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COURT OF
APPEALS
DECISION
DATED AND
RELEASED
MARCH
18, 1997
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NOTICE
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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.
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This opinion is subject to further editing. If published, the official version will appear in the bound
volume of the Official Reports.
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No. 95-2884
STATE OF WISCONSIN IN
COURT OF APPEALS
ROBERT
E. LEE & ASSOCIATES, INC.,
Plaintiff,
v.
DAVID
J. PETERS, individually, and
PETERS
SERVICE CENTER, INC.,
Defendants-Third-Party
Plaintiffs-Counter-Defendants- Fifth-Party
Plaintiffs-Sixth-Party Plaintiffs,
v.
CARL
KLEMM, INC., d/b/a KLEMM
TANK
LINES, a Wisconsin corporation,†
Third-Party Defendant-Fourth-Party Plaintiff- Counter-Plaintiff-Respondent-Cross-Appellant,
GREAT
WEST CASUALTY COMPANY,
Fourth-Party Defendant-Appellant-Cross-Respondent,
INTEGRITY
MUTUAL INSURANCE COMPANY,
Fifth-Party
Defendant,
RICHARD
CISLER,
Sixth-Party
Defendant.
APPEAL
and CROSS-APPEAL from a judgment and an order of the circuit court for Brown
County: RICHARD G. GREENWOOD,
Judge. Reversed and cause remanded.
Before
Cane, P.J., LaRocque and Myse, JJ.
LaROCQUE,
J. Great West Casualty Company, the
liability carrier for Carl Klemm, d/b/a Klemm Tank Lines, Inc. (Klemm), a
petroleum transporter, appeals an order declaring coverage under its
comprehensive general liability (CGL) policy in a lawsuit arising out of a
gasoline spill. The circuit court decided that Great West's
endorsement MCS-90, a federally required financial responsibility provision,
negated the pollution exclusion clause in the CGL policy. Because the endorsement indemnifies the
public in case of an uncollectible judgment against an insured, but does not
otherwise change the underlying contract of insurance as between the insured
and the insurer, we reverse the order.
Klemm
cross-appeals the remaining summary judgment decision resolving certain
coverage issues favorably to Great West under its CGL policy, which included a
commercial auto coverage part (trucker's insurance). Because these coverage issues depend upon the resolution of
disputed material facts, we reverse the remainder of the summary judgment and
remand for further proceedings.
Finally, we decline to address several arguments Great West makes for
the first time on appeal.
In
an earlier decision, Robert E. Lee & Assocs. v. Peters, 206
Wis.2d 508, 557 N.W.2d 457 (Ct. App. 1996), (Lee I), we addressed
insurance issues between David J. Peters, who owns and operates Peters Service
Center, Inc., a Green Bay gas station where the spill occurred, and Peters'
insurer, Integrity Mutual Insurance Company.
The current appeal deals with issues between Klemm, the party who
delivered the gasoline to Peters, and Klemm's liability insurer, Great West.
The
summary judgment proofs for and against Great West's motion for summary
judgment set forth the relevant evidence.
The Peters' station stored gasoline in underground tanks. On the date of the spill, October 18, 1991,
at about 9:15 p.m., Peters used a measuring stick to determine the amount of
remaining unleaded gasoline in an 8,000 gallon tank. Peters measured the
remaining gasoline at 23.5 inches, or 1,526 gallons, and ordered 6,000 gallons
of fuel from Klemm. Klemm's employee,
Richard Cisler, made the delivery for Klemm at approximately 11:45 p.m., two
and one-half hours after Peters' measurement.
Prior to pumping, Cisler measured only 22.5 inches of fuel, or 1,431
gallons in the tank prior to pumping.
He then pumped 6,500 gallons of unleaded gasoline, or 500 gallons more
than Peters ordered, but less than the remaining capacity of the tank if
Cisler's measurement was accurate.
According to Great West, Cisler saw nothing unusual and observed no
evidence of a spill, although he noted that the cap for the fill pipe would not
snap tightly shut.
