|
COURT OF APPEALS DECISION DATED AND RELEASED APRIL 16, 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(1), Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 95-2012
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT III
NOR-LAKE, INC.,
A WISCONSIN
CORPORATION,
Plaintiff-Appellant,
v.
AETNA CASUALTY AND
SURETY CO. AND
EMPLOYERS
INSURANCE OF WAUSAU,
Defendants-Respondents,
ROYAL INSURANCE CO.
AND JOHN DOE INSURANCE
COMPANIES ONE THROUGH TWENTY,
Defendants.
APPEAL from a judgment
of the circuit court for St. Croix County:
ERIC J. WAHL, Judge. Affirmed
in part; reversed in part and cause remanded.
Before Cane, P.J.,
LaRocque and Myse, JJ.
PER CURIAM. Nor-Lake, Inc., appeals a summary judgment
dismissing its claim against Aetna Casualty and Surety Co. and Employers
Insurance of Wausau. Nor-Lake argues
that: (1) a question of material fact
precludes summary judgment, i.e., what portion of remediation expenses
represents legal damages; (2) City of Edgerton v. General Cas. Co.,
184 Wis.2d 750, 517 N.W.2d 463 (1994), does not bar coverage under Wausau and
Aetna's liability insurance policies; (3) the trial court misinterpreted the
Aetna umbrella insurance policy; and (4) the trial court erroneously awarded
costs.
We conclude that: (1)
what portion of remediation costs represents legal damages poses a material
issue of fact to preclude summary judgment; (2) Edgerton bars
coverage under Wausau's and Aetna's policies for costs of remediation at Nor‑Lake's
Hudson facility; and (3) the trial court correctly interpreted the Aetna
umbrella policy. We therefore affirm in
part, reverse in part and remand for resolution of Nor-Lake's liability for
property damage to another. In light of
our remand, we do not address the issue of costs.
Nor-Lake filed this
declaratory judgment action to obtain insurance benefits for costs incurred to
satisfy claims by the Wisconsin Department of Natural Resources. Starting in 1965, Nor-Lake, a refrigeration
and laboratory equipment manufacturer, used paints and solvents containing
volatile organic compounds at its Hudson facility. In 1984, Nor-Lake tested for and discovered groundwater
contamination at its Hudson facility, as well as at five nearby residential
wells. After notifying the DNR as required by § 144.76(2), Stats., it participated in remediation,
including the installation of monitoring wells, sampling of wells, groundwater
extraction and an aeration system.
From 1976 to 1987,
Nor-Lake contracted with a disposal service to dispose of its trash at what is
commonly known as the Junker landfill.
After groundwater contamination was discovered resulting from the Junker
site, Nor-Lake participated in remediation to minimize potential liability. It
is undisputed that the DNR never initiated suit against Nor-Lake.
Aetna issued Nor-Lake a
comprehensive general liability policy for the time periods in question. Aetna also sold Nor-Lake an umbrella
liability policy. Wausau issued general
liability policies for five consecutive annual periods from 1984 to 1989.
Nor-Lake's complaint
against its insurers seeks a declaration that the insurers have a duty to
defend Nor-Lake "in connection with the groundwater contamination,"
and that the insurers have a duty to indemnify Nor-Lake "for all sums
Nor-Lake has been legally obligated to pay as damages and will become legally
obligated to pay as damages in the future in connection with the groundwater
contamination ...."[1]
The trial court granted
summary judgment in favor of the insurers based upon Edgerton. Nor-Lake appeals the judgment of dismissal.
1. Damages
Nor-Lake argues that Edgerton
is not dispositive of all pollution coverage claims as a matter of law. It points to language in Edgerton
that holds the door open for "damages for injury, destruction, or the loss
of natural resources under 42 U.S.C. sec. 9607(a)(4)(C)" as claims for
damages recoverable under a comprehensive general liability policy. See id. at 784, 517 N.W.2d at
478. It argues that the trial court in
this case was presented with a factual dispute: whether some of Nor-Lake's
costs of remediation were in the nature of expenditures to compensate an
injured party for losses sustained by a wrongdoer.
