Hirschhorn v. Auto–Owners Ins. Co., 2009AP2768.

• Decision Date: 06 March 2012
• Docket Number: No. 2009AP2768.,2009AP2768.
• Citation: 2012 WI 20,809 N.W.2d 529,338 Wis.2d 761
• Parties: Joel HIRSCHHORN and Evelyn F. Hirschhorn, Plaintiffs–Appellants, † v. AUTO–OWNERS INSURANCE COMPANY, Defendant–Respondent–Petitioner.
• Court: Wisconsin Supreme Court

2012 WI 20

338 Wis.2d 761

809 N.W.2d 529

Joel HIRSCHHORN and Evelyn F. Hirschhorn, Plaintiffs–Appellants, †

v.AUTO–OWNERS INSURANCE COMPANY, Defendant–Respondent–Petitioner.

No. 2009AP2768.

Supreme Court of Wisconsin.

Argued Oct. 5, 2011.Decided March 6, 2012.

For the defendant-respondent-petitioner there were briefs by Timothy M. Barber and Arthur E. Kurtz and Axley Brynelson, Madison and oral argument by Timothy M. Barber.

For the plaintiff-appellant there was a brief by Joel Hirschhorn and Hirschhorn & Bieber, P.A., Coral Gables and oral argument by Joel Hirschhorn.

An amicus curiae brief was filed by Dan Kennedy and Beth E. Hanan, Gass Weber Mullins LLC, Milwaukee, for Wisconsin Defense Counsel.ANNETTE KINGSLAND ZIEGLER, J.

[338 Wis.2d 764] ¶ 1 This is a review of a published decision of the court of appeals, Hirschhorn v. Auto–Owners Insurance Co., 2010 WI App 154, 330 Wis.2d 232, 792 N.W.2d 639, that reversed a judgment entered by the Oneida County Circuit Court ¹ dismissing Joel and Evelyn F. Hirschhorn's (collectively, the Hirschhorns) complaint against their homeowners insurer, Auto–Owners Insurance Company (Auto–Owners). The Hirschhorns filed suit against Auto–Owners for breach of contract and bad faith, claiming that Auto–Owners was liable for the total loss of their vacation home. The Hirschhorns alleged that their vacation home became uninhabitable and unsaleable as a result of the accumulation of bat guano ² between the home's siding and walls.

¶ 2 Auto–Owners moved for summary judgment, which the circuit court initially denied. Upon reconsideration, however, the circuit court agreed with Auto–Owners that its insurance policy's pollution exclusion clause excluded coverage for the Hirschhorns' loss. The court of appeals reversed, concluding that the pollution exclusion clause is ambiguous and therefore must be construed in favor of coverage.

¶ 3 We granted Auto–Owners' petition for review and now reverse the decision of the court of appeals.

¶ 4 We conclude that the pollution exclusion clause in Auto–Owners' insurance policy excludes coverage for the loss of the Hirschhorns' home that allegedly resulted from the accumulation of bat guano. First, we conclude that bat guano falls unambiguously within the policy's definition of “pollutants.” Second, we conclude that the Hirschhorns' alleged loss resulted from the “discharge, release, escape, seepage, migration or dispersal” of bat guano under the plain terms of the policy's pollution exclusion clause. Accordingly, the circuit court properly dismissed the Hirschhorns' complaint against Auto–Owners.

I. FACTUAL BACKGROUND

¶ 5 The facts of this case are few and undisputed. Beginning in 1981, the Hirschhorns owned a vacation home in the town of Lake Tomahawk, Wisconsin. At all relevant times, the home was covered by a homeowners insurance policy issued by Auto–Owners. The policy insured the home itself, along with structures and personal property located at the insured premises, against “accidental direct physical loss.” However, relevant to this case, the policy contained a pollution exclusion clause that excluded from coverage any “loss resulting directly or indirectly from: ... discharge, release, escape, seepage, migration or dispersal of pollutants....” The policy, in turn, defined “pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, liquids, gases and waste. Waste includes materials to be recycled, reconditioned or reclaimed.”

¶ 6 Since 1981, at least once or twice each month, the Hirschhorns arranged for a neighbor or hired cleaner to access their vacation home to inspect it, confirm that no damage had been done in the Hirschhorns' absence, and clean and perform maintenance as necessary. During that time, bat guano was never found in the home.

¶ 7 In May 2007, Joel Hirschhorn met with a real estate broker to list the home for sale. At that time, the broker inspected the home and saw no signs of bats. However, in July 2007, upon inspecting the home again, the broker discovered the presence of bats and bat guano. The broker attempted to remove the bats and clean the home, to no avail.

