PUBLISHED
OPINION
Case No.: 95-2109
† Petition For Review Pending
Complete Title
of Case:
WISCONSIN PUBLIC SERVICE
CORPORATION, a Wisconsin
Corporation,
Plaintiff-Appellant,
v.
HERITAGE MUTUAL INSURANCE
COMPANY, a Wisconsin
Insurance Corporation,
† Defendant-Respondent.
Submitted on Briefs: January
3, 1996
COURT COURT
OF APPEALS OF WISCONSIN
Opinion Released: March
12, 1996
Opinion Filed: March 12, 1996
Source of APPEAL Appeal from
a judgment
Full Name JUDGE COURT: Circuit
Lower Court. COUNTY: Lincoln
(If "Special", JUDGE: J.M.
Nolan
so indicate)
JUDGES: Cane, P.J., LaRocque and
Myse, JJ.
Concurred:
Dissented:
Appellant
ATTORNEYSOn behalf of the plaintiff-appellant, the cause
was submitted on the briefs of David A. Piehler of Terwilliger,
Wakeen, Piehler & Conway, S.C. of Wausau.
Respondent
ATTORNEYSOn behalf of the defendant-respondent, the cause
was submitted on the brief of Glenn H. Hartley of Schmitt, Hartley
& Koppelman, S.C. of Merrill.
COURT OF APPEALS DECISION DATED AND RELEASED MARCH 12, 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. 95-2109
STATE
OF WISCONSIN IN COURT OF
APPEALS
WISCONSIN PUBLIC SERVICE
CORPORATION, a Wisconsin
Corporation,
Plaintiff-Appellant,
v.
HERITAGE MUTUAL INSURANCE
COMPANY, a Wisconsin
Insurance Corporation,
Defendant-Respondent.
APPEAL from a judgment
of the circuit court for Lincoln County:
J.M. NOLAN, Judge. Reversed
and cause remanded.
Before Cane, P.J.,
LaRocque and Myse, JJ.
CANE, P.J. Wisconsin Public Service
Corporation appeals a summary judgment dismissing its complaint against
Heritage Mutual Insurance Company.
WPS's complaint sought recovery for cleanup costs directly from
Heritage, the insurer of Helmreich Utility Construction, Inc., pursuant to
§ 632.24, Stats.,
Wisconsin's direct action statute.[1] On summary judgment, the trial court
considered whether Heritage's comprehensive general liability (CGL) policy
provides coverage for the expenses WPS incurred paying bills on behalf of the
Tomahawk School District after the school district followed a state request to
investigate and remediate contamination caused by Helmreich's negligence. The trial court concluded: (1) The policy does not provide coverage
because investigation and remediation expenses do not constitute
"damages" as that term is defined in CGL policies; and (2) the
pollution exclusion provision excludes coverage for the damages WPS is
seeking. Because we conclude there is
coverage under the policy and the pollution exclusion does not apply, we
reverse the judgment and remand for further proceedings.
The parties stipulated
to the following facts for purposes of summary judgment:
Sometime prior to October 4, 1990, the
Tomahawk School District applied to Wisconsin Public Service for the
installation of gas service to its building at 18 East Washington Street,
Tomahawk, Wisconsin. Wisconsin Public
Service agreed to provide this service to the building and agreed that it would
install a service line from its main to the building. The actual installation of the service line was to be done by an
independent contractor hired by Wisconsin Public Service, Helmreich Utility
Construction, Inc. Helmreich executed
an indemnity agreement in favor of Wisconsin Public Service whereby Helmreich
Utility agreed to indemnify Wisconsin Public Service against all actions,
claims, demands, damages, losses, costs and expenses which relate to personal
or bodily injury, damage to property of any kind where the action claimed
damage, loss, cost or expense in any way arising out of, in whole or in part,
any act or omission of the contractor.
On October 4, 1990, Helmreich installed a service line from the gas main
to the building and in the course of the installation, cut an underground pipe
that carried fuel oil from an outside underground tank into the building for
the oil furnace. The leak was first
discovered on or about October 22, 1990, and Tomahawk School District notified
Wisconsin Public Service and the Wisconsin Department of Natural
Resources. The cut line was excavated
and repaired by the School District but fuel oil had already leaked from the
tank's cut line into the surrounding soils.
On October 22, 1990, the State of Wisconsin Department of Natural
Resources mailed to Tomahawk School District a letter directing them to
investigate the degree of contamination and to remediate the problem. A similar letter was sent to Wisconsin
Public Service directing it to take the same steps. Tomahawk School District hired an engineer to investigate and
remediate the problem. To date Tomahawk
School district has been sending bills for the cost of investigation of the
problem and remediation of the problem to Wisconsin Public Service who has been
paying said bills without admitting responsibility therefor.
