General Cas. Co. of Wisconsin v. Hills

Decision Date22 April 1997
Docket NumberNo. 95-2261,95-2261
Citation209 Wis.2d 167,561 N.W.2d 718
PartiesGENERAL 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.
CourtWisconsin Supreme Court

For the plaintiff-respondent-petitioner there were briefs by Thomas N. Harrington, Lee Anne N. Conta, Laura E. Schuett and Cook & Franke, S.C., Milwaukee, and oral argument by Thomas N. Harrington.

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.

Amicus curiae was filed by Robert C. Burrell, Stephen M. Compton and Borgelt, Powell, Peterson & Frauen, S.C., Milwaukee and of counsel Laura A. Foggan, Matthew Chavez and Wiley, Rein & Fielding, Washington, D.C., for the Wisconsin Insurance Alliance and National Association of Independent Insurers.


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, 514 U.S. 1017, 115 S.Ct. 1360, 131 L.Ed.2d 217 (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 seeking "damages" under the policies at issue. We agree with the court of appeals that our decision in Edgerton does not relieve General Casualty of its duty to defend Hills, and that this interpretation is in accord with the expectations of a reasonable insured. Thus, we affirm the decision of the court of appeals.


¶2 The relevant facts are not in dispute. Since 1961, Hills has owned and operated Don's Standard 3 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 List 4 by publication in the Federal Register. See 49 Fed.Reg. 37084 (1984). The EPA then began a Remedial Investigation and Feasibility Study, which determined that the recycling activities of Arrowhead had contaminated the site.

¶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 The policies in force from June 18, 1976 to June 18, 1979 provide:

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 counterclaimed , asserting that General Casualty had breached its contractual duties to defend and indemnify him, and had acted in bad faith. On May 8, 1995, General Casualty moved for summary judgment, on the grounds that the third-party action seeks recovery for response costs, and therefore is not a suit seeking "damages," based onEdgerton. 10 The circuit court agreed, granting the motion for summary judgment at a hearing held on June 12, 1995.

¶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, 548 N.W.2d 100. 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, 548 N.W.2d 100. The court indicated that this result is consistent with the purpose of a comprehensive general liability (CGL) policy. Id.


¶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 issued to Hills. Accordingly, we emphasize from the outset that the focus of this case is on the interpretation of insurance policies, not on environmental law.

¶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 Wis.Stat. § 802.08, in the same way the circuit court applies them. See, e.g., Sprangers, 182 Wis.2d at 531, 514 N.W.2d 1; Maas, 172 Wis.2d at 78, 492 N.W.2d 621.

¶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, 492 N.W.2d 621. 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, 492 N.W.2d 621; 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, 514 N.W.2d 1; accord, e.g., Kuhn, 193 Wis.2d at 60, 532 N.W.2d 124; Kremers-Urban Co., 119 Wis.2d at 735, 351 N.W.2d 156.

¶11 This case specifically involves the duty to defend. 11 "An insurer's duty to defend the insured in a third-party suit is predicated on allegations in a complaint which, if proven, would give rise to the possibility of recovery that falls under the terms and conditions of the insurance policy." School Dist. of Shorewood v. Wausau Ins. Cos., 170 Wis.2d 347, 364, 488 N.W.2d 82 (1992) (hereinafter Shorewo...

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