A recent ruling by the Supreme Court of Wisconsin upholds an insurer's use of a pollution exclusion to deny defense and indemnity coverage for general liability claims arising from the contamination of well water by manure.
The case, Wilson Mutual v. Falk, concerned a farm insured by a policy based on the AAIS form GL-2, Personal Liability Coverage (Farm). The owners of the insured farm had applied liquid manure to fertilize their fields; the manure later seeped into the wells of several neighboring properties.
In the case, the court ruled that manure, when it contaminated the water in neighboring wells, fell under the policy's definition of "pollutant" as "any solid, liquid, gaseous, thermal, or radioactive irritant or contaminant, including acids, alkalis, chemicals, fumes, smoke, vapor and waste."
The ruling states that "a reasonable person may not consider manure safely applied on a field to be a pollutant; however, a reasonable person would consider manure in a well to be a pollutant" (emphasis in the original).
Similarly, the court ruled that coverage sought under the policy's Farm Chemicals Limited Liability Endorsement could be denied under the pollution exclusion contained within the endorsement
However, the court ruled that the insurer is still liable for up to $500 per contaminated well under the policy's incidental liability coverage for Damage to Property of Others. In doing so, the court held that, under Wisconsin jurisprudence, each incident of contamination qualified as an "occurrence" subject to incidental liability coverage.
The ruling states that, if the insurer settles every claim for $500, it will have met its obligations under the policy.
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