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BENCH BLOG: High court muddies the waters

Jean DiMotto is a retired Milwaukee County Circuit Court judge. She served for 16 years, and was on the criminal bench for 12 of those years.

Judge Jean DiMotto retired in 2013 after 16 years on the Milwaukee County Circuit bench and now serves as a reserve judge. She also serves of counsel with Nistler Law Firm. She can be reached at jeandimotto@gmail.com.

In a pair of decisions released on the same day, the Wisconsin Supreme Court decided that manure and septage are pollutants at the point they contaminate wells.

As a result, the pollution exclusion in insurance policies applies, excluding coverage for injuries to person and property.

The manure case

In Wilson Mutual Ins. Co. v. Falk, the Falks owned a dairy farm in West Bend. After obtaining a nutrient management plan, which was approved by the Washington County Land and Water Conservation Department, from a certified crop agronomist, the Falks spread liquid cow manure on their farm fields as fertilizer.

Later that year, the Department of Natural Resources notified them that it had received complaints of private well contamination from the Falks’s neighbors. After investigation, the DNR concluded that manure had leached into the aquifer supplying the wells.

The wells had to be replaced since the water was unsafe, and the DNR and Falks’s neighbors sought reimbursement for property damage and medical expenses for illness. The Falks notified Wilson Mutual pursuant to the farm insurance policy it had issued to them.

Wilson Mutual filed a declaratory judgment action, and the Falks responded with a summary judgment motion. Both motions centered on the pollution exclusion clause in one of the policies.

Washington County Circuit Judge Todd Martens relied on ordinary dictionary definitions to find that manure is “excrement,” a “contaminant” and “waste,” thus, unambiguously a pollutant under the exclusion. He also noted that spreading manure is a form of recycling, one of the actions performed on waste that is included in the language of the exclusion.

He observed that substances can serve useful purposes in one context, “yet can be characterized as pollutants in another.” He gave as examples bleach and the pesticide DDT.

The septage case

In Preisler v. Kuettel’s Septic Service, the Preislers owned a dairy farm in Hortonville across the road from a farm owned by the Kuettels. The Kuettels also were in the business of storing and disposing of septage collected from septic tanks and portable restrooms, which they combined with nonhuman waste from grease traps, floor pits and car washes.

The Preislers contracted with the Kuettels to spread the septage mixture on their farm fields as fertilizer after they secured permission from the DNR. Several years later, the Preislers noticed an algae bloom in their above-ground swimming pool that was filled with well water, reduced bovine milk production and abnormal cattle deaths.

An investigation showed that their well water had a high level of nitrates, a product of soil breakdown of the nitrogen in septage. The problems abated when a new well was dug.

The Preislers sued the Kuettels and their business, who in turn claimed against their insurers under comprehensive general liability policies. The insurers moved for summary and declaratory judgments under pollution exclusion clauses.

Outagamie County Circuit Judge Michael Gage granted the motion, deciding that septage, comprised primarily of human feces and urine, is unambiguously “waste” and therefore a pollutant under the language of the pollution exclusion.

He also concluded that the Preislers’s damage was caused by the “discharge, dispersal, seepage, migration, release or escape” of septage “under the plain terms of the exclusion.”

Court of Appeals’ input

Both the Falks and the Preislers appealed their respective trial court decisions. Despite the similarities in the cases, two different branches of the Court of Appeals came to opposite conclusions.

District 2 reversed Martens’s decision in a published opinion authored by Judge Paul Reilly. The court noted that manure is part of the normal cycle of dairy farm operations, stating, “A reasonable farmer would not consider manure [used as fertilizer] to be a ‘pollutant,’ an ‘irritant,’ a ‘contaminant’ or ‘waste’” but rather “liquid gold.”

District 3 affirmed Gage’s decision in an unpublished opinion. The court held “septage is unambiguously a pollutant. It is a contaminant, an irritant and a waste substance.”

