Kenefick v. Hitchcock

Citation522 N.W.2d 261,187 Wis.2d 218
Decision Date25 August 1994
Docket NumberNo. 93-2318,93-2318
CourtCourt of Appeals of Wisconsin
PartiesEmmett V. KENEFICK, Amelia M. Kenefick, and Emmir, Inc., a Wisconsin corporation, Plaintiffs, v. David W. HITCHCOCK, Carolyn D. Hitchcock, d/b/a Hitchcock's Phillips 66 Service Center, Defendants-Third Party Plaintiffs-Appellants. PHILLIPS PETROLEUM COMPANY, a foreign corporation, Defendant, v. FEDERATED MUTUAL INSURANCE COMPANY, Third Party Defendant-Respondent.

Before EICH, C.J., GARTZKE, P.J., and DYKMAN, J.

EICH, Chief Judge.

David and Carolyn Hitchcock appeal from an order granting summary judgment dismissing their third-party complaint against Federated Mutual Insurance Company. The Hitchcocks, owners of a service station, were sued by Emmett and Amelia Kenefick, who owned property adjacent to the station and claimed that leakage from the Hitchcocks' underground gasoline storage tanks contaminated area groundwater, causing them damage.

The Hitchcocks contended that their liability for any such damage was covered by two insurance policies issued by Federated: a liability policy effective from March 15, 1985, to March 15, 1986, and a "claims-made" pollution damage policy effective from March 15, 1986, through March 15, 1987. Claiming that Federated improperly declined to defend them in this action, the Hitchcocks filed a third-party action against the company. The parties entered into a stipulation bifurcating the coverage and liability issues, and Federated moved for summary judgment dismissing the Hitchcocks' third-party complaint on grounds that the Federated policies afforded them no coverage. The trial court granted the motion and the Hitchcocks appeal.

The issues are: (1) whether the trial court erred in concluding that there was no coverage under Federated's liability policy because the leakage did not occur within the policy period; (2) whether the asserted knowledge on the part of a Federated agent that a leak existed in the storage tanks was sufficient to comply with the notice provisions of Federated's "claims-made" policy; and (3) whether Federated otherwise breached its duty to defend the Hitchcocks in the action or, in the alternative, should be estopped from challenging coverage.

We conclude that the Hitchcocks are not covered by either policy, and that Federated is not estopped from challenging coverage. We also conclude, however, that the Hitchcocks may seek recovery of their expenses in defending the liability and damage portions of the action up to the time those proceedings were stayed pending resolution of the coverage issues. We thus reverse the order on that limited point and affirm in all other respects.

The service station, which has been owned and operated by the Hitchcocks since 1974, was built over two large underground gasoline storage tanks. Prior to 1982, the contents of the tanks were monitored only intermittently. In that year, the Hitchcocks began taking "stick inventories" of the tanks' contents twice a week and, beginning in 1985, did so nearly on a daily basis. The information thus gained was compared with gasoline purchase invoices and retail sales figures two to four times a month in order to determine the station's gasoline inventory. When the Hitchcocks' bookkeeper received the May 1986 invoice from the gasoline supplier, she noticed a discrepancy in that there appeared to be less gasoline in the storage tanks than there should have been. The Hitchcocks hired an excavator and discovered a hole in a pipe leading from one of the tanks. It was estimated at the time that approximately 1,000 gallons of gasoline were "missing." The pipe was immediately repaired.

In early 1990, the Hitchcocks replaced the two underground tanks. Soil tests taken at the time revealed that the groundwater in the area was contaminated. Several months later, in December 1990, the Keneficks, who operated a motel on the property located next to the station and obtained their water from a well, noticed that the water in their faucets had a peculiar taste and smell. They sent samples to the Wisconsin Department of Natural Resources and it was discovered that the water contained quantities of benzene, toluene and xylene. The contamination forced the Keneficks to incur expenses in providing safe water for themselves and their motel guests from that point on.

