PUBLISHED
OPINION
Case No.: 95-2261
† Petition for Review Pending
Complete Title
of Case:
GENERAL CASUALTY COMPANY
OF WISCONSIN,
†
Plaintiff-Respondent,
v.
DONALD A. HILLS d/b/a
HILLS STANDARD,
Defendant-Appellant,
ABC INSURANCE COMPANY and
DEF INSURANCE COMPANY,
Defendants.
Submitted on Briefs: February
5, 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: Barron
(If "Special", JUDGE: Edward
R. Brunner
so indicate)
JUDGES: Cane, P.J., LaRocque and
Myse, JJ.
Concurred:
Dissented:
Appellant
ATTORNEYSOn behalf of the defendant-appellant, the cause
was submitted on the briefs of Matthew A. Biegert of Doar, Drill
& Skow, S.C. of New Richmond.
Respondent
ATTORNEYSOn behalf of the plaintiff-respondent, the cause
was submitted on the brief of Thomas N. Harrington, Laura E. Schuett, and
Lee Anne Neumann of Cook & Franke S.C. of Milwaukee.
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. 95-2261
STATE
OF WISCONSIN IN COURT OF
APPEALS
GENERAL CASUALTY COMPANY
OF WISCONSIN,
Plaintiff-Respondent,
v.
DONALD A. HILLS d/b/a
HILLS STANDARD,
Defendant-Appellant,
ABC INSURANCE COMPANY and
DEF INSURANCE COMPANY,
Defendants.
APPEAL from a judgment
of the circuit court for Barron County:
EDWARD R. BRUNNER, Judge. Reversed
and cause remanded.
Before Cane, P.J.,
LaRocque and Myse, JJ.
CANE, P.J. Donald Hills appeals a
summary judgment in favor of his insurer, General Casualty Company of
Wisconsin, that declared General Casualty has no duty to defend or indemnify
Hills in a separate third-party suit brought against Hills in federal
court. Because we conclude General
Casualty's insurance policies require it to defend and indemnify Hills in the
federal action, we reverse and remand for further proceedings.
The facts are
undisputed. Hills has owned and operated
Don's Standard[1] gasoline
station in Rice Lake, Wisconsin, since 1961.
Arrowhead Refining Company operated a used oil recycling business in
Germantown, Minnesota, from 1961 to 1977.
Hills, in the regular and normal course of business, entered into an
agreement with Arrowhead Refining under which Arrowhead Refining agreed to pick
up waste at Don's Standard and transport it to the Arrowhead site in
Minnesota. In approximately 1976,
environmental contamination was allegedly discovered at or near the Arrowhead
site. Arrowhead Refining subsequently
discontinued its used oil recycling operations.
Eventually, the
Arrowhead site was placed on the National Priorities List (NPL) by the United
States Environmental Protection Agency.
The United States brought an action in the United States District Court
for the District of Minnesota against Arrowhead Refining and several other
defendants for the reimbursement of response costs. Simultaneously, a consent decree was entered in the federal
court. The consent decree was a
negotiated settlement between the government and various defendants which
outlined remedial work to be performed and described the reimbursement of
response costs.
Hills was one of
hundreds named as third-party defendants in the federal court action by
Arrowhead Refining and other defendants, acting as third-party plaintiffs
(collectively, Arrowhead). Arrowhead
sought recovery from Hills for past and future response costs associated with
the Arrowhead site. Arrowhead's
third-party complaint made four claims against Hills: (1) a claim under CERCLA[2];
(2) a claim under the Minnesota Environmental Response and Liability Act
(MERLA), §§ 115B.01-115B.24, Minn. Stats.;[3]
(3) a common law claim for contribution; and (4) a claim for unjust enrichment.
