Hydrite Chemical Co. v. Aetna Casualty & Surety Co.

Avganic Industries, Inc., Co., Chemical Plaintiffs-Appellants,† Affiliated Casualty Surety Co., & Aetna Co., Co., Insurance n/k/a Affiliated FM Insurance Casualty Reading, PA., American Co. of American Co., Co., Motorist Ins. Canadian Universal Ins. Chi cago Casualty Co., Co., Insurance Continental First Agency Co., State Ins. First State Underwriters of England Corp., England New Reinsurance a/k/a New Corp., Reinsurance Co., Granite State Insurance Surplus Co., Great American Lines Insurance a/k/a Empire Surplus American Co., Lines Ins. The Home Indemnity Company, Company, Home Insurance Integrity Company Liquidation, Insurance Samuel Fortunato, F. Commissioner of Insurance of the State Jersey, capacity of Miron, New and Michael in his as Liquidator Integrity Company, Insurance Interna Surplus Co.,

tional Lines Ins. Interstate Fire & Casualty Surplus Co., Northbrook Excess & Co., Ins. predecessor Company, as to Allstate Insurance Old Republic Co., Ins. Co., Transcontinental Insurance United States Fire Ins. Walbrook Insurance Com pany Lloyd's Limited, Certain Underwriters at companies,

London, and other Defendants- Respondents. Appeals

Court of 94-0032, 95-2840, Nos. 97-0719. Submitted on briefs 11, 1998.

February 7, 1998. May Decided to review denied. †Petition

(Also 423.) reported in 582 N.W.2d plaintiffs-appellants, On behalf of the the cause Raymond Krueger, was submitted on the briefs of F. Meany Douglas Michael, David V. P. Dehler of Best & Friedrich of Milwaukee. defendants-respondents,

On behalf of the cause was Becker, submitted on the briefs of Todd A. Coyne, Niess, Schultz, Richard G. Niess of Bauer, Becker & Madison, S.C. of Horstman, and James K. Anthony Mary P. Katauskas and A. Sliwinski of Wil- Montgomery, Chicago. Ltd., liams & defendants-respondents, On behalf of the Casualty Surety Company, Aetna and n/k/a Travelers Casualty Surety Company, and the cause was submit- Schrimpf ted on the brief of Thomas R. and Susan R. Tyndall ofHinshaw & Culbertson of Milwaukee. Dykman, Roggensack Deininger,

Before P.J., JJ. Hydrite

DYKMAN, P.J. Chemical Co. and (hereinafter Avganic "Hydrite") appeal Industries, Inc. summary judgment dismissing from orders for their against insurance action the defendant insur- Hydrite argues companies. that trial court anee duty concluding in that the insurers do not have a erred indemnify Hydrite investigating for the cost of to remediating groundwater

soil and contamination vicinity Hydrite's facility Cottage chemical agree Grove, City of Edgerton with the trial court that Wisconsin. We Cas. General (1994), precludes coverage. Accord granting affirm the trial court's orders we ingly, summary judgment. motions for insurers' Hydrite compelling appeals from an order it to also certain documents to the insurers. disclose argues protected by are the attor- that the documents ney-client product privilege doctrine. and work We already properly that the trial court have concluded granted summary judgment. insurers' motions they are Because insurers have established judgment a matter of law without the entitled to as question documents, the of whether withheld properly Therefore, the documents is moot. withheld compelling appeal from the order we dismiss the discovery.1

BACKGROUND July 30,1989, the United States Environ- Effective (EPA) Agency the federal mental Protection issued Recovery portion Act of a Resource Conservation and (RCRA License) Hydrite Hazardous Waste License facility. required Cottage The license for its Grove Hydrite develop implement action to and a corrective plan to address environmental granted properly that the trial court Because we conclude case, Hydrite no summary judgment the merits of the on compelling longer required comply with the trial court's order discovery. spent

caused the release of industrial solvents storage facility. an old drum area at the Hydrite requested indemnification from the defen- paid paid dant insurers for the sums and to be for the investigation environmental and remediation at the Cottage facility, including development Grove the implementation plan imposed of the corrective action coverage. the RCRA License. The insurers denied Hydrite April against filed a lawsuit the insur- seeking coverage during ers, for the costs incurred the investigation and remediation of the at contamination Cottage facility. the Grove

