Court Opinion

ID: 2786637
Source: CourtListenerOpinion
Date Created: 2015-03-17 13:06:33.117099+00
Date Added: 2024-06-11T11:05:17.341932
License: Public Domain

2015 WI 28

                  SUPREME COURT              OF    WISCONSIN
CASE NO.:                2013AP1303
COMPLETE TITLE:          Acuity, A Mutual Insurance Company,
                                    Third-Party
                                    Plaintiff-Respondent-Petitioner,
                               v.
                         Chartis Specialty Insurance Company, sued as and
                         f/k/a
                         American International Specialty Lines Insurance
                         Company,
                                    Third-Party Defendant-Appellant.

                           REVIEW OF A DECISION OF THE COURT OF APPEALS
                            Reported at 353 Wis. 2d 554, 846 N.W.2d 34
                                   (Ct. App. 2014 – Unpublished)

OPINION FILED:           March 17, 2015
SUBMITTED ON BRIEFS:
ORAL ARGUMENT:           January 14, 2015

SOURCE OF APPEAL:
   COURT:                Circuit
   COUNTY:               Waukesha
   JUDGE:                J. Mac Davis

JUSTICES:
   CONCURRED:
   DISSENTED:
   NOT PARTICIPATING:

ATTORNEYS:

       For the third-party plaintiff-respondent-petitioner, there
were    briefs      by    Michael   J.    Cohen,   Joseph   J.   Sarmiento,   and
Meissner Tierney Fisher & Nichols, S.C., Milwaukee, and Lance S.
Grady, Daniel K. Miller, and Grady Hayes & Neary, LLC, Waukesha.
Oral argument by Michael J. Cohen.

       For the third-party defendant-appellant, there was a brief
by Mark W. Rattan, Ericka C. Piotrowski, and Litchfield Cavo
LLP, Brookfield. Oral argument by Mark W. Rattan.
                                                                            2015 WI 28
                                                                    NOTICE
                                                      This opinion is subject to further
                                                      editing and modification.   The final
                                                      version will appear in the bound
                                                      volume of the official reports.
No.       2013AP1303
(L.C. No.    2009CV2478, 2009CV4611, 2010CV1506 & 2011CV2087)

STATE OF WISCONSIN                                :             IN SUPREME COURT

Acuity, A Mutual Insurance Company,

              Third-Party Plaintiff-Respondent-
              Petitioner                                                 FILED
      v.                                                            MAR 17, 2015
Chartis Specialty Insurance Company, sued as                           Diane M. Fremgen
and f/k/a American International Specialty                          Clerk of Supreme Court
Lines Insurance Company

              Third-Party Defendant-Appellant

      REVIEW of a decision of the Court of Appeals.                    Reversed.

      ¶1      SHIRLEY S. ABRAHAMSON, C.J.               This is a review of an
unpublished decision of the court of appeals reversing orders

and a judgment of the Circuit Court for Waukesha County, J. Mac

Davis, Judge.1

      ¶2      The   dispute    in   the       instant    case     is     between      two

insurance     companies:      Acuity,     A   Mutual     Insurance       Company      and

      1
       Acuity, A Mutual Ins. Co. v. Chartis Specialty Ins. Co.,
No. 2013AP1303, unpublished slip op. (Wis. Ct. App. Mar. 12,
2014).
                                                                        No.     2013AP1303

Chartis Specialty Insurance Company.2                Both insurance companies

issued    liability      policies     to       Dorner,     Inc.,    a     construction

company, the insured.3           The Acuity policy was a Comprehensive

General   Liability      (CGL)   policy.          The     Chartis       policy    was     a

Contractors' Pollution Liability (CPL) policy.

    ¶3      Acuity     has   defended      and    indemnified       the       insured    in

four lawsuits seeking recovery for bodily injury and property

damage caused by a natural gas-fueled explosion and fire.                              This

explosion       and   fire   occurred      after     the     insured's         employees

disturbed       an    underground     natural       gas     pipeline          during     an

excavation project.          Acuity now seeks recovery from Chartis,

asserting that Chartis's CPL policy provides coverage for the

insured in these four lawsuits.

    ¶4      The dispute in the instant case revolves around the

insurance       companies'   different          interpretations         of     Chartis's

duties    and    obligations     to   the       insured     under       Chartis's       CPL

policy.

    ¶5      The circuit court concluded that Chartis breached its
duties of defense and indemnification under the CPL policy and

ordered Chartis to share with Acuity "on a 50-50 basis" the cost

    2
       Chartis was formerly known as American International
Specialty Lines Insurance Company (AISLIC) and was sued under
that name.
    3
       Dorner, Inc. is not a party in this review because Acuity
has paid all of the insured's defense costs and indemnity
settlements and the lawsuits against the insured have been
settled and dismissed.

                                           2
                                                                           No.     2013AP1303

of defending and indemnifying the insured.                           Pursuant to this

order,    a    money      judgment   was      entered    in    favor   of        Acuity    and

against Chartis for $785,880.90 (which constitutes one-half of

the indemnity settlement payments of $1,531,761.80 that Acuity

paid on the insured's behalf), plus taxable costs of $905.75.

The two insurance companies stipulated that Chartis had already

paid one-half of the total defense fees.

    ¶6         The court of appeals reversed the judgment and orders

of the circuit court and ruled in favor of Chartis.                               The court

of appeals held that the claims of bodily injury and property

damage    asserted         against      the    insured        were   not     "caused        by

Pollution          Conditions"   and     therefore      were     not   covered        under

Chartis's CPL policy.

    ¶7         Chartis, according to the court of appeals, had no

duty to defend the insured in the four lawsuits.                           The court of

appeals remanded the matter to the circuit court with directions

to enter judgment in favor of Chartis and against Acuity for the

sum Chartis had paid Acuity toward the insured's defense fees.
    ¶8         For the reasons set forth, we agree with the circuit

court's       determination      that    that     the   natural      gas     leak     was    a

pollution condition under Chartis's CPL policy and that this

pollution condition caused the bodily injury and property damage

alleged       in    the   four   lawsuits.         We    therefore      conclude          that

Chartis's CPL policy covers the insured's liability arising from

the natural gas-fueled explosion and fire.                      Chartis must pay its

share of the defense fees and indemnity payments as ordered by
the circuit court.           Accordingly, we reverse the decision of the
                                              3
                                                                                  No.        2013AP1303

court of appeals and remand the cause to the circuit court to

reinstate the judgment in favor of Acuity and against Chartis.