¶ 8 The Hirschhorns and their family stayed at their vacation home between August 9 and 14, 2007. During their stay, they noticed a “penetrating and offensive odor emanating from the home.” Upon leaving on August 14, 2007, they arranged for a contractor to conduct a more thorough inspection of the home. The contractor determined that the cause of the odor was the accumulation of bat guano between the home's siding and walls. The contractor provided the Hirschhorns a remediation estimate but could not guarantee that cleaning up the bat guano would rid the home of its odor.

¶ 9 Subsequently, on October 23, 2007, the Hirschhorns filed with Auto–Owners a notice of property loss. The notice described the loss as resulting from the discovery of bats in the Hirschhorns' home and specifically stated, “smell awful and [insured] cannot stay in house....” Auto–Owners denied the claim three days later, reasoning that the accumulation of bat guano was “not sudden and accidental” and, in any case, resulted from “faulty, inadequate or defective” maintenance within the terms of the policy's maintenance exclusion clause.

¶ 10 On November 4, 2007, the Hirschhorns entered into a contract with a builder to demolish their existing vacation home and construct a new one in its place. In his affidavit, Joel Hirschhorn explained that he thought it was more practical financially to demolish the home than to spend the money to make it habitable again.

¶ 11 After the home's demolition, on February 22, 2008, Auto–Owners sent to the Hirschhorns a revised denial letter. Auto–Owners denied the Hirschhorns' claim on the additional ground that “[b]at guano is considered a pollutant” within the terms of the policy's pollution exclusion clause.

II. PROCEDURAL POSTURE

¶ 12 On May 15, 2008, the Hirschhorns filed suit against Auto–Owners for breach of contract and bad faith, claiming that Auto–Owners was liable for the total loss of their vacation home. The complaint alleged that the Hirschhorns' home “became uninhabitable and unsaleable due to the penetrating and offensive odor” of bat guano accumulated between the home's siding and walls. The complaint further alleged that “the drapes, carpets, fabrics and fabric furnishings in the home were rendered unusable as a result of the absorption of the bat guano odor.” Taking into account the value of the home itself, a free-standing garage, and their personal property, the Hirschhorns sought compensatory damages of $308,500, plus interest; punitive damages; and attorney fees and costs.

¶ 13 Auto–Owners moved for summary judgment, arguing that its insurance policy did not provide coverage for the Hirschhorns' loss. Specifically, Auto–Owners maintained that the accumulation of bat guano in the Hirschhorns' vacation home was predictable and therefore did not result in an accidental loss, as required by the policy's initial grant of coverage. Alternatively, even if the Hirschhorns' loss fell within the policy's initial grant of coverage, Auto–Owners argued that coverage was nevertheless excluded under three separate exclusions: a maintenance exclusion clause, a vermin exclusion clause, and a pollution exclusion clause. First, Auto–Owners contended that the loss resulted from “faulty, inadequate or defective maintenance,” namely, the Hirschhorns' inadequate upkeep of the home's siding, resulting in hundreds of access points for bats. Second, Auto–Owners argued that the loss resulted from “vermin,” a category of noxious pests that reasonably includes bats. Third and finally, Auto–Owners argued that the loss resulted from the odorous discharge of “pollutants,” a term that, as defined by the policy, reasonably encompasses bat guano.

[338 Wis.2d 769] ¶ 14 In an oral ruling on April 6, 2009, the circuit court initially denied Auto–Owners' motion for summary judgment. At the outset, the circuit court concluded that the Hirschhorns' loss constituted an “accidental direct physical loss” within the terms of the policy's initial grant of coverage. The court rejected Auto–Owners' argument that the accumulation of bat guano was predictable, explaining that the Hirschhorns could not reasonably have anticipated that bats would infest their vacation home to the point of total destruction.

¶ 15 Next, the circuit court determined that none of the three specified exclusion clauses applied. The court viewed the Hirschhorns' loss as a result of an “apparent structural defect,” as opposed to inadequate maintenance. In addition, the court concluded that bats do not unambiguously qualify as “vermin” and so construed the vermin exclusion clause in favor of coverage. Lastly, the circuit court determined that the pollution exclusion clause did not apply to these facts, reasoning that bat guano accumulating inside the home is unlike “traditional pollution”:

When we talk about pollution, it's usually a leakage or a seeping from a polluted area into some other area causing damage. And we don't have that same situation here. We have the damage actually being caused by things coming into the structure and the deposit being actually made in the structure, which isn't the same as the traditional pollution cases.

¶ 16 Auto–Owners moved the circuit court for reconsideration, arguing, inter alia, that the court failed to apply the proper analytical framework to the pollution exclusion clause.

¶ 17 The circuit court agreed. On September 18, 2009, the court granted Auto–Owners' motion for reconsideration, concluding that the pollution exclusion clause in Auto–Owners' policy excluded coverage for the Hirschhorns' loss. ³ Guided by this court's analysis of a similar pollution exclusion clause in Peace v. Northwestern National Insurance Co., 228 Wis.2d 106, 596 N.W.2d 429 (1999), the circuit...