Jump to Navigation
Jump to Content

Patz v. St. Paul Fire & Marine Ins. Co.

ELR Citation: 24 ELR 20371
Nos. No. 93-2135, 15 F.3d 699/(7th Cir., 02/02/1994)

The court affirms a district court decision that an insurance policy's pollution exclusion and owner exclusion clauses do not bar the policy's coverage of the insureds' costs of complying with a government order to clean up contaminated waste from painting operations that they buried in barrels or placed in an evaporation pit on their land. The court first rejects the insureds' invocation of the doctrine of estoppel to prevent the insurance company from contesting their interpretation of the pollution exclusion clause as only barring coverage of discharges intended to cause damage. The doctrine only forbids a person who won a judgment on one ground from repudiating that ground in a subsequent litigation in an effort to obtain a second judgment. The insurance company won nothing by attempting to prove that the insureds knew that their method of disposing of paint wastes would damage the land. The court notes that the insureds may have intended to invoke the doctrine of "mend the hold," which limits the right of a defendant in a breach of contract suit to change the ground of his defense midway through the lawsuit. A vague allusion, however, is not enough to preserve an issue for review.

The court next holds that the policy's pollution exclusion clause does not bar coverage, because the discharge from the buried barrels was "sudden and accidental" in the sense of unintended and unexpected, even though placing the waste in the barrels and burying them was intentional. With respect to the evaporation pit, the insureds believed that its clay surface would stop the contaminated water it contained and that when the water evaporated, the phosphatic solids would form a crust at the bottom of the pit that could be removed before any harm was done to the soil beneath it. The court holds that a discharge of wastes into the environment did not occur until the water leached through the bottom of the pit and that the leaching was unintended and unexpected. The initial placement of the wastes, although intentional, was not a discharge; the leakage was. The court holds that the policy's owner exclusion clause does not bar coverage, because the insureds seek to recover the cost of complying with a government order to clean up a nuisance, not to recover for damage to their property. Finally, the court denies the insurance company's motion to certify questions of coverage to the Wisconsin Supreme Court.

Counsel for Plaintiffs
Dean Laing
O'Neil, Cannon & Hollman
Bank One Plaza
111 E. Wisconsin Ave., Ste. 1400, Milwaukee WI 53202
(414) 276-5000

Counsel for Defendant
Thomas R. Schrimpf
Hinshaw & Culbertson
100 E. Wisconsin Ave., Ste. 2600, Milwaukee WI 53202
(414) 276-6464

Before POSNER, Chief Judge, KANNE, Circuit Judge, and REINHARD, District Judge.*