2014 WI 135
SUPREME COURT OF WISCONSIN
CASE NO.: 2012AP2521
COMPLETE TITLE: Tina L. Preisler and Frederick W. Preisler,
Plaintiffs-Co-Appellants-Petitioners,
v.
General Casualty Insurance Company, Regent
Insurance
Company, Hastings Mutual Insurance Company and
Secura
Insurance, a mutual company,
Defendants-Respondents,
Kuettel's Septic Service, LLC, 4-DK Farm, Duke
Kuettel,
Doug Kuettel, Dale Kuettel and Cheryl Kuettel,
Defendants-Appellants-Petitioners.
------------------------------------------------
Tina L. Preisler and Frederick W. Preisler,
Plaintiffs-Appellants-Petitioners,
v.
Chartis Specialty Insurance Company f/k/a
American
International Specialty Lines Insurance Company,
Defendant,
Rural Mutual Insurance Company,
Defendant-Respondent,
Phil's Pumping and Fab, Inc.,
Defendant-Co-Appellant-Petitioner.
REVIEW OF A COURT OF APPEALS DECISION
(Reported at 352 Wis. 2d 754, 843, N.W.2d 710)
(Ct. App. 2014 – Unpublished)
OPINION FILED: December 30, 2014
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: September 12, 2014
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Outagamie
JUDGE: Michael W. Gage
JUSTICES:
CONCURRED: BRADLEY, J., concurs. (Opinion filed.)
DISSENTED: ABRAHAMSON, C.J., dissents. (Opinion filed.)
NOT PARTICIPATING:
ATTORNEYS:
For the defendants-appellants-petitioners, there were
briefs by Michael C. Menghini and Herrling Clark Law Firm Ltd.,
Appleton, and oral argument by Michael C. Menghini.
For the defendant-co-appellant-petitioner, there were
briefs by Winston A. Ostrow, Jonathan T. Smies, and Godfrey &
Kahn, S.C., Green Bay, and oral argument by Jonathan T. Smies.
For the plaintiffs-co-appellants-petitioners, there were
briefs by James A. Olson, P. Scott Hassett, Kathryn A. Harrell,
Daniel S. Lenz, and Lawton & Cates, S.C., Madison, and oral
argument by James A. Olson.
For defendant-respondent Rural Insurance Company, there was
a brief by Christine M. Rice, Matthew J. Van Keulen, and Simpson
& Deardorff, S.C., Milwaukee. Oral argument by Christine M.
Rice.
For defendant-respondent Hastings Mutual Insurance Company,
there was a brief by William R. Wick, Ryan R. Graff, Katelyn P.
Sandfort, and Nash, Spindler, Grimstad & McCracken LLP,
Manitowoc, and oral argument by Ryan R. Graff.
For defendants-respondents General Casualty Company of
Wisconsin and Regent Insurance Company, there was a brief and
oral argument by Jeffrey A. Evans and von Briesen & Roper, S.C.,
Milwaukee.
For defendant-respondent Secura Insurance, there was a
brief and oral argument by Todd Joseph Koback, John P. Runde,
and Davczyk & Varline, LLC, Wausau.
2
3
2014 WI 135
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2012AP2521
(L.C. No. 2010CV2601 & 2011CV706)
STATE OF WISCONSIN : IN SUPREME COURT
Tina L. Preisler and Frederick W. Preisler,
Plaintiffs-Co-Appellants-Petitioners,
v.
General Casualty Insurance Company, Regent
Insurance Company, Hastings Mutual Insurance
Company and Secura Insurance, a mutual company,
Defendants-Respondents,
Kuettel's Septic Service, LLC, 4-DK Farm, Duke
Kuettel, Doug Kuettel, Dale Kuettel and Cheryl
Kuettel,
FILED
Defendants-Appellants-Petitioners.
DEC 30, 2014
----------------------------------------------
Diane M. Fremgen
Tina L. Preisler and Frederick W. Preisler, Clerk of Supreme Court
Plaintiffs-Appellants-Petitioners,
v.
Chartis Specialty Insurance Company f/k/a
American International Specialty Lines
Insurance Company,
Defendant,
Rural Mutual Insurance Company,
Defendant-Respondent,
Phil's Pumping and Fab, Inc.,
Defendant-Co-Appellant-Petitioner.
REVIEW of a decision of the Court of Appeals. Affirmed.
¶1 PATIENCE DRAKE ROGGENSACK, J. We review a decision
of the court of appeals1 affirming an order of the circuit court2
that granted summary judgment to Rural Mutual Insurance Company,
Regent Insurance Company and General Casualty Company of
Wisconsin. Our review focuses on the interpretation of
pollution exclusion clauses in commercial and contractor general
liability insurance policies.
¶2 We conclude that a reasonable insured would understand
that decomposing septage is a "contaminant" and therefore, a
"pollutant" as defined in the policies when it has decomposed
and seeps into a water supply. Accordingly, we affirm the
decision of the court of appeals, which granted summary judgment
upon its conclusion that the pollution exclusion clause
precluded coverage for harm resulting from the Preislers' water
supply's contamination.
1
Preisler v. Kuettel's Septic Serv., LLC, No. 2012AP2521,
unpublished slip op. (Ct. App. Jan. 14, 2014).
2
The Honorable Michael W. Gage of Outagamie County
presided.
2
No. 2012AP2521
¶3 We also conclude that the petitioners failed to
petition this court for review of the court of appeals dismissal
of their claims against Hastings Mutual Insurance Company and
Secura Insurance Company on alternative grounds. We decline to
consider issues not raised in petitions for review. State v.
Bodoh, 226 Wis. 2d 718, 737, 595 N.W.2d 330 (1999); Wis. Stat.
§ 809.62 (2011-12).3 Accordingly, those dismissals are not
before us.
I. BACKGROUND
¶4 This review involves an insurance coverage dispute
concerning a pollution exclusion clause commonly found in
commercial general liability (CGL) policies. The historic facts
are not in dispute.
¶5 Fred and Tina Preisler operate a dairy farm and raise
cattle. A well drilled in 1972 supplied water for the
Preislers' household and farm uses until 2008.
¶6 Duke, Doug, Dale, and Cheryl Kuettel live on a farm
across the road from the Preislers' farm. From that property,
the Kuettels run a farming operation, 4-DK Farm, and a septic
pumping service, Kuettel's Septic Service, LLC. Kuettel's
Septic hauls, stores, and disposes of the waste it pumps from
customers' septic tanks. Kuettel's Septic also collects waste
from grease traps, floor pits, and car washes, which it combines
with the human waste from septic tanks. Kuettel's Septic
3
All subsequent references to the Wisconsin Statutes are to
the 2011-12 version unless otherwise indicated.
3
No. 2012AP2521
periodically hired Phil's Pumping and Fab, Inc. to dispose of
septage.4
¶7 Septage is primarily composed of human urine and fecal
material, as well as other materials disposed of in septic
tanks, grease interceptors and portable restrooms. See Wis.
Admin. Code § NR 113.03(55) (Feb. 2014) (defining septage).
Septage contains nitrogen, and when septage is introduced into
soil, it decomposes. During that biological process nitrates
are formed. Mike O'Leary et al., Understanding Nitrogen in
Soils, Univ. of Minn. (2002)
http://www.extension.umn.edu/agriculture/nutrient-
management/nitrogen/understanding-nitrogen-in-soils/.