During discovery, Hydrite withheld certain docu- attorney-client privilege ments under the and work product Hydrite produced log privilege doctrine. a iden- tifying the documents it withheld. The insurers moved compel production many of of the documents. produce The trial court ordered a of number granted Hydrite's petition appeal them. We for leave to 94-0032.) discovery (Appeal order. No. briefing interlocutory appeal After on the was com- plete, Supreme City the Wisconsin Court decided of v. General Cas. (1994). N.W.2d 463 Certain insurers moved the court of appeals to remand the case so that the trial court could apply holding Edgerton. staying so, We did appeal directing the trial court to consider the Edgerton issues on remand. remand,

On both and the insurers moved summary judgment. granted The trial court Hydrite's complaint, insurers' motion and dismissed concluding holding Edgerton, that, under the duty indemnify insurers did not have to defend or 95-2840.) Hydrite. Hydrite appealed. (Appeal No. again this court to remand the case moved trial court to the for the resolve issue as join in certain insurers that did not summary judgment. the first motion for granted Hydrite's We motion. On stipulated remand, and the insurers to the policies." again terms of certain "lost The trial court Edgerton precluded coverage concluded that and summary judgment remaining granted the insurers. 97-0719.) Hydrite appealed. (Appeal All No. three appeals have been consolidated before this court.

STANDARD OF REVIEW summary judgments using novo, review de the We methodology Spring the trial See same as court. Green Kersten, 304, 315—16, Farms v. 136 Wis. 2d 401 (1987). Summary judgment appropriate 816, 820 genuine fact when there are no issues of material moving party judgment is entitled to as a matter 802.08(2), § law. See Germanotta National Stats.; 293, 296, 2d 349 N.W.2d Indem. 119 Wis. (Ct. 1984). App. deciding motion, trial first court consid- complaint pleadings to determine whether the

ers the may granted states a claim for which relief be See State Bank v. whether the answer states a defense. (Ct. 508, 511, 916, 917 Elsen, 1986). evidentiary they moving party's App. do, If party are examined to determine whether facts summary judgment. prima If has made a case for facie moving party prima case, has made facie party's proofs opposing affidavits and are considered any genuine exists as to determine whether a issue exists, material fact. Id. If a material factual issue summary judgment inappropriate. Id.

DISCUSSION Hydrite argues that the trial court misconstrued City Edgerton 750, v. General Cas. of (1994), inappropriately granted 517 463 N.W.2d and summary judgment. The insurers contend that the properly granted summary judgment trial court them supreme holding Edgerton. under the ingly, court's Accord- analysis Edgerton. we will start our with Edgerton, Edgerton In Gravel, Sand & Inc. (ES&G) City owned (City) leased and used as its landfill from 1968 to 1984. groundwater n.5, Id. at 758 & 517 N.W.2d at 468. The at the site 759, became contaminated. Id. at City 1989, N.W.2d at 468. In each ES&G requesting received a letter from the EPA respond them to request Department to a from the Wisconsin (DNR) provide Natural Resources regarding information disposal of hazardous substances at they 759-60,517 landfill. Id. at at In 1990, N.W.2d 468. requesting each a received letter from the DNR them to propose plan any a for remediation of the site and problems 760, associated with it. Id. at 517 N.W.2d at 468. City

The and ES&G forwarded these letters to specifically their requested carriers, insurance and ES&G pay any regard- its insurers to costs incurred ing provide the site and to a defense. Id. at provide at N.W.2d 468-69. The insurers refused to cov- erage or defense. Id. at 517 N.W.2d at 469. Both City declaratory judgment and ES&G filed a action against seeking insurers, a determination that the duty indemnify insurers had a to defend and them for claims, out of DNR or EPA actions any liability arising the contaminated site. Id. or suits involving Edgerton, the relevant insurance read: policies company pay will on behalf of the insured all legally sums the insured shall become obli- which gated pay damages as because of bodily injury or

A. property damage

B. applies, to which this insurance caused an occur- rence, company right and the shall have the duty any against seeking to defend suit the insured bodily injury on account of such or prop- erty damage.... omitted).

