# Petition for Writ of Certiorari — Edgerton Sand & Gravel, Inc. v. General Casualty Co.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1995
- **Citation:** 515 U.S. 1161

## Text

Suprém- Court, Ua
Pif£ED

418483 may 8 1995

OFFICE OF THE CLERK

No

In the
SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1994

Edgerton Sand & Gravel, Inc.,
Plaintiff-Respondent-Petitioner,

V.

General Casualty Company of Wisconsin
and Aetna Casualty and Surety Company,
Defendants-Appellants-Respondents.

On Petition for a Writ of Certiorari to the
Supreme Court of Wisconsin

PETITION FOR A WRIT OF CERTIORARI
AND APPENDICES TO THE PETITION

Charles V. Sweeney David B. Goodwin

Of Counsel Counsel of Record

N315 Charley Bluff Rd. Joshua Koltun

Milton, WI 53563 Of Counsel

(608) 868-2710 Heller, Ehrman, White &
McAuliffe

Attorneys for Petitioner 333 Bush Street

Edgerton Sand & San Francisco, CA 94104

Gravel, Inc. (415) 772-6000

i
QUESTIONS PRESENTED

l. Is the Due Process Clause of the Fourteenth
Amendment violated when a state supreme court justice casts
the deciding vote in a case raising an important question of
state law, where the justice owns shares of stock in, and the
justice’s spouse is employed as a staff attorney by, an amicus
curiae that had represented to the state supreme court that it
is vitally interested in the outcome of the case?

2. Does the "voluntary, knowing, and intelligent"
test for waiver of fundamental constitutional rights in
criminal cases apply equally in the civil context?

il
PARTIES IN THE PROCEEDING

Pursuant to Rule 29.1, Petitioner discloses that this
petition is filed by Edgerton Sand & Gravel, Inc., a
Wisconsin corporation. Edgerton Sand & Gravel, Inc. was
a plaintiff in the complaint and a respondent before the
Supreme Court of Wisconsin. Related companies to
Edgerton Sand & Gravel, Inc. are Administrative Services,
Inc., a Wisconsin corporation, Edgerton Crushing, Inc., a
Wisconsin corporation, and Edgerton Readi-Mix Concrete
Co., a Wisconsin partnership.

The respondents are General Casualty Company of
Wisconsin and Aetna Casualty & Surety Company. The
respondents are insurance corporations that were named as
defendants in the complaint and were appellants before the
Supreme Court of Wisconsin.

City of Edgerton, Wisconsin was a plaintiff in the
complaint and was a respondent before the Supreme Court
of Wisconsin. Wisconsin Insurance Security Fund, Hanover
Insurance Company, Wausau Insurance Companies and
Local Government Property Insurance Fund were defendants
in the complaint.

GUBSTIONS PRESENTED ...... esc cccsess 1

PARTIES IN THE PROCEEDING ............ il

po Gt Res) ill

pe Ge see 8, rr ee vi

PETITION FOR WRIT OF CERTIORARI ....... l

TPE civ eeavaibeavesen«ve l

De Che Wat eV wewe cee hee eee es l
CONSTITUTIONAL PROVISION INVOLVED .... 2
STATEpGees OF THE CASE 2... ccc cee eee 2

3.

THE ST. PAUL COMPANIES
REPRESENTED TO THE SUPREME
COURT OF WISCONSIN THAT THEY
WERE VITALLY INTERESTED IN THE
OUTCOME OF THE PROCEEDING
BELOW IN THE PRESENT CASE .. 2

II.

Il.

iV
TABLE OF CONTENTS
(continued)

Page

SUPREME COURT OF WISCONSIN
JUSTICE GESKE DID NOT FULLY
DISCLOSE TO PETITIONER THAT SHE
HAD A SUBSTANTIAL FINANCIAL AND
PERSONAL INTEREST IN THE ST. PAUL
CRUE 6 ch ce whee eeen 5

REASONS FOR GRANTING THE PETITION .... 11

I.

THIS COURT HAS NEVER
CONSIDERED WHETHER’ THE
DUE PROCESS CLAUSE
REQUIRES THE RECUSAL OF A
JUDGE WHEN THE JUDGE HAS A
SUBSTANTIAL PECUNIARY AND
PERSONAL INTEREST IN AN
AMICUS CURIAE THAT HAS
REPRESENTED TO THE COURT
SmAS TF &£3 ~¥ETALET
INTERESTED IN THE OUTCOME
i Wee SU ck oes bt ee ee 1]

Vv
TABLE OF CONTENTS
(continued)

II. THIS COURT HAS NEVER
CONSIDERED WHETHER THE
"VOLUNTARY, KNOWING, AND
INTELLIGENT" TEST FOR
WAIVER OF FUNDAMENTAL
CONSTITUTIONAL RIGHTS
APPLIES EQUALLY IN THE CIVIL
AS IN THE CRIMINAL CONTEXT... 17

CASES

Aetna Ins. Co. v. Kennedy,

Pe eT, ss re

Aetna Life Insurance Co. v. Lavoie,

SiS G.B.BS GRD occa as

American TV and Appliance of Madison,
Inc..,
151 Wis. 2d 175,

443 N.W.2d 662 (1989) ......

Barker v. Wingo,

GOT U.S. 44 (19TH) ow cece

Bernard v. Bernard,

31 F.3d 842 (9th Cir. 1994) ...

Blau v. City of Milwaukee,
232 Wis. 197,
285 N.W. 347,
286 N.W. 874,

oes of). eee

Bond v. Dentzer,

494 F.2d 302 (2d Cir. 1974) ...

eR RE rR eer orem TN anne an

vii
TABLE OF AUTHORITIES
(continued)
Page

Brady v. United States,

gt Me 8) Pe ee 17, 18
Brookhart v. Jones,

Pree ee res Se eee 18
Castaneda v. Pederson, and St. Paul

Fire & Marine Insurance Co.,

185 Wis. 2d 200,

3 BR mw & FT) a are 14
Commonwealth Coatings

Corp. v. Continental Casualty Co.,

ee ee os bn OS 8 he hee wes 12
D.H. Overmyer Co. v. Frick Co.,

Gee Ue BPP CUNTED bn ce sees wade 17, 19
Gonzalez v. County of Hidalgo, Texas,

489 F.2d 1043 (Sth Cir. 1973) .......... 18
Headwaters, Inc. v. Bureau of Land

Management,

665 F. Supp. 873 (D. Or. 1987) ......... 14
In re Honolulu Consolidated Oil Co.,

Bae ©, eed Gee PET ot ce ctw nices 16

Page

In re Murchison,
Dee ULB. 199 CTR eR cc ce te ees 12, 13, 15, 16

Jelinek v. St. Paul Fire & Casualty
Insurance Co.,
182 Wis. 2d 1,
PEs ee ce FOO RP 6 wee wee ee RS 14

Liljeberg v. Health Services Acquisition
Corp.,
ee as OT CO es been eee ia eeasn 16

Ohio Bell Tel. Co. v. Comm’n,
sk Re OF. ee cee 21

Patz v. St. Paul Fire & Marine

Insurance Co.,
15 F.3d G9 (7th Cir. 1994) .........2.. 15

Sambo’s Restaurants, Inc. v. City of
Ann Arbor,
663 F.2d 686 (6th Cir. 1981)........... 18

State v. Marhal,
172 Wis. 2d 491,
N.W.2d 758 (Wis. App. 1992) .......... 10

Tumey v. Ohio,
Ble Ua, SUOCIBST) wr eiwess ii, 1%, 13, 316

ix
———— ~~" poe
Page
United States v. Nobel,
GOO Fad 231 G3 Cir. IFGZ) ww wc cee 20
Yakus v. United States,
Pee ee eee ee ee 20
STATUTES
ee es EE tA NACA SR eR ee 16
Se es eR. 9 6 00 AOR ORR ERS 2
— & By 2. : reer ere ers eee 14
_ oe ks err ere re 6, 20
Be © OVC ePeee Py Ty CCT E ere er 14

OTHER AUTHORITIES

Russ Banham, Superfund Reform Groups, 1 Lloyd’s
Environmental Risk International 3-4 (May 1993) .... 3

No.

In the
SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1994

Edgerton Sand & Gravel, Inc.,
Plaintiff-Respondent-Petitioner,

v.

General Casualty Company of Wisconsin
and Aetna Casualty and Surety Company,
Defendants-Appellants-Respondents.

On Petition for a Wnit of Certiorari to the
Supreme Court of Wisconsin

PETITION FOR A WRIT OF CERTIORARI

|
PETITION FOR WRIT OF CERTIORARI

Edgerton Sand & Gravel, Inc. hereby respectfully
requests the Court to issue a Writ of Certiorari to review the
decision of the Supreme Court of Wisconsin on the Motion
to Vacate Decision or Alternatively to Rehear Without
Participation of Challenged Justice, entered in this case on
February 23, 1995.

OPINIONS BELOW

The opinion of the Supreme Court of Wisconsin on
the Motion to Vacate Decision or Alternatively to Rehear
Without Participation of Challenged Justice, filed February
23, 1995, reproduced in the Appendix (hereafter "App.”) at
101, is reported at 190 Wis. 2d 510, 527 N.W.2d 305 (Wis.
1995). The opinion of the Supreme Court of Wisconsin on
the substantive question of insurance coverage law presented
below is reported at 184 Wis. 2d 750, 517 N.W.2d 463
(Wis. 1994), and is reprinted in the Appendix at App. 116.
The opinion of the Wisconsin Court of Appeals is reported
at 172 Wis. 2d 518, 493 N.W.2d 768 (Wis. App. 1992), and
is reprinted in the Appendix at App. 163. The unreported
decision of the Circuit Court for Rock County, Wisconsin,
dated May 10, 1991, is reprinted in the Appendix at App.
207.

JURISDICTION

The Supreme Court of Wisconsin issued its opinion
on the Motion to Vacate Decision or Alternatively to Rehear
Without Participation of Challenged Justice on February 23,

2

1995. The jurisdiction of this Court is invoked under 28
U.S.C. § 1257(a).

CONSTITUTIONAL PROVISION INVOLVED

The Due Process Clause of the Fourteenth
Amendment to the United States Constitution provides that
"[n]Jo State shall . . . deprive any person of life, liberty, or
property, without due process of law... .”

STATEMENT OF THE CASE'

I, THE ST. PAUL COMPANIES REPRESENTED
TO THE SUPREME COURT OF WISCONSIN
THAT THEY WERE VITALLY INTERESTED
IN THE OUTCOME OF THE PROCEEDING
BELOW IN THE PRESENT CASE

This case arises from a declaratory judgment action
that Edgerton Sand & Gravel, Inc. ("Petitioner") and one

, This Petition refers to the pertinent pleadings filed in the

proceeding below before the Supreme Court of Wisconsin as follows:
(a) Brief and Addendum of Amici Curiae Wisconsin Insurance Alliance
and Insurance Environmental Litigation Association in Support of
Petition for Review (filed Jan. 12, 1993) (“ILEA Br."); (b) Motion of
Wisconsin Insurance Alliance and Insurance Environmental Litigation
Association for Leave to File Brief as Amici Curiae in Support of
Petition for Review (filed Jan. 12, 1993) (“ILEA Mtn."); (c) Brief of
Edgerton Sand & Gravel, Inc. in Support of Motion to Vacate the
Court’s Decision in This Appeal or, in the Alternative, to Rehear the
Case Without the Participation of Justice Janine P. Geske (filed Nov.
28, 1994) (“Edgerton Br.”).

3

other party filed to obtain liability insurance coverage for the
costs of complying with government orders that required
Petitioner and other responsible parties to clean up
environmental contamination at a landfill in Edgerton,
Wisconsin. The trial court ruled that Petitioner’s insurers,
General Casualty Company of Wisconsin and Aetna Casualty
& Surety Company, covered those environmental
remediation costs. App. 207. The Wisconsin Court of
Appeals affirmed. App. 163.

The Supreme Court of Wisconsin granted review to
decide (a) whether the costs of complying with
environmental remediation orders are "damages" that could
be covered by standard form liability insurance policies, and
(b) whether administrative environmental remediation
proceedings are “suits” that could trigger the duty to defend
under standard form liability insurance policies. App. 118-
19,

Those issues are of enormous financial significance
to the insurance industry. A recent study estimated that
domestic insurers are likely to end up paying $214 billion to
fund environmental remediation costs in the United States.
See Russ Banham, Superfund Reform Groups, | Lloyd’s
Environmental Risk International 3-4 (May 1993) (citing to
a study by the Tillinghast consulting firm); see also ILEA
Br. 5 (the total environmental cleanup costs in the United
States, including costs not covered by insurance, have "been
reliably estimated to be at least $500 billion”). While the
precise percentage of that amount that would apply to
Wisconsin claims is uncertain, insurance industry amici
curiae in this case told the court below that it can cost tens

4

or even hundreds of millions of dollars to clean up a single
contaminated site. ILEA Br. 3. If environmental
remediation proceedings are not “suits” for "damages,"
standard form liability insurance policies would not cover
those costs. App. 121.

Because of the substantial liabilities at stake, the
Supreme Court of Wisconsin’s deliberations on these two
issues generated great interest in the insurance industry. The
Insurance Environmental Litigation Association ("IELA") --
"a trade association of national property and casualty
insurers formed, in part, to represent its members’ positions
in environmentally-related insurance coverage cases” (ILEA
Br. 1) -- was granted leave to file a brief amici curiae "on
behalf of” eighteen specified insurance companies urging
reversal of the Wisconsin Court of Appeals decision. ILEA
Mtn. 2 n.2.

Among the insurers on whose behalf IELA filed its
amicus brief were the St. Paul Companies ("St. Paul"). Jd.
ILEA told the Supreme Court of Wisconsin that the
"member companies on whose behalf this submission is
made” -- including St. Paul -- "have substantial, independent
interests in the questions presented” in this case. /d. at 3.

