Connors v. Zurich Am. Ins. Co.

• Decision Date: 15 October 2015
• Docket Number: No. 2014AP2990.,2014AP2990.
• Citation: 872 N.W.2d 109,365 Wis.2d 528
• Parties: Patrick J. CONNORS, Plaintiff–Appellant, v. ZURICH AMERICAN INSURANCE COMPANY, Grede Foundries Health Plan by its Third Party Administrator Anthem Blue Cross and Blue Shield and DEF Insurance Company, Defendants, Charter Oak Fire Insurance Company, Defendant–Respondent.
• Court: Wisconsin Court of Appeals

365 Wis.2d 528

872 N.W.2d 109

Patrick J. CONNORS, Plaintiff–Appellant,

v. ZURICH AMERICAN INSURANCE COMPANY, Grede Foundries Health Plan by its Third Party Administrator Anthem Blue Cross and Blue Shield and DEF Insurance Company, Defendants,Charter Oak Fire Insurance Company, Defendant–Respondent.

No. 2014AP2990.

Court of Appeals of Wisconsin.

Submitted on Briefs June 12, 2015.

Opinion Filed Oct. 15, 2015.

On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Christopher E. Rogers and Susan R. Tyndall of Habush Habush & Rottier, S.C.®, Madison.

On behalf of the defendant-respondent, the cause was submitted on the brief of Stacy Broman of Meagher & Geer, P.L.L.P., Minneapolis, Minnesota.

Before KLOPPENBURG, P.J., SHERMAN, and BLANCHARD, JJ.

BLANCHARD, J.

¶ 1 Patrick Connors alleges that a foundry where he had been employed negligently allowed bacteria to be dispersed or released into the air, that he inhaled some of these bacteria while visiting the foundry, and that this resulted in illness causing bodily injury. Connors filed this direct action against the foundry's insurer. The circuit court granted summary judgment to the insurer after concluding that a pollution exclusion provision contained in the foundry's insurance policy bars coverage for Connors' alleged injuries. The court concluded that the bacteria allegedly dispersed or released by the foundry and inhaled by Connors were "contaminants," which are defined to be "pollutants" under the pollution exclusion.

¶ 2 We conclude that the pollution exclusion in the foundry's policy, which is considerably more detailed than the standard pollution exclusion in many commercial general liability policies, is ambiguous on the question of whether the bacteria are "pollutants" in the context of the occurrence alleged here. The exclusion is ambiguous in this context because the bacteria are not obviously in the nature of the commercial or industrial products or byproducts specified in the pollution exclusion, and therefore a reasonable insured could expect coverage. Accordingly, we reverse the summary judgment and remand for further proceedings.¹

BACKGROUND

¶ 3 In the operative complaint, Connors makes allegations that include the following. Connors had been an employee of Grede Foundries of Reedsburg, Wisconsin, and hoped to return to work there, when he became ill and was diagnosed with pneumonia

caused by exposure to the bacteria Legionella pneumophila.²

An investigation by a federal agency showed that water in the foundry cooling towers contained Legionella pneumophila. These towers were "in proximity" to "fresh air intakes" at the foundry. During the pertinent time period, the foundry had a liability insurance policy with Charter Oak Fire Insurance Company.³

¶ 4 As pertinent here, the complaint alleges that the foundry "was negligent in not properly maintaining its cooling towers, and other water sources," which "allowed for the growth of legionella pneumophila " and Connors' exposure to the bacteria, which resulted in bodily injury to him.

¶ 5 Those are the limited factual allegations in the complaint. However, the parties do not dispute that the following additional facts apply to Connors' allegations:

Legionnaire[s'] disease is a type of pneumonia

caused by the Legionella bacteria. The bacteria grow best in warm water, like the kind found in hot tubs, cooling towers, hot water tanks, large plumbing systems, or parts of air-conditioning systems of large buildings. Legionnaire[s'] disease is contracted by breathing in [water] mist or vapor that has been contaminated with Legionella bacteria.

See Heinecke v. Aurora Healthcare, Inc., 2013 WI App 133, ¶ 2, 351 Wis.2d 463, 841 N.W.2d 52. As is commonly understood, pneumonia

is an infection with potentially serious health effects that inflames air sacs in the lungs. See http://www.mayoclinic.org/diseases-conditions/ pneumonia /basics/definition/con–20020032 (last visited Oct. 13, 2015).

¶ 6 The only issue on appeal is whether the pollution exclusion in the foundry's Charter Oak policy applies in the context of an occurrence of the type alleged here. We now address pertinent policy terms.