¶8 When nitrates are created in excess of what plants are
able to use, nitrates can leach into water supplies. Id. The
presence of nitrates in water supplies is a concern for human
health as it may cause health problems in infants and may be
implicated as a risk factor associated with chronic health and
reproductive problems. Nonpoint Source Pollution Abatement
Program Redesign, Nitrate in Groundwater - A Continuing Issue
for Wisconsin Citizens 3 (1999). Additionally, high nitrate
4
We will subsequently refer to Fred and Tina Preisler as
"the Preislers." We will refer to Kuettel's Septic, 4-DK Farm,
the individual Kuettels, and Phil's Pumping collectively as "the
Kuettels." We will refer to the insurance companies either
collectively as "the insurers" or individually as "Regent" or
"Rural."
4
No. 2012AP2521
levels may cause poor appetite or acute nitrogen poisoning in
livestock. Id.
¶9 Fred Preisler and Duke Kuettel discussed applying
septage on the Preislers' farm as fertilizer. Kuettel's Septic
received permission from the Wisconsin Department of Natural
Resources (DNR) to apply it. Kuettel's Septic applied septage
to the Preislers' farm fields for several years.
¶10 In 2008, the Preislers experienced problems with their
well water. The Preislers' cattle that drank the water began to
die at an uncharacteristic rate. The Preislers further noted a
decrease in milk production. August 2008 testing showed the
Preislers' well water contained elevated levels of nitrates,
which are produced as septage decomposes. The cattle deaths
subsided later in 2008 after the Preislers drilled a new well.
¶11 The Preislers sued Kuettel's Septic in 2010 and Phil's
Pumping in 2011. The cases were consolidated and 4-DK Farm and
the individual Kuettels were added. The Preislers alleged
negligence in storing and in applying septage resulting in
nuisance and trespass. They also alleged the Kuettels were
strictly liable for engaging in an abnormally dangerous activity
and that Duke Kuettel violated Wis. Stat. § 100.18 by promising
compliance with DNR regulations, failing to follow through, and
falsifying DNR reports.
¶12 The Preislers added the parties' insurers to the suit.
Hastings insured Kuettel's Septic under a CGL policy between
1999 and 2005, after which Regent insured Kuettel's Septic
(General Casualty Insurance Company did not insure any party,
5
No. 2012AP2521
but is affiliated with Regent). Hastings also insured 4-DK Farm
under a CGL policy until 2007, after which Secura insured 4-DK
Farms. Secura also provided homeowners insurance to individual
Kuettels.5 Rural insured Phil's Pumping under a CGL policy
between 2002 and 2013.
¶13 The Rural and Regent policies include similarly worded
pollution exclusion clauses. They exclude harm "arising out of
the actual, alleged, or threatened discharge, dispersal,
seepage, migration, release or escape of 'pollutants'. . . ."
The Rural and Regent policies also define "pollutants" similarly
as: "any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids,
alkalis, chemicals and waste. Waste includes materials to be
recycled, reconditioned or reclaimed."
5
The homeowners policies are not at issue in this appeal.
They do not include pollution exclusion clauses, and the circuit
court determined another exclusion applied. The parties do not
challenge this determination, and we do not address it. See
Waushara Cnty. v. Graf, 166 Wis. 2d 442, 451, 480 N.W.2d 16
(1992) (appellate courts need not consider issues not
specifically raised on appeal).
6
No. 2012AP2521
¶14 The insurers moved for summary and declaratory
judgment.6 The circuit court agreed that the pollution exclusion
clause applies to preclude coverage for alleged losses arising
out of storage of septage and application of septage to farm
fields that is alleged to have caused contamination of the water
supply resulting in harm to the Preislers. The Preislers and
Kuettels appealed, arguing septage is not a pollutant and
therefore, the exclusion does not preclude coverage. The court
of appeals affirmed.
¶15 On April 17, 2014 we granted the Preislers' and
Kuettels' petitions for review. On May 21, 2014, Secura filed a
motion for summary disposition in this court on the alternative
basis of a limited liability endorsement. Initially, we held
the motion in abeyance. We need not address Secura's motion as
Secura's liability is not before us as we explain below.
II. DISCUSSION
A. Standard of Review
¶16 The Preislers and Kuettels ask the court to review the
applicability of the pollution exclusion clause, upon which the
6
Rural and Regent moved for summary judgment. Hastings and
Secura moved for summary and declaratory judgment. All insurers
argued they had no duty to defend or indemnify the various
insureds. The policies we address are Regent's Contractors
General Liability Coverage policy for Kuettel's Septic, LLC and
Rural's Commercial General Liability Coverage policy for Phil's
Pumping and Fab, Inc. We do not discuss the pollution exclusion
clauses in Hastings' and Secura's policies because the parties
did not petition for review of the court of appeals' dismissal
of claims against Hastings and Secura, on alternative grounds.
7
No. 2012AP2521
circuit court and the court of appeals relied to grant summary
judgment dismissing Rural and Regent from this lawsuit. When we
review summary judgment, we independently apply the same
methodology as the circuit court and the court of appeals. The
standards set forth in Wis. Stat. § 802.08 are our guides.
Hirschhorn v. Auto-Owners Ins. Co., 2012 WI 20, ¶20, 338 Wis. 2d
761, 809 N.W.2d 529 (reviewing summary judgment denying coverage
for property harm from accumulation of bat guano); Siebert v.
Wis. Am. Mut. Ins. Co., 2011 WI 35, ¶27, 333 Wis. 2d 546, 797
N.W.2d 484 (reviewing summary judgment denying coverage in
negligent entrustment claim); Peace v. Nw. Nat'l Ins. Co., 228
Wis. 2d 106, 119-20, 596 N.W.2d 429 (1999) (reviewing summary
judgment denying coverage for claims arising from ingestion of
lead); Donaldson v. Urban Land Interests, Inc., 211 Wis. 2d 224,
229-30, 564 N.W.2d 728 (1997) (reviewing summary judgment
denying coverage for injuries resulting from buildup of carbon
dioxide). Summary judgment "shall be rendered if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law." § 802.08(2).
¶17 The parties do not dispute the material facts giving
rise to the Preislers' loss.7 Rather, the sole issue is whether
the pollution exclusion clause in the insurance policies
7
See Preisler, No. 2012AP2521, unpublished slip op., ¶12.
8
No. 2012AP2521
excludes coverage for harm the Preislers allege they sustained
due to contamination of their water supply by decomposing
septage. The interpretation of an insurance policy is a
question of law that we review independently. Siebert, 333
Wis. 2d 546, ¶28.
B. Policy Interpretation
¶18 This case requires us to interpret the pollution
exclusion clause as it applies to decomposing septage that
entered a water supply. We must determine whether it is a
pollutant within the meaning of the pollution exclusion clause
of the insurance policies. The primary task in contract
interpretation is to determine and carry out the parties'
intentions. Hirschhorn, 338 Wis. 2d 761, ¶22; Am. Family Mut.
Ins. Co. v. Am. Girl, Inc., 2004 WI 2, ¶23, 268 Wis. 2d 16, 673
N.W.2d 65. We interpret insurance policy language according to
its plain and ordinary meaning as understood by a reasonable
insured. Hirschhorn, 338 Wis. 2d 761, ¶22; Peace, 228 Wis. 2d
at 120-21.
