GENERAL CASUALTY COMPANY OF WISCONSIN, Plaintiff-Respondent-Petitioner, v. Donald A. HILLS, d/b/a Hills Standard, Defendant-Appellant, ABC INSURANCE COMPANY and DEF Insurance Company, Defendants.
No. 95-2261
Supreme Court of Wisconsin
April 22, 1997
561 N.W.2d 718 | 209 Wis. 2d 167
Oral argument January 28, 1997.
For the defendant-appellant there was a brief by Matthew A. Biegert and Doar, Drill & Skow, S.C., New Richmond and oral argument by Matthew A. Biegert.
Amicus curiae brief was filed by Timothy J. Muldowney, Jeffrey J. Kassel and LaFollette & Sinykin, Madison and Richard M. Hagstrom and Zelle & Larson, Minneapolis, MN for the Alliance of American Insurers.
Amicus curiae brief was filed by Richard C. Ninneman, Jeffrey O. Davis, Joan M. Harms and Quarles & Brady, Milwaukee for the Wisconsin Realtors Association, Building Owners and Managers Association and the Wisconsin Association for Environmental Insurance Protection.
Amicus curiae brief was filed by Raymond R. Krueger, Cynthia E. Smith and Michael Best & Friedrich, Milwaukee for the Association of Environmentally Responsible Businesses, Inc., Associated General Contractors of Greater Milwaukee, Inc., Counsel of Small Business Executives, Petroleum Marketers Association of Wisconsin, Wisconsin Fabricare Institute, Inc., Wisconsin Automotive Trade Association and Wisconsin Federation of Cooperatives.
Amicus curiae was filed by Michael D. Flanagan, Thomas C. Ewing, Mary K. Braza, Lisa S. Neubauer and Foley & Lardner, Milwaukee for The Wisconsin Policyholders Association.
¶ 1. N. PATRICK CROOKS, J. General Casualty Company of Wisconsin (General Casualty) seeks review of a published decision of the court of appeals,1 which reversed a judgment of the Circuit Court of Barron County, Judge Edward R. Brunner, presiding. The circuit court granted summary judgment in favor of General Casualty on the grounds that it has no duty to defend or indemnify its insured, Donald Hills (Hills), in a third-party action seeking recovery for environmental response costs. The circuit court concluded that no duty to defend or indemnify exists because, under City of Edgerton v. General Cas. Co., 184 Wis. 2d 750, 517 N.W.2d 463 (1994), cert. denied, 115 S. Ct. 1360, 2615 (1995) (hereinafter “Edgerton“), the action is not a suit seeking “damages.” The court of appeals reversed, concluding that because parties other than the Environmental Protection Agency (EPA) or the Department of Natural Resources (DNR) are seeking monetary compensation for contamination Hills allegedly inflicted on property that does not fall within the policies’ owned-property exclusion,2 the action is a suit
I.
¶ 2. The relevant facts are not in dispute. Since 1961, Hills has owned and operated Don‘s Standard3 in Rice Lake, Wisconsin. In the regular and normal course of business, Hills contracted with Arrowhead Refining Company (Arrowhead) to pick up waste from Don‘s Standard. Arrowhead transported the waste and deposited it at Arrowhead‘s waste oil recycling business in Hermantown, Minnesota (“Arrowhead site” or “site“). Arrowhead operated this business from approximately 1961 to 1977.
¶ 3. In September 1984, the EPA placed the Arrowhead site on the National Priorities List4 by pub-
¶ 4. In 1989, the United States filed suit in the United States District Court for the District of Minnesota, Fifth Division, against Arrowhead and fourteen additional defendants, seeking declaratory relief and recovery of response costs. On January 30, 1991, thirteen of these defendants, including Arrowhead,5 filed a third-party complaint against Hills and hundreds of other parties,6 seeking recovery for response costs associated with the site. In the third-party complaint, Arrowhead makes four specific claims against Hills, based on: (1) the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA);7 (2) the Minnesota Environmental Response and Liability Act (MERLA);8 (3) common law contribution; and, (4) unjust enrichment.
