Guenther v. City of Onalaska

• Decision Date: 19 November 1998
• Docket Number: No. 98-0724,98-0724
• Citation: 223 Wis.2d 206,588 N.W.2d 375
• Parties: Ron GUENTHER and Kathy Guenther, Plaintiffs-Co-Appellants, v. CITY OF ONALASKA, Defendant-Appellant, Cities & Villages Mutual Insurance Company, Defendant-Respondent. dCourt of Appeals of Wisconsin
• Court: Wisconsin Court of Appeals

Page 375

588 N.W.2d 375

223 Wis.2d 206

Ron GUENTHER and Kathy Guenther, Plaintiffs-Co-Appellants,

v.

CITY OF ONALASKA, Defendant-Appellant Cities & Villages Mutual Insurance Company Defendant-Respondent. ^d No. 98-0724. Court of Appeals of Wisconsin Submitted on Briefs Sept. 4, 1998. Opinion Released Nov. 19, 1998. Opinion Filed Nov. 19, 1998.

On behalf of the plaintiffs-co-appellants, the cause was submitted on the briefs of William G. Skemp and Sonja Davig Huesmann of William Skemp Law Firm, S.C. of La Crosse.

On behalf of the defendant-appellant, the cause was submitted on the briefs of Janet Jenkins of Johns Flaherty, S.C. of La Crosse.

On behalf of the defendant-respondent, the cause was submitted on the brief of Daniel E. Dunn of Smyth & Dunn of La Crosse.

Before VERGERONT, ROGGENSACK and DEININGER, JJ.

ROGGENSACK, J.

Ron and Kathy Guenther and the City of Onalaska (Onalaska) appeal from a summary judgment dismissing Onalaska's insurer, Cities and Villages Mutual Insurance Company (Mutual Insurance), from the Guenthers' lawsuit for damages incurred when an Onalaska sewer backed-up into the Guenthers' basement. The circuit court concluded that the backup was excluded from coverage under the policy's pollution exclusion clause and it dismissed the action against Mutual Insurance. We agree that the pollution exclusion could reasonably be interpreted as was done by the circuit court, however, we conclude that Onalaska could also have reasonably understood that the exclusion for "contamination by pollutants" did not apply to an occurrence as routine as a domestic sewer backup, which caused at least some damages, which were unrelated to any toxic nature ¹ of the sewage. Therefore, we conclude the policy is ambiguous and we construe it in favor of coverage. Accordingly, we reverse and remand for further proceedings in the circuit court.

BACKGROUND

In May, 1995, an Onalaska sewer backed-up into the basement of a flower shop owned by the Guenthers. The basement was flooded with twenty-six inches of water, human waste, and other debris. As a result of the flooding, the Guenthers lost inventory, office supplies and business documents which were stored in the basement. In addition, they had to replace the water heater, repair the furnace, repaint the basement floor, and replace the carpeting. Because the water which flooded their basement contained human waste, sludge and mud, it created a very unpleasant odor in the basement. Ron Guenther, in statements made under oath, said that the building "[s]tunk to high heaven" and smelled "[l]ike an outhouse." According to Ron, the basement still does not smell right even though it was professionally cleaned and deodorized.

The Guenthers filed a lawsuit against Onalaska and its insurer, Mutual Insurance, for damages to their property. Mutual Insurance filed a motion for summary judgment seeking dismissal of the action against it, claiming that the sewer backup constituted contamination by pollution, which was not covered under its policy. The circuit court agreed and dismissed Mutual Insurance from the litigation. This appeal followed.

DISCUSSION

Standard of Review.

This court reviews summary judgment decisions de novo, applying the same standards employed by the circuit court. Smith v. Dodgeville Mut. Ins. Co., 212 Wis.2d 226, 232, 568 N.W.2d 31, 34 (Ct.App.1997). We first examine the complaint to determine whether it states a claim, and then review the answer, to determine whether it presents a material issue of fact or law. Id. If we determine that the complaint and answer are sufficient, we proceed to examine the moving party's affidavits, to determine whether they establish a prima facie case for summary judgment. Id. at 232-33, 568 N.W.2d at 34. If they do, we look to the opposing party's affidavits, to determine whether there are any material facts in dispute which entitle the opposing party to a trial. Id. at 233, 568 N.W.2d at 34.

Both parties look to the language of the insurance contract between Onalaska and Mutual Insurance to support their respective positions. Interpretation of a written insurance policy is a question of law which we review de novo, without deference to the decision of the circuit court. Donaldson v. Urban Land Interests, Inc., 211 Wis.2d 224, 230, 564 N.W.2d 728, 731 (1997).