¶19 Terms, words, or phrases in an insurance policy are
ambiguous rather than plain if they are "fairly susceptible to
more than one reasonable interpretation." Hirschhorn, 338
Wis. 2d 761, ¶23; accord Peace, 228 Wis. 2d at 121. Policy
language is not ambiguous merely because more than one
dictionary definition exists or the parties disagree about its
meaning. Hirschhorn, 338 Wis. 2d 761, ¶23; Peace, 228 Wis. 2d
at 136. Policy language also is not ambiguous because different
9
No. 2012AP2521
courts have come to differing interpretations. Peace, 228
Wis. 2d at 136.
¶20 Policy language is ambiguous when a reasonable insured
would read the policy to provide coverage and the language is
susceptible to more than one reasonable interpretation. See
Donaldson, 211 Wis. 2d at 235. If coverage is ambiguous, the
court's construction is constrained and ambiguities are
construed against the insurer and in favor of coverage.
Hirschhorn, 338 Wis. 2d 761, ¶23; Peace, 228 Wis. 2d at 121;
Donaldson, 211 Wis. 2d at 230.
1. Initial grant of coverage
¶21 The insurers, in disputing the policies' grant of
coverage to the Kuettels, are disputing their duties to defend
and indemnify. We determine an insurer's duty to defend "by
comparing the allegations of the complaint to the terms of the
insurance policy." Estate of Sustache v. Am. Family Mut. Ins.
Co., 2008 WI 87, ¶20, 311 Wis. 2d 548, 751 N.W.2d 845.
"[A]llegations contained within the four corners of the
complaint" trigger the duty to defend. Id. We focus on the
nature, rather than the merits, of the claim. Id. The duty to
defend is broader than the duty to indemnify, "insofar as the
former implicates arguable, as opposed to actual, coverage."
Id. We construe allegations in the complaint liberally and
assume all reasonable inferences. Id., ¶21. The Preislers'
complaint includes allegations of negligent septage application
and storage by the Kuettels.
10
No. 2012AP2521
¶22 Our procedure for determining whether coverage exists
under an insurance policy follows three steps. First, we
examine the facts of the insured's claim to decide whether the
policy makes an initial grant of coverage for the claim set out
in the complaint. Am. Girl, 268 Wis. 2d 16, ¶24. The analysis
ends there if the policy clearly does not cover the claim. Id.
However, if the claim set out in the complaint triggers a
potential grant of coverage, we secondly examine whether any of
the policy's exclusions preclude coverage for that claim. Id.
Third, if an exclusion precludes coverage, we analyze exceptions
to the exclusion to determine whether any exception reinstates
coverage. Id.
¶23 The parties did not argue the Preislers' claims fall
outside the policies' grant of coverage. The court of appeals
assumed without deciding that the policies at issue
affirmatively grant coverage.8 However, we nevertheless consider
whether there is a potential grant of coverage because it aids
in our evaluation of the historic facts in the context of the
pollution exclusion.
¶24 Coverage is triggered by an occurrence. Regent's and
Rural's policies provide that they "appl[y] to 'bodily injury'
and 'property damage' only if: (1) The 'bodily injury' or
'property damage' is caused by an occurrence." (Emphasis
added.) The policies define "occurrence" identically:
8
Preisler, No. 2012AP2521, unpublished slip op., ¶15.
11
No. 2012AP2521
"'[o]ccurrence' means an accident, including continuous or
repeated exposure to substantially the same general harmful
conditions." We interpret policy language according to its
plain and ordinary meaning as understood by a reasonable
insured. Hirschhorn, 338 Wis. 2d 761, ¶22; Peace, 228 Wis. 2d
at 120-21.
¶25 We turn to Couch on Insurance for its description of
"occurrence" in pollution exclusion cases:
Due to the fact that most policies define an
"occurrence" to mean an "accident," the pollution
coverage issue often turns upon the intent of the
insured. In making this determination, jurisdictions
have focused on different aspects of the polluting
process to assess the mindset of the insured. Most
courts have focused on the damage caused by the
pollution and have concluded that there is an
occurrence when the insured did not expect or intend
the resultant damage.
9 Steven Plitt et al., Couch on Insurance § 127.4 (2008).
¶26 We have interpreted whether certain circumstances fall
within policy definitions of "occurrence." In American Girl, we
determined that soil settlement that occurred because of faulty
site-preparation advice of a soil engineer was an "occurrence."
Am. Girl, 268 Wis. 2d 16, ¶38. The policy's definition of
"occurrence" was the same as here, and we focused on defining
"accident." Id., ¶37. We looked to a dictionary definition:
"'The word "accident," in accident policies, means an event
which takes place without one's foresight or expectation. A
result, though unexpected, is not an accident; the means or
cause must be accidental.'" Id. (quoting Black's Law Dictionary
12
No. 2012AP2521
15 (7th ed. 1999)). We considered two causes of property
damage, both the inadequate site-preparation advice and the
actual settling of the soil, and found neither was intended,
anticipated, or expected. Id., ¶38. We therefore held the
accidental circumstances underlying the claim constituted an
"occurrence" within the policy's definition. Id.
¶27 Interpreting American Girl, the court of appeals has
held accidental soil contamination was an "occurrence," where
the policy provided no definition. United Coop. v. Frontier FS
Coop., 2007 WI App 197, ¶¶12, 15, 304 Wis. 2d 750, 738 N.W.2d
578. The court acknowledged that American Girl required focus
on the "event or series of events that allegedly caused the
alleged bodily injury or property damage." Id., ¶16. United
Coop. lacked any specific facts on how the soil contamination
occurred, but nevertheless concluded that the contamination was
an "occurrence" because it caused property damage to
groundwater. Id., ¶¶20, 35.
¶28 As with American Girl and United Coop., the facts of
this case, if proved, present an "occurrence" triggering an
initial grant of coverage. Here, the "accident" was the seepage
of decomposing septage into the Preislers' water supply.
Seepage into the water supply was not "intended, anticipated, or
expected." Am. Girl, 268 Wis. 2d 16, ¶38. Seepage of
decomposing septage into the water supply is an occurrence, as
was the settling soil in American Girl and the soil
contamination in United Coop. Id.; United Coop., 304 Wis. 2d
750, ¶20. Here, the resulting harm is water with elevated
13
No. 2012AP2521
nitrate levels. See United Coop., 304 Wis. 2d 750, ¶35 (stating
an occurrence caused property damage to groundwater).
2. Pollution exclusion
¶29 Next, we examine whether either of the policies'
exclusions preclude coverage at the time of the occurrence. See
Am. Girl, 268 Wis. 2d 16, ¶24. Typically, to resolve whether a
pollution exclusion applies, we first determine whether the
substance in question falls unambiguously within the policy's
definition of pollutants. Hirschhorn, 338 Wis. 2d 761, ¶25
(determining whether bat guano is unambiguously a pollutant);
Peace, 228 Wis. 2d at 119 (determining whether lead present in
paint is unambiguously a pollutant); Donaldson, 211 Wis. 2d at
229 (determining whether exhaled carbon dioxide is unambiguously
a pollutant). Then, if the substance fits within the policy's
definition of pollutants, we determine whether the alleged loss
resulted from the "discharge, dispersal, seepage, migration,
release or escape" of the substance under the plain terms of the
policy's pollution exclusion clause. Hirschhorn, 338 Wis. 2d
761, ¶25; Peace, 228 Wis. 2d at 119; Donaldson, 211 Wis. 2d at
229.