Summary judgment is
reviewed de novo. American States
Ins. Co. v. Skrobis Painting & Decorating, 182 Wis.2d 445, 450, 513
N.W.2d 695, 697 (Ct. App. 1994). We
apply the standard set forth in § 802.08(2), Stats., in the same manner as the circuit court. Edgerton, 184 Wis.2d at 764,
517 N.W.2d at 470. To demonstrate a
prima facie case for summary judgment, the moving party, here the defendant
insurer, must show a defense that would defeat the claim. See Grams v. Boss, 97 Wis.2d
332, 338, 294 N.W.2d 473, 477 (1980).
We conclude that to the extent Nor-Lake's expenditures may include
expenses that compensate another for negligently damaging another's property,
the insurers have failed to demonstrate a prima facie defense.
In Edgerton, the City of
Edgerton and the owner of a landfill, Edgerton Sand and Gravel, Inc., received
letters from the DNR ordering a remediation plan to address groundwater
contamination at a landfill. Id.
at 759-60, 517 N.W.2d at 468. The
landfill was used as a dump from the early 1950s to 1984. The city leased the landfill from 1964 to
1984. Id. at 758-59
n.5, 517 N.W.2d at 468 n.5.
Edgerton and ES&G
asked their general comprehensive liability carriers to provide defense costs
as well as to pay any liability resulting from the Environmental Protection Agency
or DNR claims. Id. at
762, 517 N.W.2d at 469. They relied on
the following policy language:
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
....
Id. at
769, 517 N.W.2d at 472 (emphasis deleted).
In Edgerton, our supreme court
held that Superfund response costs do not constitute "damages" as
that term is used in a comprehensive general liability policy. Id. at 782, 517 N.W.2d at
477. "'Damages' as used in ...
insurance policies unambiguously means legal damages. It is legal compensation for past wrongs or injuries and is
generally pecuniary in nature." Id.
at 783-84, 517 N.W.2d at 478 (quoting Shorewood School Dist. v. Wausau
Ins. Cos., 170 Wis.2d 347, 368, 488 N.W.2d 82, 89 (1992). "Damages" do not include
injunctive relief. Id. Our supreme court concluded that because a
DNR letter directing clean-up of ground water contamination did not constitute
a suit, the insurer had no duty to defend.
Also, because injunctive relief was sought instead of damages, it held
the policy did not provide coverage. Id.
at 786, 517 N.W.2d at 479.
Here, like Edgerton,
the comprehensive general liability policies promise to pay on behalf of
Nor-Lake "all sums which the insured shall become legally obligated to pay
as damages because of ... property damage ...." The insurers rely on Edgerton for the proposition
that there is no coverage for Nor-Lake's remediation costs. Edgerton, however, did not
involve remediation of neighboring properties.
It addressed remediation due only to contamination at the property the
insured owned or occupied. See id.
at 758-62, 517 N.W.2d at 468-69. The
insurers cite no authority for the proposition that § 144.76, Stats., compliance relieves an
individual of legal liability for damages he negligently caused to another's
property.[2]
In
Nischke v. Farmers & Merchants Bank & Trust, 187 Wis.2d
96, 522 N.W.2d 542 (Ct. App. 1994), we recognized that in a negligence action,
a plaintiff could recover from a tortfeasor the costs to remediate a site in
response to a letter from the DNR. Id.
at 103-04, 522 N.W.2d at 545. Nischke
does not address whether a tortfeasor's insurer would be required to indemnify the
tortfeasor. However, Nischke
stands for the proposition that expenses of remediation can be an element of
legal damages. Nischke
states:
Thus,
assuming the bank was the negligent cause of the leak, its negligence has made
Nischke legally obligated to incur costs to restore her property. These are recoverable as the normal measure
of compensatory damages, despite the fact such expenses may exceed the
diminution in fair market value.
Id. at
120, 522 N.W.2d at 552.
Here,
Nor-Lake undertook remediation not only to clean up its own site, but to clean
up the effects of contamination on five residential wells and a landfill. Nor-Lake has demonstrated a material issue
of fact whether it is liable for negligently damaging neighboring wells and a
landfill. To the extent that its
negligence caused property damage for which it is legally liable, the policy
affords coverage. The cost of
remediation is not conclusory as to the amount of damages but is relevant
evidence the court may consider in making a determination of damages. The fact that Nor-Lake was legally required
to remedy the property damage before it was sued goes to the issue of duty to
defend, not to liability for damages. See
Edgerton, 184 Wis.2d at 786, 517 N.W.2d at 479.
2.
Aetna and Wausau CGL Policies
Nor-Lake argues that the
trial court erroneously applied Edgerton to preclude coverage
under the Aetna and Wausau CGL policies.
