In late-December, 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 farm owner policy from Wilson Mutual Insurance Co. 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.” “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.
Wilson Mutual filed suit to determine whether the Falk’s general farm owner 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. 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.’” 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.” The court emphasized that the “occurrence” at issue (and the occurrence for which the Falks sought coverage for) was not the land spreading of manure, but manure seepage into a well.
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).
The complete National Law Review article can be read here.