¶30 However, the parties do not appeal the circuit court's
ruling that the Preislers' alleged damage resulted from the
"discharge, dispersal, seepage, migration, release or escape of"
decomposing septage within the meaning of the terms in the
14
No. 2012AP2521
pollution exclusion clause.9 Therefore, we are presented with
the sole inquiry of whether, at the time of the occurrence that
triggered coverage, the decomposing septage is a pollutant
within the policies' definition.
a. limited inquiry
¶31 We need to determine only whether decomposing septage
is a pollutant as it seeped into the Preislers' water supply.
There is no occurrence until that seepage into the water supply
takes place. Our approach of construing whether a substance is
a pollutant at the point it harms the interests of another is
consistent with our previous pollution exclusion decisions. As
we explain below, those decisions focused on the event giving
rise to the alleged harm at issue, rather than on an initial
event that may have involved a beneficial use of the substance.
Peace, 228 Wis. 2d at 126; U.S. Fire Ins. Co. v. Ace Baking Co.,
164 Wis. 2d 499, 501, 476 N.W.2d 280 (Ct. App. 1991).
¶32 Peace and Ace Baking are particularly instructive. In
Peace, harm resulted from the release of lead paint chips,
flakes, and dust into a home painted with lead paint. Peace,
228 Wis. 2d at 111. We focused not on lead intentionally used
in paint for a beneficial purpose, but rather on release of lead
from the paint on the walls into the air or onto the floor as
the substance that gave rise to an occurrence under the language
9
See Preisler, No. 2012AP2521, unpublished slip op., ¶39
(failing to challenge the circuit court's conclusion at the
court of appeals).
15
No. 2012AP2521
of the policy. See id. at 126 ("Conceptually, we view the lead
not as contaminating the paint but as giving the paint the
potential to contaminate air, water, and the human body when it
disperses."). Therefore, although lead had a beneficial use in
the paint when it was applied to the walls, our evaluation of
whether lead was a pollutant was made when harm occurred.
¶33 In Ace Baking, fabric softener and ice cream cones
were stored in the same warehouse, and a fragrance additive to
the fabric softener spread to the ice cream cones, making them
taste like soap. Ace Baking, 164 Wis. 2d at 500. The court of
appeals determined that the fragrance in the fabric softener
became a pollutant when it spread to the ice cream cones stored
in the same warehouse, even though the court would not have
considered it a pollutant if it had stayed in the fabric
softener. Id. at 505. The court said, "it is a rare substance
indeed that is always a pollutant; the most noxious of materials
have their appropriate and non-polluting uses." Id. Peace and
Ace Baking support our conclusion that we apply the definition
of pollutant at the time of the occurrence, i.e., when
decomposing septage entered Preislers' well, rather than the
allegedly negligent application of septage to fields.
b. reasonable insured
¶34 The pollution exclusion clause provides, "[t]his
insurance does not apply to: . . . 'Bodily injury' or 'property
damage' arising out of the actual, alleged or threatened
discharge, dispersal, seepage, migration, release or escape of
'pollutants'." Each policy defines "pollutants" as "any solid,
16
No. 2012AP2521
liquid, gaseous or thermal irritant or contaminant, including
smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.
Waste includes materials to be recycled, reconditioned or
reclaimed." The policy does not further define contaminant.
¶35 We construe these terms according to their plain and
ordinary meanings as understood by a reasonable person in the
position of the insured. Hirschhorn, 338 Wis. 2d 761, ¶22;
Peace, 228 Wis. 2d at 120-21. Our decisions in Donaldson, Peace
and Hirschhorn are instructive in determining the meaning of
contaminant and therefore, pollutant. Furthermore, the limiting
principles applied in Donaldson and Langone aid us in
determining a reasonable insured's understanding of the meaning
of pollutant and contaminant. Donaldson, 211 Wis. 2d at 232;
Langone v. Am. Family Mut. Ins. Co., 2007 WI App 121, ¶22, 300
Wis. 2d 742, 731 N.W.2d 334.
¶36 First, in Donaldson, we held that the pollution
exclusion clause did not preclude coverage for personal injury
claims stemming from inadequate ventilation of exhaled carbon
dioxide in an office building. Donaldson, 211 Wis. 2d at 235.
We concluded a reasonable insured would not understand exhaled
carbon dioxide to fall within the policy's definition of
pollutants. Id. at 231-32. We recognized the pollutant
definition was broad: "'irritant' and 'contaminant,' when
viewed in isolation, are virtually boundless, for there is
virtually no substance or chemical in existence that would not
irritate or damage some person or property." Id. at 232
(quoting Pipefitters Welfare Educ. Fund v. Westchester Fire Ins.
17
No. 2012AP2521
Co., 976 F.2d 1037 (7th Cir. 1992)). Therefore, we warned that
"[t]he reach of the pollution exclusion clause must be
circumscribed by reasonableness, lest the contractual promise of
coverage be reduced to a dead letter." Id. at 233. We
concluded that the plaintiffs' injuries resulted from an
everyday activity "gone slightly, but not surprisingly, awry."
Id. (quoting Pipefitters, 976 F.2d at 1043-44). We explained it
was significant that exhaled carbon dioxide is "universally
present and generally harmless in all but the most unusual
instances" and that exhaled carbon dioxide is a necessary and
natural part of life. Id. at 234. Accordingly, we held that
"the pollution exclusion clause is ambiguous because [the
insured] could reasonably expect coverage on the facts of this
case." Id. at 233.
¶37 Two years later, in Peace, we held that a pollution
exclusion clause excluded coverage for personal injury claims
arising out of a minor's ingestion of lead-based paint chips,
flakes, and dust present in the insured's apartment. Peace, 228
Wis. 2d at 110-11. We concluded once the previously contained
pollutant, lead, "begins to disperse, discharge, or escape from
the containment of the painted surface, it falls within the
plain language of the pollution exclusion clause." Id. at 130.
¶38 Before coming to our conclusion, we consulted a non-
legal dictionary to define contaminant and irritant. Id. at
122. We applied these common definitions to the plaintiff's
claims and concluded there was "little doubt that lead derived
from lead paint chips, flakes, or dust is an irritant or serious
18
No. 2012AP2521
contaminant." Id. at 125. We noted the physical consequences
of lead paint used in a home were well-documented. Id. at 123-
24. "Lead poisoning from paint at residential properties is
generally caused by the inhalation of lead-contaminated dust
particles or toxic lead fumes through respiration or the
ingestion of lead-based paint chips by mouth. The consequences
can be disastrous for children." Id. We distinguished
Donaldson because lead paint chips, flakes and dust "are widely,
if not universally, understood to be dangerous," while carbon
dioxide is not. Id. at 137. Therefore, "[r]easonable owners of
rental property[, the insureds,] understand their obligation to
deal with the problem of lead paint." Id. at 138.
¶39 Most recently, in Hirschhorn, we held bat guano
unambiguously falls within the term, "pollutants," as defined by
the insurance policy because it constituted an irritant and a
contaminant. Hirschhorn, 338 Wis. 2d 761, ¶¶33-34. We referred
both to dictionary definitions of the terms and health
consequences of human proximity to bat guano. Id., ¶33. We
concluded a reasonable insured would consider bat guano to be
waste, referencing the dictionary definition of the term. Id.,
¶34.
¶40 In the instant case, the issue is whether a reasonable
insured would consider decomposing septage to be a pollutant
when it seeps into a water supply. Again, we interpret policy
language according to its plain and ordinary meaning as
understood by a reasonable insured. Id., ¶22; Peace, 228
Wis. 2d at 120-21. When determining the ordinary meaning of
19
No. 2012AP2521
words not defined in an insurance policy, it is appropriate to
look to the definitions in a non-legal dictionary. Weimer v.