The next day, Peters
discovered gasoline in the manhole for the unleaded tank fill pipe and
recognized that a spill had occurred.
Peters promptly notified the Wisconsin Department of Natural Resources
and retained Robert E. Lee & Associates, Inc., an environmental consultant,
to investigate the spill and develop a remediation plan. Lee's test results indicated that the
groundwater in the vicinity of the service station was contaminated with
unleaded gasoline.
The
DNR investigated the spill, and ultimately issued a remediation order directed
to Klemm from the division of enforcement based upon findings of fact and
conclusions of law. During the course
of investigation, Klemm, through its safety director, Gene Oleson, took the
position that the spill resulted from product expansion and the presence of a
broken fill cap on the underground storage tank. Cisler expressed a similar opinion, as did a DIHLR employee to
whom the DNR addressed the issue of the cause of the spill. Although it included no express written
finding whether expansion rather than a direct overfill caused the spill, the
DNR concluded that Klemm was responsible under the provisions of ch. 144, Stats., for the discharge of hazardous
substances.
The
DNR ordered Klemm to further investigate the site to determine the extent of
the contamination and submit a remediation plan. Klemm's consultant excavated soil from the site, constructed
monitoring wells and analyzed numerous soil samples. The test results indicated that the soil contamination was not
the result of a single spill, but was instead caused by spills of gasoline
prior to 1991, as well as the unleaded gasoline delivered by Klemm on October
18, 1991. Klemm has expended in excess of $100,000 toward the remediation.
Lee
filed the initial lawsuit in this matter against Peters, seeking recovery for
remediation services provided to Peters.
Among the various legal maneuvers, Peters joined Klemm, alleging
negligence and seeking damages for losses associated with the spill. Klemm in turn joined its CGL insurer, Great
West, and also filed a counterclaim against Peters for its costs associated
with the DNR order to remediate.
Klemm's counterclaim against Peters alleged that much of the
contamination remediated through the cleanup was from gasoline spills prior to
the Klemm spill. The circuit court
initially granted summary judgment to Great West on all issues, including the
question of its duty to defend; it later vacated part of that judgment,
deciding a duty existed because coverage was available under the financial
responsibility endorsement made part of the Great West CGL policy.
COVERAGE
UNDER CGL POLICY ENDORSEMENT MCS-90
We
first address the order vacating part of the summary judgment in favor of Great
West and declaring coverage under the financial responsibility endorsement in
the CGL policy. The order effectively
grants a partial summary judgment to Klemm on this issue.
We
apply the summary judgment methodology set forth in § 802.08(2), Stats., de novo. Wegner v. Heritage Mut. Ins. Co.,
173 Wis.2d 118, 123, 496 N.W.2d 140, 142 (Ct. App. 1992). The appropriate method in a summary judgment
analysis has been stated often and warrants rereading but not repeating. See In re Cherokee Park Plat,
113 Wis.2d 112, 115-16, 334 N.W.2d 580, 582-83 (Ct. App. 1983). On summary judgment the burden is upon the
moving party to establish the absence of a genuine, that is, disputed, issue as
to any material facts with such clarity as to leave no room for
controversy. Kraemer Bros. Inc.
v. United States Fire Ins. Co., 89 Wis.2d 555, 565, 278 N.W.2d 857, 862
(1979). The inferences to be drawn from
the underlying facts contained in the moving party's material should be viewed
in the light most favorable to the party opposing the motion. Grams v. Boss, 97 Wis.2d 332,
339, 294 N.W.2d 473, 477 (1980). If the
material is subject to conflicting interpretations or reasonable people might
differ as to the significance of the material, it is improper to grant summary
judgment. Id. The construction of an insurance policy
presents questions of law that we review de novo. American States Ins. Co. v. Skrobis
Painting & Decor., Inc., 182 Wis.2d 445, 450, 513 N.W.2d 695, 697
(Ct. App. 1994). Wisconsin law,
however, dictates that any ambiguity in coverage clauses in an insurance
contract be interpreted broadly in favor of the insured, while exclusionary
clauses are narrowly construed. Link
v. General Cas. Co., 185 Wis.2d 394, 399, 518 N.W.2d 261, 262 (Ct. App.