Id. at at 472 (emphasis The court held that as used in supreme "damages" insurance means policies legal damages, generally nature, in designed past to for pecuniary compensate Id. at 783, 517 N.W.2d at 478. wrongs injuries. or does not include the cost of with "Damages" complying decree. Id. The court noted that remedia- an injunctive CERCLA2 tion and costs under and response assigned are, definition, consid- state statutes3 equivalent relief. Id. at 517 N.W.2d at 784, ered to be equitable 478. The court continued: relief, costs were equitable response

[A]s an form of rather, past wrongs; to for designed compensate not any deter future contamina- they were intended to Response, Compensa Comprehensive The Environmental 1980, Liability "Superfund." as See tion and Act of also known n.2, City Edgerton Cas. v. General (1994). 463, 467 See § 144.442(8)-(9), STATS. action, injunctive tion providing means while cleanup for remediation of the affected site. type This of relief is distinct from that which is substitutionary monetary compensation provided — for a up to make claimed loss. (citation omitted). Id. at 517 N.W.2d at 478 According Hydrite, comprehensive most of the (CGL) general liability policies insurance at issue language following: this case contain similar to the company pay will on behalf of the insured all legally sums which the insured shall become obli- gated to pay as because of Bodily Injury

A. or Property Damage

B. applies

to which this insurance .... language policy language This is identical to the Edgerton. Edger- construed in And like the insureds Hydrite seeking ton, was not reimbursement its "legal damages." for insurers Under the terms of the required pay License, RCRA was not substitutionary, monetary compensate EPA relief to wrongs. past required Instead, was develop implement plan a corrective action Cottage address environmental contamination at the facility. Hydrite sought Grove indemnification from its investigation insurers for the cost of its environmental Cottage facility, and remediation at the Grove includ- ing development implementation of the plan pursuant corrective action to the RCRA License. "legal damages" Edgerton. These costs are not under Therefore, we conclude that the insurers were not required indemnify Hydrite under the terms of the policies. insurance

Hydrite argues that the facts of this case are dis- tinguishable Edgerton, facts of and therefore controlling. support it contends that is not In argument, Hydrite primarily of its relies on General Hills, 167, Cas. Co. v. (1997), 209 Wis. 2d 561 N.W.2d 718 Corp. Heritage and Wisconsin Pub. Serv. Mut. (1997) (here- 160, Ins. 561 N.W.2d 726 WPS). Hydrite's arguments, inafter Before we address we will summarize Hills and WPS. Hills, Donald Hills contracted with Arrowhead

Refining Company pick up waste from his service Hills, 171, station. 209 Wis. 2d at 561 N.W.2d at 720. transport Arrowhead would then the waste to its waste recycling oil site. Id. After the EPA determined that recycling Arrowhead's had activities contaminated the against site, the United States filed Arrowhead, suit seeking declaratory recovery response relief and 172, costs. Id. at 561 N.W.2d at 721. Arrowhead then third-party complaint against seeking filed a recovery Hills, response costs associated with the site. Id4 declaratory judgment action,

Hills' insurer filed a requesting duty the court to determine that it had no indemnify defend or Hills. Id. at 561 N.W.2d at asserting counterclaimed, 721. Hills that the insurer breached its contractual duties and acted bad faith. policy Id. at 561 N.W.2d at 721. The between language equivalent Hills and his included insurer language rsxEdgerton. construed See id. at summary judg- at 561. The insurer moved for arguing against ment, that because the suit Hills 4In Refining Company addition to Arrowhead and Donald Hills, the action included fourteen additional defendants third-party hundreds of additional defendants. For the sake of simplicity, only we refer to Arrowhead and Hills.

