High court: Contractor’s insurers must share settlements, costs in explosion lawsuits

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The Wisconsin Supreme Court has ruled that an insurer of a contractor is not exempt from paying court costs and settlements after an explosion in Oconomowoc.

The dispute between the two insurers stems from a gas pipe explosion that leveled First Baptist Church of Oconomowoc and two houses on Wisconsin Avenue on April 2, 2008. Two We Energies employees were injured.

The church’s insurance company, the injured workers and those who occupied the houses sued Dorner Inc., the construction company that employed the workers that ruptured the line, and settled. The question that remained was how the settlements would be paid out.

Acuity, A Mutual Insurance Co., issued Dorner’s comprehensive general liability policy, paid out the settlements and insured Dorner. Acuity sought reimbursement from Chartis Specialty Insurance Co., which insured Dorner against damage caused by chemical pollution.

The justices ruled unanimously Tuesday that Chartis must pay its share of the fees and settlements from the lawsuits because its policy covers Dorner’s liability for the damage and injuries caused by the explosion. In more general terms, according to the court’s opinion, it is possible for both a commercial general liability policy with a pollution exclusion clause and a contractors’ pollution liability policy to cover an insured simultaneously.

Mark Rattan, an attorney for Chartis, and Michael Cohen, an attorney for Acuity, could not be immediately reached for comment Tuesday morning.

The Supreme Court’s ruling affirms the decision made by Waukesha County Circuit Court Judge J. Mac Davis. He had ruled in May 2013 that both of Dorner’s insurers needed to split the settlements and court costs. Chartis, according to the circuit court, had breached its duty to defend and insure Dorner, and it ordered Chartis to pay $785,880.90, which was half of the settlement payments of $1,531,761.80 that Acuity paid on Dorner’s behalf.

More specifically, the high court agreed with the circuit court that the natural gas leak was a pollution condition and that condition caused the injuries and property damage that were the subject of the four lawsuits.

“A reasonable insured construction company would conclude” according to the Supreme Court opinion, “that the natural gas leak in the instant case constituted a pollution condition under Chartis’s CPL policy.”

Chartis had argued that the injuries and damages alleged in the lawsuits were caused by the explosion and fire, not the contaminating nature of natural gas, thus there was no coverage under the pollution liability policy.

The justices were not convinced by the argument, pointing out that, according to Chartis’ policy, the presence of gas did not have to be the immediate cause of the explosion in order to trigger coverage.

The appeals court had reversed the circuit court’s decision on March 12, finding Chartis did not have to defend Dorner or pay half of the $1.531,761.80 in settlements or the $283,073.94 in legal costs from the lawsuits.  According to the appeals court, the plaintiffs in the lawsuits never claimed harm was done by the gas that leaked from the ruptured line. Follow @erikastrebel