                                                 I

     ¶9     The facts are not in dispute for purposes of this

review.

     ¶10    The insured contracted with the Wisconsin Department

of   Transportation          to     perform           road        construction,          including

underground      excavation.              While       the     insured's       employees             were

excavating       a    portion       of     Worthington             Street    in     Oconomowoc,

Wisconsin, they discovered a pressurized natural gas pipe and

incorrectly      concluded        that      it       was     no    longer     in        use.         The

employees       attempted      to    move        the       pipe,        damaging    it        in     the

process.

     ¶11    The damage to the pipe caused natural gas to escape.

Shortly    thereafter,        natural       gas        that       had    leaked     out        of    the

damaged pipe exploded, causing a fire.                             The explosion and fire

caused property damage to various buildings, including a nearby

church    and    residence,         and    caused          personal       injury        to    various
people at the scene.

     ¶12    In       the    aftermath       of       the     explosion       and    fire,           four

lawsuits were filed against the insured seeking recovery for

property damage and bodily injury.                            These four lawsuits were

consolidated in Waukesha County Circuit Court.

     ¶13    Acuity         undertook      the        insured's       defense       in        the    four

lawsuits.       The insured and Acuity filed a third-party complaint

against Chartis seeking, among other things, a declaration that

                                                 4
                                                                             No.      2013AP1303

Chartis has a duty to defend and indemnify the insured in the

four lawsuits.

      ¶14    Acuity     did    not        contest         its   duties    to    defend      and

indemnify the insured and does not contest its liability in the

instant case.       Rather, it seeks reimbursement from Chartis for

one-half     of   the    defense          fees       incurred      in    representing       the

insured     and   one-half         of    the   indemnity          payments     made    on   the

insured's behalf.

      ¶15    Chartis denies coverage under its CPL policy, which

covers the insured's liability for "Bodily Injury [or] Property

Damage . . . caused           by        Pollution         Conditions . . . ."          Chartis

does not contest that the four lawsuits allege bodily injury and

property damage resulting from the natural gas-fueled explosion

and fire.     Rather, Chartis asserts that neither the natural gas-

fueled explosion and fire nor the resulting bodily injury and

property     damage     were        "caused          by    Pollution      Conditions"        as

required by the CPL policy.

      ¶16    Acuity and Chartis filed opposing motions for summary
judgment on the issue of coverage under Chartis's CPL policy.

On January 28, 2011, the circuit court entered summary judgment

in   favor   of    Acuity.         The    circuit         court    determined      that     the

natural gas that leaked from the damaged pipe constitutes a

"contaminant" under the CPL policy and thus that its release

from the damaged pipe was a "pollution condition" under the

policy.      The circuit court explained: "[N]atural gas doesn't

belong floating around in the street, or in the church, or in

                                                 5
                                                                    No.    2013AP1303

the air around this area because it might blow up.                        So it's a

contaminant in that sense, it's certainly dangerous."

     ¶17       With   regard   to    the   allocation      of   defense   fees   and

indemnity payments, the circuit court entered an order on May

25, 2012, instructing Acuity and Chartis to split the cost of

defending and indemnifying the insured "on a 50-50 basis."

     ¶18       The underlying lawsuits settled, and Chartis paid its

one-half share of the defense fees incurred by Acuity.                           The

circuit court entered an order on May 2, 2013, after the four

lawsuits had settled, instructing Chartis to pay its one-half

share of the indemnity settlement payments as well.                       On May 8,

2013, a money judgment was entered against Chartis.

     ¶19       The court of appeals reversed the circuit court and

remanded the cause to the circuit court with instructions to

vacate the orders and judgment in favor of Acuity and to enter

judgment in favor of Chartis.                  The court of appeals provided

scant    explanation     of    its   decision,     concluding      that   the    four

lawsuits alleged bodily injury and property damage "due only to
the explosion and fire, not to contact with the escaped natural

gas itself because the gas intrinsically is an 'irritant or

contaminant' . . . ."4          Thus,      the   opinion    continues,     coverage

under Chartis's CPL policy is not "fairly debatable" and Chartis

had no duty to defend the insured in the underlying lawsuits.5
     4
       Acuity, A Mutual Ins. Co. v. Chartis Specialty Ins. Co.,
No. 2013AP1303, unpublished slip op., ¶14 (Wis. Ct. App. Mar.
12, 2014).
     5
         Id.

                                           6
                                                             No.    2013AP1303

                                   II

     ¶20    We   review   the   circuit    court's   grant     of    summary

judgment in favor of Acuity using the same standards and methods

applied by the circuit court.6            Under Wis. Stat. § 802.08(2)

(2011-12),7 a moving party is entitled to summary judgment if

there are no genuine issues of material fact and the moving

party is entitled to judgment as a matter of law.8             The parties

in the instant case do not dispute the facts.                The issue is

whether Acuity is entitled to judgment as a matter of law.

     ¶21    Whether Acuity is entitled to summary judgment as a

matter of law depends on the interpretation of Chartis's CPL

policy.     The interpretation of an insurance policy ordinarily

presents a question of law that this court decides independently

of the circuit court and court of appeals, but benefiting from

their analyses.9

                                   III

     ¶22    We begin by repeating the rules governing a court's

interpretation of an insurance policy.          These rules have been
set forth many times.

     6
       Pawlowski v. Am. Family Mut. Ins. Co., 2009 WI 105, ¶15,
322 Wis. 2d 21, 777 N.W.2d 67.
     7
       All subsequent references to the Wisconsin Statutes are to
the 2011-12 version unless otherwise indicated.
     8
         Pawlowski, 322 Wis. 2d 21, ¶15.
     9
       Martin v. Am. Family Mut. Ins. Co., 2002 WI 40, ¶10, 252
Wis. 2d 103, 643 N.W.2d 452.