Country Mut. Ins. Co., 216 Wis. 2d 705, 723, 575 N.W.2d 466
(1998); Just v. Land Reclamation, Ltd., 155 Wis. 2d 737, 745,
456 N.W.2d 570 (1990).
¶41 As explained above, we accepted a non-legal dictionary
definition of contaminant in Peace, 228 Wis. 2d at 122. We
determined the ordinary meaning of contaminant is one that
contaminates, and contaminate means "'[t]o make impure or
unclean by contact or mixture.'" Id. at 122 (quoting American
Heritage Dictionary of the English Language 406 (3d ed. 1992)
[hereinafter American Heritage Dictionary]).
¶42 In determining whether a substance is a contaminant
and therefore a pollutant, the focus is on the event causing
harm because that is the occurrence triggering coverage. Id. at
126. Here, the event causing harm is decomposing septage
seeping into the water supply. A reasonable insured would
understand decomposing septage to be a contaminant when it seeps
into a water supply.
¶43 Handling, storing, and applying septage are activities
regulated by both the DNR and the United States Environmental
Protection Agency. See generally 40 C.F.R. § 503 (2013)
(federal regulation of domestic septage); Wis. Admin. Code §§ NR
113-114 (Feb. 2014) (state regulation of septage). Publications
produced to guide septage haulers and storers recognize septage
may be harmful and have the potential to affect health of humans
and livestock. EPA, A Plain English Guide to the EPA Part 503
20
No. 2012AP2521
Biosolids Rule 2 (1994), available at
http://water.epa.gov/scitech/wastetech/biosolids/503pe_index.cfm
; Wis. DNR, Septage Operator Servicing Handbook and Study Guide
8-9 (2013), available at
http://dnr.wi.gov/regulations/opcert/documents/septagestudyguide
.pdf [hereinafter "WDNR Septage Handbook"]. The government's
regulation of septage contributes to reasonable insureds'
awareness of the health risks of septage hauling, storing, and
application. See Peace, 228 Wis. 2d at 150 (Bradley, J.,
concurring) (noting regulatory restriction of lead use and
pollutant status despite intentional application).
¶44 Limiting principles that consider the nature of the
substance ensure that our construction of a pollution exclusion
clause is consistent with the understanding of a reasonable
insured. Donaldson, 211 Wis. 2d at 232 (citing Pipefitters, 976
F.2d at 1043); Langone, 300 Wis. 2d 742, ¶22. These principles
apply to aid in the overarching reasonable insured analysis.
See Hirschhorn, 338 Wis. 2d 761, ¶30 (tying the limiting
principle back to a reasonable insured's understanding); Peace,
228 Wis. 2d at 136-38 (addressing limiting principle within the
understanding of a reasonable insured); Donaldson, 211 Wis. 2d
at 233-34 (placing limiting principles in context of a
reasonable insured); Langone, 300 Wis. 2d 742, ¶¶17-18
(discussing limiting principle in context of a reasonable
insured).
¶45 One such limiting principle applies whenever the
substance is "universally present and generally harmless in all
21
No. 2012AP2521
but the most unusual instances." Donaldson, 211 Wis. 2d at 234.
In those instances, we are hesitant to conclude that such a
substance is a pollutant. Id. Both Donaldson and Langone
considered the gasses at issue to be "universally present and
generally harmless in all but the most unusual instances." Id.;
see also Langone, 300 Wis. 2d 742, ¶19 ("Like carbon dioxide,
carbon monoxide is colorless, odorless, and present in the air
around us.").
¶46 Individual components of septage are common.10
Septage is a waste product with use as a farm fertilizer.
Application of septage comes with risks to water supplies
because decomposing septage can release high levels of nitrates,
which can be dangerous to humans and cattle if they reach water
supplies. WDNR Septage Handbook at 8-9. Septage is not
generally harmless nor is it the type of pervasive substance
considered in Donaldson and Langone. See Donaldson, 211 Wis. 2d
at 234; Langone, 300 Wis. 2d 742, ¶19.
¶47 A second limiting principle is that if the harm
results from "everyday activities gone slightly, but not
surprisingly, awry," a reasonable insured would not necessarily
understand the substance to be a pollutant. Pipefitters, 976
10
In Guenther v. City of Onalaska, 223 Wis. 2d 206, 588
N.W.2d 375 (Ct. App. 1998), the court of appeals held the
pollution exclusion clause did not apply to the occurrence of a
domestic sewer backup. Id. at 208. Guenther is
distinguishable, as there the court concluded the policy covered
damage resulting from the liquid, non-toxic nature of the sewage
backup. Id.
22
No. 2012AP2521
F.2d at 1043-44; accord Peace, 228 Wis. 2d at 158; Donaldson,
211 Wis. 2d at 233. Exposure of decomposing septage to the
Preislers' water supply is not "an everyday activity 'gone
slightly, but not surprisingly, awry.'" See Donaldson, 211
Wis. 2d at 233 (quoting Pipefitters, 976 F.2d at 1043-44);
Langone, 300 Wis. 2d 742, ¶19.
¶48 To explain further, in Langone, a gas-burning boiler
caused an excess of carbon monoxide and caused the harm at
issue. Langone, 300 Wis. 2d 742, ¶¶2-3. The court of appeals
noted the common exposure of individuals to some carbon monoxide
in homes, especially in the presence of stoves with gas burners.
Id., ¶19. However, the exposure of water supplies to
decomposing septage is not an everyday activity, as evidenced by
the protective regulatory mechanisms surrounding the hauling,
storing, and application of septage that are designed to prevent
invasion of water supplies. 40 C.F.R. § 503 (2013); Wis. Admin.
Code §§ NR 113-114 (Feb. 2014).
¶49 Additionally, we have already rejected an attempt to
equate application of a contaminant to the surrounding
environment with exhalation of an omnipresent gas. Peace, 228
Wis. 2d at 137-38 (differentiating release of lead paint from
exhaling carbon dioxide). A reasonable insured would not
understand exposure of water supplies to decomposing septage as
"an everyday activity 'gone slightly, but not surprisingly,
awry.'" See Donaldson, 211 Wis. 2d at 233 (quoting Pipefitters,
976 F.2d at 1043-44); Langone, 300 Wis. 2d 742, ¶19.
23
No. 2012AP2521
¶50 Furthermore, that septage fits the ordinary meaning of
waste, which the policies expressly list as a pollutant,
supports our conclusion that septage is a pollutant when it
seeps into a water supply. Septage is primarily composed of
human urine and feces. The ordinary meanings of feces and urine
are, respectively, "'[w]aste matter eliminated from the bowels;
excrement,'" and "'[t]he waste product secreted by the
kidneys.'" Hirschhorn, 338 Wis. 2d 761, ¶34 (quoting The
American Heritage Dictionary 1965). The ordinary meaning of
waste includes, among other things, "'[t]he undigested residue
of food eliminated from the body; excrement.'" Id. (quoting
American Heritage Dictionary 2016). In Hirschhorn, these
definitions of waste, urine, and feces supported our conclusion
that bat guano——which consists of bat urine and feces——was a
pollutant when it infiltrated a home. Id., ¶¶34-36. Likewise,
in the present case, these definitions support our conclusion
that decomposing septage is a pollutant when it seeps into a
water supply.