General Casualty filed
this declaratory judgment action in Wisconsin circuit court requesting that the
trial court declare General Casualty has no duty to defend or indemnify Hills
in the third-party action.[4] Hills filed a counterclaim, alleging that
General Casualty had breached its duty to defend Hills. General Casualty filed a motion for summary
judgment, alleging that it has no duty to defend or indemnify Hills because
there has not been any "suit seeking damages" filed against
Hills. The trial court granted the
judgment, and also dismissed Hills' counterclaim against General Casualty.[5] Hills now appeals.
Hills contends the
insurance policies issued to him by General Casualty afford insurance coverage
for the third-party claim against him.
Over the years, General Casualty issued several insurance policies to
Hills, doing business as Don's Standard.
The policies in effect from June 1976 to June 1979 provide in pertinent
part:
Coverage
2 - Property Damage Liability: To pay on behalf of the insured all sums which the insured shall
become legally obligated to pay as damages because of injury to or destruction
of property, including the loss of use thereof, caused by accident and arising
out of the hazards hereinafter defined.
(Emphasis in original.)
The
policy in effect from June 1987 to June 1988 provides:
We will
pay all sums the insured legally must pay as damages because of bodily
injury or property damage to which this insurance applies caused by
an accident resulting from garage operations. (Emphasis in original.)
The
policy in effect for certain policy periods from June 1988 to June 1991
provides:
We
will pay all sums an "insured" legally must pay as damages because of
"bodily injury" or "property damage" to which this
insurance applies caused by an "accident" and resulting from
"garage operations."
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 undisputed
facts, concerns the final step in summary judgment: determining whether General Casualty is entitled to judgment as a
matter of law on the theory that the insurance policies do not provide coverage
for Hills' defense or indemnification in the federal action.
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.
At the outset, we
recognize that this court must analyze whether there is coverage for Hills, a
Wisconsin insured, under the insurance policies issued by a Wisconsin insurer,
for claims under federal and Minnesota law.
Neither party has raised a choice of law issue. Instead, the parties agree that Wisconsin
law applies for purposes of determining on summary judgment whether there is
insurance coverage. Thus, this court is
faced with the task of determining whether, under Wisconsin law, the insurance
policies' language requires General Casualty to defend and indemnify Hills in
the third-party federal action against him.
Our
supreme court addressed insurance coverage for environmental cleanup in City
of Edgerton v. General Cas. Co., 184 Wis.2d 750, 517 N.W.2d 463
(1994). The plaintiffs in Edgerton
were the City of Edgerton and the owner of a landfill site, Edgerton Sand and
Gravel, Inc. Id. at 754,
758, 517 N.W.2d at 466, 468. The site
of the landfill was owned by the Sweeney family (owners of ES & G) and was
used as a dump and burn site for waste materials from the early 1950s through
the time of its closing in December 1984.
Id. at 758 n.5, 517 N.W.2d at 468 n.5. The City of Edgerton leased the site from
1968 to 1984 for landfill operations. Id.
Both the city and ES
& G received letters from the Wisconsin Department of Natural Resources
indicating the DNR suspected groundwater contamination at the landfill. Id. at 759-60, 517 N.W.2d at
468. The Environmental Protection
Agency also sent ES & G and the city a letter requesting information
regarding the disposal of hazardous substances at the landfill. Id. Subsequent letters from the DNR ordered the city and ES & G
to propose a plan to remediate the site. Id. at 760, 517 N.W.2d
at 468. Failure to respond would result
in the listing of the site on CERCLA's National Priorities List, or state
action. Id. at 760-62,
517 N.W.2d at 469.
The city and ES & G
asked their comprehensive general liability (CGL) carriers to provide coverage
for defense costs as well as any liability resulting from Environmental
Protection Agency or DNR claims. Id.
at 762, 517 N.W.2d at 469. One of the
nearly identical CGL policies at issue 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
....
Id. at
769, 517 N.W.2d at 472 (emphasis deleted).
The carriers refused to provide coverage. Id. at 762, 517 N.W.2d at 469. Edgerton held that neither a
potentially responsible party (PRP) letter nor a comparable notification letter
by a state agency such as the DNR triggers the insurers' duty to defend because
the letters do not constitute a "suit" under the CGLs. Id. at 771, 774, 517 N.W.2d at
473, 474.
