Samuels Recycling Co. v. CNA Ins. Companies

• Decision Date: 25 November 1998
• Docket Number: No. 97-3511,97-3511
• Citation: 588 N.W.2d 385,223 Wis.2d 233
• Parties: SAMUELS RECYCLING COMPANY, Plaintiff-Appellant, v. CNA INSURANCE COMPANIES, Continental Casualty Company, Continental Insurance Company, Transcontinental Insurance Co., Transportation Insurance Co., Defendants-Respondents.
• Court: Wisconsin Court of Appeals

Page 385

588 N.W.2d 385

223 Wis.2d 233

SAMUELS RECYCLING COMPANY, Plaintiff-Appellant, v. CNA INSURANCE COMPANIES, Continental Casualty Company Continental Insurance Company, Transcontinental Insurance Co., Transportation Insurance Co., Defendants-Respondents.

No. 97-3511.

Court of Appeals of Wisconsin.

Submitted on Briefs Sept. 4, 1998.

Opinion Released Nov. 25, 1998.

Opinion Filed Nov. 25, 1998.

On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Richard W. Pitzner and Edward S. Marion of Murphy & Desmond, S.C. of Madison.

On behalf of the defendants-respondents, the cause was submitted on the brief of Stephen Sonderby of Haskell Perrin of Chicago, and Richard G. Niess of Coyne, Niess, Schultz, Becker & Bauer, S.C. of Madison.

Before VERGERONT, ROGGENSACK and DEININGER, JJ.

VERGERONT, J.

Samuels Recycling Company appeals two trial court orders granting the motion of CNA Insurance Companies ¹ for summary judgment and dismissing Samuels' claims. ² Samuels asserted these claims: its CNA insurance policies should be reformed to cover the government-ordered environmental cleanup and remediation costs; CNA acted in bad faith in delaying payment on Samuels' claims; and CNA failed to provide loss control services, or negligently provided them. We agree with the trial court's determination that there are no genuine issues of material fact on any claim and that CNA is entitled to judgment on each as a matter of law. We therefore affirm.

BACKGROUND

Samuels is a scrap processing and recycling company that incurred a number of liabilities for environmental cleanup and remediation. Prior to incurring the liabilities, Samuels purchased standard-form comprehensive general liability (CGL) insurance policies from CNA. ³ The standard-form CGL insurance policies provided:

The [insurance] 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 [insurance] company shall have the right and duty to defend any suit against the insured seeking damages . ⁴

(Emphasis added.)

On September 27, 1991, Samuels submitted a claim to CNA. This claim, together with two supplemental claims submitted in August 1992, requested payment for the following expenses: several cleanup and remediation measures required by the Wisconsin Department of Natural Resources (DNR) aimed at addressing alleged groundwater contamination problems pursuant to a consent order from the DNR; the defense and eventual settlement of a private lawsuit in which Samuels was named as a party, Gould v. Alter Metals Co.; and responding as a potentially responsible party to the United States Environmental Protection Agency (EPA) as a shipper of lead acid battery materials to a secondary lead smelting facility. CNA did not pay the claims, but instead asserted several policy defenses.

One of CNA's policy defenses was that the cost of the cleanup required by the DNR and EPA were not the result of a lawsuit and therefore were not covered as "damages" under the CGL policies. At the time Samuels submitted the claims to CNA, Wisconsin appellate courts had not yet interpreted this policy language. However, on November 25, 1992, we decided City of Edgerton v. Gen. Cas. Co. (Edgerton I ), 172 Wis.2d 518, 493 N.W.2d 768 (1992), rev'd, 184 Wis.2d 750, 517 N.W.2d 463 (1994) (Edgerton II ), in which we held that government-ordered cleanup costs are considered "damages" covered under the standard-form CGL policy when the government assumes an adversarial posture, regardless of whether a formal lawsuit has been filed. Samuels continued to seek payment of its claims and CNA continued to reserve its rights to deny coverage based on this and other defenses.

Samuels filed a complaint against CNA ⁵ on April 15, 1993, asserting various claims arising out of the nonpayment of Samuels' environmental liability claims, including a claim for breach of contract for not paying the government-ordered cleanup costs as required by Edgerton I. In June 1994, the supreme court reversed Edgerton I and held that "damages" covered by the standard-form CGL policy must result from a suit in a court of law. City of Edgerton v. Gen. Cas. Co. (Edgerton II ), 184 Wis.2d 750, 782-83, 517 N.W.2d 463, 477-78 (1994). Based on Edgerton II, the trial court dismissed Samuels' breach of contract claim for government-ordered cleanup costs and allowed Samuels to file an amended complaint.