sought recovery response costs, for it did not seek holding Edgerton. "damages" 174, under the Id. at at 721. N.W.2d supreme court first noted that a rem- whether edy sought depend upon does not constitutes upon of the rem- action, the form of the but the nature edy sought. 178, 561 at Hills, 209 Wis. 2d at Damages preventive." nature, in "are remedial not 723. the relief Arrowhead Id. The court concluded substitutionary, monetary sought relief from Hills was past wrongs, designed compensate for not relief prevent at future harm. Id. at 561 N.W.2d 724. Therefore, the court concluded that Arrowhead was "damages" seeking Hills as that term was used policies at Id. the insurance issue. The court further seeking "conclusion that Arrowhead is stated that its legal damages compensate past for Arrowhead wrongs prece- Wisconsin is accord with established repairing restoring dent damaged property . . . that cost of original and water to its condition proper compensatory damages." a measure of Id. omitted). (emphasis Utility WPS, hired Helmreich WPS Construc- gas building

tion to install service to a owned WPS, Tomahawk School District. 209 Wis. 2d at installing line, 561 N.W.2d at 728. While the service underground pipe, causing cut an fuel oil Helmreich surrounding soil to become contaminated. Id. The ordering WPS, sent letters to Tomahawk and DNR investigate property. them to and remediate the Id. paid admitting responsibility all for WPS bills without against and then a direct action them commenced Hel- mreich's insurer. Id. The insurer filed motion for summary judgment, contending that reimbursement investigation and not "dam- remediation costs was ages" policy. covered Id. at supreme at 728. The that, Hills, court concluded like parties WPS involved other than the EPA or DNR seek- ing recovery damages negligently for that the insured Accordingly, caused. Id. at 561 N.W.2d at 728-29. controlling the court concluded that Hills was and that sought "damages" the action under Helmreich's insur- policy. ance Id. at 561 N.W.2d at 729.

Hydrite argues seeking first that it is to recover restoring damaged property the cost of and water to its original recognized condition, which Hills as a measure compensatory damages. But of relevance in Hills sought was not whether the sums the insured the from damages; insurer would rather, be considered the focus remedy sought was on whether the the insured damages. would be considered In Hills, substitution- ary, monetary compensate past wrongs relief to for was sought insured, from the therefore, the sums sought damages from the insured were considered be by policy. Here, covered the however, the EPA did not substitutionary, monetary Hydrite. seek relief from through required Instead, EPA, License, the the RCRA Hydrite implement necessary corrective measures to Cottage address environmental to the Grove facility. remedy sought by the EPA is more akin to remedy equitable sought by Edgerton the DNR substitutionary remedy sought than the in Hills. Accordingly, Hills does not affect our conclusion that "damages" does not seek indemnification for from its insurers. argues seeking recovery also that it is for

"damages" damage because its claim involves to third- party property. Hydrite reasonably contends that it expected coverage damage third-party caused to property. complaint, Hydrite In its notes that soil and beyond groundwater has extended contamination boundary beyond storage of the area and drum facility. supporting Cottage in its affidavits Grove And summary judgment, Hydrite asserts that its motion for addressing neighboring contamination it was properties investigation design

through and the site systems. remedial distinguishable

Hydrite argues Edgerton damage it owned because involved WPS, hand, the other In Hills and on insured. property. The insured did not own the contaminated part distinguished its case from Hills court property in was not the contaminated Hills because insured, it not fall and therefore would owned owned-property exclusion of Hills' insur- within the policies. Hills, 209 2d at 561 N.W.2d ance See Wis. at 724. Hydrite's argument reject because we believe

We Edgerton and Hills is of that this distinction between marginal significance Edgerton here. The court did not owned-property of even reach issue whether applied. Hills, n.14, See 2d at 180 exclusion Wis. at 724. After the court decided issue that the DNR's letters to the the threshold seeking damages" a insureds did not constitute "suit triggering duty defend, the insurers' it was unneces- sary application for the court to consider the of the Edgerton, owned-property 184 Wis. 2d at exclusion. See Hydrite's Likewise, if 517 N.W.2d at 467-68. implementing action costs incurred in plan the corrective duty damages triggering are not the insurers' indemnify, poli- it is irrelevant whether the insurance owned-property cies also include exclusions. Edgerton that The distinction between Hills and important Edgerton, most here is that DNR directed the insureds develop remediation plan and incur remediation and response costs; while Hills, parties other than the EPA or DNR sought com- pensatory, relief monetary from the insured for alleged past contamination of property. The Hills court recog- nized the relevance of this distinction. The court stated: Edgerton,

[Ulnlike neither the EPA nor DNR have requested or directed Hills develop a remediation plan or incur remediation response costs under CERCLA or an equivalent state statute....

