MARCH 9, 2015
A scrap metal company that supplied wastewater containing
polychlorinated biphenyls (PCBs) to a water treatment company isn’t covered by
an insurance policy containing a pollution exclusion clause, a state appeals
court has ruled.
United Milwaukee Scrap, which processes and sells scrap
metals, contracted with Advanced Waste Services, to remove wastewater from the
United Milwaukee Scrap facility. In turn, Advanced Waste treats wastewater to
resell byproducts like oil.
But the wastewater that United Milwaukee Scrap provided
contained PCBs. Advanced Waste alleged the PCBs caused significant damage to
its recycling processes. Advanced Waste sued for negligence and breach of
contract, among other claims.
United Milwaukee Scrap notified its insurer, Illinois
National Insurance, but the insurer refused to defend the lawsuit, claiming
damage caused from PCBs was not covered. The circuit court in Milwaukee County
granted summary judgment to Illinois National.
In Advanced Waste Services Inc. v. United Milwaukee Scrap
LLC, 2014AP1169 (March 3, 2015), a three-judge panel for the District I Appeals
Court agreed that Illinois National’s policy contained an exclusion that barred
coverage for pollutant damages.
United Milwaukee Scrap admitted that PCBs are “pollutants,”
but said coverage still applied because United Milwaukee Scrap did not
“disperse” the PCBs, Advanced Wastewater did. Milwaukee Scrap further alleged
that Advanced Wastewater had a duty to check for PCBs.
“Under the plain language of the policy there is no
requirement that the insured disperse the pollutant for the exclusion to
apply,” wrote Judge Patricia Curley. “As we see from the policy language above,
no actor is specified, leaving the possibility that a pollutant could be
dispersed in any number of ways – including without the direct action of any
party at all.”
The panel said its conclusion was supported by a recent case
involving a home that was polluted with bat guano. In that case, the bats
dispersed the pollutant, not the homeowners, and the state supreme court ruled that
a pollution exclusion clause barred coverage.
“The Hirschhorns’ policy, like United Milwaukee Scrap’s
policy, did not specify whether coverage required a particular party to
disperse a pollutant,” Judge Curley wrote. “Instead, that policy, like the one
before us, applied to any loss involving the dispersal of pollutants.”
The panel was not persuaded by a federal case from New
Jersey involving Nestle Foods, which contracted with a company to pick up waste
products, which were delivered to a landfill. Nestle’s insurer said a pollution
exclusion barred coverage clean-up liability, but a court disagreed.
“While United Milwaukee Scrap contends that Nestle Foods
should control, we disagree because it interprets New Jersey law, which reads
an additional requirement into the standard pollution exclusion that Wisconsin
does not,” Judge Curley explained.