¶51 The policies' use of "contaminant" in defining
"pollutant" should have been clear notice to the Kuettels that
their policies would not cover claims involving decomposing
septage's seepage into water supplies.11 Stated otherwise, a
11
One could wonder what conversation transpired between the
insurance agent and the Kuettels yielding insurance policies
that do not cover harm caused in the course of their chosen
business. However, the actions of the insurers and their agents
are not before us.
24
No. 2012AP2521
reasonable insured would conclude that the policies would not
provide coverage on these facts. The key terms of the policies
are unambiguous. See Peace, 228 Wis. 2d at 136.
¶52 Typically, we would proceed to determine whether
spraying or injecting septage on farmland constitutes the
"discharge, dispersal, seepage, migration, release or escape of
'pollutants'." See Donaldson, 211 Wis. 2d at 228. However, the
parties do not appeal the circuit court's ruling that the
Preislers' alleged loss resulted from the "discharge, dispersal,
seepage, migration, release or escape of" septage within the
meaning of the terms in the pollution exclusion clause of the
insurance policy.12 Accordingly, we conclude that the insureds'
claims fall within the unambiguous terms of the pollution
exclusion clauses.13
C. Summary Judgment Granted to Hastings and Secura
¶53 A final issue is whether the Preislers and Kuettels
have waived consideration of the court of appeals' grant of
summary judgment to Hastings and Secura. Secura and Hastings
12
See Preisler, No. 2012AP2521, unpublished slip op., ¶39
(failing to challenge the circuit court's conclusion at the
court of appeals).
13
Typically, our third step is to analyze exceptions to the
exclusion to determine whether any reinstates coverage. Am.
Family Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, ¶24, 268
Wis. 2d 16, 673 N.W.2d 65. The parties did not argue an
exception to the pollution exclusion applies; therefore, we need
not reach this step.
25
No. 2012AP2521
argued alternative grounds for summary judgment to the circuit
court and the court of appeals.14
¶54 The circuit court did not address Hastings' and
Secura's alternative grounds for summary judgment. The only
responses to Hastings' and Secura's arguments to the court of
appeals were the Preislers' assertions in two reply brief
footnotes that Hastings and Secura were required to file cross-
appeals to raise alternative grounds for summary judgment. The
court of appeals held Preislers' response insufficient and
separately dismissed claims against Hastings and Secura on their
alternative grounds. See Preisler v. Kuettel's Septic Serv.,
LLC, No. 2012AP2521, unpublished slip op., ¶¶40-42 (Ct. App.
Jan. 14, 2014).
¶55 By supreme court rule, "[i]f a petition [for review]
is granted, the parties cannot raise or argue issues not set
forth in the petition unless ordered otherwise by the supreme
court." Wis. Stat. § 809.62(6). In their petitions for review,
the Preislers, the Kuettels, and Phil's Pumping framed the issue
as whether septage falls within the pollutant definition for
purposes of the pollution exclusion clause.
¶56 None of the petitioners petitioned the supreme court
to review summary judgments granted to Hastings and Secura on
alternative grounds. Hastings' dismissal was based on the
14
Brief for Secura at 24-30, Preisler, No. 2012AP2421,
unpublished slip op. (Ct. App. Jan. 14, 2014); Brief for
Hastings at 33-36, Preisler, No. 2012AP2421, unpublished slip
op. (Ct. App. Jan. 14, 2014).
26
No. 2012AP2521
conclusion that the harm did not occur during the policy period.
Secura's dismissal was based on the conclusion that the harm did
not occur to the covered premises. In granting the petition, we
did not instruct the parties to brief or argue any additional
issues pursuant to Wis. Stat. § 809.62(6). Because the
alternative grounds for summary judgment in favor of Hastings
and Secura were not raised as an issue on petition to us, the
Preislers, the Kuettels, and Phil's Pumping have waived our
consideration of those grounds for summary judgment. See Doyle
v. Engelke, 219 Wis. 2d 277, 294, 580 N.W.2d 245 (1998)
(concluding that issues omitted from petitions for review may be
waived if we do not direct that they be addressed).
Accordingly, these dismissals by the court of appeals become the
law of the case for further proceedings on Preislers' claims.
State v. Moeck, 2005 WI 57, ¶18, 280 Wis. 2d 277, 695 N.W.2d
783.
¶57 While we retain the inherent power to consider issues
beyond those raised in the petitions, we decline to do so in
this matter. See Univest Corp. v. Gen. Split Corp., 148 Wis. 2d
29, 37, 435 N.W.2d 234 (1989).
III. CONCLUSION
¶58 We conclude that a reasonable insured would understand
that decomposing septage is a "contaminant" and therefore, a
"pollutant" as defined in the policies when it has decomposed
and seeps into a water supply. Accordingly, we affirm the
decision of the court of appeals, which granted summary judgment
upon its conclusion that the pollution exclusion clause
27
No. 2012AP2521
precluded coverage for harm resulting from the Preislers' water
supply's contamination.
¶59 We also conclude that the petitioners failed to
petition this court for review of summary judgments of dismissal
of their claims against Hastings and Secura. We decline to
consider issues not raised in petitions for review. Bodoh, 226
Wis. 2d at 737; Wis. Stat. § 809.62. Accordingly, those
dismissals are not before us.
By the Court.—The decision of the court of appeals is
affirmed.
28
No. 2012AP2521.awb
¶60 ANN WALSH BRADLEY, J. (concurring). Although I
agree with the majority's conclusion that septage is a pollutant
here, I part ways with the majority when it undertakes an
analysis of "occurrence." Not only is the analysis unclear, it
is unnecessary to the decision, and inconsistent with Wilson
Mutual Ins. Co. v. Falk, 2014 WI 136, __ Wis. 2d __, __ N.W.2d
__, a case decided on the same day, on the same issue.
¶61 It is unclear whether the majority is embarking on a
cause approach or damage approach in determining what
constitutes an occurrence. It quotes a leading authority on
insurance law, Couch on Insurance, for the premise that "[m]ost
courts have focused on the damage caused by the pollution and
have concluded that there is an occurrence when the insured did
not expect or intend the resultant damage." Majority op., ¶25
(quoting 9 Steven Plitt et al., Couch on Insurance § 127.4
(2008)). It then discusses Am. Family Mut. Ins. Co. v. Am.
Girl, Inc., 2004 WI 2, ¶38, 268 Wis. 2d 16, 673 N.W.2d 65, which
looked at both cause and damage in its discussion of occurrence.
Id., ¶26.
¶62 Yet, after discussing these authorities, the majority
cites United Coop. v. Frontier FS Coop., 2007 WI App 197, ¶¶12,
15, 304 Wis. 2d 750, 738 N.W.2d 578, for the premise that the
focus in an occurrence determination is on "the event or series
of events that allegedly caused the alleged bodily injury or
property damage." Id., ¶27. The majority then concludes that
the occurrence in this case was the "[s]eepage of decomposing
septage into the water supply" and "the resulting harm is water
1
No. 2012AP2521.awb
with elevated nitrate levels." Id., ¶28. By including its
statement that the resulting harm was something other than the
occurrence, the majority suggests it is taking the cause
approach. Without a definite statement, however, the
juxtaposition of this conclusion with the conflicting
authorities renders the majority's analysis unclear.
¶63 Not only is the majority's analysis of what
constitutes an occurrence unclear, but it is also unnecessary.
