Fontana Builders, Inc. v. Assurance Company of America, 882 N.W.2d 398

Background

Fontana Builders (a corporation owned by James Accola) built a spec home in Lake Geneva and maintained a builder's risk policy from Assurance Company of America during construction; AnchorBank was mortgagee and Accola personally guaranteed loans.
The Accolas (James and Suzy) moved in under a temporary occupancy permit before closing and obtained a homeowner's policy from Chubb; they stored substantial personal property in the house.
On June 28, 2007 a fire severely damaged the house and the Accolas’ personal property; Chubb investigated and later settled with the Accolas for $1.5 million (with settlement language disclaiming coverage admission).
Assurance denied Fontana’s claim under the builder’s risk policy, relying primarily on the policy term that coverage ends “when permanent property insurance applies,” and also asserting an "other insurance" clause and preexisting-structure exclusions.
Lower courts split: circuit court originally found Assurance liable; on first appeal the court of appeals held the question whether the Chubb policy terminated Assurance was for the jury (applying an extrinsic-evidence exception). On remand a jury found the Chubb policy was "permanent" and "applied," ending Assurance coverage; Fontana and AnchorBank appealed to the Wisconsin Supreme Court.

Issues

Issue	Plaintiff's Argument (Fontana)	Defendant's Argument (Assurance)	Held
1) Who decides interpretation of the builder's risk policy provision (law vs. fact)?	Court should decide as a question of law; policy interpretation is legal.	Court of appeals: where extrinsic evidence is involved, jury should decide meaning.	Court (supreme) held interpretation is a question of law; extrinsic-evidence exception applies only to disputes about parties' intent at formation.
2) Did the Chubb homeowner's policy cause termination because it was "permanent property insurance" that "applies"?	No — Fontana and the Accolas insured distinct interests (builder/owner vs. occupier/purchaser), so Chubb did not "apply" to terminate Assurance.	Yes — homeowner's insurance is "permanent property insurance" and it applied to the same property, so Assurance's coverage ended when Chubb took effect.	Held for Fontana: the phrase targets the builder's insured interest; because Chubb did not insure Fontana's builder/owner interest, it did not "apply" to terminate the builder's risk policy.
3) Does the "other insurance" clause make Assurance excess to Chubb?	Fontana: clause inapplicable because policies insure different interests and different insureds.	Assurance: its policy is excess if Chubb covered the loss.	Court concluded "other insurance" did not apply where policies insure different parties/interests; no offset here (court did not need to decide further after main holding).
4) Admissibility of Chubb settlement evidence at trial	Fontana: settlement evidence barred by Wis. Stat. § 904.08.	Assurance: evidence about Chubb payments and adjustment activity is admissible (not offered as settlement).	Supreme Court reversed on policy interpretation grounds and did not resolve the § 904.08 evidentiary question.

Key Cases Cited

Danbeck v. Am. Family Mut. Ins. Co., 245 Wis. 2d 186 (2001) (insurance-contract interpretation is a question of law reviewed de novo)
Kraemer Bros., Inc. v. U.S. Fire Ins. Co., 89 Wis. 2d 555 (1979) (discusses extrinsic-evidence rule in insurance policy construction)
Ben-Hur Mfg. Co. v. Firemen's Ins. Co. of N.J., 18 Wis. 2d 259 (1962) (distinct parties may have different insurable interests; recovery limited to actual interest)
Central Auto Co. v. Reichert, 87 Wis. 2d 9 (1978) (contract interpretation may involve factfinder when extrinsic evidence illuminates parties' intent at formation)
RTE Corp. v. Md. Cas. Co., 74 Wis. 2d 614 (1976) (construction of unambiguous policy language is for the court)