Contamination exclusion unambiguous

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A bacterial outbreak at a food company is “contamination” within the meaning of a pollution exclusion in its commercial property insurance policy, the Wisconsin Court of Appeals held on Jan. 28.

Landshire Fast Foods of Milwaukee, Inc., prepares sandwiches and other foods for sale to businesses and institutions. In 1999, Landshire began delivering sandwiches to the commissary at Great Lakes Naval Training Station.

On May 31, 2000, Great Lakes reported it had found Listeria monocytogenes, a bacteria, on some of Landshire’s product. This form of Listeria can cause mild flu-like symptoms in healthy adults, but, in more vulnerable populations such as the elderly, it can produce a life-threatening illness with a 25 percent mortality rate.

Great Lakes returned all of the food to Landshire and refused to accept any additional Landshire product. Ultimately, it was determined that the source of the Listeria contamination was a meat slicer.

During this time, Landshire held a commercial property insurance policy issued by Employers Mutual Casualty Company. Landshire submitted claims for loss of income, loss of product, sanitizing expenses, and costs related to investigating the source of the bacteria.

Employers denied liability, and Landshire sought declaratory judgment to compel coverage. After motions for summary judgment, Waukesha County Circuit Court Judge Donald J. Hassin held that all of the claims for damages were excluded, and dismissed the complaint.

Landshire appealed, but the court of appeals affirmed in a decision by Judge Harry G. Snyder.

The Policy

The policy provided that Employers would provide coverage for “direct physical loss of or damage to Covered Property … caused by or resulting from any Covered Cause of Loss.”

Among the exclusions were loss or damages caused by “Discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ unless the discharge, dispersal, seepage, migration, release or escape is itself caused by any of the ‘specified causes of loss….’”

“Pollutants” is defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

Contaminant

At issue in the case was the meaning of the word, “contaminant.” Landshire conceded that Listeria is a contaminant, but argued that Listeria is not the type of contaminant excluded in a pollution exclusion.

The court acknowledged a number of arguments in Landshire’s favor: bacteria is organic and thus differs from the enumerated list of specified contaminants in the policy exclusion; the ejusdem generis rule of construction limits nonenumerated losses to those of the same kind, class, character, or nature of the given examples; and provisions limiting coverage must be strongly construed against the insurer.

Nevertheless, the court determined this was insufficient to make the term “contaminant” ambiguous, and no reasonable insured in Landshire’s position would fail to consider bacteria a “contaminant.”

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The court relied on its prior interpretation of a pollution exclusion in U.S. Fire Ins. Co., v. Ace Baking Co., 164 Wis. 2d 499, 505, 476 N.W.2d 280 (Ct. App. 1991), that “there is no coverage for the contamination of [a company’s product] by any substance foreign to those products.

In addition, in Richland Valley Prods., Inc., v. St. Paul Fire & Cas. Co., 201 Wis.2d 161, 169-170, 548 N.W.2d 127 (Ct.App.1996), the court stated, “contamination ‘connotes a condition of impurity resulting from mixture or contact with a foreign substance,’ and that it means ‘to make inferior or impure by mixture; an impairment of impurity; loss of purity resulting from mixture or contact,’ a definition the court found consistent with common understanding and Webster’s New International Dictionary. Even if exclusions from all-risk policies are construed narrowly and in favor of the insured, the term ‘contamination’ is plain.”

Concluding that “contaminant” unambiguously includes bacteria when it renders a product impaired or impure, the court declined to apply the rule of ejusdem generis to rewrite the policy, and affirmed.

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David Ziemer can be reached by email.