                                    7
                                                                     No.    2013AP1303

      ¶23    Words and phrases in insurance policies are subject to

the   same        rules     of     construction        applicable    to    contracts

generally.10       The primary objective in construing these words and

phrases is "to ascertain and carry out the true intent of the

parties."11       To that end, "a court may consider the purpose or

subject matter of the insurance, the situation of the parties,

and the circumstances surrounding the making of the contract."12

      ¶24    When language in an insurance policy is unambiguous, a

court will not rewrite the policy by interpretation or impose

obligations       the     parties     did   not   undertake.13       However,    when

language     in    an     insurance    policy     is   ambiguous,    it    should    be

construed     against        the    insurance      company    that    drafted       the

policy.14     "Under the doctrine of contra proferentem, ambiguities

in a policy's terms are to be resolved in favor of coverage,

while coverage exclusion clauses are construed narrowly against

the insurer."15

      ¶25    To protect the insured's reasonable expectations of

coverage, a policy's terms "should be interpreted as they would

      10
       Frost ex rel. Anderson v. Whitbeck, 2002 WI 129, ¶15, 257
Wis. 2d 80, 654 N.W.2d 225.
      11
           Id., ¶16.
      12
           Id., ¶22.
      13
           Id., ¶17.
      14
           Id., ¶19.
      15
       Donaldson v. Urban Land Interests, Inc., 211 Wis. 2d 224,
230, 564 N.W.2d 728 (1997) (footnote omitted).

                                            8
                                                                        No.   2013AP1303

be understood from the perspective of a reasonable person in the

position of the insured."16

     ¶26    To       determine   whether       a   duty   to   defend    exists,     the

court must compare "the allegations of the complaint to the

terms of the insurance policy."17                   As this court declared in

Liebovich       v.   Minnesota   Insurance         Co.,   2008   WI   75,     ¶16,   310

Wis. 2d 751, 751 N.W.2d 764, "[a]n insurer has a duty to defend

when there are allegations in a complaint that, if proven, would

give rise to recovery under the terms and conditions of the

insurance policy." (Internal quotation marks omitted.)

     16
          Id.

     Two more recent cases discuss the reasonable insured
standard for interpreting a general liability policy's pollution
exclusion clause.   See Preisler v. Gen. Cas. Ins. Co., 2014 WI
135, ¶40, ___ Wis. 2d ___, 857 N.W.2d 136; Wilson Mutual Ins.
Co. v. Falk, 2014 WI 136, ¶38, ___ Wis. 2d ___, 857 N.W.2d 156.
     17
       Fireman's Fund Ins. Co. of Wis. v. Bradley Corp., 2003 WI
33, ¶19, 261 Wis. 2d 4, 660 N.W.2d 666.      See also Estate of
Sustache v. Am. Family Mut. Ins. Co., 2008 WI 87, ¶20, 311
Wis. 2d 548, 751 N.W.2d 845 (stating that the "allegations
contained within the four corners of the complaint" trigger the
duty to defend).

     The insurance policy at issue in the instant case provides
a duty to defend as follows:

     B. DEFENSE

          When a Claim is made against the Insured to which
          Section I. INSURING AGREEMENT, A. COVERAGE above
          applies, the Company has the right to appoint
          counsel and the duty to defend such Claim, even if
          groundless, false, or fraudulent.

                                           9
                                                                    No.   2013AP1303

      ¶27    Although "the duty to defend is triggered by arguable,

as   opposed     to   actual,   coverage,"18    the    duty    to    indemnify   is

triggered by actual coverage.19            In other words, the duty to

defend depends upon the nature, not the merits, of the claim

against the insured,20 while the duty to indemnify depends on the

merits of the claim.21          The duty to defend is therefore broader

than the duty to indemnify.22

      ¶28    Employing    these    rules   of     interpretation,         a   court

engages     in    a   three-step    process     to     determine      whether    an

insurance policy provides coverage.23             A court first determines

      18
           Fireman's Fund, 261 Wis. 2d 4, ¶20 (emphasis added).
      19
       See 14 Steven Plitt et al., Couch on Insurance § 200:3 at
200-10 (3rd ed. 1997) (explaining that the duty to defend
depends on whether there is a possibility of "liability to
indemnify," whereas "the duty to indemnify [] arises only when
the insured's underlying liability is established" (emphasis
added)).
      20
       Liebovich v. Minn. Ins.             Co.,       2008    WI    75,   ¶16,   310
Wis. 2d 751, 751 N.W.2d 764.
      21
       See 14 Plitt et al., supra note 19, § 200:3 at 200-10
("[T]he duty to indemnify arises only once liability has been
conclusively determined.").   See also 2 Arnold P. Anderson,
Wisconsin Insurance Law § 7.24 (6th ed. 2010) (stating that the
duty to defend "depends on the nature of the claim and has
nothing to do with the merits of the claim" and explaining that
"[t]he duty to indemnify is not reached if there is no arguable
coverage (duty to defend)").
      22
           Elliott v. Donahue, 169 Wis. 2d 310, 320, 485 N.W.2d 403
(1992).
      23
       See, e.g., Preisler, ___ Wis. 2d ___, ¶22; Wilson Mut.,
___ Wis. 2d ___, ¶26; Wadzinski v. Auto-Owners Ins. Co., 2012 WI
75, ¶14, 342 Wis. 2d 311, 818 N.W.2d 819.

                                      10
                                                             No.     2013AP1303

whether the dispute at issue falls within the initial coverage

grant of the policy.         If so, the court then determines whether

any of the policy's exclusions apply to remove the matter from

the scope of the policy's coverage.              If an exclusion applies,

the court must then decide whether an exception to the exclusion

applies to reinstate coverage.

      ¶29   With these interpretive principles in mind, we turn to

Chartis's CPL policy, the policy at issue.

                                       IV

      ¶30   Three sections of Chartis's CPL policy are important

to determining Chartis's liability in the present case.

      ¶31   First is the coverage section of the CPL policy.                 The

policy provides that Chartis will cover the insured's liability

for   claims   of   bodily   injury    and   property   damage     "caused    by

Pollution Conditions."        The relevant coverage provision states

as follows:

      A. COVERAGE

        1. The Company will pay on behalf of the Insured all
           sums that the Insured shall become legally
           obligated to pay as Loss as a result of Claims
           for   Bodily    Injury,   Property    Damage,   or
           Environmental    Damage   caused   by    Pollution
           Conditions resulting from Covered Operations.
           The Pollution Conditions must be unexpected and
           unintended from the standpoint of the Insured.
           The   Bodily    Injury,   Property    Damage,   or
           Environmental Damage must occur during the Policy
           Period.
      ¶32   Second is the CPL policy's definitions of the phrases

"Pollution     Conditions"    and     "Covered   Operations,"      which     are
critical to defining the scope of the policy's coverage.

