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  • WisBar News
    March 09, 2015

    Scrap Metal Company Not Covered for PCB Damage, Appeals Court Rules

    Joe Forward
    Legal Writer

    March 9, 2015 – A scrap metal company that supplied wastewater containing polychlorinated biphenyls (PCBs) to a water treatment company isn’t covered by an insurance policy containing a pollution exclusion clause, a state appeals court has ruled.

    United Milwaukee Scrap, which processes and sells scrap metals, contracted with Advanced Waste Services, to remove wastewater from the United Milwaukee Scrap facility. In turn, Advanced Waste treats wastewater to resell byproducts like oil.

    But the wastewater that United Milwaukee Scrap provided contained PCBs. Advanced Waste alleged the PCBs caused significant damage to its recycling processes. Advanced Waste sued for negligence and breach of contract, among other claims.

    United Milwaukee Scrap notified its insurer, Illinois National Insurance, but the insurer refused to defend the lawsuit, claiming damage caused from PCBs was not covered. The circuit court in Milwaukee County granted summary judgment to Illinois National.

    In Advanced Waste Services Inc. v. United Milwaukee Scrap LLC, 2014AP1169 (March 3, 2015), a three-judge panel for the District I Appeals Court agreed that Illinois National’s policy contained an exclusion that barred coverage for pollutant damages.

    United Milwaukee Scrap admitted that PCBs are “pollutants,” but said coverage still applied because United Milwaukee Scrap did not “disperse” the PCBs, Advanced Wastewater did. Milwaukee Scrap further alleged that Advanced Wastewater had a duty to check for PCBs.

    “Under the plain language of the policy there is no requirement that the insured disperse the pollutant for the exclusion to apply,” wrote Judge Patricia Curley. “As we see from the policy language above, no actor is specified, leaving the possibility that a pollutant could be dispersed in any number of ways – including without the direct action of any party at all.”

    The panel said its conclusion was supported by a recent case involving a home that was polluted with bat guano. In that case, the bats dispersed the pollutant, not the homeowners, and the state supreme court ruled that a pollution exclusion clause barred coverage.

    “The Hirschhorns’ policy, like United Milwaukee Scrap’s policy, did not specify whether coverage required a particular party to disperse a pollutant,” Judge Curley wrote. “Instead, that policy, like the one before us, applied to any loss involving the dispersal of pollutants.”

    The panel was not persuaded by a federal case from New Jersey involving Nestle Foods, which contracted with a company to pick up waste products, which were delivered to a landfill. Nestle’s insurer said a pollution exclusion barred coverage clean-up liability, but a court disagreed.

    “While United Milwaukee Scrap contends that Nestle Foods should control, we disagree because it interprets New Jersey law, which reads an additional requirement into the standard pollution exclusion that Wisconsin does not,” Judge Curley explained.

    Related Articles

    Farmers Only Slightly Covered for Manure Seepage into Neighboring WellsWisBar News (Jan. 2, 2015).

    Damage from Septage as Fertilizer Not Covered by Insurance Policies, Court SaysWisBar News (Dec. 30, 2014).

    A “Crap” Shoot? Navigating Pollution Exclusion Clauses in WisconsinWisBar InsideTrack (Feb. 19, 2014).

    Wisconsin Supreme Court Sides with Insurance Company in Bat Guano CaseWisBar News (March 8, 2012).



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