Cincinnati Insurance Company v. James Ropicky, 415 Wis.2d 1

Homeowners (the Ropickys) suffered substantial damage to their home after a severe rainstorm caused rainwater to infiltrate their residence.
The Ropickys submitted a claim to their insurer, Cincinnati Insurance Company, which denied most of the claim, citing Construction Defect and Fungi Exclusions in the policy.
Cincinnati paid only under limited portions of the policy, including $10,000 under a fungi-related coverage and $2,138.53 for certain damages, and refused further payment based on its reading of the exclusions.
Ropickys contested this denial, seeking declaratory judgment, breach of contract, and bad faith claims; the circuit court granted summary judgment for Cincinnati, accepting their interpretation of the policy exclusions.
On appeal, the appellate court reviewed whether the exclusions and exceptions were correctly applied and whether material facts required remand.

Issue	Plaintiff's Argument (Ropickys)	Defendant's Argument (Cincinnati)	Held
Applicability of Construction Defect Exclusion	Damage qualifies as ensuing loss and thus covered	All damage excluded due to construction defects	Ensuing loss exception applies, reinstating coverage
Applicability of Fungi Exclusion	Fungi Endorsement means the exclusion does not apply; only fungi-caused loss is subject to $10,000 cap	Fungi exclusion applies broadly; $10,000 cap is total limit for all fungi-related damage	Fungi Exclusion does not apply; Additional Coverage only limits $10,000 to fungi-caused damage
Allocation of Damages (fungi vs. water/rain)	Damages caused by rain should not be limited by fungi cap; only fungi-caused portions subject to limit	All damage at least partially related to fungi, so subject to $10,000 cap	Only damage actually caused by fungi, wet/dry rot, or bacteria limited to $10,000; remainder covered by policy
Dismissal of Bad Faith Claim	Improper to dismiss while dispute over coverage exists	Proper because Cincinnati acted within its rights under the policy	Dismissing the bad faith claim was error; to be reinstated on remand

Arnold v. Cincinnati Ins. Co., 276 Wis. 2d 762 (Wis. Ct. App. 2004) (interprets ensuing loss exception in faulty construction context; foundation for coverage reinstatement analysis)
American Fam. Mut. Ins. Co. v. American Girl, Inc., 268 Wis. 2d 16 (Wis. 2004) (sets standard for insurance policy construction and exclusions)
Just v. Land Reclamation, Ltd., 151 Wis. 2d 593 (Wis. Ct. App. 1989) (allocation of burdens concerning exclusions and exceptions in insurance policies)
Wadzinski v. Auto-Owners Ins. Co., 342 Wis. 2d 311 (Wis. 2012) (construing exclusions and limits under insurance contract principles)