¶ 5. Hills and General Casualty entered into a series of “combination service station” policies from June 18, 1976, to June 18, 1979, and a series of “garage” policies from June 18, 1988, to June 18, 1991.9
General Casualty Company . . . [a]grees with the insured . . . [t]o 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.
(R. 6 at 6, 19, 32.) Likewise, the policy in force from June 18, 1987 to June 18, 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 and resulting from garage operations.
(R. 6 at 63.) (Emphasis original in policies.) The policies in force from June 18, 1988 to June 18, 1991 contain the same language as the 1987-88 policy. (R. 6 at 103, 147, 192.)
¶ 6. On January 19, 1995, General Casualty filed a declaratory judgment action, requesting the circuit court to determine that General Casualty has no duty to defend or indemnify Hills in the third-party action under these policies. On February 16, 1995, Hills coun-
¶ 7. The court of appeals reversed. The court of appeals emphasized the factual distinctions between this case and Edgerton. In particular, the court of appeals indicated that in Edgerton, the DNR sent the insureds a letter directing them to propose a plan to remediate the landfill. General Cas. Co. v. Hills, 201 Wis. 2d 1, 11, 548 N.W.2d 100 (Ct. App. 1996) (hereinafter “Hills“). In addition, the court of appeals noted that unlike the insureds in Edgerton, Hills does not own, lease, or control the contaminated property. Id. at 10-12. Accordingly, the court found it significant that the contaminated property does not fit within the owned-property exclusion contained in the policies. Based on these factual distinctions, the court of appeals concluded that the action is a suit seeking “damages.” Id. at 12. The court indicated that this result is consistent with the purpose of a comprehensive general liability (CGL) policy. Id.
II.
¶ 8. The issue before us is whether the action Arrowhead filed against Hills seeks “damages” as that word is used in the insurance policies General Casualty
¶ 9. In the absence of extrinsic evidence, this court determines the interpretation of an insurance policy as a matter of law, without deference to the lower courts. See, e.g., Sprangers v. Greatway Ins. Co., 182 Wis. 2d 521, 532, 514 N.W.2d 1 (1994); Maas v. Ziegler, 172 Wis. 2d 70, 79, 492 N.W.2d 621 (1992). In addition, when reviewing a grant of summary judgment, this court applies the standards set forth in
¶ 10. In general, the interpretation of an insurance contract is controlled by principles of contract construction. See, e.g., Kuhn v. Allstate Ins. Co., 193 Wis. 2d 50, 60, 532 N.W.2d 124 (1995); Maas, 172 Wis. 2d at 79. The primary objective in interpreting a contract is to ascertain and carry out the intentions of the parties. See, e.g., Maas, 172 Wis. 2d at 79; Kremers-Urban Co. v. American Employers Ins. Co., 119 Wis. 2d 722, 735, 351 N.W.2d 156 (1984). “Of primary importance is that the language of an insurance policy should be interpreted to mean what a reasonable person in the position of the insured would have understood the words to mean.” Sprangers, 182 Wis. 2d at 536; accord, e.g., Kuhn, 193 Wis. 2d at 60; Kremers-Urban Co., 119 Wis. 2d at 735.
¶ 12. Therefore, in order to decide whether General Casualty has a duty to defend Hills, we must
¶ 13. This court has considered the “as damages” insurance language in two recent cases. First, in School Dist. of Shorewood v. Wausau Ins. Cos., 170 Wis. 2d 347, 488 N.W.2d 82 (1992), this court considered whether a third-party action seeking declaratory and injunctive relief to remedy alleged intentional discrimination and racial segregation by two school districts was a suit seeking “damages” under an insurance policy. Id. at 355-56. The court concluded that the word “damages” as used in an insurance policy “unambiguously means legal damages. It is legal compensation for past wrongs or injuries and is generally pecuniary in nature.” Id. at 368.