What constitutes an occurrence was not addressed in the
arguments presented by the parties. This issue was neither
briefed nor argued, and none of the leading cases on pollution
exclusions discuss it. See Hirschhorn v. Auto-Owners Ins. Co.,
2012 WI 20, 338 Wis. 2d 761, 809 N.W.2d 529; Peace v.
Northwestern Nat'l Ins. Co., 228 Wis. 2d 106, 596 N.W.2d 429
(1999); Donaldson v. Urban Land Interests, 211 Wis. 2d 224, 564
N.W.2d 728 (1997); Langone v. Am. Family Mut. Ins. Co., 2007 WI
App 121, 300 Wis. 2d 742; 731 N.W.2d 334; United States Fire
Ins. Co. v. Ace Baking Co., 164 Wis. 2d 499, 476 N.W.2d 280 (Ct.
App. 1991).
¶64 Lastly, if the majority is going to address what
constitutes an occurrence, it should do so in a consistent
manner. As noted above, the majority appears to take a cause
approach to occurrence. This conflicts with the apparent
approach embraced in Wilson Mutual, __ Wis. 2d __, ¶32, which we
also release today. Wilson Mutual acknowledges that "Wisconsin
is in the jurisdictional majority in defining an occurrence as
2
No. 2012AP2521.awb
unexpected or unintended resultant damage." Which precedent
should future attorneys follow?
¶65 Overall, the majority's occurrence discussion is
problematic. By creating unclear, unnecessary, and inconsistent
precedent, the court does not live up to its obligation to
provide a clear and concise articulation of a legal standard.
Accordingly, I respectfully concur.
3
No. 2012AP2521.ssa
¶66 SHIRLEY S. ABRAHAMSON, C.J. (dissenting). I would
reverse the decision of the court of appeals.
¶67 This case requires us to interpret the standard
pollution exclusion clauses in a commercial general liability
policy and a contractors' general liability policy.
¶68 The majority opinion frames the question presented in
this case as "whether decomposing septage is a pollutant as it
seeped into the Preislers' water supply."1 The majority opinion
then holds that "a reasonable insured would conclude that the
policies would not provide coverage on these facts."2
¶69 The majority opinion's approach to the pollution
exclusion clauses in the instant case unnecessarily departs from
precedent, undercuts the limiting principles our prior cases
have applied to pollution exclusion clauses, and further
confuses this murky area of the law.
¶70 The majority opinion needlessly decides what
"occurrence" triggered coverage in the instant case and further
complicates the law in this area. The question of what
constitutes an occurrence need not be decided to resolve the
question presented. The occurrence issue was neither raised nor
briefed by the parties and was not ruled on by the circuit court
or the court of appeals. The issue is complex.3 The court
1
Majority op., ¶31.
2
Id., ¶51.
3
Steven Plitt et al., 9 Couch on Insurance § 126:27 (1997)
("Whether there has been an accident or occurrence to trigger
insurance coverage has been a much litigated issue.").
1
No. 2012AP2521.ssa
should not delve into it without the benefit of briefs or
argument.
¶71 Furthermore, the majority opinion's discussions of
what constitutes an occurrence and of whether a substance is a
pollutant are inconsistent with the court's approach to those
issues in Wilson Mutual v. Falk, 2014 WI 136, ¶38, ___
Wis. 2d ___, ___ N.W.2d ___. I write on substantially similar
issues in my dissent in Wilson Mutual. My dissents in Wilson
Mutual and in the instant case should be read together.
¶72 I conclude that a reasonable person in the position of
the insureds, two companies in the business of hauling, storing,
and disposing of septage, would not consider septage a pollutant
under the pollution exclusion clause of general liability
policies they purchased to cover liability for damage caused by
their septic business operations.
¶73 If the majority is unwilling to honor the reasonable
expectations of these insured septic companies, then I conclude
the case should be remanded to the circuit court to allow the
parties to present evidence regarding the insureds' expectations
of coverage and the objective reasonableness of those
expectations.4
¶74 Accordingly, I dissent.
I
4
See majority op., ¶51 n.11 ("One could wonder what
conversation transpired between the insurance agent and the
Kuettels yielding insurance policies that do not cover harm
caused in the course of their chosen business. However, the
actions of the insurers and their agents are not before us.").
2
No. 2012AP2521.ssa
¶75 The present case involves two insured companies and
two insurance policies.5
¶76 Kuettel's Septic Service, LLC (Kuettel's) is a company
that hauls, stores, and disposes of septage. Kuettel's
sometimes disposes of septage by spreading it as fertilizer on
farmland. Kuettel's has periodically hired Phil's Pumping and
Fab, Inc. (Phil's Pumping) to dispose of septage. Phil's
Pumping sometimes disposes of the septage by spreading it as
fertilizer on farmland.
¶77 These septic companies purchased general liability
policies to insure their business operations, that is, they
purchased insurance policies to cover damage they might cause in
the ordinary course of their hauling, storing, and disposing of
septage.
¶78 Kuettel's purchased a contractors' general liability
policy from Regent Insurance Company. The Regent policy
contains the following provisions:
B. EXCLUSIONS
1. Applicable to Contractors Liability Coverage
This insurance does not apply to:
. . . .
f. Pollution
(1) "Bodily injury" or "property damage"
arising out of the actual, alleged or
5
As the majority opinion points out, there were other
insurers and other insurance contracts involved at earlier
stages of the litigation.
3
No. 2012AP2521.ssa
threatened discharge, dispersal,
seepage, migration, release or escape
of "pollutants" . . . .
F. LIABILITY AND MEDICAL EXPENSES DEFINITIONS
. . . .
14. "Occurrence" means an accident, including
continuous or repeated exposure to
substantially the same general harmful
conditions.
. . . .
16. "Pollutants" means any solid, liquid, gaseous
or thermal irritant or contaminant, including
smoke, vapor, soot, fumes, acids, alkalis,
chemicals and waste. Waste includes materials
to be recycled, reconditioned or reclaimed.
¶79 Phil's Pumping purchased a commercial general
liability policy from Rural Mutual Insurance Company. The Rural
Mutual policy contains the following provisions:
2. Exclusions
This insurance does not apply to:
. . . .
f. Pollution
(1) "Bodily injury" or "property damage,"
arising out of the actual, alleged, or
threatened discharge, dispersal, seepage,
migration, release or escape of
"pollutants" . . . .
SECTION V - DEFINITIONS
. . . .
13. "Occurrence" means an accident, including
continuous or repeated exposure to
substantially the same general harmful
conditions.
. . . .
4
No. 2012AP2521.ssa
15. "Pollutants" mean any solid, liquid, gaseous or
thermal irritant or contaminant, including
smoke, vapor, soot, fumes, acids, alkalis,
chemicals and waste. Waste includes materials
to be recycled, reconditioned or reclaimed.
¶80 For several years, Kuettel's and Phil's Pumping spread
septage on Fred and Tina Preisler's farmland. In 2008, when the
Regent and Rural Mutual insurance policies described above were
in effect, the Preislers discovered that septage had seeped into
their well and contaminated their water supply, causing cattle
loss and other problems on their farm.
¶81 The Preislers sued Kuettel's and Phil's Pumping,
alleging that the companies negligently stored and spread
septage, resulting in nuisance and trespass. Kuettel's and
Phil's Pumping contend that septage is not a pollutant under the
pollution exclusion clauses at issue and thus that Regent and
Rural Mutual should defend and indemnify under the policies.
