General Cas. Co. of Wisconsin v. Hills

Citation201 Wis.2d 1,548 N.W.2d 100
Decision Date12 March 1996
Docket NumberNo. 95-2261,95-2261
Parties, 64 USLW 2628 GENERAL CASUALTY COMPANY OF WISCONSIN, Plaintiff-Respondent, d v. Donald A. HILLS d/b/a Hills Standard, Defendant-Appellant, ABC Insurance Company and DEF Insurance Company, Defendants.
CourtCourt of Appeals of Wisconsin

On behalf of the defendant-appellant, the cause was submitted on the briefs of Matthew A. Biegert of Doar, Drill & Skow, S.C. of New Richmond.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Thomas N. Harrington, Laura E. Schuett, and Lee Anne Neumann of Cook & Franke S.C. of Milwaukee.

Before CANE, P.J., and LaROCQUE and MYSE, JJ.

CANE, Presiding Judge.

Donald Hills appeals a summary judgment in favor of his insurer, General Casualty Company of Wisconsin, that declared General Casualty has no duty to defend or indemnify Hills in a separate third-party suit brought against Hills in federal court. Because we conclude General Casualty's insurance policies require it to defend and indemnify Hills in the federal action, we reverse and remand for further proceedings.

The facts are undisputed. Hills has owned and operated Don's Standard 1 gasoline station in Rice Lake, Wisconsin, since 1961. Arrowhead Refining Company operated a used oil recycling business in Germantown, Minnesota, from 1961 to 1977. Hills, in the regular and normal course of business, entered into an agreement with Arrowhead Refining under which Arrowhead Refining agreed to pick up waste at Don's Standard and transport it to the Arrowhead site in Minnesota. In approximately 1976, environmental contamination was allegedly discovered at or near the Arrowhead site. Arrowhead Refining subsequently discontinued its used oil recycling operations.

Eventually, the Arrowhead site was placed on the National Priorities List (NPL) by the United States Environmental Protection Agency. The United States brought an action in the United States District Court for the District of Minnesota against Arrowhead Refining and several other defendants for the reimbursement of response costs. Simultaneously, a consent decree was entered in the federal court. The consent decree was a negotiated settlement between the government and various defendants which outlined remedial work to be performed and described the reimbursement of response costs.

Hills was one of hundreds named as third-party defendants in the federal court action by Arrowhead Refining and other defendants, acting as third-party plaintiffs (collectively, Arrowhead). Arrowhead sought recovery from Hills for past and future response costs associated with the Arrowhead site. Arrowhead's third-party complaint made four claims against Hills: (1) a claim under CERCLA 2; (2) a claim under the Minnesota Environmental Response and Liability Act (MERLA), §§ 115B.01-115B.24, Minn.Stats.; 3 (3) a common law claim for contribution; and (4) a claim for unjust enrichment.

General Casualty filed this declaratory judgment action in Wisconsin circuit court requesting that the trial court declare General Casualty has no duty to defend or indemnify Hills in the third-party action. 4 Hills filed a counterclaim, alleging that General Casualty had breached its duty to defend Hills. General Casualty filed a motion for summary judgment, alleging that it has no duty to defend or indemnify Hills because there has not been any "suit seeking damages" filed against Hills. The trial court granted the judgment, and also dismissed Hills' counterclaim against General Casualty. 5 Hills now appeals.

Hills contends the insurance policies issued to him by General Casualty afford insurance coverage for the third-party claim against him. Over the years, General Casualty issued several insurance policies to Hills, doing business as Don's Standard. The policies in effect from June 1976 to June 1979 provide in pertinent part:

Coverage 2--Property Damage Liability: To 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. (Emphasis in original.)

The policy in effect from June 1987 to June 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 resulting from garage operations. (Emphasis in original.)

The policy in effect for certain policy periods from June 1988 to June 1991 provides:

We will pay all sums an "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."

Our review of summary judgment is de novo. Park Bancorporation, Inc. v. Sletteland, 182 Wis.2d 131, 140, 513 N.W.2d 609, 613 (Ct.App.1994). When reviewing summary judgment, we apply the standard set forth in § 802.08(2), STATS., in the same manner as the circuit court. Kreinz v. NDII Secs. Corp., 138 Wis.2d 204, 209, 406 N.W.2d 164, 166 (Ct.App.1987). This appeal, based on undisputed facts, concerns the final step in summary judgment: determining whether General Casualty is entitled to judgment as a matter of law on the theory that the insurance policies do not provide coverage for Hills' defense or indemnification in the federal action.