Indeed, IELA stated that the interest of each IELA
member in the outcome of this case was not just
“substantial,” but also was "vital[]":

The member companies of . . . IELA have
issued to a great many insureds, in Wisconsir
and elsewhere, insurance policies containing

5

provisions identical or similar to those at
issue here. Accordingly, they are vitally
interested in the judicial interpretation of
those provisions. . . . [Indeed, t]his is no
ordinary case, in view of the number of
important first-impression issues involved and
the potential financial impact of the Court’s
decision on environmental cleanups estimated
to cost hundreds of billions of dollars.

Id. at 3-4.

Il. SUPREME COURT OF WISCONSIN JUSTICE
GESKE DID NOT FULLY DISCLOSE TO
PETITIONER THAT SHE HAD A
SUBSTANTIAL FINANCIAL AND PERSONAL
INTEREST IN THE ST. PAUL COMPANIES

At the commencement of oral argument in this case
before the Supreme Court of Wisconsin on November 29,
1993, Justice Janine P. Geske made the following disclosure
in open court to the attorneys for Petitioner and the other

parties:

I... want to make a disclosure. Last night
when I was looking one more time at the
amicus briefs, I noted that Mr. Burell had
filed an amicus brief on behalf of the
Insurance Environmental Litigation
Association, and I looked at the appendix and
I noted that one of the companies listed in
that is St. Paul Companies. My husband is

6

employed by that company. I do not believe
that it presents any conflict and will not
influence me. If anybody has any objections
to me [sic] sitting on this case, I would
appreciate hearing from you in [sic] letter by
the end of the week. Thank you.

App. 105-06.

Although Wisconsin law requires a judge to make a
"full and complete disclosure on the record of the factors
creating" a potential conflict of interest, Wis. Stat.
§ 757.19(3), Justice Geske’s disclosure at the hearing in fact
was incomplete.

First, Justice Geske failed to disclose that her
husband, Michael J. Hogan, is more than a mere employee
of St. Paul. He is a staff attorney for St. Paul, practicing in
Milwaukee, who represents St. Paul in insurance coverage
litigation that determines whether St. Paul is liable for
defense and indemnification costs incurred by its insureds.
Edgerton Br. 4. Similar issues were involved in the present
case. App. 118-121, 128-162.

Second, Justice Geske did not disclose at the hearing
that she had an interest in excess of $50,000 in the St. Paul
savings plan, which consists of St. Paul stock and mutual
funds, as well as a financial interest in a St. Paul retirement
plan. To be sure, Justice Geske disclosed this information
in a Statement of Economic Interests that she filed with the
State of Wisconsin Ethics Board. App. 109-10 (referring to
Justice Geske’s December 14, 1993 disclosure); Edgerton

7

Br., Addendum B (copy of disclosure form).? However,
Justice Geske did not, at the time of the hearing (App. 105-
06), or thereafter, direct the attention of the parties in this
case to this filing.

Based on the information provided to it at the hearing
before the Supreme Court of Wisconsin, Petitioner did not
object within a week to Justice Geske’s participation in the
case. App. 106. Subsequent to the Supreme Court of
Wisconsin’s decision on the merits of the insurance coverage
questions, Petitioner learned of Justice Geske’s financial
interest in St. Paul and that Justice Geske’s husband was a
staff attorney for St. Paul.’

Ill. THE DECISIONS BELOW

On June 16, 1994, the Supreme Court of Wisconsin
issued its decision on the merits of the insurance coverage
questions in this case. Justice Geske wrote the opinion for
the four-to-three majority. All but one of the other highest

. The disclosure form has two categories for financial

information: “Value $50,000 or Less” and "Value More Than $50,000.”
Edgerton Br., Addendum B. Thus Justice Geske’s holdings may well
be far in excess of $50,000.

’ See App. 104-05, 108 (on September 2, 1994, while Petitioner’s
motion to the Wisconsin Supreme Court for reconsideration of its
decision on the merits was pending, three non-parties to this case
sought leave to file a motion for recusal of Justice Geske and
submitted evidence of her interest in the St. Paul Companies, but the
Wisconsin Supreme Court declined to grant those non-parties leave to
file their motion).

8

State courts to address these questions had ruled that an
environmental remediation proceeding is a "suit" that seeks
"damages" as those terms are used in standard form
comprehensive general liability insurance policies. The
Supreme Court of Wisconsin majority concluded, however,
that an administrative environmental remediation proceeding
is not a “suit” and that the costs incurred to remediate
environmental contamination are not "damages." App. 121.
The three dissenters argued that the decision of Wisconsin
Court of Appeals in favor of Petitioner should have been
affirmed. App. 155-62.

On October 25, 1995, the Supreme Court of
Wisconsin denied Petitioner’s motion for reconsideration.
App. 115. Petitioner and one other party filed a petition for
writ of certiorari before this Court to seek review of the
Supreme Court of Wisconsin’s June 16, 1994 decision on the
“suit” and "damages” issues; however, by order dated March
20, 1995, this Court declined to grant the petition.

In the meantime, on November 28, 1994, Petitioner
filed a motion to vacate the Supreme Court of Wisconsin’s
decision, or, in the alternative, for rehearing of the case
without the participation of Justice Geske ("Motion to
Vacate"). In the brief in support of the Motion to Vacate,
Petitioner argued, inter alia, that Justice Geske’s failure to
recuse herself and to disclose fully at the hearing her
financial interest in the outcome of the case violated the Due
Process Clause of the Fourteenth Amendment to the
Constitution of the United States. Edgerton Br. 12-14.

9

On February 23, 1995, the Supreme Court of
Wisconsin dismissed Petitioner’s Motion to Vacate.‘ The
court stated initially that Petitioner had waived its right to an
impartial decisionmaker because Petitioner did not request
Justice Geske to recuse herself during the week after the
November 29, 1993 hearing. App. 102, 108 110. The
court indicated that Petitioner had a duty to conduct an
investigation before the end of the week of the November
29, 1993 hearing to determine whether Justice Geske had
financial ties to St. Paul. App. 107. The court noted that
“at least since . . . December 14, 1993,” Justice Geske had
disclosed her holdings in St. Paul stocks and mutual funds
and that her husband was an attorney-employee of St. Paul.
App. 109. The court also referred to Petitioner’s delay in
filing the Motion to Vacate until November 1994, after the
court had ruled on the motion for reconsideration, and to
Petitioner’s failure to join in a proposed motion for vacation
or rehearing without the participation of Justice Geske that
three non-parties unsuccessfully sought leave to file with the
court in September 1994, while the motion for
reconsideration was pending. App. 103-04, 108.

But the court concluded that it would entertain the
Motion to Vacate. The court explained that, although the

4

In its decision, the court did not distinguish between
Petitioner’s right to an impartial decisionmaker under the Wisconsin
recusal statute and Petitioner’s right to an impartial decisionmaker
under the Due Process Clause of the Fourteenth Amendment of the
Constitution of the United States. Because the federal question was
expressly raised in the Motion to Vacate, the Supreme Court of
Wisconsin necessarily determined the federal question.

10

ordinary rule under Wisconsin law is that the court would
not exercise jurisdiction after remittitur of a judgment, that
rule is inapplicable in cases where a judge is disqualified
from participating in a decision. App. 103 (citing American
TV and Appliance of Madison, Inc., 151 Wis. 2d 175, 181,
443 N.W.2d 662, 664 (1989)). Under Wisconsin law,
where a judge is disqualified from participating in a case, the
court’s decision is void, and may be expunged by the court
"at any time,” notwithstanding “statutory requirements for
reopening, appealing from, or modifying orders or
judgments." Jd.; accord State v. Marhal, 172 Wis. 2d 491,
493 N.W.2d 758 (Wis. App. 1992), review denied, _ Wis.
2d __, 497 N.W.2d 131 (1993) (although defendant "waived
his direct challenge to the impartiality of the sentencing trial
judge by not seeking her recusal . . . the sentencing must
nevertheless be vacated if the trial judge should have recused
herself sua sponte”) (emphasis added).

The court then decided to exercise its jurisdiction and
reached the merits of the challenge to the appearance of
Justice Geske’s impartiality. App. 102-03, 104, 108-09,
111. The court ruled that Justice Geske had properly

. Although the court stated at one point that "we could, and do,
base [our determination of the motion] on the fact that there has been
one reconsideration of the court’s decision and we will not entertain a
request for a second,” App. 108 (citing Blau v. City of Milwaukee, 232
Wis. 197, 208, 285 N.W. 347, 286 N.W. 874, 287 N.W. 594 (1939)), the
remainder of the court’s order states that the court chose not to
exercise the option to refuse to entertain a second motion for
reconsideration, and considered Petitioner’s claim “on the merits.”
App. 112; see also App. 105, 108-09, 111. Moreover, Petitioner sought,
in the alternative, to vacate the decision. Under Wisconsin law such a

11

participated in the decision, because (a) St. Paul was an
amicus, not a party, and (b) Justice Geske had made a
subjective determination that she would be impartial in the
case. App. 109-11.

I. THIS COURT HAS NEVER CONSIDERED
WHETHER THE DUE PROCESS CLAUSE
REQUIRES THE RECUSAL OF A JUDGE
WHEN THE JUDGE HAS A SUBSTANTIAL
PECUNIARY AND PERSONAL INTEREST IN
AN AMICUS CURIAE THAT HAS
REPRESENTED TO THE COURT THAT IT IS
VITALLY INTERESTED IN THE OUTCOME
OF THE CASE

Almost seventy years ago, this Court held that "it
certainly violates the Fourteenth Amendment . . . to subject
[a person’s] . . . liberty or property to the judgment of a
court the judge of which has a direct, personal, substantial
pecuniary interest in reaching a conclusion against him in his
case." Tumey v. Ohio, 273 U.S. 510, 523 (1927); see also
id. at 512 (ruling unconstitutional an Ohio law under which
a mayor, sitting as a court of justice, received a fee if the

motion could be made at any time when the asserted ground was the
disqualification of a Justice. See App. 111. Thus, the discussion in the
decision below of the waiver of the right to file a motion to reconsider
does not apply to Petitioner’s Motion to Vacate. The court below
therefore did not rely upon an independent and adequate state law
ground for its decision.

12

defendant was convicted, but not if the defendant was
acquitted); In re Murchison, 349 U.S. 133, 136 (1955) (the
"situation [in which recusal is mandatory] is one ‘which
would offer a possible temptation to the average . . . judge
to . . . lead him not to hold the balance nice, clear and
true.’") (citation omitted).

A later decision amplifying the Tuwmey standard,
Commonwealth Coatings Corp. v. Continental Casualty Co. ,
393 U.S. 145 (1968), is particularly apt. In that case, an
arbitrator had occasionally acted in the past as a paid
consultant to one of the parties to the arbitration, and had
received $12,000 in fees from the party over several years.
Id. at 146. This Court held that the arbitrator’s interest
required disqualification, noting that, were the arbitrator a
judge, disqualification would be constitutionally mandated.
Id. at 148.

This Court has also held that a judge may have a
"direct, personal, substantial, [and] pecuniary” interest in the
outcome of a lawsuit, such that the judge’s participation in
a proceeding violates the Due Process Clause, even though
the judge has no interest in any of the parties to the lawsuit.
See Aetna Life Ins. Co. v. Lavoie, 475 U.S. 813, 824-25
(1986). In the proceeding underlying Lavoie, the Alabama
Supreme Court had recognized, by a five-to-four vote, a new
type of insurance "bad faith” claim. Justice Embry, the
author of the Alabama Supreme Court’s majority opinion (id.
at 818), had filed a separate lawsuit in the Alabama state
courts in which he alleged a similar "bad faith" claim. After
the Alabama Supreme Court issued its opinion, Justice
Embry settled his bad faith case for $30,000. /d. at 818-19.

;

13

Aetna Life Insurance -- the losing party before the Alabama
Supreme Court -- argued that its Due Process rights were
violated because Justice Embry cast the deciding vote in the
Alabama Supreme Court decision.

This Court agreed, vacated the Alabama Supreme
Court decision, and remanded the case for further
proceedings in which Justice Embry would not participate.
Id. at 828. In concluding that Aetna’s due process rights
were violated, this Court examined several “factors [that]
might constitute such an interest in the outcome of th[e] case
that would bear on recusal.” Jd. at 822. In particular, the
Court noted that: (a) Justice Embry had a financial interest
in the outcome of the case because he had a similar claim
pending in an Alabama v*ate court; (b) the Alabama Supreme
Court’s decision »~~l4 be binding on all Alabama state
courts; (c) the law ox .e “bad faith” issue was unsettled in
Alabama; and (d) "[w]hen Justice Embry cast the deciding
vote, he did not merely apply well-established law and in
fact quite possibly made new law... ."_ Id.

Although the precise contours of the "direct,
personal, substantial, [and] pecuniary” test have never been
defined with precision, see Murchison, 349 U.S. at 136, the
line of authority from Twmey to Lavoie squarely places Judge
Geske’s interest in this case in the impermissible zone.

There is no question that the Due Process Clause
would have required Justice Geske to recuse herself from
participating in the case below if St. Paul had been a party.
Justice Geske had a direct and substantial interest in St.
Paul, through her ownership of more than $50,000 in St.

|

14

Paul stock and other securities in the St. Paul savings plan,
her interest in the St. Paul retirement plan, and her
husband’s employment by St. Paul as an insurance coverage
attorney.‘ Indeed, Justice Geske recused herself in the two
cases during her tenure on the Supreme Court of Wisconsin
in which St. Paul was a party. Castaneda v. Pederson, and
St. Paul Fire & Marine Insurance Co., 185 Wis. 2d 200,
518 N.W.2d 246 (1994), and Jelinek v. St. Paul Fire &
Casualty Insurance Co., 182 Wis. 2d 1, 512 N.W.2d 764
(1994). Thus she implicitly acknowledged a significant
financial or personal stake in cases in which St. Paul is a

party.’