                                       11
                                                                         No.   2013AP1303

       ¶33    The phrase "Pollution Conditions" is defined by the

policy as the "release or escape of any solid, liquid, gaseous,

or thermal irritant or contaminant . . . into or upon land, or

any structure on land, [or] the atmosphere . . . provided such

conditions are not naturally present in the environment in the

concentration        or     amounts    discovered."           The   policy     does    not

define       the    terms    "irritant"         or     "contaminant."          The    full

definition of "Pollution Conditions" is as follows:

       Pollution Conditions means the discharge, dispersal,
       release or escape of any solid, liquid, gaseous or
       thermal irritant or contaminant, including smoke,
       vapors, soot, fumes, acids, alkalis, toxic chemicals,
       medical waste and waste materials into or upon land,
       or any structure on land, the atmosphere or any
       watercourse or body of water, including groundwater,
       provided such conditions are not naturally present in
       the environment in the concentration or amounts
       discovered.
       ¶34    The     phrase       "Covered          Operations"    is     defined      by

Chartis's CPL policy as "those activities performed by the Named

Insured at a job site."                No one disputes that the insured's

excavation project, during which the insured's employees damaged

the natural gas pipe, was a covered operation under the policy.

       ¶35    Third are the policy's "other insurance" provisions.

An    endorsement      to    the    CPL    policy       regarding   other      insurance

provides that "[w]here other insurance may be available for Loss

covered under [the CPL] Policy," the CPL policy "is primary."

The    endorsement          details       Chartis's      obligations       under      such

circumstances, including its obligation to contribute one half
of    the    cost    of     covering       an     insured's    liability       when   the

                                             12
                                                                           No.      2013AP1303

insured's     other    insurance            policy     "is   also    primary"       and   that

policy "permits contribution by equal shares."

       ¶36    The "other insurance" endorsement to the CPL policy

also excludes from coverage any claim arising out of covered

operations with respect to which the named insured is insured

under another CPL policy.

       ¶37    We now explore these sections of the CPL policy in the

context of the facts underlying the instant case.                              We begin by

determining whether the escape of natural gas from the damaged

pipe    falls       within       the        policy's       definition     of       "Pollution

Conditions."         More specifically, we address whether the four

lawsuits     assert    claims          of    bodily     injury      or   property      damage

"caused      by    Pollution        Conditions."             We   explore      the    "other

insurance" sections of the CPL policy last.

                                                V

       ¶38    We address three arguments the parties pose regarding

Chartis's      obligations          under      its     CPL    policy     to    defend       and

indemnify the insured.
       ¶39    First,       the     parties      dispute       whether    the       escape    of

natural      gas    from     the    damaged         pipe     constitutes       a    pollution

condition.         This dispute centers on whether natural gas is an

"irritant or contaminant."

       ¶40    Second, if the escape of natural gas from the damaged

pipe was a pollution condition, the parties dispute whether the

property damage and bodily injury alleged in the four lawsuits

were "caused" by that pollution condition.

                                               13
                                                                       No.    2013AP1303

     ¶41    Third, the parties dispute whether concurrent coverage

under Acuity's CGL policy and Chartis's CPL policy is possible

in the instant case.

                                          1

     ¶42    First, we address whether the escape of natural gas

from the damaged pipe constitutes a pollution condition.                              The

answer turns on whether the natural gas that escaped from the

damaged pipe was an "irritant or contaminant."                       Chartis's policy

does not define the words               "irritant" and "contaminant."                 The

court has, however, previously interpreted the words "irritant"

and "contaminant" in the context of pollution exclusion clauses

in general liability policies.

     ¶43    In the instant case, we are interpreting the words

"irritant" and "contaminant" in the CPL policy's statement of

coverage.        The   meanings    of    these    words       when   used    in   a   CPL

policy's    statement      of     coverage     may    be      different      than     the

meanings    of    these   words    when    used      in   a    pollution     exclusion

clause in a general liability policy.                 As explained previously,
ambiguities in the coverage terms of an insurance policy are

construed broadly (in favor of coverage), while ambiguities in

an insurance policy's exclusion are construed narrowly (in favor

of coverage).24        Nevertheless, our interpretation of the words

"irritant" and "contaminant" in prior cases involving pollution

exclusion clauses is instructive.

     24
          Donaldson, 211 Wis. 2d at 230.

                                          14
                                                                                 No.    2013AP1303

     ¶44    When       interpreting      these       words           in     the    context       of

pollution exclusion clauses in general liability policies, the

court has used the common, ordinary, dictionary definitions of

these words.

     ¶45    Furthermore, in the pollution exclusion clause cases,

the court has interpreted the words "irritant" and "contaminant"

by looking to the particular fact situation presented.                                          The

court      has        recognized       that        the        words         "irritant"          and

"contaminant,"          when     "viewed       in        isolation,          are       virtually

boundless, for there is virtually no substance or chemical in

existence    that       would    not   irritate          or    damage       some       person    or

property."25      Thus, when interpreting these words in a pollution

exclusion clause, the court has applied limiting principles to

prevent the exclusion from extending beyond its intended scope

and leading to absurd results.26

     ¶46    In discussing whether natural gas is a contaminant,

the parties in the instant case focus on two pollution exclusion

clause cases:           Peace ex rel. Lerner v. Northwestern National
Insurance    Co.,       228     Wis. 2d 106,        596       N.W.2d 429          (1999),       and

Hirschhorn       v.    Auto-Owners      Insurance             Co.,        2012    WI    20,     338

Wis. 2d 761, 809 N.W.2d 529.

     25
       Id. at 232 (quoting Pipefitters Welfare Educ. Fund v.
Westchester Fire Ins. Co., 976 F.2d 1037, 1043 (7th Cir. 1992)).
     26
       Donaldson, 211 Wis. 2d at 232 (citing Pipefitters, 976
F.2d at 1043).

                                              15
                                                                       No.    2013AP1303

      ¶47    In Peace, the issues were whether lead paint was a

pollutant and, relatedly, whether damage caused by lead paint

was excluded from coverage under an insurance policy's pollution

exclusion clause.

