Advanced Waste Servs., Inc. v. United Milwaukee Scrap, LLC

• Decision Date: 03 March 2015
• Docket Number: No. 2014AP1169.,2014AP1169.
• Citation: 863 N.W.2d 634,361 Wis.2d 723
• Parties: ADVANCED WASTE SERVICES, INC., Plaintiff, v. UNITED MILWAUKEE SCRAP, LLC, Defendant–Third–Party Plaintiff–Appellant, v. Illinois National Insurance Company, Third–Party Defendant–Respondent.
• Court: Wisconsin Court of Appeals

361 Wis.2d 723

863 N.W.2d 634

ADVANCED WASTE SERVICES, INC., Plaintiff

v.UNITED MILWAUKEE SCRAP, LLC, Defendant–Third–Party Plaintiff–Appellant

v.Illinois National Insurance Company, Third–Party Defendant–Respondent.

No. 2014AP1169.

Court of Appeals of Wisconsin.

Submitted on Briefs Jan. 6, 2015.

Opinion Filed March 3, 2015.

On behalf of the defendant-third-party plaintiff-appellant United Milwaukee Scrap, LLC, the cause was submitted on the briefs of Michael J. Ganzer of Terschan, Steinle, Hodan & Ganzer, LLP, of Milwaukee.

On behalf of the third-party defendant-respondent, the cause was submitted on the brief of Jeffrey A. Schmeckpeper and Heather D. Willick of Kasdorf, Lewis & Swietlik, S.C., of Milwaukee, and Joseph A. Hinkhouse, Sarah H. Dearing and Courtney Zanocco, pro hac vice, of Hinkhouse Williams Walsh, LLP, of Chicago, Illinois.

Before CURLEY, P.J., KESSLER and BRENNAN, JJ.

Opinion

CURLEY, P.J.

¶ 1 United Milwaukee Scrap, LLC, appeals the trial court's grant of summary judgment on its third-party complaint against its insurer, Illinois National Insurance Company (Illinois National). United Milwaukee Scrap was sued by Advanced Waste Services, Inc., after wastewater United Milwaukee Scrap provided was found to be contaminated with PCBs,¹ and Illinois National refused to defend the claim, arguing that the “total pollution exclusion” in its policy precluded coverage. The trial court agreed with Illinois National and granted summary judgment in its favor. On appeal, United Milwaukee Scrap claims that the total pollution exclusion does not apply because United Milwaukee Scrap was not the entity who dispersed the pollutant. It also argues, in the alternative, that the policy is ambiguous. We disagree and affirm.

Background

¶ 2 United Milwaukee Scrap is a company that buys, processes, and sells scrap metals generated from industrial waste, obsolete materials, and construction demolitions. Advanced Waste Services is a waste-hauling service that recycles oily waste water and resells the used oil. Prior to the suit giving rise to this appeal, United Milwaukee Scrap contracted with Advanced Waste to remove wastewater from its facilities.

Pursuant to the contract, United Milwaukee Scrap would deliver its oily wastewater to Advanced Waste, and Advanced Waste would then take the water to its “ChemWorks” facility for processing.

¶ 3 In February 2013, Advanced Waste sued United Milwaukee Scrap for negligence, intentional misrepresentation, negligent misrepresentation, strict responsibility, and breach of contract, among other causes of action. According to the complaint, the wastewater removed from United Milwaukee Scrap's facility was contaminated with PCBs, which contaminated ChemWorks during the recycling process. Advanced Waste further alleged that it remained unaware of the PCBs until after the wastewater “circulated throughout substantial portions of the ChemWorks Treatment Facility, thus contaminating [its] facility, equipment, and product.” The complaint alleged that the contamination was ultimately caused by United Milwaukee Scrap's failure to disclose the existence of PCBs in its wastewater.

¶ 4 After Advanced Waste filed its claim, United Milwaukee Scrap notified Illinois National, its insurer, but Illinois National refused to defend the lawsuit. Illinois National denied coverage on the basis of the “total pollution exclusion with a hostile fire exception. ”² As relevant here, that exclusion prohibited coverage for:

(1) ... “property damage” which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time....

(2) Any loss, cost or expense arising out of any:

(a) Request, demand, order or statutory or regulatory requirement that any insured or others ... clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of “pollutants.”

¶ 5 Because Illinois National refused to defend the lawsuit, United Milwaukee Scrap filed a third-party complaint against Illinois National. The third-party complaint alleged that Illinois National had breached its duty to defend and indemnify under the policy.

¶ 6 Illinois National in turn filed a motion for summary judgment, arguing that it had no duty to defend the claim against United Milwaukee Scrap because the allegations fell within the policy's total pollution exclusion. In its summary judgment response, United Milwaukee Scrap admitted that PCBs are “pollutants” under the policy and that the pollutants were at some point “dispersed.” It argued that the exclusion did not apply, however, because United Milwaukee Scrap—i.e., the insured—did not cause the pollutant's dispersal.