The due process concerns that require recusal if the
judge has a substantial financial or personal interest in a
party apply equally to an amicus curiae such as St. Paul --
at least under the circumstances at issue here, where the
amicus curiae represented that it is "vitally interested” in the
outcome of the case, and brought to the attention of the court
the significant financial impact the court’s ruling was likely

. Wisconsin is a “community property’ state. Wis. Stat. §§

766.31 et seq. Thus, that Justice Geske’s husband -- rather than Justice
Geske herself -- is a St. Paul employee does not matter for present
purposes: a portion of the Geske/Hogan family income is derived
froma St. Paul. See generally Headwaters, Inc. v. Bureau of Land
Management, 665 F. Supp. 873, 874 (D. Or. 1987) (recusal is
appropriate where the judge’s spouse was a shareholder in a company
that would obtain a financial benefit from the outcome of the case).
. Apart from the requirements of due process, Wisconsin law
requires recusal where the judge “has a significant financial or personal
interest in the matter.” Wis. Stat. § 757.19(2).

15

to have on it. Here, St. Paul represented to the Supreme
Court of Wisconsin that its interest was “substantial” and
"independent" of the other insurers joining the IELA brief
(ILEA Mtn. 3),* and pointed to the “potential financial
impact” of the Supreme Court of Wisconsin’s decision on
claims for insurance coverage for “environmental cleanups
estimated to cost hundreds of billions of dollars.” Jd. at 4.
That is precisely the situation that "would offer a possible
temptation to the average . . . judge to. . . lead him not to
hold the balance nice, clear and true." Jn re Murchison, 349
U.S. at 136.

Lavoie indicates that Due Process concerns extend
beyond the situation where the judge has an interest in a
party. Under the same factors that this Court applied in
Lavoie, 475 U.S. at 812, Justice Geske’s participation denied
Petitioner due process. Justice Geske (a) had an interest in
the outcome of the case because she had a financial and
personal interest in an amicus curiae that had an
"independent," “substantial” and “vital[{]" “interest” in the

A computer search revealed that St. Paul has been a party to
more than 100 reported decisions involving insurance coverage for the
types of environmental remediation claims that are affected by the
Wisconsin Supreme Court’s decision in this appeal, including the recent
decision in Patz v. St. Paul Fire & Marine Insurance Co., 15 F.3d 699
(7th Cir. 1994) (applying Wisconsin law). Most pertinently, St. Paul
issued liability insurance policies to several parties that are potentially
responsible for the cleanup of the Edgerton landfill. After the
Wisconsin Supreme Court decision was issued, St. Paul denied
insurance coverage for at least two potentially responsible parties at the
site, and will probably not be liable for the costs incurred by those
parties at the site. Edgerton Br., Addenda D-F.

|

16

outcome of this case; (b) the Supreme Court of Wisconsin’s
decision would be binding on all Wisconsin state courts; (c)
the law on the issues presented below was unsettled in
Wisconsin (ILEA Mtn. 3); and (d) when Justice Geske cast
the deciding vote, she "did not merely apply well-established
law and in fact quite possibly made new law... ." 475
U.S. at 822; see App. 118.

With the large number of amici curiae briefs that are
filed every year, the issue raised in this Petition will arise in
other cases. But no case of which Petitioner is aware has
squarely addressed whether due process precludes a judge
from casting the deciding vote in a case where the judge has
a financial or personal interest in an anicus curiae that will
benefit directly from the outcome of the case.° Because of
the huge financial impact of the decision below on insurance
policyholders in Wisconsin, and the serious due process
concerns that arise from Justice Geske’s participation in that
decision, Petitioner respectfully requests the Court to grant
its petition in this case.

: Cf. Berard v. Bernard, 31 F.3d 842, 844-45 (9th Cir. 1994) (a
judge married to United States Trustee concludes that he should recuse
himself in any case in which the United States Trustee appears as an
amicus, citing to the views of the Committee on Codes of Conduct); see
also In re Honolulu Consolidated Oil Co., 243 F. 348 (9th Cir. 1917) (a
judge should recuse himself under the federal recusal statute where the
judge is a stockholder in a corporation with a pending lawsuit that will
be affected by the case pending before him). The policy goal of the
federal recusal statute, 28 U.S.C. § 455, -- the avoidance of the
appearance of judicial impropriety -- is of “constitutional dimensions.”
Liljeberg v. Health Services Acquisition Corp., 486 U.S. 847, 865 & n.12
(1988) (citing Lavoie, Tumey, and Murchison).

wo

17

Il. THIS COURT HAS NEVER CONSIDERED
WHETHER THE "VOLUNTARY, KNOWING,
AND INTELLIGENT" TEST FOR WAIVER OF
FUNDAMENTAL CONSTITUTIONAL RIGHTS
APPLIES EQUALLY IN THE CIVIL AS IN THE
CRIMINAL CONTEXT

This Court has stated, in the criminal context, that
"[w]aivers of constitutional rights not only must be voluntary
but must be knowing, intelligent acts done with sufficient
awareness of the relevant circumstances and likely
consequences.” Brady v. United States, 397 U.S. 742, 748
(1970) (internal citations omitted). In D.H. Overmyer Co.
v. Frick Co., 405 U.S. 174 (1971), a civil case, this Court
assumed, without deciding, that the Brady standard applies
to the contractual waiver of due process rights in the civil
context. Jd. at 185.

Overmyer involved the exercise of a provision of
Ohio law whereby one party may consent in advance to a
default judgment without notice or hearing. In a decision
narrowly confined to the facts of the case, id. at 178, 188,
the Court determined that the petitioner had voluntarily,
knowingly, and intelligently waived its constitutional right to
notice and a hearing. Id. at 187.

This case presents this Court with an opportunity to
decide the question not reached in Overmyer -- whether the
"voluntary, knowing, and intelligent” standard applies in to
the waiver of a fundamental due process right in the civil
context. Unlike Overmyer, this case presents a situation in
which a “voluntary, knowing, and intelligent” waiver did not

18

occur. At least two federal Courts of Appeal have
determined a purported waiver of fundamental constitutional
rights in civil cases to be invalid where it was not voluntary,
knowing, and intelligent.’ At least implicitly, the decision
of the Supreme Court of Wisconsin in this case is to the

contrary.

The reasoning of Brady and its predecessors should
be just as compelling in the civil as in the criminal context.
To deny parties their fundamental constitutional rights on the
basis of anything less than a voluntary, knowing, and
intelligent waiver would invite erosion of due process rights
through a variety of technical defaults. Particularly in the
present case, where the due process right at issue is designed
to uphold the public’s confidence in the judiciary, to adopt
a lower standard for waiver would only tend to diminish the
judiciary, and indeed the legal system, in the eyes of the
public.

Determining whether a particular alleged waiver was
indeed voluntary, knowing, and intelligent may depend in
part on the particular circumstances of the case. Brookhart

10 See Gonzalez v. County of Hidalgo, Texas, 489 F.2d 1043, 1048-50
(Sth Cir. 1973); Sambo’s Restaurants, Inc. v. City of Ann Arbor, 663
F.2d 686, 693 (6th Cir. 1981) (Opinion of Celebrezze, J.) (waiver
invalid because not knowing); id. at 695-696 (Opinion of Merritt, J.)
(waiver was invalid because not voluntary); cf. Bond v. Dentzer, 494
F.2d 302, 312-14 (2d Cir. 1974), cert. denied, 419 U.S. 837 (Kaufman,
J., dissenting) (the device of wage assignment denies debtor the due
process right to have the question of default adjudicated, and an
adhesion contract clause did not constitute a constitutionally valid
waiver of that right).

19

v. Jones, 384 U.S. 1, 4 (1966). There is a presumption
against such a waiver. Jd. Whether the waiving party was
an uncounselled criminal defendant or a sophisticated,
counselled corporation is of course a relevant factor to be
considered. See, e.g., Overmyer, 405 U.S. at 186.
Ultimately, when a court determines that a constitutional
right has been waived, it is deciding a question of federal
constitutional law. Brookhart, 384 U.S. at 4 & n.4.

In the proceeding below, Petition did not voluntarily,
knowingly, and intelligently waive its constitutional right to
an unbiased decisionmaker.

Justice Geske gave Petitioner a week within which to
request her to recuse herself from hearing this case. But she
did not give Petitioner sufficient information to make an
informed waiver of Petitioner’s due process rights. Justice
Geske merely told Petitioner that her husband, Michael
Hogan, worked for St. Paul. For all Petitioner knew, Mr.
Hogan could have worked in St. Paul’s employee relations
department or as a bookkeeper or a life insurance agent.
Nothing in Justice Geske’s statement suggested that Mr.
Hogan was an attorney who represented St. Paul in insurance
coverage matters. Nor did Justice Geske suggest or even
hint at the hearing that she had an interest in excess of
$50,000 in the St. Paul savings plan, which included
holdings of St. Paul stock, as well as a holding in the St.
Paul pension plan.

To the extent that the Supreme Court of Wisconsin
held that Petitioner had an affirmative obligation to conduct
an independent investigation of government records to

for eee

20

determine whether Justice Geske had a personal or financial
interest that would warrant a request for disqualification,
App. 107, 111, the court was in error. That holding
substitutes a "due diligence” requirement for the "voluntary,
knowing, and intelligent” standard set forth in decades of
this Court’s decisions.

Waiver of a litigant’s right to a fair and impartial
judge should not be determined on the ground that a litigant
might have performed a Dun & Bradstreet search, or scoured
the public records, in order to determine whether a judge
should be disqualified from sitting on a case. Rather, a
party should be deemed to have waived its fundamental
constitutional rights only if the judge had fully disclosed, on
the record and at the time of the purported waiver, the
disqualifying circumstances." No such disclosure was
made below.”

. Indeed, by statute in Wisconsin, Wis. Stat. § 757.19(3),
disqualification of a judge may be waived only “by agreement of all
parties and the judge after full and complete disclosure on the record
of the factors creating such disqualification.” See also United States v.
Nobel, 696 F.2d 231, 237 & n.11 (3d Cir. 1982), cert. denied, 462 US.
1118 (1983) (under the federal Code of Judicial Conduct, full disclosure
must be made “at a time early enough to form the basis of a timely
motion at or before trial and under circumstances which avoid any
subtle coercion”). ©

12

Of course, a state may set reasonabie procedural requirements
for the assertion of a constitutional right, and the failure of a party to
comply with those requirements may constitute a waiver of that right.
Yakus v. United States, 321 U.S. 414, 444 (1944). But here, the
Supreme Court of Wisconsin determined that a litigant may assert such
rights at any time, even after a case is decided and the matter is

21

Furthermore, while litigants may be entitled to waive
fundamental constitutional rights that affect them personally,
when the assertion of those rights affects society as a whole,
waiver may be inappropriate. Most pertinently, the decision
below affects the interests of thousands of insurance
policyholders in Wisconsin that were not represented in the
courtroom.'? Obviously, those persons and businesses were
not asked to waive Justice Geske’s conflict of interest. It is
inconsistent with the fair and impartial administration of
justice for a judge with a substantial financial or personal
interest in the outcome of the case that affects the public
generally to cast the deciding vote in that case. Rather, in
those circumstances, the right to an impartial decisionmaker
should be mandatory, not waivable.

This Court should grant the petition for writ of
certiorari to decide (a) whether a party may waive its due
process rights to require disqualification of a judge with a
personal or financial interest in the outcome of a case that
affects both the party and other persons or entities not parties
to the case, and (b) if so, whether such a waiver must be
"voluntary, knowing, and intelligent.”

remanded to the lower courts. App. 103; see also Barker v. Wingo, 407
U.S. 514, 527 (1972) (“Courts should ‘indulge every reasonable
presumption against waiver, .. . and they should ‘not presume
acquiescence in the loss of fundamental rights.) (citing Aetna Ins. Co.
v. Kennedy, #1 U.S. 389, 393 (1937), and Ohio Bell Tel. Co. v.
Comm’n, 301 U.S. 292, 307 (1937)).

” More than 100 Wisconsin businesses and government entities
joined in briefs amicus curiae in support of Petitioner’s motion for
reconsideration of the Supreme Court of Wisconsin’s decision.

22
CONCLUSION

For all of the foregoing reasons, the petition for writ
of certiorari should be granted.

Respectfully submitted,

David B. Goodwin

Counsel of Record

Joshua Koltun

Heller, Ehrman, White &
McAuliffe

333 Bush Street

San Francisco, CA 94104

(415) 772-6000

Charles V. Sweeney

Of Counsel

N315 Charley Bluff Road
Milton, WI 53563

(608) 868-2710

Attorneys for Petitioner
Edgerton Sand & Gravel, Inc.

No.

In the
SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1994

Edgerton Sand & Gravel, Inc.,
Plaintiff-Respondent-Petitioner,

Vv.

General Casualty Company of Wisconsin
and Aetna Casualty and Surety Company,
Defendants-Appellants-Respondents.

On Petition for a Writ of Certiorari to the
Supreme Court of Wisconsin

APPENDICES TO THE
PETITION FOR A WRIT OF CERTIORARI

INDEX TO APPENDIX

100

Page

WISCONSIN SUPREME COURT
Decision dated
February 23, 1995 101

WISCONSIN SUPREME COURT
Decision on Motion for
Reconsideration dated
October 25, 1994 115

WISCONSIN SUPREME COURT
Opinion Filed June 16, 1994 116

WISCONSIN COURT OF APPEALS,
DISTRICT IV
Decision Dated November 25, 1992 163

CIRCUIT COURT FOR ROCK COUNTY,
WISCONSIN
Decision by Judge John H. Lussow
dated May 10, 1991 206

APPENDIX PAGE
101

STATE OF WISCONSIN _ : IN SUPREME COURT

No. 91-1408

City of Edgerton and
Edgerton Sand & Gravel, Inc.,

Plaintiffs-Respondents,
v.

General Casualty Company
of Wisconsin,

Defendant-Appellant-Petitioner,
Wisconsin Insurance Security Fund,
Defendant,
Aetna Casualty and Surety Company,
Defendant-Co-Appellant-Petitioner,
Hanover Insurance Companies,
Wausau Insurance Companies and

Local Government Property Insurance Fund,

Defendants.

APPENDIX PAGE
102

ON MOTION TO VACATE DECISION OR
ALTERNATIVELY TO REHEAR WITHOUT
PARTICIPATION OF CHALLENGED JUSTICE.

Motion dismissed.
Decided Feb. 23, 1995.