The interpretation of an insurance policy is a question of law this court decides independently of the circuit court. Smith v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 810, 456 N.W.2d 597, 598 (1990). Insurance policies are controlled by the same principles of law applicable to other contracts. Id.

At the outset, we recognize that this court must analyze whether there is coverage for Hills, a Wisconsin insured, under the insurance policies issued by a Wisconsin insurer, for claims under federal and Minnesota law. Neither party has raised a choice of law issue. Instead, the parties agree that Wisconsin law applies for purposes of determining on summary judgment whether there is insurance coverage. Thus, this court is faced with the task of determining whether, under Wisconsin law, the insurance policies' language requires General Casualty to defend and indemnify Hills in the third-party federal action against him.

Our supreme court addressed insurance coverage for environmental cleanup in City of Edgerton v. General Cas. Co., 184 Wis.2d 750, 517 N.W.2d 463 (1994). The plaintiffs in Edgerton were the City of Edgerton and the owner of a landfill site, Edgerton Sand and Gravel, Inc. Id. at 754, 758, 517 N.W.2d at 466, 468. The site of the landfill was owned by the Sweeney family (owners of ES & G) and was used as a dump and burn site for waste materials from the early 1950s through the time of its closing in December 1984. Id. at 758 n. 5, 517 N.W.2d at 468 n. 5. The City of Edgerton leased the site from 1968 to 1984 for landfill operations. Id.

Both the city and ES & G received letters from the Wisconsin Department of Natural Resources indicating the DNR suspected groundwater contamination at the landfill. Id. at 759-60, 517 N.W.2d at 468. The Environmental Protection Agency also sent ES & G and the city a letter requesting information regarding the disposal of hazardous substances at the landfill. Id. Subsequent letters from the DNR ordered the city and ES & G to propose a plan to remediate the site. Id. at 760, 517 N.W.2d at 468. Failure to respond would result in the listing of the site on CERCLA's National Priorities List, or state action. Id. at 760-62, 517 N.W.2d at 469.

The city and ES & G asked their comprehensive general liability (CGL) carriers to provide coverage for defense costs as well as any liability resulting from Environmental Protection Agency or DNR claims. Id. at 762, 517 N.W.2d at 469. One of the nearly identical CGL policies at issue provided:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

A. bodily injury or

B. property damage

to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages....

Id. at 769, 517 N.W.2d at 472 (emphasis deleted). The carriers refused to provide coverage. Id. at 762, 517 N.W.2d at 469. Edgerton held that neither a potentially responsible party (PRP) letter nor a comparable notification letter by a state agency such as the DNR triggers the insurers' duty to defend because the letters do not constitute a "suit" under the CGL policies. Id. at 771, 774, 517 N.W.2d at 473, 474.

Additionally, the court went on to hold that the CGL policies did not "provide coverage for Superfund response costs, since such costs do not constitute damages." Id. at 782, 517 N.W.2d at 477. Edgerton quoted with approval language from Shorewood School Dist. v. Wausau Ins. Cos., 170 Wis.2d 347, 368, 369-70, 488 N.W.2d 82, 89, 90 (1992) (emphasis in original):

"Damages" as used in ... insurance policies unambiguously means legal damages. It is legal compensation for past wrongs or injuries and is generally pecuniary in nature. The term "damages" does not encompass the cost of complying with an injunctive decree.

....

[The] limited construction of the term "damages" is consistent with the basic grant of coverage in the insurance policies. The insurers agreed to pay "all sums which the insured shall become legally obligated to pay as damages." The insurers did not agree to pay "all sums which the insured shall become legally obligated to pay." The addition of "as damages" serves as a qualifier, a limit to coverage.

See Edgerton, 184 Wis.2d at 783-84, 517 N.W.2d at 478. Thus, Edgerton stands for the proposition that letters from an environmental agency do not constitute a suit and that...

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    ...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 contain......
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