32 ELR 20439 -- Johnson Controls, Inc. v. Employers Insurance of Wausau

Johnson Controls, Inc. v. Employers Insurance of Wausau

No. 01-1193 (COURT OF APPEALS OF WISCONSIN December 27, 2001)

ELR Digest

The court affirms a trial court holding that no insurance coverage existed for 21 of a company's contaminated landfill sites. For purposes of determining if the company's insurance applied, the court set forth four categories of sites. The first category is one where the insured is responsible for cleaning up contamination at a site pursuant to a government directive issued under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) or state law. In such instances, the costs of remediation are not damages, and insurance does not apply. The second category consists of sites where the insured is responsible for contamination at a site it does not own, but has not been directed to remediate the site. The government, however, has directed other parties to remediate the site, and those parties sue the insured for payment. Such actions by nongovernmental agencies seeking costs are suits for damages and are covered by insurance. The third category involves sites where the insured is responsible for the contamination at a site it does not own, has been directed by the government to clean up the site, but has not done so. If the government sues the insured to recover costs, there is no insurance coverage. The fourth category of sites encompasses situations where the insured is responsible for at least part of the contamination at a site it does not own, has been directed to remediate the site, but has not done so. If the owners of the site sue the insured there is no insurance coverage. Here, the trial court found that all of the company's sites fell within categories one, three, or four.

The court first holds that with respect to the category one sites, the record supports the trial court's findings. Even when the government did not file a lawsuit, it contacted the company about its potential liability. The fact that the government did not sue thecompany at some sites does not render those sites at issue category two sites. The court next holds that the trial court properly categorized five sites as category three sites. For three of the sites, the company ignored government directives, and for two of the sites the United States joined the company as a party in an ongoing CERCLA cost recovery action. The court further holds that the trial court properly categorized two sites as category four sites. At both sites, the record supports the trial court's findings that the company received a government directive, ignored it, and was then sued by private parties. Thus, because all 21 sites fall within categories one, three, or four, the costs that the company incurred at these sites are not legal damages covered by insurance.

The full text of this decision is available from ELR (13 pp., ELR Order No. L-435).

Counsel for Plaintiff
Matthew J. Flynn
Quarles & Brady
411 E. Wisconsin Ave., Ste. 2040, Milwaukee WI 53202
(414) 277-5000

Counsel for Defendant
Michael J. Cohen
Meissner, Tierney, Fisher & Nichols
111 E. Kilbourn Ave., 19th Fl., Milwaukee WI 53202
(414) 273-1300

[OPINION OMITTED BY PUBLISHER IN ORIGINAL SOURCE]