¶ 7 The trial court granted summary judgment in Illinois National's favor. United Milwaukee Scrap now appeals.

Analysis

Standards of Review

¶ 8 We review the trial court's grant of summary judgment de novo, applying the same methodology as the trial court. See Young v. West Bend Mut. Ins. Co., 2008 WI App 147, ¶ 6, 314 Wis.2d 246, 758 N.W.2d 196. The rest of the summary judgment standard is well-known, and this court need not explain it in detail here. See Wis. Stat. § 802.08 (2013–14);³ Alliance Laundry Sys., LLC, v. Stroh Die Casting Co., 2008 WI App 180, ¶ 12, 315 Wis.2d 143, 763 N.W.2d 167. It suffices to say that this court will only grant summary judgment where “there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law.” See § 802.08(2).

¶ 9 This case also involves the construction of an insurance contract, which we review de novo. See Farmers Auto. Ins. Ass'n v. Union Pac. Ry. Co., 2009 WI 73, ¶ 30, 319 Wis.2d 52, 768 N.W.2d 596. “The same rules of construction that govern general contracts are applied to the language in insurance polices.” Folkman v. Quamme, 2003 WI 116, ¶ 12, 264 Wis.2d 617, 665 N.W.2d 857. We construe insurance policies “to give effect to the intent of the parties as expressed in the language of the policy.” Id.

¶ 10 “There is an established framework for determining whether coverage is provided under the terms of an insurance policy.” Olson v. Farrar, 2012 WI 3, ¶ 40, 338 Wis.2d 215, 809 N.W.2d 1. First, we examine whether the policy makes an initial grant of coverage. See id., ¶ 41. If the initial grant of coverage is triggered by the claim, we then examine the various exclusions to determine whether they preclude coverage. See id. “If so, the court then determines whether there is an exception to the exclusion which reinstates coverage.” Id.

“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.” If a word or phrase is susceptible to more than one reasonable interpretation, it is ambiguous. “[B]ecause the insurer is in a position to write its insurance contracts with the exact language it chooses—so long as the language conforms to statutory and administrative law—ambiguity in that language is construed in favor of an insured seeking coverage.”

Id., ¶ 42 (citations and quotation marks omitted; brackets in Olson ). Furthermore, while “we must read insurance policies from the standpoint of a reasonable insured,” see Sobieski v. Farmers Ins. Exch., 181 Wis.2d 324, 331, 510 N.W.2d 796 (Ct.App.1993), “[w]e will not interpret a policy ‘to provide coverage for risks that the insurer did not contemplate or underwrite and for which it has not received a premium,’ ” see State Farm Mut. Auto. Ins. Co. v. Langridge, 2004 WI 113, ¶ 15, 275 Wis.2d 35, 683 N.W.2d 75 (citation omitted).

Summary judgment must be affirmed because the “Total Pollution Exclusion With a Hostile Fire Exception” bars coverage.

¶ 11 With the proper standards in mind, and given that the parties do not dispute that the policy initially grants coverage, see Olson, 338 Wis.2d 215, ¶ 41, 809 N.W.2d 1, we turn to the undisputed facts and the language of the policy's total pollution exclusion. As noted, the exclusion bars coverage for, among other things:

“property damage” which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time.

¶ 12 According to United Milwaukee Scrap, there was no “pollutant” and no “dispersal” as defined by the policy because the PCBs were not released until after the wastewater left United Milwaukee Scrap's possession; moreover, once it was transferred it “was the duty of Advanced Waste to ensure that the wastewater was not contaminated.” It argues, “[a]t no point during the transfer of [wastewater] from United Milwaukee to Advanced Waste did it become a pollutant within the meaning of the Illinois National policy; it was always a contained substance of which Advanced Waste customarily took delivery of as part of its business.” What this actually means, however, is that United Milwaukee Scrap does not dispute that Advanced Waste's complaint alleges the dispersal of pollutants; rather, it contends that the exclusion does not apply because United Milwaukee Scrap, the insured, did not disperse the pollutant.

¶ 13 We disagree. Under the plain language of the policy there is no requirement that the insured disperse the pollutant for the exclusion to apply. As we see from the policy language above, no actor is specified, leaving the possibility that a pollutant could be dispersed in any number of ways—including without the direct action of any party at all. Additionally, the phrase “at any time” leaves open a scenario under which a pollutant might be, either intentionally or unintentionally, dispersed without any action by the insured. We thus conclude that the policy does not require that the insured disperse the pollutant in order for the exclusion to apply. Therefore, the fact that Advanced Waste dispersed the pollutant does not prevent us from applying...