Watertown Tire Recyclers LLC v. Nortman
| Decision Date | 20 January 2011 |
| Docket Number | No. 2007CV230,No. 2010AP305,2010AP305,2007CV230 |
| Court | Wisconsin Court of Appeals |
| Parties | Watertown Tire Recyclers, LLC,Plaintiff-Respondent-Cross-Appellant United States Environmental Protection agency and v. James W. Nortman and Robertson Ryan & Associates, Inc., Defendants, ace property and |
NOTICE
This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports.
A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See WIS. STAT. § 808.10 and RULE 809.62.
Before Higginbotham, Sherman and Blanchard, JJ.
¶1 This is an insurance coverage dispute involving a Commercial General Liability (CGL) policy following a major stockpile fire at a tire recycling business. The fire and suppression efforts caused Watertown Tire Recyclers to incur liability for water clean-up costs asserted by the United States Environmental Protection Agency (EPA), and liability for debris clean-up costs assessed by the Wisconsin Department of Natural Resources.
¶2 Watertown made a claim for all of these clean-up costs under its CGL policy to Watertown's insurer, ACE Property and Casualty Insurance Co. ACE denied Watertown's claims for coverage based on the CGL's "absolute pollution" exclusion. Watertown pled several causes of action against ACE seeking coverage under the CGL policy: (1) declaratory judgment; (2) equitable estoppel; (3) breach of modified contract; (4) bad faith; and (5) reformation. Watertown also made a negligence claim against its insurance agent, James Nortman, and his employer Robertson Ryan & Associates, Inc, which was the subject of Watertown Tire Recyclers v. Nortman (Watertown I), No. 09-2465, unpublished slip op. (Wis. Ct. App. June 17, 2010).
¶3 In this case, the circuit court issued a declaratory judgment that coverage exists under the so-called "sublimit" exception to the "absolute pollution" and "owned property" exclusions up to a maximum of $300,000. The circuit court dismissed all of Watertown's claims seeking full coverage.
¶4 Both parties appeal from the court's declaratory judgment. ACE argues that the "sublimit" exception does not apply. Watertown argues that the circuit court erred in failing to include a monetary judgment after it determined that this coverage applies. We affirm the circuit court on both grounds. Weconclude the "sublimit" exception provides coverage for Watertown's liability as established under federal law resulting from fire damage to leased property. Yet the court reasonably exercised its discretion in determining that a monetary judgment against ACE based on coverage created by the "sublimit" exception was not appropriate, because the court was not presented with sufficient evidence to determine a fixed sum appropriate for a monetary judgment.
¶5 We affirm the court's dismissal of Watertown's claims seeking full coverage under the CGL policy. We conclude that the circuit court properly dismissed the equitable estoppel claim, because the policy language precluded coverage for clean-up costs, and equitable estoppel does not apply to exclusionary clauses in insurance contracts; the breach of contract claim, because there is no evidence that creates a genuine issue of material fact as to whether the parties' conduct unambiguously indicated a shared intent to modify the policy; the bad faith claim, because there was an objectively reasonable basis to deny coverage and because Watertown's claims of flaws in ACE's investigation, standing alone, are not enough to support a bad faith claim against ACE; and the reformation claim, because the insurance agent was not negligent in procuring an insurance policy that included the "absolute pollution" exclusion.
¶6 Watertown operated a stockpiling, shredding, and recycling scrap tire business on property that Thomas Springer, the LLC's sole member, leased to Watertown. On July 19, 2005, a stockpile tire fire ignited and burned for five days. Firefighters used an estimated ten million gallons of water to extinguish the fire.
¶7 In the aftermath, the EPA ordered Watertown (as operator) and Springer (as owner) to clean up the contaminated fire suppression water. Wisconsin's Department of Natural Resources ordered both to remove on-site debris. Watertown agreed to have the EPA treat the contaminated water and contracted with a private company to have the debris removed.
¶8 Watertown sought coverage for the water and debris clean-up expenses from ACE under the CGL policy. ACE rejected all clean-up claims under the policy based on the policy's "absolute pollution" exclusion.