Additionally, the court
went on to hold that the CGL policies did not "provide coverage for
Superfund response costs, since such costs do not constitute
damages." Id. at
782, 517 N.W.2d at 477. Edgerton quoted
with approval language from Shorewood School Dist. v. Wausau Ins. Cos.,
170 Wis.2d 347, 368, 369-70, 488 N.W.2d 82, 89, 90 (1992) (emphasis in
original):
"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.
The term "damages" does not encompass the cost of complying
with an injunctive decree.
....
[The] limited construction of the term
"damages" is consistent with the basic grant of coverage in the
insurance policies. The insurers agreed
to pay "all sums which the insured shall become legally obligated to pay as
damages." The insurers did not
agree to pay "all sums which the insured shall become legally
obligated to pay." The addition of
"as damages" serves as a qualifier, a limit to coverage.
See Edgerton, 184
Wis.2d at 783-84, 517 N.W.2d at 478.
Thus, Edgerton stands for the proposition that letters
from an environmental agency do not constitute a suit and that the agency's
order to an owner or occupier of land to remediate the land is nothing more
than an order for injunctive relief.
In the instant case,
there is no question that a suit has been filed against Hills. At issue is whether the third-party suit
against Hills is a suit for damages that requires General Casualty to defend
and indemnify Hills. For the reasons
discussed herein, we conclude Edgerton did not address the
situation presented in this case and furthermore, that the suit against Hills
is a suit seeking "damages" as that term is used in the General
Casualty insurance policies. Therefore,
we conclude General Casualty must provide Hills with defense and
indemnification.
The facts in Edgerton
were notably different from the facts before this court. First, the insureds in Edgerton
sought coverage for contamination of property that they owned or
controlled. Here, Hills never owned or
controlled the Arrowhead site. Instead,
Hills entered into an agreement with Arrowhead under which Arrowhead agreed to
pick up waste at Hills' service station and transport it to the Arrowhead
site. Here, private individuals and
companies seek monetary damages from Hills for Hills' alleged contribution to
the contamination of the privately-owned property for which Hills may be liable
under federal law. The liability
policies at issue promised to pay "all sums which the insured shall become
legally obligated to pay as damages because of injury to or destruction of
property" and "all sums the insured legally must pay as damages
because of bodily injury or property damage." Arrowhead seeks judgment against Hills that will make him legally
obligated to pay damages for contributing to the contamination of Arrowhead's
property.
Second, the government
in Edgerton directed the city and ES & G to propose a plan to
remediate the contaminated landfill. Edgerton stands for the proposition that an order for
remediation is not damages. Instead, an
order is an injunctive decree which requires a party to perform specific
acts. Under Edgerton, the
term "damages" does not encompass the cost of complying with an
injunctive decree. Id. at
783, 517 N.W.2d at 478. In contrast, Edgerton
states that the term "damages" as it is used in insurance policies
unambiguously means legal damages, defined as legal compensation for past
wrongs or injuries. Id.
at 784, 517 N.W.2d at 478. Here,
Arrowhead is seeking monetary compensation from Hills for costs it has incurred
or will incur to clean up the site contamination to which Hills contributed as
one of many third-party defendants that recycled their oil through
Arrowhead. Arrowhead's suit for
monetary compensation is a request for legal damages, not injunctive relief.
The distinctions between
Edgerton and this case are critical. The function of this court when reviewing insurance policies is
to further the insured's reasonable expectations of coverage while meeting the
intent of both parties to the contract.
Kremers-Urban Co. v. American Employers Ins. Co., 119
Wis.2d 722, 735, 351 N.W.2d 156, 163 (1984).
We conclude the damages Arrowhead seeks from Hills are the same
"damages" for which General Casualty agreed to provide coverage.