HEFFERNAN, CHIEF JUSTICE. We dismiss the
motion of Edgerton Sand & Gravel, Inc. (ES&G) to v=cate
this court’s decision of June 16, 1994, 184 Wis.2d 750, 517
N.W.2d 463 or, alternatively, for a rehearing in the matter.
To the extent the motion seeks a second reconsideration, this
court does not reconsider denials of reconsiderations. In
addition, the motion must be dismissed because we conclude
that the movant, ES&G, on multiple occasions, waived
whatever objections it might have had to the participation of
one of the justices in the court’s decision.

Nevertheless, because the movant has questioned the
integrity of a justice of this court and hence the integrity of
a decision of the court, we address the movant’s claim and
conclude that the motion of ES&G is meritless.' The court
does not ordinarily exercise any jurisdiction after the
remittitur of the judgment, opinion and the record to the

' It should be noted that on the date the instant motion was filed,
the movant submitted a copy of a consent to the substitution of ES &
G’s president, who is a member of the Wisconsin bar, for the attorneys
who had appeared on its behalf in the review and on the motion for
reconsideration. That consent was directed to the circuit court in which
the underlying action originated. The instant motion was filed by ES
& G’s substituted counsel.

a

igkitsie 2c... de

:
;

APPENDIX PAGE
103

circuit court. Ott v. Boring, 131 Wis. 472, 110 N.W. 824
(1907). However, this court has held that the Ott rule is
inapplicable when it is asserted, as here, that the court’s
decision is void because a justice should not have participated
in the case. State v. American TV & Appliance, 151 Wis.2d
175, 181, 443 N.W.2d 662 (1989). It behooves the court in
the defense of its own legitimacy and of its integrity to
consider such claims.

The movant, ES&G, was a plaintiff in the action
seeking a declaration that it was afforded insurance coverage
for the defense of administrative proceedings it considered to
be the equivalent of a suit at law. By decision of June 16,
1994, a divided court (four-three) held against the plaintiffs,
the author of this opinion on the motion for vacatur or
rehearing being one of the minority.

On July 5, 1994, ES&G moved for reconsideration,
contending that the court had misapprehended controlling
law. The motion was based on the assertion that the court’s
decision was contrary to the intent of the United States
Congress as determined by a recent decision of the United
States Supreme Court, Key Tronic Corp. v. The United
States, --- U.S. ----, 114 §.Ct. 1960, 128 L.Ed.2d 797
(1994). ES&G also claimed that this court erred when it
concluded that, under the terms of its insurance policy, the
administrative proceedings involving ES&G were not
reasonably to be construed as synonymous with a "suit."

Those legal assertions and a request to supplement the
record were the sole bases for ES&G’s reconsideration
motion, notwithstanding that Kenosha Auto Transport (KAT)
and two others, who had sought amicus status in the

|

APPENDIX PAGE
104

reconsideration, requested permission to file a motion and
brief asking that the decision be vacated or that Justice Janine
P. Geske be disqualified from the reconsideration. Although i
KAT’s proposed motion and brief had been served on all
parties, including ES&G, neither ES&G nor any other party
joined in KAT’s challenge or asserted Justice Geske’s
disqualification as ground for reconsideration or vacatur.
KAT’s motion to file an amicus brief was denied and its
request to move for Justice Geske’s disqualification was
dismissed on September 15, 1994. ES&G’s motion for
reconsideration was denied on October 25, 1994, and the
record was remitted to the circuit court on November 17,
1994, |

On November 29, 1994, one year after oral argument,
more than two months after KAT’s request was denied and
almost a month and one-half after ES&G’s reconsideration
motion was denied, ES&G filed the present motion, asserting
that Justice Geske was disqualified under sec. 757.19(2) and
(3), Stats.,? from participating in the original decision and

? 757.19 D'squalification of judge.

(2) Any judge shall disqualify himself or herself from any civil
or criminal action or proceeding when onc of the following situations
occurs:

(a) When a judge is related to any party or counsel thereto or
their spouses within the 3rd degree of kinship.

(b) When a judge is a party or a material witness, except that
a judge need not disqualify himself or herself if the judge determines
that any pleading purporting to make him or her a party is false, sham
or frivolous.

(c) When a judge previously acted as counsel to any party in
the same action or proceeding.

Kae so ie.

APPENDIX PAGE
105

asking for the vacation of the decision of June 16, 1994, or,
in the alternative, for rehearing without the participation of
Justice Geske. It is clear that ES&G previously waived any
objection it might have had to Justice Geske’s participation.
We dismiss the motion for this reason, but we point out that,
even if the disqualification issue had been raised timely on
reconsideration, it would have been determined to be without
merit.

We set forth the significant facts. The case was
argued to the court on Monday, November 29, 1993. At the
outset of the argument, shortly after counsel for one of the
petitioners on review commenced his presentation, Justice
Geske stated:

"I ... want to make a disclosure. Last
night when I was looking one more time at the
amicus briefs, I noted that Mr. Burrell had
filed an amicus brief on behalf of the
Insurance Environmental Litigation

(d) When a judge prepared as counsel any legal instrument or
paper whose validity or construction is at issue.

(c) When a judge of an appellate court previously handled the
action or proceeding while judge of an inferior court.

(f) When a judge has a significant financial or personal interest
in the outcome of the matter. Such interest does not occur solely by
the judge being a member of a political or taxing body that is a party.

(g) When a judge determines that, for any reason, he or she
cannot, or it appears he or she cannot, act in an impartial manner.

(3) Any disqualification that may occur under sub. (2) may be
waived by agreement of all parties and the judge after full and complete
disclosure on the record of the factors creating such disqualification.

APPENDIX PAGE
106

Association, and I looked at the appendix and
I noted that one of the companies listed in that
is St. Paul Companies. My husband is
employed by that company. I do not believe
that presents any conflict and will not
influence me. If anybody has any objections
to me sitting on this case, I would appreciate
hearing from you in letter by the end of the
week.”

Justice Geske’s declaration in open court disclosed
that her husband was an employee of a company that, while
not a party to the litigation, was a member of an association
that had submitted a nonparty amicus brief. No objection
was raised by any of the parties at oral argument nor was any
objection raised “by the end of the week.” No objection to
Justice Geske’s participation whatsoever was raised until
KAT, a nonparty, raised the question in the proposed amicus
brief it tendered to the court on September 2, 1994.

The disqualification statute provides that any
disqualification "may be waived by agreement of all parties
and the judge after full and complete disclosure on the record
of factors creating the disqualification.” Section 757.19(3),
Stats. It is significant to note that ES&G does not argue that
the disclosure made by Justice Geske and the setting of a
time limit to object or to waive objection to her participation
was not a proper procedural framework for the waiver of
disqualification. Rather, counsel for ES&G argues that the
disclosure was not sufficient--that it did not constitute a “full
and complete disclosure."

—

4
3
+
4
v§
“
v

APPENDIX PAGE
107

Wisconsin law, sec. 19.43, Stats., and the rules of
this court, SCR 60.18, require members of the judiciary to
file each year with the Ethics Board a statement of economic
interests, including their assets and liabilities. As matters of
public record, those statements are available for inspection by
any interested person. A judge in a particular case who is
aware of facts that may be relevant to the issue of his or her
disqualification must disclose those facts to the parties for
purposes of waiver under sec. 757.19(3), Stats. This is a
duty imposed on a judge by law. A party concerned about
those facts should then, at a minimum, examine the judge’s
financial disclosure on record because information in those
records may prompt further inquiry.

We conclude that under the circumstances of this case
the disclosure made by Justice Geske was sufficient--that all
the facts necessary for counsel to determine whether to assert
or waive any disqualification were either disclosed or were
readily obtainable of record prior to the "weekend deadline”
suggested by Justice Geske. Following that disclosure, if
ES&G had been concerned, it could have examined the
financial disclosures Justice Geske had filed with the Ethics
Board and if those disclosures did not satisfy ES&G in
respect to Justice Geske’s financial ties to St. Paul
Companies, it could have asked for more information from
her or could have advised her “by the end of the week” that
it objected to her participation.

If ES&G’s counsel examined the public record, it
apparently did not deem the information in it sufficient to
pursue the disqualification issue. Now, however, ES&G’s
substituted counsel asserts that Justice Geske’s
disqualification was required on the basis of inferences it

APPENDIX PAGE
108

makes from that information. Clearly, ES&G waived any
possible disqualification by not acting by the "end of the
week” and for one year following oral argument.

Even after the court’s decision on June 16, 1994--after
learning that Justice Geske was the scrivener for the
court--ES&G’s counsel did not raise the question of Justice
Geske’s qualification to sit but asserted in its reconsideration
motion only that the court had failed to follow what counsel
considered controlling law. Despite the fact that ES&G had
been served with a copy of KAT’s proposed amicus motion
and brief raising the disqualification issue, it did not join in
KAT’s motion or express to the court in its motion for
reconsideration on the merits any position in respect to
disqualification.

Hence, we conclude that on at least two discrete
occasions ES&G’s counsel failed to make any objection to
Justice Geske’s participation. These successive waivers in
themselves bar ES&G from asserting its motion for vacatur
at this time, months after it could have informed itself of the
facts on which its motion is based and made any concern
known to the court. The motion must be dismissed.

We could well rest our determination of the motion
solely upon the absence of ES&G’s timely assertion of its
purported rights or we could, and do, base it also on the fact
that there has been one reconsideration of the court’s
decision and we will not entertain a request for a second.
Blau v. City of Milwaukee, 232 Wis. 197, 208, 285 N.W.
347, 286 N.W. 874, 287 N.W. 594 (1939). Nonetheless,
when there is an attack upon the impartiality of the court or
of one of its justices, we should determine whether such

APPENDIX PAGE
109

attack is meritorious or meretricious. We conclude that the
instant assault upon this court by ES&G is the latter.

First, it must be noted that all of ES&G’s arguments
for disqualification hinge upon its persistent and unfounded
assertion that St. Paul Companies is in essence a party to the
action. It is not. The Insurance Environmental Litigation
Association, of which St. Paul Companies is a member, filed
a non-party amicus brief. St. Paul is not a party and
Attorney Hogan is not its counsel in this case.

Second, ES&G overlooks the fact that the lacunae in
information that it now asserts made Justice Geske’s in-court
disclosure defective was a matter of record at least since
Justice Geske filed her Statement of Economic Interests with
the Ethics Board, pursuant to sec. 19.43, Stats., on
December 14, 1993.’ That document, a public record, sets
forth that Justice Geske’s husband, Michael Hogan, was an
attorney-employee for St. Paul Fire & Marine Company and
that she and her immediate family owned a “savings plus
program for St. Paul Fire & Marine--St. Paul stocks and
mutual funds" of a combined value of more than $50,000.
Further, contrary to ES&G’s assertion that Justice Geske did
not disclose that she and her husband had a financial interest
in St. Paul’s employee pension plan, her financial disclosure
recites that one of the family assets is a retirement plan with
St. Paul Fire & Marine. (Addendum to Statement of

> ES & G appended a copy of that statement to its brief in support
of the instant motion.

APPENDIX PAGE
110

Economic Interest filed on December 14, 1993.)* Had there
been any real concern over the Geske-Hogan holdings in St.
Paul Insurance Company following the in-court disclosure,
ES&G had every opportunity to assert it. It did not.

It is also alleged that Justice Geske did not disclose
that St. Paul had a significant interest in the litigation. Once
Justice Geske announced that Attorney Hogan was employed
by St. Paul, the parties, including ES&G, were in a position
to ascertain whether St. Paul’s interest was significant. Yet,
when the employment relationship of Justice Geske’s husband
with St. Paul was disclosed, ES&G did not raise St. Paul’s
interest or of the Geske-Hogan interest as potentially
requiring disqualification and did not do so thereafter when
it moved for reconsideration. Only after the initial adverse
decision on the merits and after having been rebuffed on the
merits of its motion for reconsideration did ES&G, by its
substituted counsel, raise the issue of the extent of St. Paul’s
interest in the underlying litigation.

ES&G dismisses as irrelevant to a determination of
disqualification on the basis of financial interest the one

* It should be noted that counsel for ES & G repeatedly refers to
the precedent of federal court decisions as being dispositive in this
court. Under federal statutes, any financial interest, no matter how
insignificant, or factually irrelevant, may be a basis for disqualification.
28 U.S.CA. sec. 455(b)(4) and (d)(4). That is not the law of the State
of Wisconsin, which requires disqualification only if there is a
“significant financial or personal interest.” It is not asserted that the
interest of the Justice or her family is significant. The complaint of ES
& G is that it lacks the information needed to assert that the interest
is significant.

APPENDIX PAGE
111

factor relevant here to the issue of disqualification--Justice
Geske’s statement, "I do not believe [my husband’s
employment with St. Paul Companies] presents any conflict
and will not influence me.” While not relevant in respect to
sec. 757.19(2)(f), Stats., that statement is far from irrelevant.
Because, on the facts of record, none of the grounds for
mandatory disqualification has any objective factual basis, the
only basis for Justice Geske’s disqualification would be that
set forth in sec. 757.19(2)(g), Stats., "[w]Jhen a judge
determines that, for any reason, he or she cannot, or it
appears he or she cannot, act in an impartial manner."
(Emphasis supplied.)

As pointed out in American TV, supra, 151 Wis.2d
at 182, 443 N.W.2d 662 the determination under sec.
757.19(2)(g), Stats., unlike the other subdivisions of the
Statute, is a subjective one. That, however, does not prevent
the parties from bringing to the judge’s attention facts that
may bear on that determination. Here, Justice Geske
announced to the world that the fact that her husband worked
for the St. Paul Companies would not influence her decision.
It was appropriate for her to so state and it invited counsel to
challenge the statement on the basis of objective facts.
Counsel did not do so within the time specified by Justice
Geske--"the end of the week"--and ES&G did not do so when
it moved for reconsideration eight months later. ES&G did
not raise the disqualification issue until one year later.

