This post does not construe legal advice
For regular readers, you will notice that from time to time, I like to highlight a recent court decision that focuses on an area of concern. Today, I’m going to highlight a recent decision involving an insurance company, a farmer, and how the term “manure” could be handled under the farmer’s general farm coverage policy with the insurance company.
n Wilson Mutual Insurance Co. v. Falk (Wis. 2014), Falk was out applying manure to cropland in accordance with the farm’s nutrient management plan. The manure seeps into water wells being used by neighboring landowners, poisoning the wells, and causing huge costs in temporarily cleaning and replacing the wells. Falk’s farm policy excluded bodily injury and property damage from pollutants – typical in many general farm coverage policies.
The first issue the Wisconsin Supreme Court had to tackle was: is manure a pollutant? The decision turned on whether or not manure is pollutant, a decision which needs to meet two requirements:
- That the pollutant is generally undesirable and not commonly present in the occurrence the insured party is trying to have covered (here the occurrence would be the well contamination from manure), and
- If a reasonable insured person would consider the substance (here manure) causing the damage in the occurrence (the wells being contaminated) to be a pollutant.
In looking at the requirements, the court had to look at the context of the occurrence that an insured party is seeking to be covered.
For example, previous court decisions had found bat guano inside a home to be a pollutant because it was undesirable in a home and something a reasonable insured would consider a pollutant. Lead paint in a home was also something that universally could be considered a pollutant because it is widely understood to be dangerous. Finally, the court had found an ingredient in fabric softener to be a pollutant when stored in the same warehouse with ice cream cones. The court points out that abnormally high carbon dioxide levels and abnormally high carbon monoxide levels were not pollutants since they were each universally present and generally harmless in all but unique cases.
The court found manure in the context of contaminating a well to be more like bat guano, lead paint, and fabric softener ingredients. When present in a well, manure is largely undesirable and understood to be harmful. Manure found in a well is largely considered a pollutant by a reasonable insured person. You may notice, I keep pointing out “in a well;” the court was only looking at manure in this context and does point out that manure when safely and properly applied can be a universally present, wanted, and generally harmless substance on a farm field and would not be considered a pollutant by a reasonable insured person.
Because the court found the manure in a well to be a pollutant, the court agreed this excluded manure from falling under the Farm Chemicals Limited Liability Endorsement on the farmer’s insurance coverage. For those unfamiliar with endorsements, these are also known as riders, addendums, or attachments to the policy. Endorsements modify the existing insurance contract to add on additional coverage. In this case, the endorsement required the insurance company to cover damages caused by farm chemicals that caused property damage to another person. This did not apply because manure found in a well was not a farm chemical but a pollutant in the eyes of this court.
So what does this mean for you? Well, if you are in Wisconsin this case is potentially a big deal and has raised concerns in the ag law community. Maryland courts have found the pollution exclusion clause in most insurance policies to refer to environmental pollution (Sullins v. AllState Insurance Co., 1995). Maryland courts have also adopted a standard of whether a reasonable person would find the material to be a pollutant (Clendenin Bros., Inc. v. U.S. Fire Ins. Co., 2006). Maryland courts have never been presented with the issue of whether damage from pollution caused by manure is a pollutant. So currently, I do not know the answer to the question of what this decision means to Maryland farmers, but it is an issue you should be aware of as you look at your current levels of insurance coverage, scenarios that may fall outside that coverage, and how you would handle that cost in your operation.
Clendenin Bros., Inc. v. U.S. Fire Ins. Co., 390 Md. 449 (Md. 2006).
Sullins v. Allstate Ins. Co., 340 Md. 503 (Md. 1995).
Wilson Mut. Ins. Co. v. Falk, 2014 WI 136 (Wis. 2014).