¶9 The water clean-up bill ($663,457.08) that the EPA presented to Watertown remains unpaid. Springer paid the private company for the debris-removal costs and settled DNR's claims related to the cleanup.
¶10 In October 2009, the EPA sued Watertown and Springer in federal court to recover the costs of its response, resulting in a consent decree in favor of the EPA and against Watertown and Springer in the amount of $790,930.
¶11 Watertown filed this lawsuit. Watertown and ACE both submitted motions for summary judgment. Watertown moved for summary judgment on its declaratory judgment claim on the alternative grounds that: (1) the "absolute pollution" exclusion did not apply and therefore the CGL policy provided for full coverage of the fire-related clean-up costs, or (2) the $300,000 of coverage under the "sublimit" exception to the exclusion applies to the water clean-up expenses for EPA. ACE moved for summary judgment dismissing all of Watertown's claims.
¶12 The circuit court granted Watertown's request for partial summary judgment on the declaratory judgment action and concluded that the "sublimit"exception applied to cover EPA's clean-up expenses, but denied Watertown's request for a monetary judgment. The court also granted ACE's motion for summary judgment on all other claims.
¶13 ACE appeals from the declaratory judgment, and Watertown cross-appeals, arguing that the court erred in failing to include a monetary award. Watertown also challenges the circuit court's dismissal of its claims seeking coverage beyond the "sublimit" exception on the theories of equitable estoppel, breach of modified contract, bad faith, and reformation.
¶14 Before reaching the specifics of Watertown's arguments and the single issue appealed by ACE, we begin by briefly summarizing the companion appeal, Watertown I, No. 09-2465, unpublished slip op. (Wis. Ct. App. June 17, 2010), because it is relevant to our discussion of the issues raised in this appeal. Then, we address whether the insurance policy provides initial coverage for the claims and whether the "sublimit" exception to the "owned property" and "absolute pollution" exclusions saves some coverage under Johnson Controls, Inc. v. Employers Ins. of Wausau, 2003 WI 108, ¶1, 264 Wis. 2d 60, 665 N.W.2d 257, and whether the court erroneously exercised its discretion in declining to enter a money judgment against ACE.
¶15 After determining these fundamental coverage issues, we turn to the five legal doctrines that Watertown relies on in seeking to overcome the "owned property" and "absolute pollution" exclusions that otherwise preclude full coverage under the CGL policy for clean-up expenses.
¶16 In Watertown I, Watertown alleged that its insurance agent, Nortman, was negligent in obtaining a CGL insurance policy that included the "absolute pollution" exclusion, which resulted in denial of coverage for both clean-up claims. Watertown I, No. 09-2465, ¶6. This court concluded that Nortman could not have been negligent on these grounds because, regardless of the "absolute pollution" exclusion, the CGL's "owned property" exclusion independently applies to exclude coverage. Id., ¶19. Therefore, Nortman's alleged negligence in including the "absolute pollution" exclusion in the policy could not have affected coverage. Id., ¶24.
(Emphasis added.)
¶18 We concluded that the "owned property" exclusion precluded coverage under these circumstances because Watertown's costs were to restore damaged property that it rented from Springer for the "prevention of... damage to another's property," specifically, to groundwater and nearby surface water on the Springer property. Id., ¶¶10, 13, 19.
¶19 With that background, we turn to the "sublimit" exception. ACE appeals from the declaratory judgment finding ACE to be obligated for coverage up to $300,000 under the "sublimit" exception, arguing that coverage under the CGL policy applies only to third-party liability claims to off-site property. Watertown appeals from the decision of the court that it lacked a sufficient basis to enter a monetary judgment under the "sublimit" exception. We first address ACE's obligation under its insurance policy.
¶20 The issue is whether Watertown's liability under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601-9675 (2000), for the EPA's remediation triggered insurance coverage for Watertown under the "sublimit" exception to the "absolute pollution" and "owned property" exclusions.1
¶21 We review a grant of summary judgment de novo, applying the same standards as the circuit court. Green Spring Farms v. Kersten,...
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