The assertion that Justice Geske failed to make a
disclosure of facts that counsel could have fully explored in
the public record can only be explained by ES&G’s continued
effort to ignore facts that were apparent and available to
anyone who thought them to be of concern. While

APPENDIX PAGE
112

reasonable persons may disagree on the merits of the original
decision, as did the author of this opinion, no reasonable
person can argue on the basis of objective facts or on the
basis of the subjective test under sec. 757.19(2)(g), Stats.,
that Justice Geske acted in other than an impartial and just
manner.

We point out that a complaint was made to the
Judicial Commission alleging that Justice Geske’s
participation in this case constituted a violation of the Code
of Judicial Ethics. That complaint was dismissed upon the
Judicial Commission’s determination that there was no
probable cause to believe that any violation whatsoever
occurred.* While the Judicial Commission’s letter appended
hereto is evidence that Justice Geske has been completely
exonerated by the tribunal authorized to investigate and
charge judges for ethical violations, we do not rely on that
determination.

Our review of the record establishes that the claims
made in the motion for vacatur and for disqualification in the
event of further proceedings are meritless and untimely
Further, ES&G’s untimely arguments have had the effect of
delaying the final decision in the case and have disrupted the
orderly procedures of this court.

Motion dismissed with costs.

GESKE, J., did not participate.

> See appended letter of Judicial Commission dated January 17,
1995.

APPENDIX PAGE
113

APPENDIX
State of Wisconsin
JUDICIAL COMMISSION

James C. Alexander
Executive Director Phone: 608-266-7637
Suite 606, Tenney Building
110 East Main Street
Madison, Wisconsin 53703-3328

January 17, 1995
CONFIDENTIAL

Honorable Janine P. Geske Justice, Wisconsin
Supreme Court 231 East, Capitol Madison, Wisconsin

Dear Justice Geske:

On December 16, 1994, the Judicial Commission
considered the allegation of misconduct filed against you for
your participation in the case City of Edgerton et al. v.
General Casualty Company of Wisconsin et al., Case No. 91-
1408.

As I stated in my letter of December 20, 1994, the
Commission’s review of the investigation resulted in its
determination that probable cause did not exist that a
violation of the Code of Judicial Ethics had occurred. The
matter has accordingly been closed.

APPENDIX PAGE
114

It is my understanding that you are waiving your right
to confidentiality under s 757.93, Wisconsin Statutes, only

for the specific purpose of filing this letter in the court file of
the case involved, with copies to the attorneys of record.

Again, thank you for your cooperation with the
Commission in the investigation of this matter.

Very truly yours, /s/ James C. Alexander

James C. Alexander

Attorney at Law

2 Saderatllakn "lai TO cls aOR Cah ta

APPENDIX PAGE
115

STATE OF WISCONSIN _ : IN SUPREME COURT

DISTRICT 4
EDGERTON, CITY v. GENERAL CASUALTY CO.,
#91-1408

IT IS ORDERED THAT THE MOTION FOR
RECONSIDERATION IS DENIED WITH COSTS.

C.J. HEFFERNAN, J. ABRAHAMSON AND J.
BABLITCH DISSENT.

IT IS FURTHER ORDERED THAT THE MOTION
TO STRIKE PORTIONS OF MEMO IN SUPPORT C!
MOTION FOR RECONSIDERATION AND THE MOTIO'N
TO FILE MEMO IN SUPPORT OF MOTION FOR
RECONSIDERATION ARE DISMISSED.

Dated: October 25, 1994.

Marilyn L. Graves
Clerk of Supreme Court

APPENDIX PAGE
116

STATE OF WISCONSIN _ : IN SUPREME COURT

No. 91-1408

City of Edgerton and
Edgerton Sand & Gravel, Inc.,

Plaintiffs-Respondents,
Ve

General Casualty Company
of Wisconsin,

Defendant-Appellant-Petitioner,
Wisconsin Insurance Security Fund,
Defendant,
Aetna Casualty and Surety Company,
Defendant-Co-Appellant-Petitioner,
Hanover Insurance Companies,
Wausau Insurance Companies and

Locai Government Property Insurance Fund,

Defendants.

APPENDIX PAGE
117

REVIEW of a decision of the Court of Appeals.
Affirmed in part, reversed in part, and remanded.

Filed June 16, 1994.

JANINE P. GESKE, J. This is a review of a
published decision of the court of appeals, City of Edgerton
v. General Cas. Co., 172 Wis. 2d 518, 493 N.W.2d 768 (Ct.
Apr. 1992), which affirmed in part and reversed in part a
judgment of the circuit court for Rock County, John H.
Lussow, Circuit Judge. The circuit court granted summary
judgment to the plaintiffs, City of Edgerton (the City) and
Edgerton Sand and Gravel, Inc. (ES&G). The City and
ES&G sought a declaration of their rights under insurance
policies issued by General Casualty Company of Wisconsin
(General Casualty) and Aetna Casualty and Surety Company
(Aetna).° The City and ES&G claimed that the policies
provided coverage for environmental remediation costs
resulting from the operation of a landfill located in the City.

‘Both the City and ES&G maintained insurance policies for
personal injury liability from approximately 1973 to 1986. Specifically,
ES&G received primary coverage from Iowa National Mutual Insurance
Co. for the period of January, 1973 to January, 1984 (Iowa National is
now insolvent). Primary coverage from January, 1984 to January, 1986
was provided by General Casualty. ES&G also maintained an excess
coverage policy, issued by Aetna, from April, 1974 to April, 1977.

Iowa National also issued a primary coverage policy to the City
for April, 1977 to April, 1981. That coverage was then carried by
Gencral Casualty from April, 1982 to April, 1986. Aetna did not issue
a policy to the City at any time.

Both ES&G and the City agree that General Casualty’s policies
commencing after 1984 do not provide coverage.

APPENDIX PAGE
118

The circ. it court agreed and granted the motion for summary
judgment. The court of appeals reversed that decision.

General Casualty and Aetna filed cross-motions for
summary judgment in the circuit court, claiming that (a) no
suit seeking damages had been filed which would trigger a
duty to defend, and (b) the failure of ES&G to provide notice
of an occurrence or claim precluded coverage. The circuit
court denied the cross-motions, and the court of appeals
affirmed.

We now affirm the court of appeals decision with
regard to the City’s and ES&G’s motion for summary
judgment and reverse the court of appeals decision with
regard to General Casualty’s and Aetna’s cross-motions for
summary judgment.

Of paramount concern in this case is whether the
insurance policies for which ES&G and the City contracted
require a duty to defend against federal and state agencies’
demands for environmental cleanup. Consequently, the
following issues of first impression are before the court:

(1) Does the receipt of certain letters from a
governmental agency requesting voluntary participation in
environmental cleanup efforts constitute a “suit seeking
damages” sufficient to trigger an insurance company’s duty
to defend?

be nee thn ev hace etl imsetcrtie ale we § Wiles

a Ny ae a Oa IO ta Ol et MA Ol Peat wee

APPENDIX PAGE
119

(2) Do cleanup and remediation costs under
CERCLA’ and equivalent state statutes’ constitute
“damages” within the context of a comprehensive liability
insurance policy?

"CERCLA, or the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, is also known as “Superfund”
and was designed to provide for the cleanup of hazardous waste. The
act empowered the federal government, through the Environmental
Protection Agency (EPA), to identify hazardous waste sites and pursue
remedial activities. As part of the remedial process, the government
may perform the cleanup and seek compensation from responsible
parties or require the polluters to do the cleanup.

Following the implementation of CERCLA in 1980, state
legislatures enacted similar legislation which would apply to hazardous
waste identified under the federal program, as well as reach to other
substances that individual states had the need to control. See Howell
A. Burkhalter, Comment, Liability for CERCLA Cleanup Costs—Are
Insurers the Victims of Judicial Activism?, 26 Wake Forest L. Rev. 221,
222 n.8 (1991).

CERCLA was amended by the Superfund Amendments and
Reauthorization Act of 1986 (SARA) and is codified at 42 U.S.C. secs.
9601-9675 (1988 & Supp. 1992). This amendment served to buttress the
original legislation.

Throughout this opinion, CERCLA will be cited as 42 U.S.C.
sec. ,

"Sections 144.43 to 144.79, Stats., comprise subch. IV of ch. 144 and
focus upon solid waste, hazardous waste, and refuse. Specifically, secs.
144.442 and 144.443 establish the process for environmental repair and
the financial responsibility associated with it. Various sections within
this subchapter will be referred to in pertinent part throughout this
opinion.

APPENDIX PAGE
120

(3) Do the personal injury provisions of an
insurance policy provide coverage for environmental cleanup
costs when there has been no allegation of wrongful entry,
eviction, or other invasion of the right to private occupancy?

(4) Is the “insured’s own property” exclusion
applicable so as to preclude coverage for cleanup and
response costs incurred to remediate the insured’s own

property?

The threshold question in this case is whether the
receipt by ES&G and the City of letters by the Wisconsin
Department of Natural Resources (DNR), requesting
remediation of a contaminated site, triggered General
Casualty’s and Aetna’s duty to defend the City and ES&G as
their insureds. The court of appeals concluded that the duty
to defend arose when a federal or state environmental agency
identified a potentially responsible party (PRP)’ which it

*42 U.S.C. sec 9622(e)(1) provides in pertinent part:

Whenever the President determines that a period of
negotiation under this subsection would facilitate an
agreement with potentially responsible parties for
taking response action (including any action described
in section 9604(b) of this title) and would expedite
remedial action, the President shall so notify all such
parties...

Once a PRP is notified of its status under this section, it has three
options: (1) do nothing and wait for the government to recover the
costs of the cleanup; (2) clean up the affected site or join with other
PRPs to effect a cleanup; or (3) litigate with the government so as to
possibly secure a more favorable future result. See Joanna L. Johnson,

14 Re odtay

APPENDIX PAGE
121

unequivocally required to pay the cost of, or participate in
paying the cost of, landfill remediation. Edgerton, 172 Wis.
2d at 530. However, the duty to defend is not triggered
unless the suit seeks damages. /d. (citing Shorewood School
Dist. v.. Wausau Ins., 170 Wis. 2d 347, 366, 488 N.W.2d 82
(1992)). Damages, according to the court of appeals, are
remedial in nature, not preventive, and therefore do not
encompass the cost of complying with an injunctive decree.
See Shorewood School Dist., 170 Wis. 2d at 370. Though
General Casualty and Aetna argued that Superfund
remediation and cleanup costs were incurred in response to
claims for injunctive relief, the court of appeals concluded
that the manner in which the term "damages" was used in the
insurance policies at issue contemplated costs incurred when
responding to the Superfund initiative.

We now hold that the DNR’s notification to ES&G
and the City by letter that ES&G and the City were
potentialiy responsible parties and liable for hazardous waste
site remediation costs does not trigger the insurers’ duty to
defend because the letters do not constitute a "suit seeking
damages” within the plain meaning of the insurance policies
contracted for and issued to ES&G and the City.

Comment, Whether Insurers Must Defend PRP Notifications: An
Expensive Issue Complicated by Conflicting Court Decisions, 10 N. Ill.
U.L. Rev. 579, 581 n.8 (1990) [hereinafter Whether Insurers Must
Defend].

APPENDIX PAGE
122

This holding makes it unnecessary for us to further
analyze the personal injury and pollution exclusion provisions
of the policies at issue.

The relevant facts are as follows. ES&G owns a
landfill site in Rock County, consisting of approximately ten
acres."° The site, located on the southern border of the
City, accommodated sand and gravel operations as well as
serving the City’s landfill from 1968 to 1984.

By 1978, the DNR informed ES&G by letter that it
suspected groundwater contamination at the site. The DNR
recommended that the landfill be closed and capped. In
1984, volatile organic compounds (VOCs) were detected in
the groundwater under and in the vicinity of the site. ES&G
closed the landfill on December 30, 1984, and, during the
next year, the site was capped.'' Though the site was

‘The site of the landfill was owned by the Sweency family (owners
of ES&G). From the carly 1950’s until the time of its closing in
December of 1984, the landfill was used as a dump and burn site for
waste materials. From 1968 to 1984, the City of Edgerton leased the
site for landfill operations. Licensing information indicates that the site
was to be a depository for municipal waste, not hazardous or industrial
wastes. However, ES&G and the City have claimed that sludge from
the City’s water treatment plant was also dumped at the site.

''*Capping” of the landfill required the construction of a clay cap,
consisting of approximately two and one-half feet of clay material, over
which was deposited six inches of topsoil. Ground cover was planted
over the cap to ensure soil stability. Construction of the clay cap was
done with DNR approval.

9 Pie toa

APPENDIX PAGE
123

closed, groundwater contamination remained, and the DNR
recommended the landfill for placement on the EPA’s list of
contaminated sites for priority cleanup.

On June 22, 1989, the EPA notified ES&G and the
City by certified letter'? that the EPA was investigating the
circumstances surrounding the presence of hazardous

"The letter from the EPA stated the following in pertinent part:

The United States Environmental Protection Agency
(U.S. EPA) is_ presently investigating the
circumstances surrounding the presence of hazardous
substances in and around the Edgerton Sand & Gravel
Site in Rock County...

Pursuant to the authority of Section 104(e) of the
Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA), 42
U.S.C. [sec.] 9604(e), amended by the Superfund
Amendments and Reauthorization Act of 1986, Pub.
L. 99-499 [SARA], and pursuant to Section 3007 of the
Resource Conservation and Recovery Act (RCRA), 42
U.S.C. [sec.] 76927, you are hereby requested to
respond to the following Information Requests.
Compliance with the following Information Requests
is mandatory...

The information requests focused upon the City’s and ES&G’s
possession, custody or control relating to the operation/cleanup of the
landfill and to the storage and/or disposal of hazardous substances at
the site.

APPENDIX PAGE
124

substances in and around the landfill.’ The EPA then
requested that ES&G and the City (now considered PRPs)
respond to the DNR’s request for information regarding the
disposal of hazardous substances at the landfill from 1950 to
1984.

In July, 1989, both the City and ES&G forwarded the
letters received from the EPA to their primary carrier,
General Casualty. Each separately requested defense
coverage. ES&G specifically requested that General Casualty
pay any costs which ES&G may have incurred regarding the
site.

