Insurance doesn’t cover bat guano nightmare, says Wis. Supreme Court

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A Wisconsin couple learned in 2007 that their vacation home had been rendered uninhabitable because of bat guano that had piled up in the walls. Last week, the state supreme court compounded their troubles by deciding that the loss wasn’t covered by their insurance.

Joel and Evelyn Hirschhorn’s tale of dreams turned to ashes began with the purchase of a vacation home in Lake Tomahawk, Wis., in 1981. Over the years, the Hirschhorns hired a local to regularly clean and maintain the property when they weren’t around.

Until 2007, the Hirschhorns didn’t realize they had a bat problem. That unpleasant fact came to light in May 2007 when they picked a real estate broker to list their vacation home for sale. The broker discovered the presence of bats and bat guano on the property when he inspected the home.

At first, the Hirschhorns didn’t realize the magnitude of the problem, but they finally understood that they were dealing with more than a few pests when they had to flee the vacation home due to an overpowering odor after a three-day stay in August 2007.

The Hirschhorns hired a contractor to conduct a thorough inspection and he gave them the bad news that the foul odor was due to bat guano that had accumulated between the home’s siding and walls. The contractor provided the Hirschhorns with a remediation estimate, but could not guarantee that cleaning up the bat guano would eliminate the odor.

So the Hirschhorns decided that the best move was to demolish their vacation home and construct a new one on the site.

They thought that the loss would be covered by a homeowners insurance policy issued by Auto-Owners. But the insurance company quickly disabused them of that notion, denying the claim based on a pollution exclusion in its policy.

The Hirschhorns sued in state court to establish coverage, but the trial court sided with Auto-Owners, concluding that the pollution exclusion unambiguously precluded the Hirschhorns’ claim.

The Wisconsin Court of Appeals reversed that judgment in 2010, concluding that Auto-Owners’ policy was ambiguous and that its pollution exclusion could reasonably be interpreted as not contemplating bat guano.

Last week, the Wisconsin Supreme Court ended the Hirschhorns’ hopes of having Auto-Owners pay up. First, the court decided that bat guano falls within the meaning of the term “pollutants” in the Auto-Owners policy:

Bat guano, composed of bat feces and urine, is or threatens to be a solid, liquid, or gaseous irritant or contaminant. That is, bat guano and its attendant odor “make impure or unclean” the surrounding ground and air space, and can cause “inflammation, soreness, or irritability” of a person’s lungs and skin. These points cannot be seriously contested by the Hirschhorns, who alleged in their complaint that the odor of bat guano was so “”penetrating and offensive”” as to render their vacation home unfit to live in.

Finally, the court concluded that the Hirschhorns’ loss resulted from the “”discharge, release, escape, seepage, migration or dispersal”” of bat guano under the plain terms of the policy’s pollution exclusion clause.

The bat guano, deposited and once contained between the home’s siding and walls, emitted a foul odor that spread throughout the inside of the home, infesting it to the point of destruction. The Hirschhorns acknowledged as much in their complaint. They alleged that “”the drapes, carpets, fabrics and fabric furnishings in the home were rendered unusable as a result of the absorption of the bat guano odor.”

Accordingly, implicit in their complaint is an allegation that the bat guano somehow separated from its once contained location between the home’s siding and walls and entered the air, only to be absorbed by the furnishings inside the home. According to the Hirschhorns, the result was the total loss of their vacation home. Such an allegation falls squarely within the terms of the pollution exclusion clause.

CASE: Hirschhorn v. Auto-Owners