Asbestos Exclusion in Policy Issued to Building’s Sellers Precludes Coverage for Losses Claimed by Building’s Buyers
December 31, 2013 |The Wisconsin Supreme Court, affirming lower court decisions, has ruled that an asbestos exclusion in a business owners policy that had been issued to the sellers of a building precluded coverage for losses claimed by the buyers of the building.
The Case
A company that purchased an apartment building asserted that its contractor cut through asbestos-wrapped ducts, dispersing asbestos throughout the building. The company and its shareholders (the “buyers”) sued the sellers for damages.
The seller’s insurance company moved to intervene in the buyers’ lawsuit. The trial court granted the motion and then held that the insurer had no duty to defend or indemnify the sellers. The case reached the Wisconsin Supreme Court.
The Wisconsin Supreme Court’s Decision
The Wisconsin Supreme Court affirmed, finding that the policy’s asbestos exclusion precluded coverage.
The court first rejected the buyers’ argument that the asbestos exclusion was ambiguous because asbestos has a variety of forms and meanings and because the word “asbestos” was undefined in the policy. In the court’s view, to a “reasonable insured” reading the policy, “asbestos in any form is asbestos.”
The court then rejected the buyers’ argument that the asbestos exclusion was ambiguous because its “broad language” invited multiple reasonable interpretations and had to be narrowly construed against the insurer. The court noted that the exclusion applied to loss “arising out of, resulting from, caused by, or contributed to in whole or in part by asbestos.” Explicit in all of those terms, the court said, was the requirement of some type of causal relationship between asbestos and the loss. The court then found that, in this case, a causal nexus existed between the loss claimed and the asbestos because “the loss here arose out of the dispersal of asbestos throughout the building.”
The court concluded, therefore, that a reasonable insured would interpret the asbestos exclusion in the insurer’s policy to preclude the loss alleged by the buyers.
The case is Phillips v. Parmelee, No. 2011AP2608 (Wis. Dec. 27, 2013).