Tomahawk School District has paid none of the costs of investigation or
remediation to date associated with this incident and has filed no legal action
as against Wisconsin Public Service.
Tomahawk School District did not lose the use and occupancy of its
building at all as the result of said contamination.
Wisconsin Public Service commenced a
lawsuit as against Heritage Mutual Insurance Company based upon Heritage's
insurance policy issued to Helmreich Utility Construction, Inc. at the time of
the cutting of the underground fuel pipe.
All amounts claimed by Wisconsin Public Service as against Heritage
Mutual Insurance Company are for payments made by it to or on behalf of the
Tomahawk School District for the investigation of and the remediation of the
contamination on Tomahawk School District Property. Wisconsin Public Service complied with Sec. 144.76 Wis. Stats.
[Section 144.76, Stats., governs
hazardous substance spills.]
The
stipulated facts also included the contract between WPS and Helmreich
(including the indemnification agreement), the insurance contract between
Helmreich and Heritage, and the DNR letters to the school district and
WPS. The indemnification agreement
provides in relevant part:
To
the fullest extent permitted by law, the Contractor [Helmreich] shall fully
indemnify and completely hold harmless the Company [WPS], its agents, insurers
and/or employees from and against all actions, claims, demands, damages,
losses, costs and expenses, including but not limited to attorney's fees (and
any other costs associated with the handling of or defense of any such action
or claim of any kind), which relate to personal or bodily injury, sickness,
disease, death, or injury or damage to property of any kind (including without
limitation the loss of use thereof), and including without limitation any
consequential damage arising therefrom, where all or any of such actions,
claims, damages, losses, costs or expenses in any way arise out of or by reason
of, or are claimed to arise out of or by reason of, in whole or in part, any
act or omission of the Contractor, any subcontractor, anyone directly or
indirectly employed by any of them or anyone for whose acts any of them may be
liable.
The letters from the DNR
to the school district and WPS stated:
Under
s. 144.76(3), Wis. Stats., any person who possesses or controls a hazardous
substance which is discharged, or who causes the discharge of a hazardous
substance, must take the actions necessary to restore the environment and
minimize the harmful effects from the discharge to the air, lands or waters of
the State.
The
DNR stated that because WPS was instrumental in the release of a hazardous
substance, and because the school district was the legal owner of the property,
both WPS and the school district were responsible for investigating and
cleaning up the property.
The parties agree there
are two issues on appeal:
(1) whether there is coverage under the Heritage insurance policy
for the costs WPS incurred paying the bills for investigation and remediation
of the school district's property; and (2) whether the policy's pollution
exclusion applies.
Our review of summary
judgment is de novo. Park
Bancorporation, Inc. v. Sletteland, 182 Wis.2d 131, 140, 513 N.W.2d
609, 613 (Ct. App. 1994). When
reviewing summary judgment, we apply the standard set forth in § 802.08(2), Stats., in the same manner as the
circuit court. Kreinz v. NDII
Secs. Corp., 138 Wis.2d 204, 209, 406 N.W.2d 164, 166 (Ct. App.
1987). This appeal, based on stipulated
facts, concerns a question of law and is therefore suitable for summary
judgment resolution.
The interpretation of an
insurance policy is a question of law this court decides independently of the
circuit court. Smith v. Atlantic
Mut. Ins. Co., 155 Wis.2d 808, 810, 456 N.W.2d 597, 598 (1990). Insurance policies are controlled by the
same principles of law applicable to other contracts. Id.
WHETHER THE POLICY PROVIDES
COVERAGE
First,
we consider whether the Heritage policy provides coverage for the money WPS is
seeking pursuant to its indemnification agreement with Helmreich.[2] WPS maintains that the following policy
language provides coverage for Helmreich:
1. Insuring Agreement.
a.
We will pay those sums that the insured becomes legally obligated to pay
as damages because of bodily injury or property damage to which
this insurance applies. (Emphasis in
original.)
At
issue is whether the money WPS is seeking is included in the term
"damages." The policy does
not define "damages."
Heritage argues that WPS
seeks "response costs," not "damages." Our supreme court in City of Edgerton
v. General Cas. Co., 184 Wis.2d 750, 517 N.W.2d 463 (1994), stated that
Superfund response costs do not constitute damages under the terms of a
comprehensive general liability insurance policy. Id. at 782, 517 N.W.2d at 477. Therefore, Heritage argues, the policy does
not provide coverage for the expenses WPS incurred paying the bills for
investigating and remediating the damage caused by the fuel oil leak. We do not agree with Heritage that Edgerton's
holding relieves insurers of liability for all sums for which insureds are
liable for negligently damaging others' property.
