Thursday, March 11, 2010

Milwaukee Metropolitan v. American International Specialty

Mar 10: In the U.S. Court of Appeals, Seventh Circuit, Case No. 09-1645, 09-1715 & 09-1783. The Milwaukee Metropolitan Sewerage District is responsible for flood control and wastewater treatment in the greater Milwaukee area. As part of a flood control project, the District needed to acquire from Milwaukee County a piece of real estate along Lincoln Creek. The nominal asking price was $1.00. In anticipation of possible pollution clean-up costs, the project manager recommended obtaining insurance coverage, which the District directed its insurance agency to acquire. After a policy was issued, the District acquired title to the land. Soon thereafter, the District encountered significant pollution on the land. But when it submitted a claim to its environmental liability insurer, American International Specialty Lines Insurance Company (AISLIC), for costs incurred in removing the pollution, the insurer denied coverage.
    The District then sued AISLIC in Wisconsin State court seeking damages under several state law claims. Following removal to Federal court and a bench trial, the district court concluded that coverage for the pollution was appropriate. The court reformed the District's insurance policy with AISLIC to provide coverage for the pollution removal costs and entered judgment for $226,468.51
in favor of the District. The court also entered judgment in the same amount for AISLIC on its indemnity claim against Crump Insurance Services of Illinois, Inc. (Crump). AISLIC and Crump appeal from the district court's judgment, and the District cross-appeals the judgment and the denials of its post-trial motions.
    The Appeals Court reversed the judgment of the district court and remanded with instructions to enter judgment for AISLIC on the District's reformation claim and to dismiss AISLIC's indemnity claim against Crump as moot. The Appeals Court also dismissed the District's cross-appeal as moot. The Appeals Court explained further and said, ". . .the record indicates that the District knew that the policy would not include 'Lincoln Creek' as an insured property. From the very beginning of the District's efforts to obtain coverage for the Parcel, its agent Sedgwick was concerned that the information it was providing to Crump might not be sufficient for AISLIC to decide whether to provide coverage. . . Because its agent . . . knew that 'Lincoln Creek' would not be covered unless the District owned or operated the land, the District cannot reasonably claim to have proceeded under a mistake that the policy would cover the Parcel before satisfying that requirement. . ."
    Access the complete opinion (click here). [Please Note: The 7th circuit has a temporary web hyperlink nomenclature system. If the link does not work click on this link and enter the case number above (click here).]