... [A] position reasonable insured in the Hills would interpret the phrase "as damages" to claim, include for a brought by parties DNR, other than the EPA or which obligates him or pay her to monetary sums because of the negligent contamination of property that does not fit within the owned-property exclusion, since this very is the reason that an purchases individual liability coverage.

Hills, Wis. 2d at 185, 561 at 724-25 added).5 (emphasis Regent Manitowoc, See also City Ins. Co. v. (Ct. 1996).

450, 556 N.W.2d 405 App. Although Regent was supreme decided before the WPS, court decisions in Hills and we believe its WPS, decision is consistent with Hills and and we analysis find its Regent, instructive. In analyzed the court sev cases, post -Edgerton eral including the appeals court of WPS, decisions in Hills and and concluded: essence, post -Edgerton merely Distilled [the cases] to their hold brought against by non-government that a lawsuit an insured a third-party money third-party spent to recover has or will spend because of the insured's contamination of not owned, leased, damages" or controlled the insured is a "suit for phrase When, applied by City Edgerton. as that is defined and of Hydrite Edgerton, was insureds Here, like the governmental investi- responding directive when to a property; remediating gating contaminated its respond- Hydrite not Hills, was insureds in unlike the ing monetary compensatory, relief for to a demand Accordingly, third-party. non-government we a Edgerton, Hills, controls.6 not conclude that policies argues Hydrite of the that several also policy distinguishable from the construed here are policies Edgerton do not confine of the because some policies example, "damages." For several to indemnify require "for dam- the insured the insurer to Hydrite expenses." consequential ages, direct or "expenses" argues it seeks are cov- that the amounts argument, support policies. its these ered "expenses" Hydrite define to on dictionaries that relies among things, mean, other "costs." Hydrite's interpretation reject of the broad We "expenses" that the for the same reason term interpretation rejected of the term "dam- a broad court Edgerton, ages." In the court stated: however, brings a lawsuit the United States or a state either cleanup [CER- against incurred costs under an insured to recover remediation, CLA], impose plan that action is not a "suit a for or is, rather, "equitable monetary damages" relief." a suit for but (footnote at 409 Regent, 205 Wis. 2d at 556 N.W.2d omitted). required argues that it was not to be also legal action in order for its insurers become defendant already con indemnify "damages." We have obligated to it for sought expenditures for which cluded that damages, regardless of whether a law indemnification were not the insurers filed. Because the issue of whether suit had been on indemnify Hydrite disposed has been required were argument. See Sweet v. grounds, we do not reach this other (Ct. 1983). 61, 67, App. Berge, 2d 113 Wis. [The] "damages" limited construction of the term grant consistent with the basic in the policies. insurance The to agreed pay insurers "all stuns which insured legally the shall become obli- as gated pay damages." The insurers did not sums agree "all pay which the insured shall legally obligated become to pay." The addition of "as damages" qualifier, as a coverage. serves a limit to Edgerton, 184 Wis. 2d at 517 N.W.2d at 478 (quoting Cos., School v. Dist. Wausau Ins. (1992)).

347, 369-70, 82, 90 "damages" given if court believed that were a broad interpretation, damages" phrase "as would become surplusage any expenses prior because or incidental to litigation by policies. Edgerton, would covered be 184 Wis. 2d at 517 N.W.2d at 478.

