Suits by “neighbors” of hog facilities are an ever present threat to the livestock producer and your farm’s insurance policy may not provide coverage. However, some courts in both Illinois and Wisconsin have rendered recent opinions which may help the producer when neighbors decide to sue.
In what could broaden an insurer’s duty to defend Illinois livestock producers in odor lawsuits, an Illinois appeals court rejected an insurer’s denial of coverage to hog confinement operators under the standard “pollution exclusion” provision in an insurance policy. On November 13, 2013, a decision was rendered in Country Mutual Insurance Company v. Hilltop View, 2013 Ill.App. (4th) 130124 which basically held that odor was not pollution. In the case, neighbors to a hog confinement facility alleged that the “foul and obnoxious odors” coming from the facility caused them to suffer loss of enjoyment of their property and harmed their way of life (a “nuisance” claim). After the lawsuit was filed, it was tendered to the farm’s insurance company. The farm operator’s insurer sought a judgment that it had no duty to defend the operators primarily because of the “pollution exclusion” language in the policy.
Relying on a previous decision by the Illinois Supreme Court, the court noted that a “pollution exclusion” clause applied only to injuries caused by “traditional environmental pollution.” The court found that odors emanating from hog confinements and the resulting manure application on surrounding fields did not constitute “traditional environmental pollution.” The court relied on the fact that the neighbors had “dealt with the smells” created by hog farms since their inception and that these farms were traditionally viewed as a source of food, not pollution. The court did note, however, that even though it did not apply in this particular “nuisance” case, it may not be difficult to find “traditional environmental pollution” from a hog confinement facility. For example, a hog producer dumping manure into a creek would be point source pollution. That action would be viewed as “traditional environmental pollution.”
Additionally, the court rejected the insurer’s argument that characterizing hog odor as “traditional environmental pollution” was consistent with other environmental laws, namely the Illinois Environmental Protection Act’s alleged treatment of odors as “air pollution.” Unconvinced, the court found that manure odor and the odor from these facilities did not meet the definition of “air pollution” under the Illinois Environmental Protection Act and noted that earlier court decisions in Illinois defined “traditional environmental pollution” as “hazardous material discharged into the land, atmosphere, or any water course or body of water.” The court added, however, that this definition was misleading and too broad since many materials can be hazardous to a body of water but beneficial to land. The fact that a material is hazardous in certain situations does not mean that it always constitutes “hazardous material.” Manure is one such material. Spread on fields, it can be beneficial and non-polluting. Dumped into a creek, it can be hazardous and polluting.
Country Mutual, the insurer, argued that the language of the Livestock Management Facilities Act supported its position that swine waste odors are “traditional environmental pollution.” In particular, the insurer cited §20(f) of the Act, which states, in part: “The application of livestock waste to the land is an acceptable, recommended, and established practice in Illinois. However, when livestock waste is not applied in a responsible manner, it may create pollution problems.” The court felt that this section of the Livestock Management Facilities Act demonstrated that the spreading of manure on farm fields was a traditional agricultural practice and would not constitute “traditional environmental pollution.”
Although the decision in this case is favorable at first blush, it must be recognized exactly what the plaintiffs in the underlying case were claiming. In particular, the lawsuit was strictly a “nuisance suit,” claiming interference with the enjoyment of their property, and was not making claims to health or any other injury as would typically be alleged in a “pollution” claim. The court specifically made reference to this issue, noting that the neighbors did not appear to be claiming that the hog confinement facility was “polluting” the environment in the traditional sense of the word, it was just creating a nuisance.
Across the border in Wisconsin, an appellate court also held that manure was not a pollutant and found that the insurance policy did provide coverage for a claim by a neighbor that cow manure runoff damaged an aquifer and a neighbor’s well, Wilson Mutual Insurance Company v. Falk, 2013 Wis.App. Lexis 1031. In its decision, the Court of Appeals for Wisconsin considered whether cow manure generated at a dairy farm constituted a pollutant for the purpose of a “pollution exclusion.” In the Wilson Mutual case, the dairy farm owners, in early 2011, began using manure generated by cattle for crop fertilizer. Their plan was prepared by an agronomist and was approved by their local county’s land and water conservation district. However, several months later they were notified that manure run off from their farm had contaminated a local aquifer and polluted their neighbors’ wells. When those neighbors asserted claims against the farm owners, they turned to coverage under their insurance policy. Wilson Mutual, the insurer, denied coverage on the basis of its policy’s pollution exclusion. In the ensuing coverage litigation, the trial court granted summary judgment in Wilson Mutual’s favor, concluding that cow manure constitutes waste for the purpose of the policy exclusion, therefore, barred coverage for the underlying claims. On appeal, the Court of Appeals reasoned that since “there is virtually no substance or chemical in existence that would not irritate or damage some person or property,” that “the reach of the pollution exclusion clause thus must be circumscribed by reasonableness, lest everyday incidents be characterized as pollution and the contractual promise of coverage be reduced to a dead letter.” In other words, determining whether a substance qualifies as a pollutant for the purpose of the exclusion must be viewed in terms of the understanding of a “reasonable person in the position of the insured.”
It is best to review your farm’s policy with your agent and/or farm attorney. It appears that “pollution exclusions” in a policy may not negate coverage for a “nuisance” suit but if the claim against the producer alleges “pollution,” a pollution exclusion clause may negate coverage. At least in Wisconsin, under the set of facts noted above, manure was not considered to be a “pollutant.” This particular “run-off” issue has not been decided in Illinois, and as the Country court noted, it is not difficult to imagine manure being a “pollutant.” Accordingly, ask your agent or attorney if you are covered under your policy for both risks, nuisance and pollution, before your neighbor decides to sue you. Your insurer will probably provide a policy that includes coverage for the type of potential “pollution” claims described herein, albeit at higher premiums.