1994).
The
Great West CGL endorsement, MCS-90, assures compliance with the federal Motor
Carrier Act of 1980, §§ 29 and 30.
The endorsement is set forth on a form provided by the Interstate
Commerce Commission. The federal Act is
codified at 49 C.F.R.
§ 387.1, et. seq.
We
agree with Great West that the only purpose of the endorsement is the
additional protection of the public, and it does not otherwise alter the
coverage or exclusions of the underlying insurance contract between the
principals. First of all, there is the
language of the endorsement itself:
In consideration of the premium stated in the policy to
which this endorsement is attached, the insurer (the company) agrees to pay,
within the limits of liability described herein, any final judgment recovered
against the insured for public liability resulting from negligence in the
operation, maintenance or use of motor vehicles subject to the financial
responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of
1980 .... It is understood and agreed
that no condition, provision, stipulation, or limitation contained in the
policy, this endorsement ... shall relieve the company from liability or from
the payment of any final judgment, within the limits of liability herein
described, irrespective of the financial condition, insolvency or bankruptcy of
the insured. However, all terms,
conditions and limitations in the policy to which the endorsement is attached
shall remain in full force and effect as binding between the insured and the
company. (Emphasis added.)
Case law also supports our conclusion that the
endorsement protects the public from losses attributable to insolvent
tortfeasors, and otherwise does not alter the contract.
Travelers Ins. Co. v.
Transport Ins. Co., 787 Fd.2d 1133, 1140 (7th Cir. 1986), held:
The purpose of the federal statute and regulations is to
insure than an ICC carrier has independent financial responsibility to pay for
losses sustained by the general public arising out of its trucking
operations. However, once it is clear
that there are sufficient funds available to safeguard the public, the inquiry
changes: "[t]he pertinent question
is whether the federal policy of assuring compensation for loss to the public
prevents the courts from examining the manner in which private agreements or
state laws would otherwise allocate the ultimate financial burden of the
injury." Insurance Co. of
North America, 595 F.2d at 138 (emphasis added). We agree with the majority view that
"I.C.C. public policy factors are frequently determinative where protection
of a member of the public is at stake, but those factors cannot be invoked by
another insurance company which contracted to insure a specific risk and which
needs no equivalent protection. Underwriters,
569 F.2d 313.
Another
more recent case from the seventh circuit holds that these endorsements
"do not affect the terms of the agreement between insurer and insured
...." American
Inter-Fidelity Exch. v. American Re-Ins. Co., 17 F.3d 1018, 1022 (7th
Cir. 1994).
The
third circuit has reached a similar conclusion. Carolina Cas. Ins. Co. v. INA, 595 F.2d 128, 140
(3rd Cir. 1979), held: "[T]he
federal motor carrier requirements do not displace rights and duties which the
insurance contracts and state law would otherwise create ...."
While
a conflicting view can be found in other federal decisions, Wisconsin, albeit
in a different context from the present dispute, has adopted "the majority
view." Nowak v. Transport
Indem. Co., 120 Wis.2d 635, 358 N.W.2d 294 (Ct. App. 1984), addressing
the question which of two insurance carriers provided primary coverage, adopted
a similar position, stating:
"[O]nce the public is protected by the existence of an adequate
fund, the purpose of the regulations is fulfilled and the parties and their
insurers are free to allocate responsibility among themselves." Id. at 642, 358 N.W.2d at 298
(quoting Carolina Cas. Co. v. INA., 533 F.Supp. 22, 25‑26
(D. S.C. (1981)). We conclude that, as
between insured and insurer, the endorsement does not alter the provisions of
the CGL policy. Great West, therefore,
does not provide coverage to Klemm under the financial responsibility
endorsement.
KLEMM'S
CROSS-APPEAL
We
now turn to Klemm's cross-appeal of the remainder of the summary judgment that
survived the order. In light of our
coverage analysis set forth hereafter, we first address the circuit court's
conclusion that City of Edgerton v. General Cas. Co., 184 Wis.2d
750, 517 N.W.2d 463 (1994), negates Great West's duty to defend.