The Keneficks' attorney wrote to the Hitchcocks on March 25, 1991, and again on November 29, 1991, advising them of the contamination and informing them that the Keneficks would be seeking compensation for their damages. The Hitchcocks forwarded the letters to Federated, and the Keneficks commenced this action on April 2, 1992. The Hitchcocks filed a third-party action against Federated a few weeks later.

As we have noted, the Hitchcocks claim coverage under two Federated policies. The first, issued in 1985, covered all sums for which they might become legally obligated to pay for property damage "which occurs during this policy period." The policy period ended on March 15, 1986. The second was a "claims-made" pollution damage policy providing coverage for any claims made against the Hitchcocks during the policy period and reported to the company either during the period or within fifteen days thereafter. The policy provided, among other things, that "[a] claim shall be deemed to have been made only when suit is brought or written notice of such claim is received by the insured." That policy lapsed on March 15, 1987.

I. Coverage Under the 1985-86 "Occurrence" Policy

We review summary judgments de novo, employing the same methodology as the trial court. Green Spring Farms v. Kersten, 136 Wis.2d 304, 315, 401 N.W.2d 816, 820 (1987). Generally, summary judgment is proper where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Id. And "the 'mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.' " Baxter v. DNR, 165 Wis.2d 298, 312, 477 N.W.2d 648, 654 (Ct.App.1991) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986)). A factual issue is "genuine" if the evidence is such that reasonable jurors could return a verdict for the nonmoving party. Id.

The Hitchcocks argue first that there is a disputed issue of fact that should preclude summary judgment under the 1985-86 policy: that is, when the leak--the "occurrence" insured against--occurred. Federated disagrees. It points to the fact that the Hitchcocks' bookkeeper first noticed that there appeared to be less gasoline in the tanks than shown by the station's delivery and sales records during the last week of May 1986. Federated thus argues that the undisputed facts establish that the leak first occurred at that time, which was more than two months after the policy had terminated. Federated's argument is based on the following excerpts from the deposition testimony of David Hitchcock: 1

Q. Do you have any reason to believe that the leak was an on-going thing and had accumulatively leaked over a much longer period of time prior to Memorial Day weekend of 1986?

A. I do not believe so.

Q. I believe you indicated that you didn't notice any discrepancies in the inventories prior to this time in May of 1986?

A. No, I didn't.

Federated also points to the testimony of Kristin Ziech, the Hitchcocks' daughter and bookkeeper for the family's business.

Q. And do you remember that this, the incident that occurred Memorial Day weekend in 1986, do you remember that that ever occurred again, a similar instance occurred between [1986 and] 1989 when you concluded doing the books?

A. No.

Q. And you don't recall an incident prior to that?

A. No.

The Hitchcocks characterize this evidence as "ambiguous"; they claim that the only "fact" established by the evidence is when the leak was discovered, not when it occurred, which, they assert, is the relevant question under the provisions of the 1985-86 policy. They suggest in their brief that, given "the slow nature of the leak," 2 and the seasonal nature of the gas station business, "it is impossible to tell when the leak occurred."

Federated points out--correctly, we think--that the Hitchcocks, as the policyholders, have the burden of setting forth specific facts to show that covered bodily injury or property damage occurred during the policy period. In Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d265 (1986), the plaintiff sued for the death of her husband which, she claimed, was caused by his exposure to asbestos-laden products manufactured and marketed by several corporations including Celotex. Celotex moved for summary judgment dismissing the action on grounds that the plaintiff had failed to put forth any evidence that her husband had been exposed to Celotex products. Id. at 319-20, 106 S.Ct. at 2550-51. The Supreme Court affirmed the district court's dismissal of the action, holding that summary judgment procedure, which is generally the same in federal practice as it is in Wisconsin, 3

mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to any material fact," since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial. The moving party is "entitled to a judgment as a matter of law" because the nonmoving party has failed to make a sufficient showing on an essential element of [his or] her case with respect to...

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