      ¶48    The insured landlords in Peace sought coverage under

their commercial general liability policy for a child tenant's

personal injury claim.               The complaint alleged that the landlord

"negligently failed to properly remove all lead-based paint from

the property"; that the child had ingested lead paint chips,

flakes,     and    dust    inside       the     property;    and     that    the    child

suffered lead poisoning as a result.27

      ¶49    The       landlords'      commercial      general     liability       policy

excluded from coverage all claims of bodily injury or property

damage      "arising      out    of    the      actual,    alleged    or     threatened

discharge, dispersal, release or escape of pollutants . . . ."28

The policy defined "pollutants" as "any solid, liquid, gaseous

or   thermal      irritant      or    contaminant . . . ."29           The    insurance

company asserted that lead paint was a contaminant and thus a
pollutant,       and    denied       coverage      under   the   policy's     pollution

exclusion clause.

      ¶50    The Peace court observed that the commercial general

liability policy provided no definition of "contaminant."                            The

      27
       Peace ex rel. Lerner v. Nw. Nat'l                             Ins.    Co.,     228
Wis. 2d 106, 113-14, 596 N.W.2d 429 (1999).
      28
           Id. at 113.
      29
           Id.

                                              16
                                                                        No.    2013AP1303

court      stated:           "When    determining       the    ordinary     meaning      of

[undefined] words, it is appropriate to look to the definitions

in a non-legal dictionary."30                  The court further stated that the

dictionary           definition        of      "contaminant"       is       "one        that

contaminates."31          "Contaminate," the court explained, "is defined

as '1. To make impure or unclean by contact or mixture.'"32

      ¶51       Because of the severe consequences of lead poisoning

for human health, the Peace court concluded that "[t]here is

little doubt that lead derived from lead paint chips, flakes, or

dust is . . . [a] serious contaminant."33                      Thus, the Peace court

determined that lead released from "lead paint, chips, flakes,

or   dust"       fell     under      the    definition    of    "pollutant"        in   the

pollution exclusion clause of the commercial general liability

policy     at       issue.     The     Peace    court    barred   recovery     on       that

ground.

      ¶52       A    second    case    defining      "pollutant,"      this   time      for

purposes        of    a   pollution        exclusion    clause    in    a   homeowner's

policy, is Hirschhorn v. Auto-Owners Insurance Co., 2012 WI 20,
338 Wis. 2d 761, 809 N.W.2d 529.

      ¶53       In    Hirschhorn,          insured   homeowners     sought     coverage

under their homeowners' policy for damage to their vacation home

      30
           Id. at 122.
      31
           Id.
      32
           Id.
      33
           Id. at 125.

                                               17
                                                                       No.     2013AP1303

that resulted from "the accumulation of bat guano between the

home's     siding      and    walls."34            The    alleged     damage       was   a

"penetrating and offensive odor emanating from the home."35

     ¶54    The      homeowners'          policy     at    issue      in     Hirschhorn

contained a pollution exclusion clause similar to the one at

issue in Peace.         This pollution exclusion clause barred recovery

for any "loss resulting directly or indirectly from . . . [the]

discharge, release, escape, seepage, migration or dispersal of

pollutants."36         The policy defined "pollutants" as "any solid,

liquid,      gaseous         or        thermal      irritant    or         contaminant,

including . . . waste."37

     ¶55    As    in    Peace,     the     policy    in   Hirschhorn       included      no

definition of "contaminant."                The Hirschhorn court applied the

dictionary      definition        of    "contaminant"      provided    by    the    Peace

court, concluding that bat guano——like the lead released from

lead paint——is a contaminant and thus a pollutant.                           The court

explained that "bat guano and its attendant odor make impure or

unclean the surrounding ground and air space . . . ."38                             Thus,

     34
       Hirschhorn v. Auto-Owners Ins. Co., 2012 WI 20, ¶8, 338
Wis. 2d 761, 809 N.W.2d 529.
     35
          Id.
     36
          Id., ¶5.
     37
          Id.
     38
          Id., ¶33 (internal quotation marks omitted).

                                            18
                                                                   No.   2013AP1303

the court barred recovery under the policy's pollution exclusion

clause.39

      ¶56   Using    the      dictionary      definition      of   "contaminant"

applied by the court in Peace and Hirschhorn, natural gas that

is   released   into    the    air   from     a   damaged    natural     gas   pipe

constitutes a contaminant.           Natural gas renders the surrounding

ground and air space impure or unclean because natural gas is

extremely   flammable      and    explosive.40       An     explosion    and   fire

resulted in "great harm" in the present case.                 Thus, we conclude

that natural gas is a contaminant under the circumstances of the

present case.

      ¶57   However,    to    qualify    as   a   pollution    condition       under

Chartis's CPL policy, the contaminant must also be released in

concentrations       above       those      "naturally       present     in     the

environment."       In the instant case, the natural gas released at

the site of the explosion and fire indisputably occurred in

      39
        For additional discussion of Peace, Hirschhorn, and
related   cases  that   interpret  the  words   "irritant"  and
"contaminant" in pollution exclusion clauses, see Preisler, ___
Wis. 2d ___, ¶¶29-52, and Wilson Mutual, ___ Wis. 2d ___, ¶¶23-
52.
      40
       Natural gas invariably contains methane, usually contains
ethane, and sometimes contains propane and butane, all of which
are combustible.      G.G. Nasr & N.E. Connor, Natural Gas
Engineering Safety and Challenges: Downstream Process, Analysis,
Utilization and Safety 2 (2014).    Consequently, the release of
natural gas may result in fires or explosion. See U.S. Dep't of
Transportation, The State of National Pipeline Infrastructure 2,
https://opsweb.phmsa.dot.gov/pipelineforum/docs/Long%20Version%2
0Preliminary%20Report%20on%20Infrastructure%20040711draftwDecade
CauseCharts.pdf (last visited March 12, 2015).

                                         19
                                                                          No.     2013AP1303

concentrations above those "naturally found in the environment."

The escape of natural gas from the damaged pipe was, therefore,

a pollution condition under Chartis's CPL policy.

       ¶58   Furthermore, the expectations of a reasonable insured

guide our analysis.            A reasonable insured in the position of the

insured construction company in the instant case would believe

that    natural     gas       inadvertently      released    into     the       air   is   a

contaminant that creates a pollution condition.