In February, 1990, the DNR sent certified letters to
the City and ES&G, giving each 30 days to propose a plan
for remediation of the site and any problems associated with
it.'* Failure to respond would result in the listing of the site

"This course of action by the EPA was pursuant to 42 U.S.C. sec.
9604(e).

“In its letter, the DNR stated that the remediation plan must
comprehensively describe the actions required to determine the extent
of the contamination and to remediate it in accordance with state
regulations. The plan must also follow the guidelines established by the
EPA.

Section 144.442, Stats., outlines actions to be taken regarding
environmental repair. Section 144.442(8) specifically articulates how the
Superfund act shall be implemented in the state:

(8) IMPLEMENTING THE FEDERAL
SUPERFUND ACT. (a) The department [of natural
resources] may advise, consult, assist and contract with

APPENDIX PAGE
125

a i Acne

SUR A a HEA) a atta ARC lil DU GRE PS ne

Caer)

other interested persons to take action to implement
the federal comprehensive environmental response,
compensation and liability act of 1980, 42 USC 9601,
et seq., in cooperation with the federal environmental
protection agency. These actions include all of the
actions under subs. (4) to (6). The department may
enter into agreements with the federal environmental
protection agency.

(b) The department may expend moneys
from the appropriations under ss. 20.370(2)(dv) and
20.866(2)(tg) as required under 42 USC 9601, et seq.
The department shall promulgate by rule criteria for
the expenditure of moncys from the appropriations
under ss. 20.370(2)(dv) and 20.866(2)(tg), the moneys
available from other sources for the required sharing
of costs, the differences between public and private
sites or facilities, the potential for cost recovery from
responsible parties and any other appropriate factors.

(c) 1. The department may require a
municipality to pay a reasonable share of the amount
expended by the department for a project under par.
(b). The department shall base any share charged to
a municipality for a project under par. (b) on the
following factors:

a. The municipality's responsibility for the
site or facility affected by the project.

b. The benefit that the municipality receives
from the project.

c. The municipality's ability to pay for the
project.

APPENDIX PAGE
126

on CERCLA’s National Priorities List (NPL) or state
action.’ By April, 1990, ES&G notified Aetna, its excess
insurer, of the receipt of the EPA information request letter
and the DNR enforcement letter. Again, ES&G requested
coverage of defense costs as well as any liability resulting
from EPA or DNR claims. General Casualty denied
coverage and a defense for the City and ES&G. Aetna
denied the same for ES&G.

Both the City and ES&G, in a declaratory action
begun in December, 1990, sought to define the obligations of
General Casualty and Aetna under the insurance policies.
Specifically, both the City and ES&G claimed that General
Casualty and Aetna were obligated to defend and indemnify

2. The total amount charged to all
municipalities who are charged for the project may not
exceed 50% of the amount expended by the
department under par. (b) for the project.

3. The department shall promulgate rules
establishing criteria for determining the responsibility,
for the purposes of this subsection, of a municipality
for a site or facility affected by the project under par.
(b); the benefit a municipality receives from a project
under par. (b); and the ability of a municipality to pay
for a project under par. (b).

4. All monies received under this paragraph
shall be credited to the environmental fund for
environmental repair.

'’The work plan was prepared and then filed July 11, 1991, in the
DNR’s southern district headquarters.

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Pee, te mane

APPENDIX PAGE
127

them for any liabiiity arising out of DNR or EPA claims,
actions, or suits involving the landfill. Additionally, ES&G
and the City stated a claim for bad faith against General
Casualty and Aetna for refusing to provide a defense. A
motion for summary judgment was filed by the City and
ES&G in March, 1991. In April, 1991, General Casualty
filed a cross-motion for summary judgment which stated that
(a) since no “suit seeking damages” had been filed, no duty
to defend was triggered; (b) the insured’s failure to give
timely notice of an occurrence or claim precluded coverage
under the policies; and (c) the bad faith claim ought to be
dismissed. Aetna filed a similar cross-motion for summary
judgment.

In May, 1991, the circuit court granted the City’s and
ES&G’s motion for summary judgment and denied the cross-
motions. However, the court did dismiss the bad faith
claim.’* In July, 1991, the circuit court entered an amended
judgment from which General Casualty and Aetna appealed.

The court of appeals affirmed that part of the
judgment which denied the insurers’ cross-motions for
summary judgment and reversed that part of the judgment
which granted ES&G’s and the City’s motion for summary
judgment. The court of appeals concluded that (a) the

‘*Both General Casualty and Aetna moved the circuit court, as an
alternative to their cross-motions for summary judgment, to order a
continuance so as to permit additional discovery. The circuit court
ultimately did not rule on the motions for a continuance, and the court
of appeals decision rendered moot cach insurer’s claim that the circuit
court erroneously exercised its discretion by not addressing those
motions.

APPENDIX PAGE
128

insurers’ duty to defend was not triggered by the PRP letters
from the EPA in June, 1989, but was triggered by the receipt
of the letters from the DNR in February, 1990; (b) the DNR
letters unequivocally imposed upon the City and ES&G
responsibility to remediate and clean up the landfill or to bear
the cost of the remediation which necessitated a defense by
the insurers; and (c) remediation costs are damages within the
meaning of the term in the policies.

Summary judgment under sec. 802.08(2), Stats. ,'’
shall be rendered when no genuine issue as to any material
fact exists, and the moving party is entitled to a judgment as
a matter of law. Summary judgment should not be granted
“unless the moving party demonstrates a right to a judgment
with such clarity as to leave no room for controversy...."
Grams v. Boss, 97 Wis. 2d 332, 338, 294 N.W. 2d 473
(1980). A party seeking summary judgment must, therefore,
demonstrate to the court that a trial is unnecessary by
establishing a record which sufficiently illustrates that no

"Section 802.08(2), Stats., provides:
802.08 Summary judgment....

(2) Motion.... The judgment sought shall be
rendered if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law. A
summary judgment, interlocutory in character, may be
rendered on the issue of liability alone although there
is a genuine issue as to the amount of damages.

PE Dt EHD LB OR IAG SHE NT SoD Aalst Pte

APPENDIX PAGE
129

triable issues of material fact exist on any issue presented.
Heck & Paetow Claim Service, Inc. v. Heck, 93 Wis. 2d
349, 356, 286 N.W. 2d 831 (1980) (citing Hilkert v. Zimmer,
90 Wis. 2d 340, 342, 280 N.W. 2d 116 (1979)). If the
movant’s papers before the court do not clearly establish the
absence of such a material fact, the court shall deny the
motion. Grams, 97 Wis. 2d at 339.

On appeal, this court must review the grant or denial
of a summary judgment motion by applying the standards set
forth in sec. 802.08, Stats., just as the circuit court is to
apply them. Voss v. City of Middleton, 162 Wis. 2d 737,
748, 470 N.W.2d 625 (1991) (citing Green Spring Farms v.
Kersten, 136 Wis. 2d 304, 315, 401 N.W. 2d 816 (1987)).

DUTY TO DEFEND

Every insurance agreement functions as a contract
between the insured and the insurer. Each party to the
contract owes certain duties and obligations to the other. The
issue in this case is not, as the dissent infers, "Who will pay
the costs of environmental cleanup?", but is one of
interpretation of the insurer’s contractual duties. The insurer
maintains two obligations, the duty to indemnify the insured
in the event of a loss and the duty to defend the insured
against suits which fall under the terms of the policy. See
Mitchell L. Lathrop, Insurance Coverage for Environmental
claims sec. 8.03[1][a] at 8-24 (1994). The duty to defend “is
predicated on allegations in a complaint which, if proved,
would give rise to recovery under the terms and conditions
of the insurance policy.” Elliott v. Donahue, 169 Wis. 2d

APPENDIX PAGE
130

310, 320-21, 485 N.W.2d 403 (1992) (emphasis added)
(citing Sola Basic Industries, Inc. v. U.S. Fidelity &
Guaranty Co., 90 Wis. 2d 641, 646, 280 N.W.2d 211
(1979)). As the court of appeals stated in Nichols v.
American Employers Ins. Co., 140 Wis. 2d 743, 749, 412
N.W.2d 547 (Ct. App. 1987):

The duty to defend exists independent of the
duty to investigate. Indeed, a duty to defend
does not even arise until there has been a suit
initiated. See Solo Cup Co. v. Federal Ins.
Co., 619 F.2d 1178, 1183 (7th Cir. 1980)
cert. denied 449 U.S. 1033 (1980). As Sola
Basic points out, once the suit is initiated, the
insurer must make a determination of whether
it is obligated to defend the suit. The
determination is made based upon the
allegations in the third party’s complaints.

The language of the policy issued by General Casualty
States that the company maintains the "right and duty to
defend any suit against the insured seeking damages...."
(Emphasis added.) Aetna’s excess insurance policy for
ES&G similarly states that the company will "defend any suit
seeking damages which are not payable on behalf of the
insured under the terms of the policies of Underlying
Insurance....". (Emphasis added.) Neither policy requires

the insurance companies to defend against a "claim" made
against an insured. The only duty imposed on the insurers is
to defend against suits seeking damages from the insureds.

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APPENDIX PAGE
131

Therefore, in order to determine whether the
insurance companies have a duty to defend in this case, we
must decide whether there is a suit seeking damages against
the insureds.

WHAT CONSTITUTES A "SUIT"?

The expansive authority granted to state and federal
agencies under CERCLA, in order to initiate environmental
cleanup of hazardous waste, has had the effect of producing
a flood of litigation so as to determine who will pay the
cleanup costs--the PRP or the PRP’s insurer. Though
comprehensive analyses of insurance policy language and
policy drafting records have been performed by courts across
the country, there has been no definitive, nationwide
resolution of the ultimate issue--whether the general
comprehensive liability policy--the "CGL"--imposes a duty to
defend a federal or state demand for environmental
remediation and cleanup costs.’* Instead, courts have

‘A majority of courts have not conclusively determined that a CGL
imposes a duty to defend following the receipt of a PRP letter. Rather,
courts have bene very divided on this issue when analyzing (a) the
nature and timing of the acts which give rise to a pollution-related
problem; (b) the role the CGL insured plays in those acts, and (c) the
nature of the relief sought against the CGL insured. See Barry R.
Ostrager, Special Insurance Coverage Issues Arising Out of Hazardous
Waste/Environmental Clean-Up Litigation, American Law Institute
(1993). Further, one must carefully distinguish among the issues raised
in this type of environmental litigation, in addition to the duty to
defend: the role of the pollution exclusion clause, the scope of CGL
coverage for environmental claims, and coverage under the personal
injury endorsement. Again the split among the courts is far more self-
evident than a majority view.

APPENDIX PAGE
132

For example, the following is a partial list of decisions which
have held that a duty to defend was invoked with the issuance of a PRP
letter: Village of Morrisville Water & Light Dept. v. USF&G, 775 F.
Supp. 718 (D. Vt. 1991) (the EPA clearly warned the insured of the
probability of imminent government action, enforceable by a court of
law, if it did not respond to the letter; the PRP letter is the equivalent
to the start of a lawsuit); Avondale Industries, Inc. v. Travelers Indem.
Co., 697 F. Supp. 1314 (S.D. N.Y. 1988), aff'd 887 F.2d 1200 (2d Cir.
1989), reh’g denied 894 F.2d 498 (2d Cir. 1990), cert. denied 496 U.S. 906
(1990) (an action may be taken which binds the insured before a suit is
filed; since damages may be determined before the parties arrive in
court, the administrative process is part of the litigious process which
triggers the obligation to defend); Firernan’s Fund Ins. Companies v. Ex-
Cell-O Corp., 662 F. Supp. 71 (E.D. Mich. 1987) (the duty to defend is
not restricted to the traditional lawsuit for money damages, but extends
to the actual or threatened use of the legal process to coerce payment);
Hazen Paper v. U.S. Fidelity and Guar., 407 Mass. 689, 555 N.E.2d 576
(1990) (though literally there is no suit, the litigation defense protection
purchased by Hazen would be compromised if USF&G did not defend
in response to the EPA letter); Minnesota Min. & Mfg. v. Travelers
Indem., 457 N.W.2d 175 (Minn. 1990) (the issue of coverage does not
depend merely on the form of action taken against the insured; the
proceeding commenced is equally as coercive as a civil judgment against
the insured); and Cascade Pole Co. v. Reliance Insurance Co., No. 88-2-
2316-3 (Wash. Super. Ct. March 20, 1992) (a PRP letter is a suit
because remediation and response costs may be incurred and because
they establish adversarial relationships).

The following decisions have held that a PRP letter does not
trigger the duty to defend under a CGL policy: Harter Corp. v. Home
Indem. Co., 713 F. Supp. 231 (W.D. Mich. 1989) (the court cannot
construe an EPA threat to hold the insured liable for cleanup costs as
a suit seeking damages without doing violence to the plain meaning of
the word “suit"); State of N.Y. v. Amro Realty Corp., 697 F. Supp. 99
(N.D. N.Y. 1988) (there is no duty to defend until an actual complaint
in an environmental lawsuit is forwarded to the insurer); Detrex Chem.

ee

APPENDIX PAGE
133

developed definitions of what constitutes a “suit” when
environmental cleanup is required.

The CGL, which emerged onto the insurance industry
scene in the early 1940’s, provided broad, comprehensive
insurance and served as a replacement for specific risk
policies. See Paul V. Majkowski, Note, Triggering the
Liability Insurer’s Duty to Defend in Environmental
Proceedings: Does Potentially Responsible Party Notification
Constitute a “Suit"?, 67 St. John’s L. Rev. 383, 384 n. 3
(1993).'* The duty to defend clause in most CGL policies

Industries v. Emp. Ins. of Wausau, 681 F. Supp. 438 (N.D. Ohio 1987),
modified on reh’g (applying Wisconsin law), reaffd 746 F. Supp. 1310
(N.D. Ohio 1990) (applying Michigan law) (a claim for damages made
against the insured that might result in liability is not synonymous with
a suit and not enough to trigger the duty to defend); Patrons Oxford
Mut. Ins. Co. v. Marois, 573 A.2d 16 (Me. 1990) (no obligation to
defend since the attorney general had not sued for cleanup costs; an
administrative arena to compel cleanup was merely sought); and
Technicon Electronics v. American Home, 141 A.D. 2d 124 (N.Y. App.
Div. 1988), aff'd on other grounds 542 N.E. 2d 1048 (1989) (the PRP
letter does not constitute a suit).

