On December 30, 2014, the Wisconsin Supreme Court reversed a court of appeals decision in Wilson Mutual Insurance Co. v. Falk, 2014 WI 136 (Wis. 2014), holding that manure that contaminates a well is a “pollutant,” and is therefore not covered under a farm’s general liability insurance policy. This is a precedent setting decision, and it will affect whether farms in Wisconsin that allegedly cause the contamination of wells with manure will be able to rely on insurance to pay for damages. Given the supreme court’s holding, farms relying on standard general liability policies may not have insurance coverage for personal and property damage claims arising from well contamination caused by manure. Therefore, it is critical that you evaluate how your policy defines a “pollutant”, how the policy exclusions would apply to your operation, and whether you have additional coverage (such as specialized pollution coverage) that may be able to provide insurance coverage for damage caused by manure.
In Wilson Mutual Ins. Co., the Falks, dairy farmers in Washington County, fertilized their fields with manure from their dairy cows according to a nutrient management plan prepared by an agronomist and approved by the county conservation office. A few months later, the Wisconsin Department of Natural Resources alleged that the farm’s manure had polluted an aquifer and neighboring wells. Thereafter, the neighboring landowners sought compensation from the Falks for damages arising out of the well contamination.
At the time of the alleged contamination incident, the Falks were insured by a farmowner policy from Wilson Mutual Insurance Company that provided coverage for property damage and bodily injury; however, coverage was excluded for damage or injury that resulted from the “actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of ‘pollutants’ into or upon land, water, or air.” Id. at ¶ 9. “Pollutant” was defined to be a solid, liquid, or gaseous irritant or contaminant, including “waste.” Materials that are recycled, reclaimed, or reconsidered could be considered “waste” under the policy. Id. at ¶ 10.
Wilson Mutual filed suit to determine whether the Falk’s general farmowner policy covered the damage and injuries extending from the alleged contamination, or whether the pollution exclusion clause applied. The court sided with Wilson Mutual and concluded that manure is unambiguously a pollutant under the policy, and therefore damage from the alleged contamination is excluded from coverage. The Falks and the injured parties appealed the decision, and the court of appeals reversed the decision, siding with the Falks,
The court of appeals examined the pollution exclusion from the standpoint of “a reasonable person in the position of the insured,” while also taking into account the context and environment of the alleged injury. Wilson Mutual Insurance Co. v. Falk, 2014 WI App 10, 352 Wis. 2d 461, 844 N.W.2d 380 (citing Hirschhorn v. Auto-Owners Ins. Co., 2012 WI 20, ¶ 27; Langone v. American Family Mutual Insurance Co., 2007 WI App 121, ¶ 28). Applying these principles, the court of appeals sided with Falk and found that a “reasonable farmer would not consider manure to be a ‘pollutant,’ an ‘irritant,’ a ‘contaminant,’ or ‘waste.’” Id. The parties did not raise, and the court did not discuss, whether the cow manure spread on the Falks’ property actually contaminated the aquifer which supplied water to the wells; it focused on whether manure was a pollutant under the insurance policy. Wilson Mutual appealed to the supreme court.
Where the lower courts had looked more generally at the nature of manure as a substance used by dairy farmers, the supreme court focused on “whether manure is a pollutant at the point it entered the injured parties’ wells.” Falk, at ¶ 34. The court emphasized that the “occurrence” at issue (and the occurrence for which the Falks sought coverage for) was not the landspreading of manure, but manure seepage into a well. Falk, at ¶ 52..
The court then reviewed several of its own decisions in other insurance cases examining similar pollutant exclusion clauses and determined that a “reasonable insured would consider manure in a well to be a pollutant.” Id. at ¶ 49. (citing to e.g., Hirschhorn v. Auto-Owners Ins. Co., 2012 WI 20, ¶30, 338 Wis. 2d 761, 809 N.W.2d 529 (Wis. 2012), finding bat guano to be a pollutant when inside a home, and Peace ex rel. Lerner v. Nw. Nat’l Ins. Co., 228 Wis. 2d 106, 138-44, 596 N.W.2d 429 (Wis. 1999), finding lead paint to be a pollutant when dispersed from a wall in a residential home). The supreme court reversed the court of appeals and found that the manure falls within the pollutant exclusion clause of the Falk’s insurance policy. The Falks, therefore, cannot rely on their general farmowners insurance policy to provide coverage for alleged manure contamination of nearby wells.
The court ruled on other questions in the case, but those are not discussed here because they do not have the same precedential value as the court’s ruling on manure’s designation as a pollutant. See the full Falk opinion here for a discussion of the other issues in the case (the court applied the same analysis to rule septage is a pollutant in a companion case issued on the same day as Falk, Preisler v. Kuettel’s Septic Service LLC, 2014 WI 135 (Dec. 30, 2014)).
Farmers should be cautious in relying on the coverage provided by general liability policy to cover damages or injury related to alleged well contamination. Farmers should review their policies and work with their insurers to determine whether they require any additional coverage for claims such as the ones in this case (personal and property damage claims arising from well contamination involving manure).