       ¶59   The insured construction company in the instant case

contracts    with       the    Wisconsin     Department      of   Transportation           to

perform road construction, including excavation.                            The insured

knows    that      numerous        sources       of     contamination           are   found

underground,       including       natural    gas      pipelines,     sanitary        sewer

lines, and septic tanks.                The insured operates heavy machinery

excavating near and around these various contamination sources.

       ¶60   Any reasonable insured construction company engaged in

this kind of work would be concerned about possibly damaging

these     contamination           sources        and     releasing        contaminants.
Consequently, a reasonable insured construction company would

expect   its      CPL   policy     to    cover     damages   from     the       accidental

release of contaminants during an excavation.                     In other words, a

reasonable insured construction company would conclude that the

natural gas leak in the instant case constituted a pollution

condition under Chartis's CPL policy.

       ¶61   To    summarize:       "Pollution         Conditions"    is    defined        by

Chartis's       CPL       policy     as      the       "release      or     escape         of
any . . . gaseous . . . irritant or contaminant . . . [into] the
                                            20
                                                                        No.     2013AP1303

atmosphere . . . provided           such       conditions      are   not      naturally

present      in   the   environment     in      the   concentration        or    amounts

discovered."        Natural gas is, of course, "gaseous."                  Natural gas

is also a "contaminant" under the circumstances of the instant

case.        Natural    gas   was   "release[d]        or    escape[d]"         from   the

damaged natural gas pipe, and there is no dispute that natural

gas     is   "not    naturally      present      in   the     environment        in    the

concentration" that caused the explosion and fire.

       ¶62    We therefore agree with Acuity and the circuit court

that natural gas constitutes a "contaminant" in the instant case

and that the escape of natural gas from the damaged pipe was a

pollution condition under Chartis's CPL policy.

                                           2

       ¶63    Having    determined      that      natural      gas   constitutes         a

contaminant and that the escape of natural gas from the damaged

pipe was a pollution condition under Chartis's CPL policy, we

next     address     whether     this   pollution           condition     caused       the

property damage and bodily injury alleged in the four lawsuits
brought against the insured.

       ¶64    The coverage provision in Chartis's CPL policy states

that Chartis will pay on behalf of the insured all sums that the

insured shall become legally obligated to pay for bodily injury

or property damage "caused by Pollution Conditions."                          (Emphasis

added.)

       ¶65    We conclude that the bodily injury and property damage

alleged in the four lawsuits fulfill this requirement, that is,

                                           21
                                                                              No.   2013AP1303

the alleged bodily injury and property damage were "caused by

Pollution Conditions."

       ¶66   Our reasoning is simple.                     Each of the four lawsuits

against the insured alleges that the actions of the insured's

employees led to a natural gas leak that ultimately resulted in

an    explosion       and    fire,     causing          bodily    injury      and    property

damage.      There is no dispute that the natural gas leak caused

the explosion and fire.               There is no dispute that the explosion

and fire caused the alleged bodily injury and property damage.

This sequence of events is sufficient to establish that the

escape of natural gas (a pollution condition) caused the alleged

bodily injury and property damage.

       ¶67   In Peace, the release of lead from lead paint, chips,

and   dust      caused      the     child    tenant       to     ingest    lead,     and   the

ingestion       of    lead    poisoned       the       child.      In     Hirschhorn,      the

release of bat guano into the walls led to an offensive odor,

and the offensive odor made the property uninhabitable.                                As in

Peace     and     Hirschhorn,        it     is        clear    under    the    language     of
Chartis's CPL policy that the bodily injury and property damage

alleged      in      the     four    lawsuits           were     "caused      by    Pollution

Conditions."

       ¶68   Chartis, however, contends that the language of the

CPL policy does not mean what it says.                           Chartis argues that to

fulfill the policy's causation requirement, it is not enough

that a substance capable of acting as a contaminant was the but-

for cause of the alleged bodily injury and property damage.
Rather, according to Chartis, "the contaminating nature of the
                                                 22
                                                               No.   2013AP1303

substance   at   issue"     must   directly    cause   the   alleged    bodily

injury and property damage.        (Emphasis added.)

    ¶69     Chartis contends that the bodily injury and property

damage alleged in the four lawsuits were caused by the explosion

and fire, not by the contaminating nature of natural gas.               Thus,

Chartis reasons, there is no coverage under the CPL policy.

    ¶70     We are not convinced by Chartis's argument.

    ¶71     First, Chartis fails to tether its argument to the

language of the CPL policy.         We do not agree that Chartis's CPL

policy requires the contaminating nature of the substance at

issue to cause the alleged damage in order to trigger coverage.

On its face, the CPL policy covers claims of bodily injury or

property damage "caused by Pollution Conditions"——nothing more,

nothing less.      Chartis does not explain why this court should

read a more stringent causation requirement into this provision.

    ¶72     Second, even assuming that the contaminating nature of

the contaminant must cause the bodily injury or property damage,

we conclude that the contaminating nature of natural gas                    is
precisely   what   caused    the   bodily     injury   and   property   damage

alleged in the four lawsuits.

                                      23
                                                             No.   2013AP1303

      ¶73   As discussed previously, natural gas is a contaminant.

It can cause injury through inhalation41 and when it mixes with

air in certain concentrations, it can explode or ignite.                   In

other words, part of the contaminating nature of natural gas is

its capacity to cause explosions and fire.           In the instant case,

the escape of natural gas caused an explosion and fire that

resulted in bodily injury and property damage.                 The alleged

bodily injury and property damage were therefore caused by the

contaminating nature of natural gas.

      ¶74   Chartis's counterarguments are unpersuasive.

      ¶75   The three principal cases upon which Chartis relies to

support its causation argument are Guenther v. City of Onalaska,

223   Wis. 2d 206,     588    N.W.2d 375    (Ct.   App.   1998);   Beahm   v.

Pautsch, 180 Wis. 2d 574, 510 N.W.2d 702 (Ct. App. 1993); and

URS Corp. v. Zurich American Insurance Co., 979 N.Y.S.2d 506

(Sup. Ct. 2014).        None of these cases persuades us to adopt

Chartis's position in the instant case.