It contends that the facts in this case can be distinguished from Edgerton
so that Edgerton does not control. To the extent the trial court applied Edgerton to
Nor-Lake's obligation to remediate the contamination at Nor-Lake's facility, we
disagree.
The facts here and in Edgerton
involve the same policy language; both involve costs incurred by the insured
remediating ground water contamination at a site it owned or occupied, pursuant
to a demand by the DNR. The trial court
properly applied Edgerton to preclude coverage to remediate the
Hudson facility site owned or occupied by Nor-Lake.
Nor-Lake argues that Edgerton
can be distinguished based on the parties' intent when entering the insurance
contracts. Nor-Lake argues that its
insurance company's own records evince an intent to provide coverage under the
circumstances presented. We are
unpersuaded.
Insurance policies are
construed like other contracts. Sprangers
v. Greatway Ins. Co., 182 Wis.2d 521, 536, 514 N.W.2d 1, 6 (1994). Absent an ambiguity in its terms, its plain
language controls. International
Chiropractors Ins. Co. v. Gonstead, 71 Wis.2d 524, 527, 238 N.W.2d 725,
727 (1976). Whether an ambiguity exists
is a question of law. Extrinsic
evidence is irrelevant if the contract is unambiguous. Capitol Invest., Inc. v. Whitehall Packing
Co., 91 Wis.2d 178, 189, 280 N.W.2d 254, 258 (1979). Because Nor-Lake fails to persuade us that
the policies are in any way ambiguous, we agree with the trial court that
extrinsic evidence of the parties' intent in the form of company records and
internal documents is irrelevant. See
Hope Acres, Inc. v. Harris, 27 Wis.2d 285, 291, 134 N.W.2d 462, 465
(1965). Except in case of ambiguity,
"the intent of the parties must be determined from the four corners of the
insurance policy itself." Sambs
v. City of Brookfield, 66 Wis.2d 296, 317, 224 N.W.2d 582, 593 (1975).
Nor-Lake argues that in Edgerton,
our supreme court relied on "facts" outside the four corners of the
insurance policies, even though the court found the terms of the policy
unambiguous. See id.
at 781, 517 N.W.2d at 477. It points to
the court's observation that "CGLs were formulated and revised between
1940 and 1973. Risk assessment in
pre-1980 CGLs did not incorporate liability under CERCLA," id.
at 780 n. 26, 517 N.W.2d at 476 n. 26, and that the insurers did not have a
"coverage expectation" to defend notices that were not lawsuits. Id. at 781, 517 N.W.2d at
477.
We disagree. The Edgerton court interpreted
the parties' intent through the plain and ordinary meaning of the
contract. "[T]he words of a policy
are to be given their plain and ordinary meaning. [A]n insured's expectations may not be satisfied in contradiction
to policy language which clearly identifies the scope of the insured's
coverage." Id. at
480, 517 N.W.2d at 476-77 (citation omitted).
Edgerton's
observations cited by Nor-Lake were statements unnecessary to its
analysis. Although a variety of factors
may require a court to look beyond the four corners of a document to discern
the meaning of a contract, none are evident here. Nor-Lake has failed to persuade us that the record presents a
basis for admitting extrinsic evidence to vary the plain meaning of the
insurance contracts.
3. Aetna's Umbrella
Policy
Nor-Lake argues that the
trial court erred by misinterpreting the Aetna umbrella policy; that the policy
is ambiguous, and that it must be read in favor of coverage. We conclude that the policy is unambiguous
and that the trial court correctly applied the umbrella policy to the
remediation costs at Nor-Lake's facility.
The Aetna umbrella
policy provides:
2.1 COVERAGE. The company will indemnify the insured for ultimate net loss in
excess of the applicable underlying limit which the insured shall become
legally obligated to pay as damages because of
A. Personal Injury,
B. Property Damage, or
C. Advertising Offense
to
which this policy applies, caused by an occurrence anywhere in the world,
provided that: ....
Aetna
defined "ultimate net loss" to mean:
5.13
"ultimate net loss" means the sum actually paid or payable in cash in
the settlement or satisfaction of any claim or suit for which the
Insured is liable either by adjudication or settlement with the written consent
of the company, after making proper deduction for all recoveries and salvages
collectible. (Emphasis added.)
Nor-Lake argues that the
specific definition of "ultimate net loss" controls Aetna's
obligations under the umbrella policy.