In
fairness to the circuit court, the court of appeals decisions upon which we now
rely to reverse were issued after the trial court decision. The circuit court interpreted Edgerton
to excuse Great West from a duty to defend on grounds that the claim against
Klemm was a claim for environmental cleanup and remediation costs under CERCLA
were not "damages" in context of a CGL policy.
We
have declined to apply Edgerton in circumstances similar to those
presented here. In Edgerton,
the DNR directive to the insured to remediate his site was held not to
constitute a "suit" for "damages." Id. at 771, 517 N.W.2d at
473. Here, however, Klemm is the
defendant in a lawsuit filed against him by Peters, alleging negligent delivery
and discharge of gasoline causing damages, including "business
interruption." In General
Cas. Co. v. Hills, 201 Wis.2d 1, 548 N.W.2d 100 (Ct. App. 1996), we
decided that Edgerton did not preclude insurance coverage for
environmental contamination damages to the property of a third party. Although the supreme court has accepted a
petition to review of Hill, unless it is reversed, it is
precedent for distinguishing Edgerton. We reached a similar result concerning liability coverage in Sauk
County v. Employers Ins., 202 Wis.2d 434, 550 N.W.2d 439 (Ct. App.
1996).
We
now turn to question whether the completed operations exclusion found in Great
West's "Commercial Auto Coverage Part Truckers Insurance Form" bars
coverage. First, the coverage provision reads:
A. COVERAGE
We will pay all sums an "insured" legally must
pay as damages because of ... "property damage" to which this
insurance applies, caused by an "accident" and resulting from the
ownership, maintenance or use of a covered "auto".
In
response, Great West asserts the policy exclusion for "Completed
Operations:"
B. EXCLUSIONS
This
insurance does not apply to any of the following:
....
10. COMPLETED OPERATIONS
"Bodily
Injury" or "Property Damage" arising out of your work after that
work has been completed or abandoned.
In the
exclusion, your work means:
a. Work or operations performed by you or on
your behalf ....
Your
work will be deemed completed at the earliest of the following times:
(1) When all the work called for in your
contract has been completed. (Emphasis added.)
Whether
the completed operations exclusion applies depends on whether the spill
occurred at delivery or later when the fuel expanded. The parties' summary judgment proofs present a disputed material
fact as to when the spill occurred, and application of the exclusion depends
upon a resolution of that dispute. A
fact finder could reasonably infer from Peters' measurement of the remaining
fuel that Cisler's delivery of 6,500 gallons of unleaded gasoline exceeded the
tank's capacity when it was pumped. A
contrary reasonable inference also exists that Cisler's measurement made
several hours later was accurate and therefore the spill was caused by
expansion. If the tank was less than
full when Cisler completed pumping, the completed operations exclusion applies
and Great West is not liable.
Great
West contends that only one reasonable inference can be drawn as a matter of
law, and that no reasonable fact finder could infer from Peters' measurement
alone that Cisler overfilled the tank at delivery. It points to evidence that measurements of contents of underground
tanks are not precise, that Cisler's measurement was contemporaneous with the
delivery, and that Cisler observed no physical evidence of a spill. We reject Great West's contention.
The inability to make a precise measurement
by the stick method, used by both Peters and Cisler, strengthens Klemm's
contention that alternative inferences can be drawn from the evidence. We note that neither side points to evidence
of the amount of sales of gasoline, if any, between the two measurements. Further, Cisler's statement of his
observations at time of delivery are subject to credibility determinations by a
fact finder. We reject the use of
summary judgment under the circumstances.
Great
West makes an additional assertion, however, to resolve the question when the
spill occurred. It argues that Klemm is "judicially estopped" from
asserting coverage based upon a theory that the spill occurred at
delivery. It bases its assertion upon
Klemm's position before the DNR that the spill was expansion based. Klemm submitted an opinion to this effect
from its safety director to the DNR investigator along with Cisler's statement
that he observed no sign of a spill at the time of delivery.
