A federal court in Wisconsin has reformed a 20-year-old insurance agreement, thus striking a so-called “absolute pollution exclusion” provision and potentially providing coverage for cleanup at a third-party site. WRR Envtl. Servs., Inc. v. Admiral Ins. Co., No. 10-843 (E.D. Wis. 9/7/12).
WRR Environmental Services (WRR) operated a permitted hazardous waste facility in Wisconsin and acquired the insurance from the defendant to cover that facility. Admiral Insurance Co.’s agent issued a certificate of insurance that WRR forwarded to the state as proof of financial responsibility under the applicable hazardous waste regulations, and the state accepted that certificate. Admiral, however, separately sent a series of endorsements to WRR shortly after WRR acquired the insurance. One of these endorsements was an “absolute pollution exclusion,” which normally would preclude coverage for any environmental releases. Twenty years later, WRR sought coverage under the policy for potential cleanup liability at a site in Chicago, Illinois. The insurer denied coverage on the basis of the exclusion.
The court concluded that under Wisconsin law a court will reform a contract when the written contract, through negligence, fails to state the parties’ intent. Moreover, under Wisconsin law, “[i]n the insurance context, ‘less is required to make out a cause of action for reformation than in ordinary contract disputes.’” The court compared the “absolute pollution exclusion” to the certificate of insurance, which provided in part, that the insurer “has issued liability insurance covering bodily injury and property damage to [WRR], the insured, . . .in connection with the insured’s obligation to demonstrate financial responsibility under 40 CFR 264.147 or 265.147. The coverage applies . . . for ‘sudden accidental occurrences.’”
The court found that the exclusion was so inconsistent with the certificate of insurance as to demonstrate that the parties did not intend to incorporate such an exclusion and granted summary judgment to WRR on the pollution exclusion issue.