II
¶82 Applying the court's general principles of insurance
contract interpretation6 to the facts of the present case, I
conclude that a reasonable person in the position of these
insured septic companies would not consider septage a pollutant
under the pollution exclusion clause of a general liability
policy purchased to cover liability for damage caused by their
septic business operations.
6
See Frost ex rel. Anderson v. Whitbeck, 2002 WI 129, ¶¶15-
22, 257 Wis. 2d 80, 654 N.W.2d 225. I set forth these
principles at length in Wilson Mutual Insurance Co. v. Falk,
2014 WI 136, ¶___, ___ Wis. 2d ___, ___ N.W.2d ___ (Abrahamson,
C.J., dissenting).
5
No. 2012AP2521.ssa
¶83 Excrement may be waste, an irritant, or a contaminant,
but septage is a valuable product. It is a fertilizer used to
enrich the soil. When it is used to enrich the soil, it is no
longer waste, an irritant, or a contaminant.
¶84 Because we construe insurance contract provisions as
would a reasonable insured, we have held that pollution
exclusion clauses do not apply when "injuries result[] from
everyday activities gone slightly, but not surprisingly, awry"
or when a reasonable policyholder "would not
characterize . . . [the] incident[] as pollution."7
¶85 To septic companies like Kuettel's and Phil's Pumping,
storing and spreading septage are indisputably everyday
activities. Septic companies store septage and often spread
septage on farmland. Seepage is the whole point of spreading
septage on farmland. If the seepage of septage into the
Preislers' well resulted from the storage of septage or the
spreading of septage on farmland, then it clearly resulted from
an everyday activity "gone slightly, but not surprisingly,
awry."8
¶86 A court keeps the underlying purpose of the insurance
in mind when construing policy provisions.9 Kuettel's and Phil's
7
Donaldson v. Urban Land Interests, Inc., 211 Wis. 2d 224,
233, 564 N.W.2d 728 (1997).
8
Id.
9
Frost, 257 Wis. 2d 80, ¶22 ("[I]n construing an insurance
policy as it is understood by a reasonable person in the
position of the insured, a court may consider the purpose or
subject matter of the insurance, the situation of the parties,
and the circumstances surrounding the making of the contract.").
6
No. 2012AP2521.ssa
Pumping purchased these general liability policies to insure
their septic business operations. The insurance companies knew
the nature of the business these companies are engaged in from
their company names and probably from information submitted in
their insurance policy applications. "Certainly an insured who
purchases [commercial general liability] insurance expects to be
covered for ordinary negligence in the course of its insured
operations."10
¶87 The fact that "[h]auling, storing, and applying
septage are activities regulated by both the DNR and the United
States Environmental Protection Agency" further supports my
conclusion that Kuettel's and Phil's Pumping were aware of the
risks of working with septage and thus purchased general
liability insurance policies to cover their liability for damage
caused by their septic business operations when an everyday
activity went slightly but not surprisingly awry.11
¶88 Thus, a reasonable person in the position of these
insured septic companies would expect coverage for damage caused
by septage under a general liability policy it purchased
precisely in order to cover damage caused by its septic business
operations. An insured's reasonable expectations of coverage
must be honored. I would not bar coverage.
10
Keggi v. Northbrook Prop. & Cas. Ins. Co., 13 P.3d 785,
¶29 (Ariz. 2000).
11
Majority op., ¶43.
7
No. 2012AP2521.ssa
¶89 The majority opinion is problematic for several
reasons.
¶90 First, as I stated previously, the majority opinion
has an unnecessary discussion of occurrence, an issue that is
not relevant and was not briefed or argued by the parties.
¶91 Second, the majority's discussion of occurrence is
inconsistent with the discussion of occurrence in Wilson Mutual.
It remains unclear whether this court considers the cause of the
damage or the damage itself to be the occurrence.
¶92 The majority opinion suggests that it is taking the
cause approach.12 The Preislers' complaint alleges negligence in
the storing and spreading of septage. Couldn't the causal
event, and thus the accident for which the insureds seek
coverage, be the negligent storing or spreading of septage,
rather than seepage?
¶93 In her concurring opinion in the instant case, Justice
Bradley persuasively explains that the majority opinion's
discussion of occurrence is unnecessary, internally
contradictory,13 and inconsistent with Wilson Mutual v. Falk,
2014 WI 136, ¶32, ___ Wis. 2d ___, ___ N.W.2d ___. I join
Justice Bradley's criticism of the majority opinion's discussion
of "occurrence."
12
Majority op., ¶28.
13
"It is unclear whether the majority is embarking on a
cause approach or damage approach in determining what
constitutes an occurrence." Justice Bradley's concurrence, ¶61.
8
No. 2012AP2521.ssa
¶94 Third, the essence of the majority's analysis is that
septage becomes a pollutant under the policy when it pollutes.
Under this reasoning, every substance that pollutes is a
pollutant. This reasoning simply begs the question.
¶95 By contending that a substance becomes a pollutant
under the policy at the moment the substance contaminates, the
majority opinion allows the pollution exclusion clause to extend
far beyond the limited scope we have permitted in our prior
cases, leading to absurd results.
¶96 The majority's approach ignores the fact that "there
is virtually no substance or chemical in existence that would
not irritate or damage some person or property."14 As this court
has said again and again, "[t]he reach of the pollution
exclusion clause must be circumscribed by reasonableness, lest
the contractual promise of coverage be reduced to a dead
letter."15
¶97 Fourth, Wilson Mutual and the instant opinion are
inconsistent in their test for whether a substance is a
pollutant under a standard pollution exclusion clause, although
both look to whether a reasonable person in the position of the
insured would consider the substance a pollutant.
14
Donaldson, 211 Wis. 2d at 232 (quoting Pipefitters
Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037,
1043 (7th Cir. 1992)).
15
Donaldson, 211 Wis. 2d at 233.
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No. 2012AP2521.ssa
¶98 The instant case simply asks "whether a reasonable
insured would consider decomposing septage to be a pollutant
when it seeps into a water supply."16
¶99 Wilson Mutual sets forth the following two-part test
for whether a reasonable insured would consider a substance a
pollutant:
[A] reasonable insured would consider a substance to
be a pollutant if (1) the substance is largely
undesirable and not universally present in the context
of the occurrence that the insured seeks coverage for;
and (2) a reasonable insured would consider the
substance causing the harm involved in the occurrence
to be a pollutant.17
¶100 Does the Wilson Mutual two-part test survive the
opinion in the present case?
¶101 Fifth, as I have noted, the parties in the instant
case are here on summary judgment. If the majority is unwilling
to adhere to our longstanding practice of honoring the
expectations of the reasonable insured, then I would remand the
case to the circuit court so the parties can produce evidence
regarding the insureds' expectations of coverage and the
objective reasonableness of those expectations. Summary
judgment should not be granted before the parties have that
opportunity.
¶102 In sum, I conclude that a reasonable person in the
position of the insureds, two companies in the business of
16
Majority op., ¶40.
17
Wilson Mutual v. Falk, 2014 WI 136, ¶38, ___ Wis. 2d ___,
___ N.W.2d ___.
10
No. 2012AP2521.ssa
hauling, storing, and disposing of septage, would not consider
septage a pollutant under the pollution exclusion clause of
general liability policies they purchased to cover liability for
damage caused by their septic business operations.
¶103 For the reasons set forth, I dissent.
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No. 2012AP2521.ssa
1
Frederick W. Preisler v. Kuettel's Septic Service, LLC
Combined Opinion