It argues that in order to give meaning to every term so that none is
rendered meaningless, the phrase "any claim" must be interpreted
separately from the term "suit,' and means a "[d]emand for
money" and "[r]ight to payment, whether or not such right is reduced
to judgment, liquidated, unliquidated ...." Black's Law Dictionary
247 (6th ed. 1990). Relying on this
broad definition, Nor-Lake maintains that the DNR's demands requiring
remediation of contamination at Nor-Lake's facility constitutes "any
claim" encompassed by Aetna's policy definition of "ultimate net
loss." In the alternative, Nor-Lake
argues that "any claim" is sufficiently broad as to create an
ambiguity.
We reject Nor-Lake's
arguments. "The meaning of the
terms of the policy is assessed by a reasonable person in the position of the
insured and that reasonable insured's expectations of coverage." Edgerton, 184 Wis.2d at 780,
517 N.W.2d at 476-77. Even given an
expansive interpretation of the term "any claim," its context refers
to "any claim" for damages within the meaning of the policy. In addition to its definition, the term
"ultimate net loss" is further modified by the propositional phrase
"in excess of the applicable underlying limit which the insured shall
become legally obligated to pay as damages ...." Nor-Lake's reading ignores this qualifier. To read the umbrella policy as providing
coverage for "any claim" without qualification would be
unreasonable. See Nichols
v. American Employers Ins. Co., 140 Wis.2d 743, 751, 412 N.W.2d 547,
551 (Ct. App. 1987) (liability policy not to be interpreted to defend such
actions as child custody suits, for example).
Because "any claim" for damages does not include a claim for
injunctive relief, Edgerton, 184 Wis.2d at 786, 517 N.W.2d at
479, we reject Nor-Lake's proposed interpretation of the Aetna umbrella policy.
Nor-Lake further argues
that its liability under a consent decree resulting from a DNR administrative
adjudication falls within the meaning of "any claim or suit." An administrative proceeding is not the
equivalent of a suit or claim for legal damages. Id. at 781, 517 N.W.2d at 477. "Therefore, no matter how coercive the
language of the DNR letter was considered to be, it was used within the realm
of an administrative proceeding.
It did not have the effect of initiating a suit." Id.
at 782, 517 N.W.2d at 477 (emphasis in original).
Nor-Lake further argues
that the purpose of an umbrella policy is to provide coverage to include losses
of a different character than the more typical losses covered by underlying
liability insurance. We agree that one
purpose of an umbrella policy may be to provide broader coverage. Our first duty, however, in the
interpretation of an insurance policy is to read its plain language. Nor-Lake has not pointed to any policy
language that evinces an intent to expand the scope of coverage. We agree that the trial court properly
interpreted the policy not to cover remediation expenses at the Nor-Lake
facility.
4. Costs
Nor-Lake argues that the
trial court misinterpreted the law when it concluded that it had no discretion
but to award costs against Nor-Lake.
Because we affirm in part and reverse in part, costs will be
re-evaluated after remand.
Consequently, it is unnecessary to address this issue.
5. Conclusion
We address only the
narrow issues presented here: whether the trial court properly applied Edgerton
to require dismissal of all of Nor-Lake's claims as a matter of law. We agree that the trial court properly
interpreted the insurance policies to conclude that Edgerton
precludes coverage for remediation expenses at Nor-Lake's facility. Edgerton, however, did not
address coverage for remediation expenses for injury to neighboring wells or
landfills not owned or occupied by the insured. The insurers cite no authority for the proposition that §§ 144.60
to 74 and § 144.76, Stats.,
compliance relieves an individual of legal liability for damage he negligently
caused to another's property.
Consequently, we
conclude that the insurers have not demonstrated, as a matter of law, that the
policy fails to provide coverage for Nor-Lake's costs related to property
damage it may have negligently caused to another's property. We remand for resolution of Nor-Lake's
liability for property damages to another.
By the Court.—Judgment
affirmed in part; reversed in part and cause remanded. No costs on appeal
This opinion will not be
published. Rule 809.23(1)(b)5, Stats.
[1] The complaint was filed on November 12, 1992. City of Edgerton v. General Cas. Co., 184 Wis.2d 750, 517 N.W.2d 463 (1994), was released on June 16, 1994. On appeal, Nor-Lake confines its arguments to the issue of coverage in light of Edgerton. Therefore, we do not address the issue of duty to defend.