¶ 7 Under the pollution exclusion, "insurance does not apply to" bodily injuries caused by "pollutants" that have been dispersed or released from a location owned by the insured, here the foundry. More specifically, the policy excludes coverage for "[b]odily injury" "arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants,’ " "[a]t or from any premises, site or location which is or was at any time owned or occupied by ... any insured."

¶ 8 "Pollutants" are initially defined in the pollution exclusion to 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."

¶ 9 Up to this point in our summary, the Charter Oak policy pollution exclusion is identical to pertinent language contained in the standard commercial general liability pollution exclusion, which we will refer to as "the standard pollution exclusion."

¶ 10 However, an endorsement to the policy, entitled "Indiana Changes—Definition of Pollutants," replaces the definition of "pollutants" in the standard pollution exclusion with a different, more specific, definition. We will refer to this as "the endorsement."

Charter Oak does not dispute that the endorsement changes the definition of "pollutants" in the policy here. Therefore, consistent with discussion by the parties, when we refer to " the pollution exclusion" at issue here we are referring to the exclusion as modified by the definition of "pollutants" contained in the endorsement.

¶ 11 The endorsement begins with the same language from the standard pollution exclusion defining "pollutants" to mean "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." However, the endorsement, but not the standard pollution exclusion, then lists four categories of examples of substances that are defined to be pollutants:

"Pollutants" includes:

a. Petroleum or petroleum derivatives, gasoline, fuels, lubricants, and their respective additives and individual chemical components, including benzene and toluene;b. Chlorinated and halogenated solvents, including tetrachloroethylene (PCE or PERC), trichloroethylene (TCE), trichloroethane (TCA) and vinyl chloride

, and their degradation products;

c. Coal tar, manufactured gas plant (MGP) byproducts and polynuclear aromatic hydrocarbons (PAHs), phenols and polychlorinated biphenyls (PCBs); and

d. Organic and inorganic pesticides, and inorganic contaminants, including arsenic, barium, beryllium, lead, cadmium, chromium and mercury.

We will refer to these four categories collectively as "the included substances categories."

¶ 12 The second set of provisions in the endorsement, but again not in the standard pollution exclusion, clarifies the definition of pollutants in the following respects:

This definition of "pollutants" applies regardless of whether:

1. The irritant or contaminant, or the particular form, type or source of the irritant or contaminant, involved in the claim or "suit" is specifically identified or described in this definition, such as waste from manufacturing operations;⁴

2. The irritant or contaminant has or had any function in any of the insured's business, operations, premises, sites or locations, such as:

(i) PERC for a dry cleaning business; or

(ii) TCE, or any of the other items included as examples of "pollutants" in b. above, for degreasing operations;

3. The irritant or contaminant represents a major source of potential liability for the insured, such as gasoline, or any of the other items included as examples of "pollutants" in a. above, for a gasoline station; or

4. The insured expects or considers the irritant or contaminant to be a pollutant.

Waste includes materials to be recycled, reconditioned or reclaimed.

¶ 13 Charter Oak moved the circuit court to dismiss Connors' complaint on the grounds that the pollution exclusion bars coverage, or, in the alternative to bifurcate the proceedings to resolve the coverage issue before resolving liability, if necessary. The court granted Charter Oak's motion to bifurcate the proceedings.

¶ 14 Charter Oak followed this with a motion for summary judgment and supporting evidence, arguing in part that the evidence establishes beyond dispute that "Legionella bacteria are contaminants, and thus ‘pollutants,’ to which the pollution exclusion applies, barring coverage." This motion was accompanied by a report of Michael T. Osterholm, a medical school professor, addressing topics that include the prevalence of Legionella bacteria and the health hazard the bacteria pose when inhaled in mist or vapor.

¶ 15 Connors filed a brief in opposition to the motion for summary judgment, arguing in part that Charter Oak had failed to account for terms in the endorsement that diverge from the standard pollution exclusion, and that when all pertinent language is considered "a reasonable insured ... would conclude that this particular pollution exclusion applies only to industrial or environmental pollution," not to bacteria in the occurrence alleged here.

¶ 16 The circuit court granted Charter Oak's motion for summary judgment, after concluding that the pollution exclusion here unambiguously bars coverage for Connors' alleged injuries, and on this basis dismissed the complaint. Connors appeals.

DISCUSSION

¶ 17 The only issue presented on appeal is whether summary judgment should be granted to Charter Oak because it is undisputed that Legionella bacteria, in the context of the allegations here, are "pollutants" under unambiguous terms of the pollution exclusion.⁵ We conclude that summary judgment is not appropriate. While we rely on aspects of two recent ...