Pollution Exclusion.

The interpretation of insurance policies is governed by the same rules of construction that apply to other contracts. Id. Ambiguities in a policy's terms are resolved in favor of coverage, while coverage exclusion clauses are narrowly construed against the insurer. Id.

The principle underlying the doctrine is straightforward. As the drafter of the insurance policy, an insurer has the opportunity to employ expressive exactitude in order to avoid a misunderstanding of the policy's terms. Because the insurer is the party best situated to eliminate ambiguity in the policy, the policy's terms should be interpreted as they would be understood from the perspective of a reasonable person in the position of the insured.

Id. (further citations omitted).

The insurance policy in question contains a broad pollution exclusion ² which excludes coverage for any claim or any obligation to defend a suit or claim against the insured "arising out of the contamination or alleged contamination of any environment by POLLUTANTS." The policy defines the terms of the exclusion as follows:

POLLUTANTS--means 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. The term POLLUTANTS, as used herein, is not defined to mean potable water, agricultural water, water furnished to commercial users or water used for fire suppression.

.

Contamination includes any unclean, unsafe, damaging, injurious or unhealthful condition, either actual or potential, which arises out of the presence in the environment of any POLLUTANT, whether permanent or transient.

Environment includes any person, any man-made object or feature, animals, crops and vegetables, land, bodies of water, underground water, or water table or aquifer, air and any other natural feature of the earth and its atmosphere, whether or not altered, developed or cultivated.

Further, the policy states:

It is the intent and effect of this exclusion to exclude any and/or all coverages afforded by this policy for any CLAIM, action, judgment, liability, settlement, defense or expenses, if any, arising out of the discharge, dispersal, release or escape of POLLUTANTS.

The parties do not dispute that the Guenthers' basement is an "environment" or that the sewage "discharg[ed], dispers[ed], releas[ed] or escap[ed]" into the basement when it came through the drain in the basement floor. However, they do dispute whether the sewage which came into the basement caused damage due to "contamination by pollutants."

The definitions of "contamination" and "pollutants" are related and must be interpreted together. The appellants argue that the sewage was not a pollutant even though the definition of pollutant contained in the policy includes waste, because the human waste in the sewage was combined with a lot of water. The appellants also point out that the policy's definition of pollutants does not include "potable water, agricultural water, water furnished to commercial users or water used for fire suppression." Although those terms describe different types of water quality used in different situations, i.e., domestic, agricultural, industrial, and emergency, none of the terms describes sewer water, i.e., water which is currently not suited for any type of use. The combination of fecal matter, mud and sludge suspended in the water that flooded the Guenthers' basement could be considered a pollutant under the policy definition. However, even if it were, our inquiry does not end because the pollution exclusion does not apply unless the sewage caused damage by "contaminating" the basement.

The policy's definition of "contamination" implies that in order for contamination to occur, the harm must be caused by the toxic nature of the discharged material. Beahm v. Pautsch, 180 Wis.2d 574, 584, 510 N.W.2d 702, 706 (Ct.App.1993). According to Ron Guenther's sworn statement, some of the damage to the Guenthers' property was due to properties of sewage unrelated to any potentially toxic qualities it may have had. ³

In Beahm, we interpreted a pollution exclusion ⁴ similar to the one at issue here. In that case, smoke from fires set by the insured to burn off winter grass obscured the vision of motorists on a nearby highway causing an accident. The insurer refused coverage for the accident based on the pollution exclusion contained in its policy. Id. at 579, 510 N.W.2d at 704. We concluded that a reasonable insured would understand that the pollution exclusion clause excluded coverage only where the damage was caused by the toxic nature of the smoke which the insured allowed to escape into the environment. Id. at 584-85, 510 N.W.2d at 706-07. However, because the harm resulted from the inherent opacity of smoke, and not from any of smoke's toxic properties, such as its ability to corrode property or to injure a person's eyes, skin or respiratory system, we concluded that the damage which occurred was not contamination by a pollutant; and therefore, it was covered under the insurance policy. Id.

The distinction between the toxic and non-toxic qualities of a discharge or release may be better understood with an example. Suppose a high school swimming pool cracks and floods a vacant classroom with water which includes chlorine, a toxic substance. The damage to the desks, papers and books in the room would likely result from the liquid nature of the water, irrespective of whether it contained chlorine. However, if the pool flooded into a large aquarium filled with exotic salt...