¶ 14. The Shorewood court further explained that judicial remedies fall into four major categories: damages remedies, restitutionary remedies, coercive remedies, and declaratory remedies. Id. at 368. The court defined damages remedies as substitutionary, remedial relief for past wrongs. In particular, the court stated:
The damages award is substitutionary relief, that is, it gives the plaintiff money mainly by way of
compensation, to make up for some loss, but one ordinarily may be measured in money. . . . By way of contrast, specific remedies in law or equity, such as replevin and ejectment at law, or injunction or specific performance in equity, are not substitute remedies at all, but attempt to give the plaintiff the very thing to which he was entitled.
Id. at 369 (quoting Dobbs, Handbook on the Law of Remedies § 3.1, at 135 (1973)) (emphasis original). However, the court indicated that “[a] classification based on the form of the action, as either equitable or legal, is irrelevant” to the determination of whether the remedy sought constitutes damages. Id. Instead, the focus is on the nature of the remedy sought. Id. at 369-70. Specifically, damages “are remedial in nature, not preventive.” Id. at 370. Applying these principles, the court determined that the costs of complying with an injunction are not damages, because an injunction is designed to prevent injury, not compensate for past wrongs through substitutionary relief. Id. at 374-75.
¶ 15. Second, in City of Edgerton v. General Cas. Co., 184 Wis. 2d 750, 517 N.W.2d 463 (1994), cert. denied, 115 S. Ct. 1360, 2615 (1995), this court considered whether the insureds’ receipt of letters from the Wisconsin DNR requesting remediation of a contaminated site triggered the insurers’ duty to defend. Specifically, Edgerton Sand & Gravel (ES&G) owned a landfill in Rock County, which was leased by the City of Edgerton (City) as a landfill site from 1968 to 1984.13 Id. at 758-59. In 1978, the DNR informed ES&G by
¶ 16. This court initially determined that the letters ES&G and the City received from the DNR did not constitute a “suit” as that term was used in their insurance policies. Id. at 766-82. This court next turned to the issue of whether remediation and response costs assigned under CERCLA or equivalent state statutes constitute “damages” as that term was used in the insurance policies. The court indicated that remediation and response costs “are, by definition, considered to be equitable relief and reflect a congressional intent to differentiate between cleanup or response costs . . . and damages for injury, destruction, or the loss of natural resources . . . .” Id. at 784. The court therefore determined:
[A]s an equitable form of relief, response costs were not designed to compensate for past wrongs; rather, they were intended to deter any future contamination by means of injunctive action, while providing for remediation and cleanup of the affected site. This type of relief is distinct from that which is substitutionary-monetary compensation provided to make up for a claimed loss.
Id. at 785 (citing Shorewood, 170 Wis. 2d at 369). Thus, the court held the insurers did “not have a duty to defend against the actions of the EPA and the DNR, requesting environmental cleanup, because no suit seeking damages has been filed against the insureds.” Id. at 786.
¶ 17. Shorewood and Edgerton demonstrate that in order to determine whether an action seeks “damages,” we must consider the nature of the relief being sought-whether it is remedial, substitutionary relief that is intended to compensate for past wrongs, or preventive and focusing on future conduct. Applying this definition to the present case, we consider it relevant that this case is factually distinguishable from Edgerton and Shorewood in three pertinent ways. First, unlike Edgerton, neither the EPA nor DNR have requested or directed Hills to develop a remediation plan or incur remediation and response costs under CERCLA or an equivalent state statute. Second, unlike Edgerton, the contaminated property in this case does not fit within the owned-property exclusion contained in the insurance policies.14 Third, unlike Shorewood, Hills is not being sued to comply with an injunction.