'"As Mr. Majkowski notes in his article, insurance industry trade
organizations produced a standard CGL form following a series of
drafts from 1941 to 1973. Coverage as of 1966 was provided for any
“occurrence” as opposed to “accidents.” “Occurrence” was defined as
“an accident, including injurious exposure to condition, which results [in
injuries or damages} ... neither expected nor intended from the
standpoint of the insured...” (Emphasis added.) during the period of
these revisions, coverage was expanded and included pollution claims.
However, by 1986, the insurance industry drafted a more strict CGL
form in order to limit coverage of various pollution claims. I/d.
Disputes under the stricter CGL forms focus on the meaning of

APPENDIX PAGE
134

beginning in 1973 stated that "the company shall have the
right and duty to defend any suit against the insured seeking
damages on account of such [covered] bodily injury or
property damage, even if any of the allegations of the suit are
groundless, false or fraudulent...." See Donald E. Shrape &
Jean K. Shaffer, The Parameters of an Insurer’s Duty to
Defend, 19 Forum 555, 556 (1984). The specific
language in the comparable clause of the General Casualty
policy at issue in this case reads in pertinent part:

The company will pay on behalf of the insured
all sums which the insured shall become
legally obligated to pay as damages because of

A. bodily injury or
B. property damage

to which this insurance applies, caused by an
occurrence, and the company shall have the

“damages” and absolute pollution exclusion provisions.

*The interpretation of the CGL regarding potential coverage for
PRP notification letters has posed problems for courts across the
country. The PRP notification describes a form of liability not
compatible with pre-1980 policy language. As a result of CERCLA, a
new type of remedy has come into being: combining monetary relief
with site cleanup. Additionally, fines may tbe assessed which were not
historically contemplated by a CGL insurer. See Barry R. Ostrager &
Thomas R. Newman, Handbook on Insurance Coverage Disputes sec.
8.03 (1991); see also Whether Insurers Must Defend, 10 N. Ill. U.L. Rev.
at 582.

ne)

Patino Mas

PI Ri Oth es NEI es a

APPENDIX PAGE
135

right and duty to defend any suit against the
insured seeking damages on account of such
bodily injury or property damage, even if any
of the allegations of the suit are groundless,
false, or fraudulent, and may make such
investigation and settlement of any claim or
suit as it deems expedient, but the company
shall not be obligated to pay any claim or
judgment or to defend any suit after the
applicable limit of the company’s liability has
been exhausted by payment of judgments or
settlements.

(Emphasis added.)

When ES&G and the City responded to the EPA and
DNR letters, both were involved in an administrative
procedure pursuant to CERCLA. Therein lies the heart of
the dispute: does the duty to defend in a CERCLA
proceeding arise at this administrative level? The
controversy is further complicated by the fact that CERCLA
was designed to have an anti-litigation bias. 42 U.S.C. sec.
9622(a) states that "[w]henever practicable ... [the EPA] shall
act to facilitate [settlement] agreements ... in order to
expedite effective remedial actions and minimize litigation."
Therefore, notice letters have been used by the EPA as a
primary method to effect voluntary settlements with PRPs.
However, if a PRP chooses to ignore the notice letter, it may
face liability for recovery costs into the tens of millions of
dollars resulting from EPA-initiated cleanup.

APPENDIX PAGE
136

Some courts have concluded that PRP letters have a
unique nature within the context of aCERCLA administrative
proceeding. These courts have held that the receipt of PRP
letters is the "functional equivalent of a suit” because (a) the
letters maintain a confrontational and adversarial posture, and
(b) they create the specter of devastating financial
consequences if voluntary cooperation is not forthcoming.
As a result, PRP liability for immediate and long-range
cleanup and remediation costs necessitates a legal defense.”'

We conclude that neither a PRP letter nor a
comparable notification letter by a state agency such as the
DNR triggers the insurer’s duty to defend. Though the court
of appeals was correct when it concluded that the PRP letters
to the City and ES&G did not trigger the insurers’ duty to
defend, it should have arrived at the same conclusion

"Requests to insurers for a defense are often made in conjunction
with a reimbursement request for the following: (a) the retention of
environmental consultants; (b) the formulation and implementation of
remedial work plans; and (c) investigation costs. See Aetna Cas. and
Sur. Co., Inc. v. Pintlar Corp. 948 F.2d 1507 (9th Cir. 1991); Ray
Industries, Inc. v. Liberty Mut. Ins. Co., 728 F. Supp. 1310 (E.D. Mich.
1989), rev'd in part, reh’g denied 974 F.2d 754 (6th Cir. 1992); Avondale
Industries, Inc. v. Travelers Indem. Co., 697 F. Supp. 1314 (S.D. N.Y.
1988), aff'd 887 F.2d 1200 (2d Cir. 1989), reh’g denied 894 F.2d 498 (2d
Cir. 1990), cert. denied 496 U.S. 906 (1990) (receipt of a PRP letter
could have immediate adverse consequences for the insured, and the
administrative process is part of a “litigious process” that triggers the
duty to defend); Firernan’s Fund Ins. Companies v. Ex-Cell-O Corp., 662
F. Supp. 71 (E.D. Mich. 1987) (coverage does not hinge on the form of
the action taken or the nature of the relief sought); and Minnesota Min.
& Mfg. v. Travelers Indem., 457 N.W.2d 175 (Minn. 1990).

APPENDIX PAGE
137

regarding the DNR letters. Those letters stated in pertinent
part:

On November 6, 1989, the Department
. forwarded to you the CERCLA 104(a)
e responses it received as part of a potential
responsible party (PRP) search for the
Edgerton Sand and Gravel landfill site. These
responses were forwarded to you as part of a
joint effort to begin remediation of the known
environmental impacts from the site. To date
the Department has not received any progress
reports on your efforts to arrange for a PRP
clean up of the landfill. In our November 6,
1989, letter the Department stated that failure
of the PRP’s to reach agreement on a clean up
plan would force the Department to pursue
having the site included on the Superfund
National Priorities List (NPL).

45 a thi ¥

LR EN RR aah ASAE ot Sa et

The environmental problems associated with
this site dictate that remediation work begin
soon. Consequently, the Department will
allow you only another 30 days from the date
of this letter to propose a PRP implemented
remediation work plan....

The work plan must contain a detailed
. discussion of the tasks to be performed and a
timeline for the tasks to occur.... Also, a
legally enforceable contract between the
Department and the PRP’s must be signed

APPENDIX PAGE
138

within 60 days after a PRP work plan is
submitted to the Department, to ensure that
the work is completed properly and on
schedule.

The DNR then went on to state that if an acceptable work
plan was not submitted by the deadline date, it would pursue
the following action: (a) an attempt to have the landfill listed
on the NPL as quickly as possible and (b) legal action under
State authorities to have the site investigated and cleaned up.
The DNR also referred to statutory authority under secs.
144.43 to 144.79, Stats., by which the DNR could order the
City and ES&G to remediate damage caused by the landfill.”

“In sec. 144.01, Stats., the following applicable terms are defined:
“environmental pollution,” “hazardous substance,” “solid waste,” and
"owner."

Subchapter IV of ch. 144 focuses upon solid and hazardous
waste management and cleanup. Specifically, sec. 144.431 gives the
DNR the following powers and duties regarding solid waste:

144.431 Solid waste; powers and duties. (1) The
department shall:

(a) Promulgate rules implementing and
consistent with ss. 144.43 to 144.47.

(b) Encourage voluntary cooperation by
persons and affected groups to achieve the purposes
of ss. 144.43 to 144.47.

(c) Encourage local units of government to
handle solid waste disposal problems within their
respective jurisdictions and on a regional basis, and

ns 6 pe aati is ECR

APPENDIX PAGE
139

provide technical and consultative assistance for that
purpose.

(d) Collect and disseminate information and
conduct educational and training programs relating to
the purposes of ss. 144.43 to 144.47.

(e) Organize a comprehensive and integrated
program to enhance the quality, management and
protection of the state’s land and water resources.

(f) Provide technical assistance for the
closure of a solid waste disposal facility that is a
nonapproved facility, as defined in s. 144.441(1)(c).

(2) The department may:

(a) Hold hearings relating to any aspect of
the administration of ss. 144.43 to 144.47 and, in
connection therewith, compel the attendance of
witnesses and the production of evidence.

(b) Issue orders to effectuate the purposes of
ss. 143.43 to 144.47 and enforce the same by all
appropriate administrative and judicial proceedings.

(c) Secure necessary scientific, technical,
administrative and operational services, including
laboratory facilities, by contract or otherwise.

(d) Advise, consult, contract and cooperate
with other agencies of the state, local governments,
industries, other states, interstate or interlocal
agencies, and the federal government, and with
interested persons or groups.

APPENDIX PAGE
140

Neither letter has the attributes of a "suit." See
Detrex Chem. Industries v. Emp. Ins. of Wausau, 681 F.
Supp. 438, 446 (N.D. Ohio 1987) ("[A] claim for damages
made against [the insured] that mighr result in its legal
liability is not synonymous with a ‘suit’ so as to trigger [the
insurer’s] duty to defend....") (Emphasis added.)” This

(ec) Inspect solid waste facility construction
projects to determine compliance with ss. 144.43 to
144.47 and rules promulgated and licenses issued
under those sections.

Section 144.442, Stats., focuses upon environmental repair.
Specifically, sec. 144.442(4) provides the DNR with the authority to
conduct investigations of sites or facilities which pose an environmental
pollution hazard. It is under this section that the DNR identifies PRPs.
Section 144.442(5) authorizes the DNR to promulgate rules under which
remediation plans are established. Section 144.442(6) provides the
DNR with authority to take action for the purpose of environmental
repair. Finally, under sec. 144.442(8) the DNR may take action to
implement CERCLA by means of advising, consulting, assisting, and
contracting with other interested parties.

>t should be noted that the Court in Detrex stated in dicta that the
duty to defend would be triggered by a cost recovery action, an action
for injunctive relief, or a state administrative proceeding in which a
state agency was performing traditional judicial activities, thereby acting
in a judicial capacity. Specifically, the court stated, “Until, pursuant to
Section 9606, the EPA resorts to a court injunction or to a mandatory
court order to enforce a section 9606(a) administrative order, ... a ’suit’
would not be brought against [the insured] that would trigger [the
insurer’s} duty to defend." Jd. None of the above actions occurred in
the instant case. Rather, correspondence from the EPA was confined
to information requests, at the early stages of the PRP compliance
process. The DNR, in correspondence dated February, 1990 and
February, 1991, detailed what action may be taken if a remediation

APPENDIX PAGE
141

court has recently examined the attributes of a “suit” in State
v. P.G. Miron Const. Co., Inc., 181 Wis. 2d 1045, 512
N.W.2d 499 (1994), wherein we defined “suit” as

"any proceeding by one person or persons
against another or others in a court of law in
which the plaintiff pursues, in such court, the
remedy which the law affords him for the
redress of an injury or the enforcement of a
right, whether at law or equity.’

Miron, 118 Wis. 2d at 1053 (quoting Black’s Law Dictionary
1434 (6th ed. 1990)) (emphasis added in Miron) (the use of
arbitration under a contract between a private party and the
State does not violate the doctrine of sovereign immunity
because arbitration does not subject the state to suit). Thus,
the primary attribute of a “suit” is that parties to an action
are involved in actual court proceedings, initiated by the
filing of a complaint. Despite the dissent’s attempt to expand
the word "suit," definitions of suit or legal process all
involve a court action.” The clearest example of this is the

work plan was not forthcoming from the City and ES&G. Neither
letter identified any /ega/ action which had already been initiated.

“For example, Black’s Law Dictionary defines "legal proceedings” as
follows:

Legal proceedings. Term includes all proceedings
authorized or sanctioned by law, and brought or
instituted in a court or legal tribunal, for the acquiring
of a right or the enforcement of a remedy.

APPENDIX PAGE
142

fact that the parties to the instant case were made part of a
“suit” when a declaratory action was begun to identify
General Casualty’s and Aetna’s obligations under the
insurance policies.

Rather than initiating a suit, the letters from the EPA
and the DNR to General Casualty and Aetna were used to
gather information regarding hazardous substances at the site,
as well as to call for voluntary action by the City and ES&G
in the process 0. cleanup.” The court of appeals concluded
that additional correspondence in February, 1991, from the
DNR’s Bureau of Legal Services moved the proceedings
beyond the information-gathering stage. Specifically, the
court referred to the following language of the letter:

WDNR intends to pursue listing of this site on
the NPL unless potentially responsible parties
(PRPs) for the site enter into a contract with

Black’s Law Dictionary 896 (6th ed. 1990).

"Process" has also been defined as “[t]he entire course of a
judicial proceeding.” The American Heritage Dictionary of the English
Language 1444 (3d ed. 1992).

See Technicon Electronics v. American Home, 141 A.D.2d 124
(N.Y. App. Div. 1988), affd on other grounds 542 N.E.2d 1048 (1989).
The court concluded that “[t]he EPA letter at issue merely informed
Technicon of its potential liability under CERCLA and that the EPA
was interested in discussing Technicon’s voluntary participation in
remedial measures. The letter was an invitation to voluntary action on
Technicon’s part and is not the equivalent of the commencement of a
formal proceeding within the meaning of the subject comprehensive
general liability policies." Technicon, 141 A.D.2d at 146.

APPENDIX PAGE
143

WDNR to undertake investigation and clean-
up activities...