That court relied on state Supreme Court precedent that had resorted to ordinary dictionary definitions of the terms “irritant,” “contaminant” and “waste.” The fact that such waste can be recycled as fertilizer bolstered the court’s conclusion since this, too, falls squarely within the language of the exclusion.

Interestingly, the Court of Appeals’ decision in Preisler mirrors Martens’s trial court decision in Wilson Mutual.

The justices’ take on Wilson Mutual

Justice Michael Gableman wrote the laborious majority opinion in Wilson Mutual. The court determined that the occurrence at issue was seepage of manure into each neighbor’s well. This “unexpected or unintended resultant damage” triggered an initial grant of coverage.

Next in the analysis was whether the pollution exclusion applied. Given the dissent, the court pointedly noted that the focus was on the entry of manure into the wells, not the spreading of manure on the fields.

Evaluating whether a substance is a pollutant is done from the standpoint of a reasonable insured. A reasonable insured would consider a substance a pollutant if “(1) the substance is largely undesirable and universally present in the context of the occurrence that the insured seeks coverage for; and (2) a reasonable insured would consider the substance causing the harm involved in the occurrence to be a pollutant.”

The dissent, written by Chief Justice Shirley Abrahamson, correctly noted that the second prong of the standard simply restates the premise.

Nonetheless, the court applied this awkward standard, concluding that manure in a well meets both prongs. Accordingly, the pollution exclusion barred coverage.

However, the court then found coverage under the incidental coverages section of the policy, triggering Wilson Mutual’s duties to defend and to indemnify the Falks up to $500 for each of the five contaminated wells.

In her analysis, Abrahamson noted that manure is an everyday farm fertilizer “universally present and generally harmless on farmland.” Seepage into the soil “is the whole point.” She therefore agreed with the Falks that well contamination “resulted from everyday activities ‘gone slightly, but not surprisingly, awry.’”

Like Reilly, Abrahamson concluded that a reasonable insured under a policy that covers farm operations would not view manure as a pollutant but rather as “liquid gold” because it enriches soil.

Preisler opinion

Justice Pat Roggensack wrote for the same majority of justices in deciding Preisler.

She began with an analysis of occurrence, concluding that the occurrence was “[s]eepage of decomposing septage into the water supply,” and “the resultant harm” was water with elevated nitrate levels.

The court declared that a reasonable insured would understand decomposing septage to be a contaminant when it enters the water supply. Oddly, that declaration did not apply the standard for evaluating a reasonable insured’s perspective that was articulated in Wilson Mutual.

In a concurrence, Justice Ann Walsh Bradley agreed that septage is a pollutant. But she took issue with the majority’s approach to analyzing occurrence. Not only was this issue neither argued nor briefed by the parties but the majority used a different approach that conflicts with the Wilson Mutual approach. As Bradley asked, “Which precedent should future attorneys follow?”

“By creating unclear, unnecessary, and inconsistent precedent,” she wrote, “the court does not live up to its obligation to provide a clear and concise articulation of a legal standard.”

Abrahamson’s dissent was so similar to her dissent in Wilson Mutual that she wrote that the two should be read together. She also took issue with the occurrence analysis because it was different from that in Wilson Mutual.

“It remains unclear,” she wrote, “whether this court considers the cause of damage or the damage itself to be the occurrence.”

Commentary

These two decisions are an unfortunate contribution to pollution-exclusion case law. They muddy the water in the analyses of occurrence as well as the reasonable insured perspective.

It is a shame that although the two opinions were released on the same date with such similar fact patterns and insurance policy language, they are not reconcilable.

Still, both decisions strengthen the power of pollution exclusion clauses. All the care and caution exercised by the Falks, the Preislers and the Kuettels in seeking government approval before spreading the manure and septage was for naught since their insurers’ policies contained the pollution exclusion.

On another note, the decisions of the two trial court judges, Martens and Gage, were impressive. Both were well organized and correctly analyzed the pollution exclusion clauses. It is great to see such high-quality decision making at the circuit court level.


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