Samuels amended its complaint in October 1995, asserting four claims. The first claim was breach of contract by CNA for failing to defend Samuels in the Gould case, and for failing to indemnify Samuels in connection with the consent orders entered in that litigation. Subsequently, the supreme court ruled that Edgerton II did not relieve insurers from defending insureds named as third parties in lawsuits seeking recovery for environmental response costs. Gen. Cas. Co. v. Hills (Hills II ), 209 Wis.2d 167, 170, 561 N.W.2d 718, 720 (1997), affirming Gen. Cas.

Co. v. Hills (Hills I ), 201 Wis.2d 1, 548 N.W.2d 100 (Ct.App.1996). The [223 Wis.2d 242] parties therefore stipulated to dismissal without prejudice of the Gould breach of contract claim.

The remaining claims in the amended complaint were: reformation of the standard form CGL policy to express the alleged intentions of the parties to include coverage for government-ordered cleanup and remediation costs; bad faith by CNA because it asserted policy defenses it knew or should have known were unavailable as a matter of law; and negligence arising out of CNA's alleged negligent inspections and loss control services. CNA moved for summary judgment on these claims, and the trial court granted the motion. The court concluded there were no genuine issues of material fact and CNA was entitled to a judgment of dismissal as a matter of law.

DISCUSSION

A party is entitled to summary judgment if the properly submitted evidence shows that there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. See § 802.08(2), STATS.; see also Germanotta v. Nat'l Indem. Co., 119 Wis.2d 293, 296, 349 N.W.2d 733, 735 (Ct.App.1984). When reviewing a grant of summary judgment, we apply the same methodology as the trial court. Continental Cas. Co. v. Wis. Patients Compensation Fund, 164 Wis.2d 110, 115, 473 N.W.2d 584, 586 (Ct.App.1991). We examine the submissions of CNA on each claim to determine whether it has presented a prima facie defense to that claim. See Brownelli v. McCaughtry, 182 Wis.2d 367, 372, 514 N.W.2d 48, 49 (Ct.App.1994). If we determine it has done so, we examine the submissions of Samuels to determine whether they create a genuine issue of material fact. See E.S. v. Seitz, 141 Wis.2d 180, 186, 413 N.W.2d 670, 673 (Ct.App.1987). Although our review is de novo, we benefit from the trial court's careful analysis.

Reformation

Samuels argues that, despite the ruling in Edgerton II that standard-form CGL insurance policies do not cover government-ordered environmental cleanup costs, its CGL policies should be reformed to cover these costs because both Samuels and CNA intended they be covered. The trial court concluded that CNA's submissions showed that Samuels did not consider cleanup and remediation costs at the time it purchased the insurance policies at issue, thereby presenting a prima facie defense to the reformation claim. The court further concluded that Samuels presented no evidence that it and CNA agreed the costs would be covered and that such an agreement was not included in the policy because of a mistake of the parties. Therefore, the court decided, Samuels failed to show an issue of material fact. We agree with this analysis.

Reformation of an insurance policy is allowed when the one seeking reformation shows that, because of a mutual mistake, the policy does not contain provisions desired and intended to be included. ⁶ Sprangers v. Greatway Ins. Co., 175 Wis.2d 60, 70, 498 N.W.2d 858, 863 (Ct.App.1993). Mutual mistake is established when the party applying for insurance proves he or she made certain statements to the agent concerning the coverage desired, but the policy as issued does not provide the coverage desired. Id. at 71, 498 N.W.2d at 863. There must be clear and convincing evidence of an oral agreement or understanding that the parties intended the written policy to express, which, due to mutual mistake, the written policy did not express. See Ahnapee & W. Ry. Co. v. Challoner, 34 Wis.2d 134, 137, 148 N.W.2d 646, 648 (1967); see also Kadow v. Aluminum Specialty Co., 253 Wis. 76, 78, 33 N.W.2d 236, 237 (1948) ("[t]o justify reformation the evidence must be clear and convincing that both [parties] had agreed upon facts which were different than those set forth in the instrument").

CNA contends its materials show that Samuels did not make any statements at the time the policies were purchased indicating that it desired coverage of government-ordered cleanup and remediation costs. CNA submitted the deposition of Clifford Olson, the individual in charge of purchasing insurance for Samuels. Olson stated "I don't think we even considered it at that time." Olson also stated he did not rely on cleanup costs and remediation costs being covered in ordering the insurance, but he "just figured if you had liability, you had coverage for those type of things." We agree with the trial court that this evidence is sufficient to establish a prima facie defense to the reformation claim.

We now consider whether Samuels established an issue of material fact requiring a trial. Samuels cites Ahnapee & W. Ry. Co., 34 Wis.2d at 140, 148 N.W.2d at 649, for the proposition that "circumstances, the nature of the transaction and the conduct of the parties may be considered" in determining the true meaning which the parties inte...