¶ 19. Our conclusion that Arrowhead is seeking legal damages to compensate Arrowhead for past wrongs is in accord with established Wisconsin precedent. It has long been the law of this state that the cost of repairing and restoring damaged property and water to its original condition is a proper measure of compensatory damages. See Jost v. Dairyland Power Coop., 45 Wis. 2d 164, 172 N.W.2d 647 (1969); Anstee v. Monroe Light & Fuel Co., 171 Wis. 291, 177 N.W. 26 (1920); Pedelty v. Wisconsin Zinc Co., 148 Wis. 245, 134 N.W. 356 (1912); Fortier v. Flambeau Plastics Co., 164 Wis. 2d 639, 476 N.W.2d 593 (Ct. App. 1991), review denied, 479 N.W.2d 172 (1991). See generally 1 Russell M. Ware, The Law of Damages in Wisconsin §§ 18.4 & 18.22 (1988 & Supp. 1996); Wis JI-Civil 1804. For example, in Nischke v. Farmers & Merchants Bank & Trust, 187 Wis. 2d 96, 522 N.W.2d 542 (Ct. App. 1994), review denied, 527 N.W.2d 335 (1994), the court of appeals concluded that if Farmers & Merchants Bank, the owner of an underground storage tank, negligently caused a leak in the tank and thereby polluted
¶ 20. The passage of CERCLA and similar state statutes has not changed the law of remedies.15 Therefore, regardless of the nature of the underlying claim made by the United States against Arrowhead, the fundamental remedy Arrowhead seeks from Hills is compensatory damages for the past injuries he allegedly inflicted on the Arrowhead site.
¶ 21. Consequently, the nature of the relief being sought by Arrowhead is different than that sought by the DNR in Edgerton. We therefore reject General Casualty‘s assertion that we must overrule Edgerton in order to hold that the suit in this case seeks “damages.” Edgerton continues to stand for the proposition that receipt of a letter from the EPA or DNR requesting a party to propose a remediation plan does not constitute a “suit seeking damages.”
¶ 22. We also reject General Casualty‘s contention that we must overrule Whirlpool Corp. v. Ziebert,
¶ 23. We emphasize that our interpretation of the “as damages” language in this case is in accord with the “expectations of a reasonable person in the position of the insured.” Sprangers, 182 Wis. 2d at 536; accord, e.g., Kuhn, 193 Wis. 2d at 60; Kremers-Urban Co., 119 Wis. 2d at 735. A reasonable person in the position of Hills would expect coverage due to the purpose of liability policies. “The CGL policy was designed to protect an insured against liability for negligent acts resulting in
¶ 24. Accordingly, because liability policies are intended to protect insureds from negligent acts resulting in damage to third parties, “an insured, when buying comprehensive general liability coverage, expects that any activity resulting in unintended and unexpected . . . property damage to a third party will be covered unless it is specifically excluded.” Chesler,
¶ 25. In conclusion, we hold that because parties other than the EPA and DNR are seeking compensatory, monetary relief for losses they may incur due to Hills’ alleged past contamination of property that does not fit within the policies’ owned-property exclusion, the action seeks “damages” as that word is used in the policies at issue. Therefore, our decision in Edgerton does not relieve General Casualty of its duty to defend Hills. This interpretation is in accord with the expectations of a reasonable insured in the position of Hills. We therefore remand this case to the circuit court for further proceedings consistent with this decision.
By the Court.-The decision of the court of appeals is affirmed and the cause is remanded.
¶ 26. SHIRLEY S. ABRAHAMSON, CHIEF JUSTICE (concurring). I agree with the result reached by the majority opinion. I write separately to point out that I believe the majority opinion marks a significant
¶ 27. Rather than leaving Shorewood and Edgerton to be overturned in small measures by debatable judicial distinctions, I would embrace the inevitable now by expressly overruling Shorewood and thereby recognizing the limited application of the Edgerton decision on damages.
Notes
- Property owned, rented or occupied by the “insured;”
- Property loaned to the “insured;”
- Property held for sale or being transported by the “insured;” or
- Property in the “insured‘s” care, custody or control.