Superior Water, Light & Power Co. v. London Market Insurers (Environmental Contamination Coverage)

In Superior Water, Light & Power Co. v. London Market Insurers (2018AP1926), the Court of Appeals District III found that an insurance policy’s provision on coverage for environmental contamination was ambiguous.

Several insurance companies (referred to by the court as London Market Insurers, or LMI) issued excess liability policies to Superior Water in 1970. In 2001, the Wisconsin Department of Natural Resources claimed that Superior Water was liable for cleanup of chemicals contaminating groundwater surrounding Superior Water’s site. In this lawsuit, Superior Water argues that the 1970 policies obligated the insurers to cover those cleanup costs.

The policy in question covered any “occurrence” of damage or destruction to third-party property, with “occurrence” defined as “one happening or series of happenings arising out of or caused by one event taking place during the term of this contract.” Superior Water and the insurers disputed whether the continuous exposure of groundwater to chemicals from the Superior Water site was an “event” that occurred under the policy period. Superior Water said the exposure of different groundwater to the chemicals was a new “event.” The insurers said an “event” would be a new release or spill that caused the contamination. According to the insurers, without a new release during the policy period, the contamination would not be covered.

The court found that the policy language was ambiguous. The court’s custom is to interpret ambiguous policy language against the contract drafter. In this case, it was unclear which party drafted the policy, so the court remanded for further proceedings.