      ¶76   Guenther    and    Beahm    interpret    pollution     exclusion
clauses in general liability policies; they do not interpret

pollution liability policies such as the CPL policy at issue in

the present case.      As we explained above, the interpretation of

      41
       "If a natural gas leak has occurred and is severe, oxygen
can be reduced, causing dizziness, fatigue, nausea, headache,
and irregular breathing." U.S. Nat'l Library of Med., "Natural
Gas,"      Tox       Town,      toxtown.nlm.nih.gov/text_version/
chemicals.php?is=18 (last updated Oct. 29, 2014).        Further,
"[e]xposure to extremely high levels of natural gas can cause
loss of consciousness or even death." Id.

                                       24
                                                            No.   2013AP1303

the words "pollutant" and "contaminant" in a pollution exclusion

clause in a general liability policy will not necessarily be the

same as the interpretation of the terms "pollution condition"

and    "contaminant"   in   a   coverage   provision   in    a    pollution

liability policy.      Guenther and Beahm, therefore, do not control

the instant case.

       ¶77   Furthermore, even assuming Chartis is correct that the

"contaminating nature" reasoning in Guenther and Beahm applies

to the instant case, we conclude that the damage alleged in the

four lawsuits was caused by the contaminating nature of natural

gas.

       ¶78   URS, in contrast, does interpret a pollution liability

policy. URS is one of the few cases interpreting a pollution

liability policy.42    But URS is not persuasive.      The facts in URS

are readily distinguishable from the facts in the instant case

and the analysis in URS relies on New York case law that differs

from Wisconsin case law.

       ¶79   We briefly review these three cases.
       ¶80   In Guenther, homeowners sued the City of Onalaska when

a sewer backed up and spewed sewage into their basement, causing

damage.      The City's general liability policy had a pollution

exclusion clause that excluded coverage for any claim arising

       42
       URS Corp. v. Zurich Am. Ins. Co., 979 N.Y.S.2d 506, 510
(Sup. Ct. 2014) ("There are, in fact, few cases that deal with
interpretation of a pollution liability policy.").

                                    25
                                                                           No.    2013AP1303

out   of     "contamination . . . by               POLLUTANTS."43           The     parties

disputed whether the damage to the Guenthers' basement caused by

a sewage back-up constituted contamination by pollutants.                                The

insurance      company      asserted    that        the   back-up     did        constitute

contamination by pollutants and denied coverage.

      ¶81    The    court    of    appeals        disagreed,    in    part,       with   the

insurance company's position.                     The court of appeals reasoned

that the policy's definition of "contamination" implies that for

contamination to occur, the alleged harm "must be caused by the

toxic nature of the discharged material."44                      The damage to the

basement was apparently caused to some extent by the liquid

nature of the sewage——not by its toxic nature.45

      ¶82    The court of appeals in Guenther therefore held that

the policy provided coverage for any damage caused by the liquid

nature of the sewage and not its toxic nature.                             To the extent

the   damage      was   caused     by   the       toxic   nature      of    the    sewage,

however,     the    court     of    appeals         concluded      that      the    damage

constituted        contamination        by    pollutants        and        the     policy's
pollution exclusion clause barred coverage.

      ¶83    In    Beahm, Wilson Mutual Insurance Company's insured

was in the business of setting fires to burn off grass.                                  One

such fire became uncontrollable, with smoke blowing across a

      43
       Guenther v. City of Onalaska, 223 Wis. 2d 206, 211, 588
N.W.2d 375 (Ct. App. 1998).
      44
           Id. at 213.
      45
           Id. at 215.

                                             26
                                                                           No.    2013AP1303

nearby highway and obscuring the vision of motorists.                             A multi-

vehicle accident resulted.

     ¶84     Wilson Mutual denied coverage for the incident because

of its policy's pollution exclusion clause.                         The policy listed

"smoke" in its definition of "pollutant."46                    The court of appeals

disagreed    with    Wilson        Mutual's     assessment,        concluding      that   a

reasonable insured would believe the pollution exclusion clause

excluded coverage only when the alleged damage was caused by the

toxic nature of smoke.47

     ¶85     The    Beahm      court    determined          that    the    multi-vehicle

accident     resulted    because       smoke     is    an    opaque       substance,    not

because    smoke    "may    have       toxic    properties         which    may    corrode

property     or    injure      a    person's      eyes,       skin    or     respiratory

system."48     Thus, the pollution exclusion clause in the Wilson

Mutual policy did not bar coverage.

     ¶86     Guenther      and     Beahm   do    not    support       Chartis      in   the

present    case.        Even       accepting     Chartis's         argument      that   the

"contaminating nature" analysis in Guenther and Beahm applies to
the instant case, we have already determined that the damage

alleged in the four lawsuits was caused by the contaminating

nature of natural gas.              Consequently, the causation requirement

Chartis proposes has been fulfilled in the instant case.

     46
       Beahm v. Pautsch, 180 Wis. 2d 574, 580, 510 N.W.2d 702
(Ct. App. 1993).
     47
          Id. at 584-85.
     48
          Id. at 584.

                                           27
                                                                      No.   2013AP1303

       ¶87    Unlike Beahm and Guenther, URS involves a pollution

liability policy.          URS is not helpful to Chartis, however.

       ¶88    In    URS,   the    Hudson   Specialty      Insurance      Company   was

obligated to cover damage caused by pollution conditions on any

site    where      an   insured    was   performing      contracting     operations.

The    Hudson      policy's      definition     of    "pollution    conditions"    is

identical to the definition provided by Chartis's CPL policy.49

       ¶89    A fire took place at a building at which a Hudson

insured was performing contracting operations.                       Lawsuits were

filed against the insured alleging that its negligence resulted

in the creation of fire hazards within the building; that these

fire hazards eventually caused a fire to break out; and that the

fire caused death and injury to firefighters who responded to

the emergency.

       ¶90    Hudson maintained that none of the alleged deaths or

injuries arose out of a pollution condition as required by its

pollution liability policy.              The URS court agreed with Hudson.50

In reaching this conclusion, the URS court stressed the "close
identity between the traditional pollution exclusion provision

and Hudson's pollution coverage provision."51                      Because of this

"close      identity,"     the     URS   court       relied   on   New   York   cases

interpreting pollution            exclusion      clauses in general liability

       49
            See URS, 979 N.Y.S.2d at 507-08.
       50
            Id. at 511.
       51
            Id. at 510 (emphasis added).