Klemm
suggests that because Great West did not assert a judicial estoppel in the
circuit court, it should not be allowed to do so now. We agree. Great West has
failed to give any record citation to demonstrate that it raised the issue
before the circuit court, and we have discovered none. The trial court's written decision makes no
reference to an issue of judicial estoppel.
Appellate courts generally will not review an issue raised for the first
time on appeal. Wirth v. Ehly,
93 Wis.2d 433, 443-44, 287 N.W.2d 140, 145-46 (1980).
It
is worth noting that even where the doctrine is raised, its use is at the
discretion of the trial court. State
v. Petty, 201 Wis.2d 337, 346-47, 548 N.W.2d 817, 820 (1996). No doubt this is so because judicial
estoppel is not directed to the relationship between the parties, but is
intended to protect the judiciary as an institution from the perversion of
judicial machinery. See id.
at 346, 548 N.W.2d at 820. In light of
the absence of a showing that the trial court improperly exercised its
discretion, we decline to address the issue on its merits.
We
next address the pollution exclusion in Great West's CGL policy:
2. Exclusions
This
insurance does not apply to:
....
f. (1) "Bodily injury" or "property
damage" arising out of the actual, alleged or threatened discharge,
dispersal, release or escape of pollutants:
....
(d) At or from any site or location on which you
or any contractors or subcontractors working directly or indirectly on your
behalf are performing operations:
(i) if
the pollutants are brought on or to the site or location in connection with
such operations; or
(ii) if the operations are to
test for, monitor, clean up, remove, contain, treat, detoxify or neutralize the
pollutants.
The
plain language of this exclusion applies to a site or location where the
insured or others working for him "are performing operations." Thus, it is relevant only if the spill
occurred at the time of delivery. In
other words, if the fact finder determines that an overfill occurred while
delivery was being performed and not from an expansion later, the exclusion
will apply.
Great
West also relies upon the "Wrong Delivery of Liquid Products"
exclusion in the auto policy. This
provision excludes:
13. WRONG DELIVERY OF LIQUID PRODUCTS
"Bodily injury" or "property damage"
resulting from the delivery of any liquid into the wrong receptacle or to the
wrong address, or from the delivery of one liquid for another, if the
"bodily injury" or "property damage" occurs after delivery
has been completed. Delivery is
considered completed even if further service or maintenance work, or
correction, repair or replacement is required because of wrong delivery.
The
plain language of this exclusion applies only when there is a delivery to the
wrong receptacle or address, or the wrong liquid. It does not apply to an excess delivery.
The parties next dispute
whether the personal injury coverage in the CGL policy applies. It would seem that we decided this issue
contrary to Klemm's position in Lee I and therefore do not
address it again, nor need we address Great West's contention that the
pollution exclusion excludes coverage under the personal injury provisions.
Great
West asserts for the first time several other exclusions in its two liability
policies and again Klemm's reply relies upon its insurer's failure to raise
these defenses in the circuit court.
The absence of any record reference from Great West and our review of
the record suggests that these defenses were not raised in the trial
court. These untimely arguments invoke
the "handling of property exclusion" in the commercial auto form, the
"use of auto" exclusion in the CGL policy. We decline to address these matters raised
now for the first time.
To
summarize, although coverage is not available under the financial
responsibility endorsement MCS-90 of the CGL policy, Great West does owe a duty
to defend Klemm against potential liability for Peters' claims. Whether Great West is entitled to invoke the
completed operations exclusion of its commercial auto policy is contingent upon
a resolution of disputed facts. Great
West is not liable to Klemm under the personal injury provision of its CGL
policy in light of our holding in Lee I. Because Great West did not raise the issue
in the circuit court, we decline to address the exclusions under the
"handling of property exclusion" or the "use of auto"
exclusion.
We
therefore reverse the order declaring coverage under the CGL endorsement and
reverse and remand for a factual resolution of the issues determining the
remaining coverage issues.
By
the Court.—Judgment and order
reversed and cause remanded.