Our conclusion is based
in part on Nischke v. Farmers & Merchants Bank & Trust,
187 Wis.2d 96, 522 N.W.2d 542 (Ct. App. 1994), a case this court decided after Edgerton. 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. Id. at 103-04, 522
N.W.2d at 545. 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 costs exceed
the diminishment in her property's value.
Id. at 118, 522 N.W.2d at 551. 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. See Edgerton, 184 Wis.2d at 784, 517 N.W.2d at 478.
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. Id.
at 103-05, 522 N.W.2d at 545-46.
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.
Applying Nischke
to the instant case, we observe that WPS is seeking to recover from its
subcontractor, Helmreich, who negligently damaged the fuel oil pipe, causing
contamination to the school's property.
The sums WPS seeks are those it spent paying the remediation bills on
behalf of the school, at the school's request, because WPS recognized it was
legally liable for the negligent acts of its subcontractor. The term "damages" is defined as
"legal compensation for past wrongs or injuries and is generally pecuniary
in nature." Edgerton,
184 Wis.2d at 783, 517 N.W.2d at 478.
Here, WPS seeks reimbursement pursuant to its indemnification contract
with Helmreich for expenses incurred remedying past wrongs: property damage caused by Helmreich. Because legal damages are those which CGL
policies unambiguously mean when they use the word "damages," we
conclude WPS is seeking "damages" as that term is used in Heritage's
policy, even if the legal damages WPS seeks represent bills paid on behalf of
the school district for work performed in response to a DNR letter.
Our conclusion is
consistent with the intent of CGL policies:
to provide liability coverage for insureds against third-party claims
for damages that are based on an insured's alleged negligence. See Bausch & Lomb, Inc. v. Utica
Mut. Ins. Co., 625 A.2d 1021, 1033 (Md. 1993) ("A hallmark of the
comprehensive general liability policy is that it insures against injury done
to a third party's property, in contradistinction to an 'all-risks' policy also
covering losses sustained by the policy-holder."). Helmreich negligently caused property damage
for which WPS, as the contractor, is ultimately liable. WPS has recognized its liability by paying
the school district's costs to repair the land. Helmreich agreed to indemnify WPS for Helmreich's negligence. Heritage in its insurance policy with
Helmreich contracted to pay for the damages that result from Helmreich's
negligent actions. We conclude that
Heritage should not be able to avoid its obligation to pay the costs incurred
to restore the property damaged by Helmreich's negligence simply because the
repairs were directed by the government.
Heritage argues that
under Edgerton, cleanup costs incurred under ch. 144, Stats., whether past or future costs,
are an equitable remedy and do not constitute "damages" under
Heritage's policy. However, Heritage
ignores the significant differences between this case and Edgerton. In Edgerton, the insureds
sought coverage under their CGLs for contamination to property they owned or
occupied that was caused by their own actions.
The insureds in Edgerton argued the letters the DNR and
Environmental Protection Agency sent them constituted a suit, and that the
money they were forced to spend on remediation of property they owned or
occupied constituted damages under their policies. Our supreme court rejected their argument, holding that the DNR's
directive that the city and ES & G clean up the property did not constitute
a suit for damages. Id.
at 786, 517 N.W.2d at 479.
In contrast, the instant
case presents a situation where a contractor seeks reimbursement for bills it
paid on behalf of a property owner, at the property owner's request, because
the property owner suffered property damage due to a subcontractor's
negligence. WPS seeks reimbursement,
pursuant to its indemnification contract with Helmreich, for expenses incurred
remedying past wrongs or injuries, which the term "damages" as used
in CGL policies unambiguously means. See
id. at 784, 517 N.W.2d at 478.
Yet, the legal damages WPS seeks are the same dollars it used to pay
bills on behalf of the school district after both the school district and WPS
received a government directive to remediate the contaminated site. Therein lies the heart of the issue
presented: does Edgerton
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?
We
conclude Edgerton's holding is not as broad as Heritage maintains
and that its facts can be distinguished from this case. In Edgerton, the insureds
sought liability coverage for costs they incurred to remediate contamination on
land they owned or occupied that resulted from their own actions. In Edgerton, the court did not
state, or in our view even suggest, that when a landowner is required to repair
its land because of another's negligent act, the tortfeasor's insurer is
relieved of its obligation under the insurance policy to compensate the
landowner for its costs because the landowner responded to a government
directive. See Nischke. To the contrary, we conclude that if one
negligently damages another's land, the landowner is entitled to recover from
the tortfeasor's insurer those costs incurred to repair the property,
regardless of whether the government directed the cleanup.
