## Facts

- Kevin Peace, a minor, lived in a rented apartment owned by Djukic Enterprises, Inc. in Milwaukee.
- The Milwaukee Health Department found loose, peeling, flaking, and chipped lead-based paint in the building and ordered Djukic to remove it due to risk of lead exposure to children.
- About six weeks after the order, Djukic purchased a commercial general liability policy from Northwestern National Insurance Company covering “bodily injury” and “property damage,” subject to a pollution-exclusion clause.
- The policy defined “pollutants” broadly as “any solid, liquid, gaseous or thermal irritant or contaminant,” including “chemicals,” and excluded coverage for injury arising out of the “discharge, dispersal, release or escape of pollutants” at or from premises the insured owns, rents, or occupies.
- Peace later allegedly suffered lead poisoning from ingestion and inhalation of lead in paint chips, flakes, and dust in the apartment.
- Peace sued Djukic for negligence and statutory violations related to failure to maintain the premises and remove lead paint.
- Northwestern denied coverage and refused to defend Djukic, relying on the pollution exclusion, and sought summary judgment; Djukic cross-moved for summary judgment.

## Issues

1. Whether the policy’s pollution-exclusion clause unambiguously excludes coverage for a child’s bodily injury caused by ingestion and inhalation of lead from deteriorating lead-based paint in a rented apartment.
2. Whether lead from deteriorating paint constitutes a “pollutant” and whether the exposure results from a “discharge, dispersal, release or escape” within the meaning of the exclusion.
3. Whether, if the exclusion applies, the insurer has a duty to defend and indemnify the landlord in the underlying lead-poisoning suit.

## Decision

- The Wisconsin Supreme Court held the pollution-exclusion clause unambiguously barred coverage for Peace’s lead-poisoning claim.
- The court concluded that lead in deteriorating paint is a “pollutant” under the policy’s definition.
- The court held that the separation and migration of lead chips, flakes, and dust into the apartment environment constitutes a “discharge, dispersal, release or escape” of pollutants.
- The court rejected arguments that the exclusion is limited to traditional environmental or industrial pollution and read prior Wisconsin precedent as supporting application to indoor exposures.
- Because the allegations fell within the exclusion, Northwestern had no duty to defend or indemnify Djukic.
- The court reversed the court of appeals and reinstated summary judgment for Northwestern.

## Legal Principles

- Unambiguous insurance policy exclusions must be enforced as written; courts may not rewrite clear contract language based on perceived harsh results.
- A broadly defined “pollutant” term in a pollution exclusion can include toxic substances such as lead derived from deteriorating residential paint.
- “Discharge, dispersal, release or escape” may include gradual, indoor separation and migration of contaminants (e.g., paint dust, chips, and flakes), not only sudden or outdoor pollution events.
- The duty to defend does not arise when the complaint’s factual allegations fall entirely within a policy exclusion.
- Public-policy concerns about compensation and deterrence do not permit a court to disregard plain policy language; such allocation choices are for the legislature.

## Conclusion

The Wisconsin Supreme Court held that a standard CGL pollution exclusion, using broad “pollutant” and “discharge/dispersal/release/escape” language, bars coverage for lead-poisoning injuries caused by deteriorating lead-based paint in a residence, eliminating the insurer’s duties to defend and indemnify the landlord.


Peace v. Nw. Nat’l Ins. Co., 228 Wis. 2d 106, 596 N.W.2d 429 (Wis. 1999)