Similarly, interpret "expenses" if were we as equivalent "costs," we would the term render "dam- ages" policies surplusage in the all because expenses policies. would also be covered We policy must avoid a construction of the that would portions meaningless surplusage. render of it mere or Physicians Rockline, Ins., See Inc. Wisconsin Serv. (Ct. App. 583, 593, Wis. 2d 1993). Hydrite's proposed Therefore, we must avoid construction. "expenses"

Instead, we believe that the covered policy legal expenses defending are incurred in "damages, damages. phrase for claim consequential direct or expenses" policy, it and contained appears consequential expenses" that "direct or types "damages" what defines damages, are covered: direct consequential damages, expenses defending damages. using By a claim incurred give con- interpretation, all words effect to we this provision.7 policy in the tained pro- policies argues that that several also coverage net loss" are "ultimate for vide Edgerton. policy distinguishable construed coverage policy provides example, "for dam- one For expenses, consequential ages, all as more and or direct pol- by fully The net loss.'" term 'ultimate defined icy which "the total sum net loss" as defines "ultimate company any both, insurer, or as its insured, or property pay by obligated dam- reason of... become through adjudication or age ., either claims . . agreed policy, compromise." insurer Under another pay loss... the ultimate net of the insured "to on behalf liability by may reason of the sustain the insured which imposed upon by by law, or assumed the insured liability damage contract," for insured under policy arising "ulti- This defined an occurrence. out of as: net loss" mate

(A) legally obligated to the insured is all sums which by adjudication reason of damages whether pay as injury, personal settlement, bodily because or liability to advertising damage or injury, property and policy applies this which Fiberglas Corp. v. American Owens-Corning The court in (Ohio 1995), C.P. construed 660 N.E.2d 770 Centennial Ins. to indem required insurance that the insurer policy a similar and damages, consequential direct or "for nify the insured "expenses" that 800. The court concluded expenses." Id. at defending claims. Id. Our conclu incurred in expenses meant holding. rely on We do not with that court's sion is consistent however, the Ohio court considered Owens-Coming, because reaching language in its con testimony policy case-specific inappropriate to consider in this case. be clusion that would (B) expenses all . . . incurred or on behalf insured in the investigation, negotiation, settle- any ment and defense of policy claim covered this seeking or suit damages excluding only the salaries regular employees. of the insured's do not Again, we believe that these policies insure against the costs for which Hydrite seeking indemni- fication. first policy provides coverage "for or damages, direct consequential expenses." We have construed as already similar language providing for only expenses incurred in defending claim damages. And although the second policy states "ultimate loss" net includes expenses incurred by the insured in investigating defending claims, the claims for which the expenditures are incurred must be claims covered the Because policy. the EPA's corrective claim plan action is not a covered by the policy, Hydrite is not entitled to recover its expenses incurred in with the corrective complying action plan.8

8Hydrite argues also that in the trial decision and court's summary judgment underlying Appeal order for No. granting summary trial in judg the court erred the insurers grounds place ment on the that no "occurrence" had taken to trigger duty indemnify. Hydrite argues the insurers' that the in considering trial court erred the "occurrence" issue because it beyond scope appeals' was of the court of remand order. summary judgments Spring

We de Green review novo. See Kersten, 304, 315, Farms Wis. 2d (1987). already We have that were enti concluded the insurers summary judgment sought by Hydrite tled because sums Therefore, holding Edgerton. "damages" are not under the we not need to whether the trial court erred consider do consider ing Berge, issue. Sweet v. "occurrence" See 1983). (Ct. 67, 334 559, App. summary, poli- conclude that the insurance we require question insurers do not

cies in expenditures indemnify Hydrite for which for the Hydrite complaint. in its Accord- seeks reimbursement granting ingly, affirm the trial court's orders we summary judgment to the insurers. Appeal

By Appeal No. 94-0032: dis- the Court.— Appeal 95-2840 and 97-0719: Orders missed; Nos. affirmed. (dissenting).

ROGGENSACK, J. Because sufficient stated a sufficient claim and averred has contending damage property it caused to the facts has damage Hydrite third-parties, not which would have reasonably expected to from the insurers' be excluded general indemnify comprehensive under the duties (CGL) liability policies purchased, it and because the policies defined was not issue of an occurrence as summáry judgment fairly court at the before circuit motion, I the circuit court on these would reverse two respectfully Therefore, I issues. dissent. for to Others. Injury