                                           28
                                                                  No.    2013AP1303

policies when construing the Hudson policy's pollution coverage

provision.52

     ¶91    New York's pollution exclusion cases had interpreted

pollution    exclusion    clauses     as    barring    coverage    for   "broadly

dispersed environmental pollution."53             Thus, the URS court held

that under New York law, a pollution liability policy insures

against    claims    arising   from    broadly        dispersed   environmental

pollution,     not      pollution     occurring        within     the    confined

environment of a building.54

     52
       The URS court also relied on Colonial Oil Indus. Inc. v.
Indian Harbor Ins. Co., 528 Fed. Appx. 71 (2nd Cir. 2013).
Colonial Oil interpreted a pollution coverage policy similarly
worded to the one in URS.

     Colonial  was   a   corporation   whose  business   involved
transporting, storing, and selling fuel oil.    Colonial received
a delivery of 25 truckloads of oil, which were unloaded into one
of Colonial's storage tanks.     Colonial later discovered that
this fuel oil was contaminated with polychlorinated biphenyl, a
pollutant. Colonial lost the oil as a result and incurred costs
for decontamination and remediation.    Colonial sought coverage
for the incident under its pollution and remediation liability
policy.

     Applying New York law, the federal court of appeals
concluded that the policy did not cover Colonial's claim.
Coverage under the policy was limited to "pollution conditions,"
which was defined as the "discharge, dispersal, release,
seepage, migration, or escape of POLLUTANTS." Colonial Oil, 528
Fed. Appx. at 73 (emphasis added). Because the pollutant in the
oil remained confined in Colonial's storage tanks and was never
released into environment, the federal court of appeals
concluded that the events did not constitute a "pollution
condition" as required by the policy.
     53
          See URS, 979 N.Y.S.2d at 510.
     54
          Id. at 511.

                                       29
                                                                           No.    2013AP1303

      ¶92   Our case law interpreting pollution exclusion clauses

in general liability policies does not take the same approach as

the   New   York      cases.        Wisconsin       cases       have     not    interpreted

pollution    exclusion         clauses       as    dealing       solely    with     broadly

dispersed environment pollution.                  We are therefore not persuaded

by the reasoning or conclusion of the New York court in URS.

      ¶93   In sum, Guenther, Beahm, and URS do not convince us to

adopt   Chartis's          proposed       requirement      that     the    contaminating

nature of the contaminant cause the damage.                       These cases are not

dispositive      of    the     instant      case     because       the    facts,       policy

language, or governing law are different in the instant case.

Nonetheless,          we     are      convinced          that     Chartis's        proposed

requirement has been fulfilled in the instant case, and thus

that Acuity prevails.

      ¶94   For these reasons, we conclude that the bodily injury

and   property     damage      alleged      in     the    underlying       lawsuits      were

"caused by Pollution Conditions" as required by Chartis's CPL

policy.
                                              3

      ¶95   We     turn,       finally,       to     Chartis's         contention        that

concurrent coverage under Acuity's CGL policy and Chartis's CPL

policy is not possible in the instant case.                       Chartis argues that

if Acuity's policy covers the insured's liability in the instant

case, Chartis's policy does not.

      ¶96   Chartis        spends     a    considerable         portion    of    its    brief

claiming that the manifest intent of the two policies is that
Chartis's policy covers the insured's liability for pollution
                                             30
                                                                            No.    2013AP1303

and Acuity's policy excludes it.                   Chartis explains that the CGL

policy issued by Acuity and the CPL policy issued by Chartis

"are essentially the flip side” of each other.                             Chartis asserts

that "the Acuity CGL Policy is intended to cover [the insured's]

liability for bodily injury or property damage not caused by

pollution, and the Chartis Pollution Policy is intended to cover

liability      for     bodily      injury     or    property          damage      caused    by

pollution."      (Emphasis added.)

    ¶97      In sum, Chartis argues that the four lawsuits allege

non-pollution        losses     covered     by     Acuity,      not    pollution      losses

covered by Chartis.

    ¶98      Although Chartis may be correct that CPL policies were

designed    to       fill   the    gap   in      coverage     created        by    pollution

exclusions in CGL policies, the coverage terms of Chartis's CPL

policy   are     not    the    mirror     image     of    the     pollution        exclusion

clause in Acuity's CGL policy.                   Slightly different language can

have slightly different meanings.                   Furthermore, our approach to

construing       a     pollution     exclusion           clause       in    a     commercial
liability policy differs from our approach to construing the

coverage terms in a pollution liability policy.

    ¶99      Depending        on   the   language        of   the     policies      and    the

facts of the case, it is entirely possible for both a commercial

general liability policy with a pollution exclusion clause and a

contractors' pollution liability policy to cover the insured's

liability.

    ¶100 The very terms of Chartis's CPL policy further support
our position that the two policies can simultaneously cover the
                                              31
                                                                         No.     2013AP1303

insured's        liability.           Specifically,       the    "other        insurance"

sections described above demonstrate that when drafting its CPL

policy, Chartis contemplated concurrent coverage between the CPL

policy and other insurance policies, including general liability

policies.

      ¶101 Finally, we note that our determination that Chartis's

CPL   policy      provides      coverage    in     the    instant      case      does    not

necessarily mean concurrent coverage exists.                           Acuity defended

and   indemnified        the    insured,        but   the      question     of    whether

Acuity's    CGL     policy     covers     the    insured's       liability       for     the

natural gas-fueled explosion and fire is not before us and we do

not decide it.

                                         * * * *

      ¶102 For the reasons set forth, we agree with the circuit

court's determination that that the escape of natural gas from

the damaged pipe was a pollution condition under Chartis's CPL

policy     and    that   this    pollution       condition       caused     the    bodily

injury and property damage alleged in the four lawsuits.                                  We
therefore        conclude      that     Chartis's        CPL    policy      covers       the

insured's        liability      arising      from        the    natural        gas-fueled

explosion and fire.            Chartis must pay its share of the defense

fees and indemnity payments as ordered by the circuit court.

Accordingly, we reverse the decision of the court of appeals and

remand the cause to the circuit court to reinstate the judgment

in favor of Acuity and against Chartis.

      By   the     Court.—The     decision       of   the      court   of      appeals    is
reversed.
                                           32
    No.   2013AP1303

1