Acuity v. Chartis Specialty Insurance Company
861 N.W.2d 533
Wis.2015Background
- Dorner, Inc. (insured) damaged an underground natural gas pipeline during excavation; the resulting leak caused an explosion and fire that produced bodily injury and property damage and led to four consolidated lawsuits.
- Acuity (CGL insurer) defended and indemnified Dorner in the underlying suits and sued Chartis (CPL insurer) seeking contribution/reimbursement, arguing Chartis’s Contractors’ Pollution Liability (CPL) policy covered the losses.
- Chartis denied coverage, contending the injuries and damage were not "caused by Pollution Conditions" because the harm flowed from the explosion/fire rather than from the contaminating nature of the gas.
- The circuit court granted summary judgment to Acuity, holding the escaped natural gas was a "contaminant" and a "pollution condition" and ordered Chartis to share defense and indemnity costs 50/50; the court of appeals reversed.
- The Wisconsin Supreme Court reversed the court of appeals, holding the gas release met the CPL definition of "Pollution Conditions," that the resulting injury/damage was caused by that condition, and Chartis must pay its share.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the escaped natural gas qualifies as a "Pollution Condition" under the CPL policy (i.e., an "irritant or contaminant" released into the atmosphere in excess of natural concentrations) | Natural gas is a gaseous contaminant when released in dangerous concentrations; dictionary meaning and precedent (Peace, Hirschhorn) support treating released gas as a contaminant. | The policy terms should not be read to encompass ordinary combustible substances; "contaminant" should be limited to toxic/chemical pollution. | Held: Natural gas released in concentrations above natural background is a "contaminant" and thus a "Pollution Condition." |
| Whether the bodily injury and property damage were "caused by Pollution Conditions" so as to trigger CPL coverage | The leak (pollution condition) was the but-for cause of the explosion and fire, and the contaminating nature of gas (flammability/explosivity and health effects) directly produced the injuries/damage. | The injuries resulted from the fire/explosion, not from the contaminating (toxic) nature of the gas; policy should require that the contaminant’s toxic or contaminating properties themselves cause the harm. | Held: The sequence (release → explosion/fire → injury/damage) satisfies the policy’s causation language; the contaminating nature of natural gas (flammability/explosivity) caused the harm. |
| Whether CPL and CGL coverage can concurrently apply or are mutually exclusive here | CPL can apply to pollution-caused losses even if CGL also covers some aspects; Chartis’s policy contemplates concurrent primary coverage and contribution. | Policies are complementary by design; if CGL covers non-pollution damage then CPL should not also apply to same loss. | Held: Concurrent coverage is possible; Chartis’s CPL contemplated concurrent primary insurance and is not precluded by Acuity’s CGL; court did not decide whether Acuity’s CGL also covers these losses. |
Key Cases Cited
- Peace ex rel. Lerner v. Northwestern Nat'l Ins. Co., 228 Wis. 2d 106 (Wis. 1999) (lead paint release is a "contaminant" for pollution exclusion analysis)
- Hirschhorn v. Auto-Owners Ins. Co., 338 Wis. 2d 761 (Wis. 2012) (bat guano and its odor qualify as a contaminant/pollutant under exclusion framework)
- Guenther v. City of Onalaska, 223 Wis. 2d 206 (Ct. App. 1998) (distinguishes damage caused by toxic nature of pollutant from damage caused by its non‑toxic physical properties)
- Beahm v. Pautsch, 180 Wis. 2d 574 (Ct. App. 1993) (smoke’s opaque physical effect, not toxic properties, caused a car accident; pollution exclusion analysis limited)
- URS Corp. v. Zurich Am. Ins. Co., 979 N.Y.S.2d 506 (Sup. Ct. 2014) (interpreting a CPL policy under New York precedent; held confined fire hazards did not constitute covered "pollution conditions")
- Liebovich v. Minnesota Ins. Co., 310 Wis. 2d 751 (Wis. 2008) (insurer has duty to defend where complaint alleges facts that, if proven, would give rise to coverage)