resolved by these methods shall be resolved by final and
binding arbitration by a single neutral arbitrator selected by the parties to
the dispute.[8]
The letter enclosed CNA's September 20, 1988[9]
letter to the Los Angeles firm representing Spic and Span.� The letter to the firm, referring to �Civil
Code, Paragraph 2860,� stated that CNA had �adjusted your billings
accordingly.�
����������������������� We
have searched the record and found no further correspondence or other
communication indicating Spic and Span's disagreement with the proposition that
compensation disputes would be resolved by arbitration, the method specified
under the Cumis statute.� Although at
oral argument before this court Spic and Span contended that it had promptly
raised the issue in writing, Spic and Span was unable to point to anything in
the record to establish that.� Indeed,
Spic and Span's extensive legal correspondence on this and related compensation
matters does not appear to begin until November 1991.
����������������������� At
oral argument before this court, Spic and Span conceded that the California
litigation had been continuing for �approximately one year� before it raised
the compensation issue, for the first time, in the Wisconsin litigation.[10]� As reflected by the 1988 correspondence in
the record, lawyers had been retained, bills had been submitted, and CNA had
clarified the legal basis for adjusting compensation under California law.� Had Spic and Span wanted to contest the
applicability of California's Cumis statute, it could have done so promptly in
the California litigation.� Spic and
Span's failure to do so waived its challenge to the application of California
law to the calculation and potential arbitration of defense attorney compensation.
����������������������� By
the Court.�Judgments and order
affirmed in part; reversed in part and cause remanded.
���� [1] The complaint sought response costs and
declaratory relief under �CERCLA,� the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. � 9601, et seq., and
claimed:� breach of lease; tortious
denial of existence of contractual obligations; tortious breach of covenant to
keep and/or surrender premises in good condition; breach of warranty; tortious
breach of covenant not to use property for illegal purposes; waste; breach of
statutory duty to repair damages caused by lack of ordinary care; negligence;
fraudulent concealment; and breach of covenant of adequacy for intended use.
���� [2]� The insurers
agree with Spic and Span that an �insurance company must defend the action when
some of the allegations in the complaint fall within the policy coverage
because �apportionment of responsibility for the defense is neither practical
nor desirable.��� Grube v. Daun,
173 Wis.2d 30, 73, 496 N.W.2d 106, 122 (Ct. App. 1992) (citation omitted).� We need not, therefore, analyze the
underlying complaint against Spic and Span claim by claim.� If any one of the claims would require an
insurer to defend Spic and Span, the �insurance company must defend the
action.�� Id.
���� [3] The insurance companies do not contend that
their policies differ in any way that would render differing duties to defend
under Edgerton.� We,
therefore, analyze the policies together.
���� [4]� Given our agreement
with Spic and Span's primary argument, we need not address Spic and Span's
additional arguments requesting an award of the expense costs prior to the
trial court's decision, and regarding whether the insurers were estopped from
denying coverage.
���� [5] CNA is the collective reference for
respondents Continental Casualty Company and American Casualty Company of
Reading, Pennsylvania.
���� [6]� As CNA explained
and argued in its reply brief to the trial court:
As part of the
Civil Liability Reform Act of 1987, the California legislature enacted Cal.
Civil Code � 2860, which provides, in part, that:
(c) When the insured has selected independent counsel to
represent him or her, the insurer may exercise its right to require that
counsel selected by the insured possess certain minimum qualifications ... The
insurer's obligation to pay fees to the independent counsel selected by the
insured is limited to the rates which are actually paid by the insurer to
attorneys retained by it in the ordinary course of business in the defense of
similar actions in the community where the claim arose or is being defended....
This statute, sometimes referred to as the �Cumis
Statute� (in reference to the case entitled San Diego Navy Federal Credit
Union v. Cumis Ins. Society, Inc., 162 Cal. App.3d 358 (1984)) should
be applied to limit the amount payable by CNA to Spic and Span's independent
counsel retained in the California action to the rates CNA ordinary pays for
the defense of similar actions in the community where the underlying claim arose
or is being defended.
(Ellipses in CNA brief.)
���� [7]� The two page
letter is dated September 20, 1988 on page one, and September 14, 1988 on page
two.
���� [8] Cal.
Civ. Code � 2860(c) (West 1995) in part provides:� �Any dispute concerning attorney's fees not
resolved by these methods shall be resolved by final and binding arbitration by
a single neutral arbitrator selected by the parties to the dispute.