Indemnification summary judgment, asserting moved for policies there was under the CGL injury injury and for it had to its own caused Relying heavily City property to of on others. of Wisconsin, v. General Cas. Co. 184 Wis. 2d of (1994), majority 750, 517 N.W.2d 463 affirms the Hydrite's against all all of of claims dismissal analyzing insurers, defendant without whether the injuries property claims which arose out of to the of differently should be under the others treated CGL Hydrite's policies injury prop- from claims based on 44 erty. majority opinion focuses its attention on the license, which, below, RCRA as is discussed is not dis- positive coverage of whether is excluded under the policies. third-party It the lack CGL also relies on of a against distinguish lawsuit General Cas. Co. Hills, Wisconsin v. 2dWis. 561 N.W.2d 718 of (1997), involving damages a more recent case caused by pollutants, controlling precedent I which conclude is policies third-party for claims under the CGL when damage property at is issue. declaratory judg- filed its action one as for asking, part,

ment, that the circuit court determine scope indemnify insurers' duties to under appeal contracts; therefore, written this is not an which must examine whether a lawsuit been filed has Hydrite. against filing The actual of a lawsuit a party precondition declaratory third is not a relief. Loy 806.04, STATS., Bunderson, Section (1982). 400, 407, And, 320 N.W.2d whether a precondition has filed not a lawsuit mining been is deter- injuries whether to the of others by pollutants caused is excluded from indemnification question solely under the contracts at issue. That is interpretation, appropri- an matter contract which is declaratory judgment Hills, ate task for a action. at Wis. 2d at 722. step review, I

As the first in this examined the sought complaint. initial It broad investigation payment and remediation on included Hydrite's property, agree pre- which relief I own Hydrite's complaint by Edgerton. However, cluded also sought indemnification for losses sustained third Additionally, Hydrite's summary parties.1 motion for 1Paragraph complaint part: 34 of the states in relevant judgment clearly focused one part of its claim for indemnification on injuries third parties. support motion, of its Thomas J. Miazga averred: money has spent past injury to address the to the by past environment caused this release. . . . investigations have documented that extensive beyond contamination the boundaries of the Cot- tage facility Grove past was caused release of spent organic chemicals. . Dwight . . Dale and Hus- ton approximately own mostly acres of undeveloped property approxi- which is located mately 750 feet Cottage south of the Facility. Grove property This has been contaminated. ... Property owned the State of damaged by Wisconsin was the past spent organic release of chemicals. . . . legal obligation has a under state and fed- eral law to restore the properties by investigating cleaning and up the environmental injury which groundwater consists of contaminated and soil. also stated Miazga that although Hydrite has spent money harm, future prevent it is not seeking indem- nification for those expenses, but rather it is seeking indemnification only for past injuries. Therefore, its claims in regard to to the injury property of others are nature, remedial as were the claims described in Hills. The allegations in Hydrite's complaint [Approximately 66-gallon 600 to 800 drums at the old NCC drum

storage area released their contents to the environment sometime storage after their arrival at the old NCC drum area and before the beginning Hydrite's operation. solvent reclamation These releases into the environment contaminated . . . the soil and groundwater. groundwater Environmental to soil and beyond storage have extended the old NCC drum area at the Cot- tage facility beyond occupied by Grove owned or NCC, Hydrite Avganic during respective policy each of the and/or added.) periods. (Emphasis Miazga's Hydrite polluted in affidavit that averments property parties the of third are uncontroverted. coverage to determine is order whether interpret contend, excluded as the insurers one must the insurance to ascertain the reasonable contracts Hydrite. coverage expectations of Insurance contracts by ordinary interpreted the maxims of contract con are 50, 60, 2d struction. Kuhn v. Allstate Ins. 193 Wis. (1995). coverage 124, 128 issue, 532 When is at N.W.2d language interpret the insurance courts must the of policy, as a reasonable insured would have understood coverage Hills, 175, afforded. 209 Wis. 2d at 561 supreme in And, N.W.2d at 722. as the court stated " examining coverage question, Hills, 'classifi when action, cation equitable on the form of the as either based legal, determination of or is irrelevant' to remedy sought damages. whether constitutes remedy nature of the Instead, the focus is on the sought. Specifically, damages nature, in 'are remedial preventive.'" 178, 723-24 not Id. at 561 N.W.2d at (citations omitted). clarified that to a