General Casualty argues
that because the relief Arrowhead seeks is solely the recovery of response and
removal costs, there is no coverage because "Edgerton
specifically held that such relief does not constitute 'damages' within the
context of a liability policy."
Under General Casualty's reasoning, if Arrowhead is required to remove
contamination and remediate the site under state or federal law, Hills'
insurer, General Casualty, is not required to indemnify Hills for his
contribution to the contamination of Arrowhead's property. We conclude such a result is neither
required by Edgerton nor consistent with the purpose of
CGLs: to indemnify insureds for damage
they cause to others' property. See Bausch
& Lomb v. Utica Mutual, 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."). While the insureds in Edgerton
were not entitled to coverage under their own liability policies for
contamination they inflicted on the land they owned or leased, Hills is
entitled to indemnification for his contribution to the contamination on
Arrowhead's property, even if the property damage is cleaned up in response to
a government directive.
The parties' remaining
arguments debate whether the Arrowhead claim under MERLA is similar to a claim
under CERCLA. This debate is premised
on the belief of both parties that Edgerton held there is no
insurance coverage for environmental response cases involving CERCLA. Hills argues that MERLA is broader than
CERCLA so that even if this court interpreted Edgerton broadly,
we could still find coverage for the MERLA claim. Because under our interpretation of Edgerton,
General Casualty has a duty to defend and indemnify Hills against all of
Arrowhead's claims, we will not address the differences between MERLA and
CERCLA.
Additionally, the
parties addressed the claims of contribution and unjust enrichment. Hills argues that both claims are separate
and distinct from any CERCLA action so that even if there is no coverage for
the CERCLA claim, there is coverage for the unjust enrichment and contribution
claims. General Casualty argues the contribution
and unjust enrichment claims are derivative of the underlying claim for
response costs and could not exist without it.
Because we conclude there is coverage for Hills' liability arising out
of Arrowhead's claim, we need not address whether the coverage that also exists
for the contribution and unjust enrichment claims is provided by the policies
based on their status as independent claims or as derivative claims.
We conclude the
third-party suit against Hills seeks "damages" as that term is used
in the General Casualty insurance policies.
Therefore, we reverse the trial court's summary judgment that declared
General Casualty has no duty to defend or indemnify Hills in the third-party
action and remand for further proceedings.
By the Court.—Judgment
reversed and cause remanded.
[1] Although the case caption identifies Hills' business as "Hills Standard," the parties and the insurance policies refer to the business as "Don's Standard." There is no dispute the parties are referring to the same business, which we will identify as Don's Standard for purposes of this appeal.
[2] CERLCA stands for Comprehensive Environmental Response, Compensation, and Liability Act of 1980, which is codified at 42 U.S.C.A. §§ 9601-75 (1995). Arrowhead's complaint states that if it is found liable in whole or in part to the United States, it seeks recovery of, reimbursement for and/or contribution towards all response costs, including interest, that may have been or may be incurred in the future in any way relating to the Arrowhead site. If Arrowhead is not liable in whole or in part to the United States, it seeks from Hills recovery or reimbursement of all response costs, including interest.
[3] Arrowhead's complaint states that if it is found liable in whole or in part to the United States, it seeks recovery of, reimbursement for and/or contribution towards all response costs, including interest, that may have been or in the future will be incurred in any way relating to the Arrowhead site. Alternatively, if Arrowhead is not liable to the United States, it seeks from Hills recovery or reimbursement of all reasonable and necessary removal costs it incurred with respect to the Arrowhead site.
[4] General Casualty alleged it has no duty to defend or indemnify Hills for ten reasons, including: response costs do not constitute damages within the context of the General Casualty policies, there was no "occurrence" within the policy period of any policy, there is an applicable pollution exclusion, the pollution was expected or intended (and therefore was not an accident), and others.
[5] General Casualty moved for summary judgment based on only one of the ten claims it alleged in its complaint. Therefore, we do not address the remaining claims. Instead, we reverse and remand the case to the trial court for further consideration of General Casualty's remaining claims and Hills' counterclaim.