In sum, we conclude that
under Heritage's liability policy, Heritage must defend and indemnify Helmreich
for the damages Helmreich caused and for which Helmreich is liable under the
indemnification agreement with WPS.
Because we conclude there is insurance coverage for WPS's cause of
action for indemnification, we do not address WPS's second cause of action,
contribution.
Our inquiry does not end
at this point because, even if the insurance agreement provides coverage,
Heritage may not be required to defend and indemnify Helmreich if the pollution
exclusion applies.
WHETHER THE POLLUTION
EXCLUSION APPLIES
Heritage
argues that even if cleanup costs are "damages" under the insurance
policy, the cost of such cleanup is excluded from coverage under the following
exclusion:
This insurance does not apply to:
....
(2)
Any loss, cost or expense arising out of any governmental direction or
request that you test for, monitor, cleanup, remove, contain, treat, detoxify
or neutralize pollutants.
Heritage recognizes that
under a literal reading of this exclusion, the exclusion does not apply because
there was no government direction or request that Helmreich, the
"you" in the exclusion, take action; the DNR never sent Helmreich a
potentially responsible person (PRP) letter.
However, Heritage argues:
[C]overage should not be postured upon who
received the request but rather upon who is being asked to pay for
compliance. To require [Heritage] to
pay these costs simply because the request was not directed to Helmreich (a
liable party) in the first instance, would, as the trial court noted, be
putting form over substance.
Interpretation of an
insurance contract is controlled by general principles of contract
construction. Sprangers v.
Greatway Ins. Co., 182 Wis.2d 521, 536, 514 N.W.2d 1, 6 (1994). The objective is to ascertain and carry out
the intention of the parties. Id. The language of an insurance policy should
be interpreted to mean what a reasonable person in the position of the insured
would have understood the words to mean.
Id. A provision in an insurance policy is ambiguous if,
when read in context, it is reasonably or fairly susceptible to more than one
construction. Id. at
536-37, 514 N.W.2d at 6. Conversely,
when the terms of an insurance policy are plain on their face, the policy must
not be rewritten by construction. See
Limpert v. Smith, 56 Wis.2d 632, 640, 203 N.W.2d 29, 33 (1973).
Our examination of the
policy exclusion leads us to one inescapable conclusion: The exclusion does not apply because
Helmreich never received a directive from the government to clean up the
property. There is no ambiguity; thus,
we cannot rewrite the policy by construing the word "you" to include
anyone but the insured, Helmreich. See
id.
We also conclude the
exclusion is inapplicable for an additional reason. The policy excludes coverage for "Any loss, cost or expense
arising out of any governmental direction or request." The basis for Helmreich's liability in this
case is not its liability as a PRP under CERCLA or state law. Instead, WPS's complaint alleges Helmreich
is liable under its indemnification agreement with WPS because Helmreich
negligently broke a pipe that resulted in property damage for which WPS, as the
contractor, is ultimately liable. WPS
is seeking indemnification for the costs it incurred because it recognized its
liability to the school for the negligent act of its subcontractor. Therefore, WPS's claim against Helmreich is
not "arising out of any governmental direction," but, rather, arises
out of the indemnification agreement under which Helmreich agreed to assume
liability for its negligent acts. Thus,
the pollution exclusion is inapplicable on this basis.
In conclusion, because
WPS's complaint seeks money damages under the indemnification contract for
Helmreich's negligent actions, we conclude Heritage, pursuant to its insurance
policy, has a duty to defend and indemnify Helmreich. Therefore, we reverse the summary judgment dismissing WPS's
complaint and remand the case for further proceedings.
By the Court.—Judgment
reversed and cause remanded.
[1] Heritage
does not contest WPS's claim that it was appropriate to bring this action
directly against Heritage because of § 632.24, Stats., and the insurance policy, which provides: "A person or organization may sue us
directly to recover damages allegedly caused by you or join us as a defendant
in a suit brought against you for damages." Section 632.24 provides:
Direct action against insurer. Any bond or policy of insurance covering liability to others for negligence makes the insurer liable, up to the amounts stated in the bond or policy, to the persons entitled to recover against the insured for the death of any person or for injury to persons or property, irrespective of whether the liability is presently established or is contingent and to become fixed or certain by final judgment against the insured.
[2] WPS's complaint alleged first that pursuant to its indemnification agreement with Helmreich, it was entitled to indemnification for the costs it incurred paying the investigation and remediation bills for the school district. A second cause of action, for contribution, was plead in the alternative, anticipating that the court could determine the indemnification provisions of WPS's contract with Helmreich were unenforceable. Because we conclude there is coverage based on the claim for indemnification, we do not review the claim for contribution.