The purpose of this letter is to notify you that
unless a PRP group signs a contract with
WDNR for this site by May 31, 1991, WDNR
will request that this site be listed on the
NPL.... For NPL sites, U.S. EPA adheres to
a very Strict timeframe for negotiation of
Administrative Consent Orders. These
Consent Orders generally require, among
other things, strict compliance with the NCP
[National Contingency Plan], reimbursement
of agency oversight costs ... liquidated
damages for noncompliance and the potential
for treble damages. If the negotiation of a
Consent Order is not successful, U.S. EPA
may issue an Order requiring the PRPs
undertake specific action or undertake the
action and sue to recover its costs from the
PRPs. U.S. EPA may seek forfeitures for
non-compliance and treble damages may also
be available.

Indeed, this correspondence indicates that there was some
movement beyond the fact-gathering stage. However, there
was no movement into the realm of a suit. The
correspondence served to inform the PRPs of action which
may be pursued, or not, depending upon the response by the
City or ES&G. This letter cannot be considered the
equivalent of a service of process so as to initiate a suit.

APPENDIX PAGE
vas

However, the court of appeals adopted the reasoning
of Ryan v. Royal Ins. Co. of America, 916 F.2d 731 (ist Cir.
1990),7° in which the court articulated a four-part test to
determine if a PRP letter was the "functional equivalent of a
suit”: (a) the letter’s coerciveness; (b) the letter’s
adversariness; (c) the seriousness of effort with which the
government hounds an insured; and (d) the gravity of the
imminent consequences. Jd. at 741. The court of appeals
then concluded that the EPA and the DNR had assumed an
adversarial approach wward the City and ES&G and that
devastating financial consequences would result from a failure
to enter into the.requested contract. Therefore, there existed
a degree of compulsion which necessitated a defense.

We disagree with the conclusion of the court of
appeals. Though the tone of the correspondence may be
termed confrontational, neither the EPA’s PRP letters nor the
DNR letters by themselves impose liability. Also, if the City
or ES&G failed to respond to the letters, that failure alone
would not authorize the assessment of fines. Instead,
something more in the form of a court proceeding would be
required to “force or compel the insured to take action or
suffer serious consequences." See Professional Rental v.
Shelby Ins., 75 Ohio App. 365, 375, 599 N.E.2d 423, 430

*In Ryan, the court noted that the owner of a contaminated site
had a somewhat desultory correspondence with the New York
Department of Environmental Conservation regarding the closure and
cleanup of the affected site. Ryan sued his insurer, Royal Insurance, for
failure to defend and indemnify under the policies. At issue was
whether the correspondence between Ryan and the Department of
Conservation, regarding contamination and cleanup, was the functional
equivalent of a suit sufficient to trigger the insured’s duty to defend.

APPENDIX PAGE
145

(1991) (emphasis in original). For example, the EPA could
issue, and then seek to have enforced, an administrative order
pursuant to 42 U.S.C. sec. 9606(a) or 9604(e)(5)(A);”” it
could seek an injunctive order in federal district court under
42 U.S.C. sec. 9606(a);” or it could initiate a cost recovery
action under 42 U.S.C. sec. 9607.% Id. Indeed, the
February 8, 1991, letter from the DNR stated that if the City
and ES&G did not sign the proposed contract and the site

Though the EPA encourages voluntary participation in the cleanup
and remediation efforts by means of PRP notification letters, it is
authorized under 42 U.S.C. sec. 9606(a) to issue administrative orders
to compel a PRP to clean up a site. The EPA may negotiate the
administrative order with the PRP; if successfully done, it becomes a
binding consent order. If the negotiations fail, the EPA may then
unilaterally develop the administrative order, which has the effect of
accelerating compliance, since a fine of $25,000 is imposed for each day
the PRP does not comply. 42 U.S.C. sec. 9606(b)(1)

*Under 42 U.S.C. sec. 9606(a), the EPA may seek an injunctive
order, through the Departmeni of Justice, in order to compel a PRP to
comply with the cleanup plan.

*If a PRP decides not to respond to the PRP letter or does not
participate in cleanup operations, the federal government may, under
CERCLA, use Superfund money to clean up the site and then seek
reimbursement from any responsible party. See 42 U.S.C. secs.

9604(a)(1) and 9607(a).

Again, the legislative bias in CERCLA is to seek voluntary
settlement and cleanup. However, the EPA may also force the
government to order a cleanup, or request the government to
unilaterally implement cleanup, followed by litigation wherein
reimbursement is sought. See Professional Rental, 75 Ohio App. at 373-
74, 599 N.E.2d at 428-29.

APPENDIX PAGE
146

was listed on the NPL, primary responsibility for cleanup
activities would shift to the EPA. If that had occurred, then
the EPA administrative orders may come into play. Prior to
that time, the DNR offered the City and ES&G options under
which all concerned parties might cooperate in order to clean
up and remediate the landfill.” None of the options offered
by the DNR rose to the level of a court proceeding.

If the EPA’s conduct in sending the PRP letter or the
DNR’s letter requesting site remediation is construed as
initiating a "suit seeking damages,” the duty to defend would

The court in Professional Rental noted the following regarding
PRP notifications:

The CERCLA notification process is clearly
not analogous to the traditional means of bargaining
and settlement. ‘Settling’ with the EPA primarily
involves formulating an acceptable proposal for
cleaning up the pollution under the assumption of
PRP liability. Although the EPA designates recipients
as "potentially responsible parties, it is not the
equivalent of a conventional demand letter or a simple
accusation of fault. First, PRP notifications are sent
after the EPA has established that ’there is sufficient
evidence to make a preliminary determination of
potential liability under section 107 of CERCLA.’
Superfund Program, 53 F.R. at 5301. Second, parties
who are simply ‘identified’ as responsible under
Section 107(a) are strictly liable, regardless of fault.
The only defense (other than an act of God or war) is
the limited defense of "due care’ provided in CERCLA
Section 107(c)(3)....

Professional Rental, 75 Ohio App. at 374, 599 N.E.2d at 429.

APPENDIX PAGE
147

be mandated under the terms of the policy. Such a result
would create a duty for the insurer for which it had not
contracted.*' This court has stated that a primary goal in
interpreting insurance policies is to ascertain and carry out
the true intentions of the parties. See Kremers-Urban Co. v.
American Employers Ins., 119 Wis. 2d 722, 735, 351
N.W.2d 156 (1984). As a result, the words of a policy are
to be given their plain and ordinary meaning. Jd. The
meaning of the terms of the policy is assessed by a

*'More importantly, it is an obligation for which an insurer may not
be prepared. Typically, insurers assess the extent of the risks insured
under policies issued. The risk of liability may then be spread among
groups of insureds and premiums assigned only after the extent of the
risk is determined. The original risk assessment becomes a nullity if the
language of the policy is redefined in order to expand coverage beyond
what was planned for the insurer in the contract of insurance. Policies
of insurance, premised upon a certain level of predictability and
assessment of risk at the time of contracting, lose their effect without
the inclusion of certain basic definitions. See Whether Insurers Must
Defend, 10 Ill. U.L. Rev. at 595; Kenneth S. Abraham, Distributing Risk:
Insurance, Legal Theory, and Public Policy 103 (1986); 2 Couch on
Insurance 2d sec. 15:4 (2d ed. 1984); U.S. Fidelity and Guar. v. Star Fire
Coals, Inc., 856 F.2d 31, 33 (6th Cir. 1988) (insurers need to rely on
policy language in order to efficiently manage risks) (citing United States
Fire Ins. v. Kentucky Truck Sales, 786 F.2d 736, 739 (6th Cir. 1986)
("[T]he court must give all terms their plain meanings and not rewrite an
insurance contract to enlarge the risk.) (Emphasis added.)

As noted earlier, CGLs were formulated and revised between
1940 and 1973. Risk assessment in pre-1980 CGLs did not incorporate
liability under CERCLA. Therefore, potential liability was not spread
among polluting insured. Whether Insurers Must Defend, 10 N. Ill. U.L.
Rev. at 596; Hapke, Federal Circuit Court Decisions Contaminate
Superfund Policy, 19 Envtl. L. Rep. 10393 (1989).

APPENDIX PAGE
148

reasonable person in the position of the insured and that
reasonable insured’s expectations of coverage. Id. However,
an insured’s expectations may not be satisfied in contradiction
to policy language which clearly identifies the scope of the
insured’s coverage. Thus, “[w]here the parties have
contracted to limit recovery to a specific quantifiable type of
remedy, a court should not alter the insurance contract to
include other types of remedies not contracted for by the
parties and that may not be presently quantifiable."
Shorewood School Dist., 170 Wis. 2d at 369.

We find no ambiguity in the term “suit” as it has been
used in the insurance policies. "Suit" denotes court
proceedings, not a “functional equivalent.” The dissent
believes that a reasonable policyholder would view letters
from a federal or state agency advising an insured of liability
as a "suit." To the contrary, the word “suit” is easily
understood and unambiguous to a reasonable policyholder.
The proof is in the decisions that hold that a "PRP letter” is
the "functional equivalent of a suit." Either there is a suit or
there is not. When there is no suit, there is no duty to
defend. Therefore,

[t]o determine whether a duty to defend exists,
the complaint claiming damages must be
compared to the insurance policy and a
determination made as to whether, if the
allegations are proved, the insurer would be
required to pay the resulting judgment. The
insurer need only look at the allegations within

APPENDIX PAGE
149

the four corners of the complaint to make such
a determination.

Id. at 364-65.

Construing either the EPA’s PRP letter or the DNR
letters as the “functional equivalent of a suit” would be
contrary to present Wisconsin insurance law since (a) the
insurer would have to look beyond the four corners of the
complaint in order to assess whether a potentially covered
claim exists, and (b) the insurer would be put in the position
of anticipating a coverage expectation for which it did not
contract or receive payment. In this case, no complaint has
been filed which would initiate a suit and invoke the insurers’
duty to defend. Therefore, no matter how coercive the
language of the DNR letter was considered to be, it was used
within the realm of an administrative proceeding. It did not
have the effect of initiating a suit.

*See also Reliance Ins. v. Royal Motorcar Corp., 534 So. 2d 922, 923
(Fla. Dist. Ct. App. 1988) (an insurer’s duty to defend is determined
solely by the complaint’s allegations); American Alliance Ins. v. Frito-
Lay, 788 S.W.2d 152, 153-54 (Tex. Ct. App. 1990) (there must be an
examination of the allegations in the complaint to determine if a duty
to defend exists); Viking Ins. Co. of Wisconsin v. Hill, 57 Wash. App.
341, 787 P.2d 1385 (1990) (the duty to defend is determined by a review
of the allegations on the face of the pleading which gave rise to the
covered action); and Grieb v. Citizens Casualty Co., 33 Wis. 2d 552, 557,
148 N.W.2d 103 (1967) (whether a third-party suit comes within a
defense-coverage clause depends upon the allegations in the complaint).

APPENDIX PAGE
150

CERCLA SUPERFUND RESPONSE COSTS DO
NOT CONSTITUTE DAMAGES

Standard CGL policy language requires a duty to
defend a suit seeking damages, which, if proved, would give
rise to recovery under the terms and conditions of the policy.
Elliott, 169 Wis. 2d at 220-21. The insurer has to defend
suits against the insured requesting recovery for sums that the
insured may become legally obligated to pay as damages.
The as damages qualifier appears in the policies at issue in
the bodily injury, property damage, and personal injury
coverages. However, contrary to the conclusion of the court
of appeals, the CGL policies in this case do not provide
coverage for Superfund response costs, since such costs do

APPENDIX PAGE
151

not constitute damages. Additionally, the parties did not

42 U.S.C. sec. 9607(a) states in pertinent part:

(4) [A] person who accepts or accepted any
hazardous substances for transport to disposal or
treatment facilities, incineration vessels or sites
selected by such person, from which there is a release,
or a threatened release which causes the incurrence of
response costs, of a hazardous substance, shall be
liable for--

(A) all costs of removal or remedial
action incurred by the United States
Government or a State or an Indian
tribe not inconsistent with the
national contingency plan; ... [and]

(C) damages for injury to,
destruction of, or loss of natural
resources, including the reasonable
costs of assessing such injury,
destruction, or loss resulting from
such a release...

It should be noted that the National Contingency Plan is developed
under CERCLA by the EPA. The plan establishes procedures for the
cleanup of hazardous waste sites.

When dealing with the issue of damages, courts have disagreed
as to whether a CGL policy’s reference to “damages” includes cleanup
costs, such as at issue in this case. Courts which interpret "damages"
more broadly conclude that coverage includes claims brought under
either sec. 9607(a)(4)(A) or (C). See Kristin A. Kolesar, Note,
Insurance Coverage for CERCLA Claims Under Comprehensive General
Liability Policies: Cleaning Up Hazardous Waste in the Legal
Environment, 68 Notre Dame L. Rev. 549, 553-54 (1993) [hereinafter
Insurance Coverage for CERCLA Claims}.

ia

APPENDIX PAGE
152

contract for such coverage.

In Shorewood School Dist., this court stated that
"’[dJamages’ as used in ... insurance policies unambiguously
means legal damages. It is legal compensation for past
wrongs or injuries and is generally pecuniary in nature. The
term ’damages’ does not encompass the cost of complying
with an injunctive decree.” Shorewood School Dist., 170
Wis. 2d at 368. Further, this court stated that the

limited construction of the term ’damages’ is
consistent with the basic grant of coverage in
the insurance policies. The insurers agree to
pay ’all sums which the insured shall become
legally obligated to pay as damages.’ The
insurers did not agree to pay ’all swms which
the insured shall be come legally obligated to
pay.’ The addition of ’as damages’ serves as
a qualifier, a limit to coverage.

Id. at 369-70 (emphasis in original). Consistent with
conclusions of other courts, this court has concluded that if
the term “damages” is given a broader or more expansive
interpretation, the phrase “as damages” would be rendered
mere surplusage, since any expenses prior or incidental to
litigation would be covered by the policies. Jd. See also
Maryland Cas. Co. v. Armco, Inc. , 822 F.2d 1348, 1352 (4th
Cir. 1987), cert. denied 484 U.S. 1008 (1988) ("[i]f the term
*damages’ is given the broad, boundless connotations sought
by the [insured], then the term ’damages’ in the contract ...
would become mere surplusage, because any obligation to
pa

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_1728%3A1. Public record. Not legal advice.