In its recent decision in Hirschhorn v. Auto-Owners Ins. Co., 2012 Wisc. LEXIS 16 (Mar. 6, 2012), the Supreme Court of Wisconsin had occasion to address whether a pollution exclusion in a homeowners policy applied to bar coverage for property damage resulting from bat guano contamination.
The insureds claimed that their vacation home in Lake Tomahawk, Wisconsin was rendered uninhabitable, and unsaleable as a result of a significant accumulation of bat guano between the home’s siding and walls. Among other things, the insureds alleged that the guano created a “penetrating and offensive odor” for which they had been informed there was no guarantee of complete remediation. The insureds sought coverage under the homeowner’s policy issued by Auto-Owners, and alleged that the odor rendered the house a total loss. In fact, the insureds eventually had their house razed as a result of the alleged odors.
Auto-Owners disclaimed coverage on several grounds, including its policy’s pollution exclusion, which barred coverage for a “discharge, release, escape, seepage, migration or dispersal of pollutants.” The term “pollutants” was defined by the policy as:
… any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, liquids, gases and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
The trial court ruled in favor of Auto-Owners on summary judgment, concluding that guano falls within the definition of “pollutant” and that there was a seepage or dispersal of the guano that resulted in a loss to the insureds. The court of appeals reversed, concluding that an insured would not reasonably interpret bat guano to fall within the definition of pollutants, and that the exclusion, when read as a whole, did not suggest “a biological process such as the movement of excrement.”
On further appeal, however, the Supreme Court of Wisconsin held that the exclusion applied. In reaching its holding, the court was required to determine whether guano constituted a “pollutant,” and if so, whether there was a requisite discharge, release, escape, etc. In considering the first issue, the Court looked to its prior decisions in Donaldson v. Urban Land Interests, 211 564 N.W.2d 728 (Wis. 1997), where it held that carbon monoxide buildup as a result of inadequate building ventilation did not qualify as a “pollutant,” and Peace v. Northwestern National Ins. Co., 596 N.W.2d 429 (Wis. 1999), where the Court held that lead paint chips qualified as a pollutant. From these cases, the Court stated a general rule that matter generally understood to be harmful is a “pollutant.” With this in mind, the Court concluded:
Bat guano, composed of bat feces and urine, is or threatens to be a solid, liquid, gaseous irritant or contaminant. That is, bat guano and its attendant odor “make impure or unclean” the surrounding ground and air space, and can cause “inflammation, soreness, or irritability” of a person’s lungs and skin.
The Court further reasoned that guano “unambiguously” constitutes an irritant, or a contaminant, or waste. With regard to the latter, the court concluded that a reasonable insured would ordinarily expect that the term “waste” includes bat feces and urine, notwithstanding the definition’s reference to “materials to be recycled, reconditioned or reclaimed.”
The Court further held that there was a requisite discharge, release, escape, etc. of the guano as required by the pollution exclusion. The Court noted that each of the terms used in the exclusion connote movement and “are often synonymous with one another and ‘taken together constitute a comprehensive description of the processes by which pollutants may cause injury to persons or property.’” The Court specifically found that the odor emanating from the guano evidenced the movement and the resulting harm necessary for the exclusion to apply:
The bat guano, deposited and once contained between the home’s siding and walls, emitted a foul odor that spread throughout the inside of the home, infesting it to the point of destruction … Accordingly, implicit in [the homeowners’] complaint is an allegation that the bat guano somehow separated from its once contained location between the home’s siding and walls and entered the air, only to be absorbed by the furnishings inside the home. According to the Hirschhorns, the result was the total loss of their vacation home. Such an allegation falls squarely within the terms of the pollution exclusion clause.