The court Hills also property pollu- third-party's caused environmental required by remediation is CERCLA tants for which differently damages caused are to be treated no other means. tank, underground storage negli-

[T]he owner of an thereby gently caused a leak in the tank could recover polluted property, Nischke's Nischke remediate her land in expended the costs she received from the DNR. response to letters she (citing approval at 561 N.W.2d at 725 with Id. Appeals v. Farmers & the Court of decision Nischke Trust, 96, 120, 2d Merchants Bank & 187 Wis. (Ct. 1996)). App. CERCLA, and its counterpart, on Wisconsin have no effect the construc- policies of or tion insurance on the law of remedies.2 Hydrite purchased policies Here, not CGL did pollutants coverage list environmental as a exclusion. polluting property A limitation for others could been made have a condition insurance. Interests, Inc., See Donaldson v. Urban Land 211 Wis. (1997). 224, 228, However, 2d bargainéd parties there no indication the for that recognized purpose Furthermore, here. of CGL indemnify they damage insurance is insureds County cause of others. Sauk Employers Wausau, 433, 443, Ins. 202 2d 550 Wis. of (Ct. 1996). App. 439, 443 N.W.2d The claims for indem nification I under the contracts which address in this injuries Therefore, dissent arise from to others. cover age simply should been excluded, not have of because theory liability. of

Additionally, already we have concluded in Robert & Assocs.,Inc., Lee 509, 522, E. (Ct. 1996), App.

457, 462 that contamination to the groundwater supply and to the of land others is not the type damage by precluded Edgerton. of Therefore, the required Hydrite RCRA license which to take certain 2 9652(d) "See U.S.C. ('Nothing in this Act shall § affect modify any way obligations or in any or liabilities of person law, including law, under other State Federal or common with respect to releases of hazardous or pollutants substances other ('No 144.442(11) contaminants.'); or Wis. Stat. § common law liability resulting ... facility site or is any affected in authority, manner this power section. in provided any and remedies this in section are addition to law.')." authority, power remedy provided or ... at common Hills, n.15, 209 Wis. 2d at 182 at 725 n.15. parties of actions is not determinative whether third holding damaged. in Lee in have been Our Robert E. supreme Hills, accord with the directive of the court in explained, long "It has been the law of this state which repairing restoring damaged prop- that the cost of erty original proper and water to its condition is a compensatory damages." Hills, measure of Wis. 2d (citations omitted). at 561 N.W.2d at 724 Therefore, I conclude that a reasonable insured in position Hydrite expected not have that would injury indemnification for it caused to the of. parties by pollutants third be environmental would policies. excluded from under the CGL This solely by conclusion is driven what a reasonable position Hydrite expected insured in the would have purchased policies. it these when CGL Occurrence. also claims the circuit court erred sum

marily declaring spills the toxic were not policies party no had occurrences under the because that issue and dis moved the court to decide because covery precluded had on the occurrence issue been discovery court, itself, had estab the narrow limits disagree companies lished. The insurance do not with Therefore, I take them those assertions their brief. Schlieper 318, 322, DNA, v. 188 Wis. 2d as admitted. (Ct. 1994). App. 99, 101 Generally, legal circuit courts do not raise issues they requires sponte. However, do, fairness sua when develop parties opportunity have the that legal arguments present on the relevant facts and to 31, 41, Holmes, issue. See State (1982). did not Here, the circuit court parties Its decision on the allow the to brief the issue. appears surprise occurrence issue to have been a to all parties. agree Hydrite's position Therefore, I required important well taken. Fairness that this issue allowing parties present be decided after all their positions on it.

Conclusion. any injury Hydrite

Because I conclude that caused property damage to the of others is which it reasonably expected would not have to be excluded policies purchased under the GCL it parties opportunity because the did not have a fair develop the facts and the law relevant to the occurrence respectfully determination, I dissent.

Case Details

Case Name: Hydrite Chemical Co. v. Aetna Casualty & Surety Co.

Court Name: Court of Appeals of Wisconsin

Date Published: May 7, 1998

Citation: 582 N.W.2d 423

Docket Number: 94-0032, 95-2840, 97-0719

Court Abbreviation: Wis. Ct. App.