RECENT STATE DECISIONS

May 2005

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Wisconsin Appeals Court Determines that Insurance Policy’s Exclusion of Damages ‘Arising out of’ Oil Spill Applies to Damages Caused by Bad Smell of Oil
State Farm & Casualty Co. v. Acuity

In interpreting an insurance policy that excluded damages arising out of the discharge of pollutants, a Wisconsin Court of Appeals determined that the insurers had no duty to defend or indemnify the insured from damages caused by a fuel spill when the insured was removing oil tanks. The court rejected the insured’s argument that damages from the nontoxic quality of spilled oil, the smell, survive coverage because they are separable from the oil pollution. Instead, it determined that a reasonable person would associate the smell with the contamination.