Frankenthal International, LTD v. West Bend Mutual Insurance Company
2024 WI App 71
Wis. Ct. App.2024Background
- Frankenthal International, LTD and Frankenthal Building, LLC owned a commercial building insured by West Bend Mutual Insurance Company under a property insurance policy.
- The building, comprised of three properties, had significant periods without tenants, with the last tenant leaving one section in early 2020 but leaving furniture behind to help attract new tenants.
- Frankenthal actively sought to lease the building, kept utilities functional, regularly maintained the property, and kept it furnished for prospective tenants.
- In February 2021, a furnace malfunction caused pipes to burst, resulting in water damage, which Frankenthal promptly reported to West Bend.
- West Bend denied the insurance claim, asserting the building was "vacant" under the policy's provisions, thereby excluding coverage for water damage.
- On cross-motions for summary judgment, the circuit court ruled in favor of Frankenthal, prompting West Bend’s appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Definition of "customary operations" under the vacancy provision | Frankenthal argued that active efforts to lease, maintain, and furnish the building constitute "customary operations" as a landlord. | West Bend contended only actual leasing/renting and activities incidental to having tenants count as "customary operations." | The term is ambiguous; interpreted in favor of coverage, so Frankenthal’s leasing efforts counted as customary operations. |
| Ambiguity of the term "customary operations" | Argued that undefined language in the policy should be construed against the insurer if ambiguous. | Claimed the owner’s interpretation would make the vacancy provision meaningless and too broad. | Found the term ambiguous; construed the ambiguity in favor of the insured (Frankenthal). |
| Policy purpose and regular presence requirement | Claimed their conduct (maintenance, active showings, negotiations) met the policy’s intent to prevent deterioration and ensure regular presence. | Argued that only a leasing office or daily active use would meet the "regular presence" requirement. | Reasonable insured could view Frankenthal’s actions as fulfilling "customary operations" and the vacancy provision’s purposes. |
| Effect of different interpretations on the policy’s language | Urged that West Bend’s view would render one clause of the vacancy provision meaningless (the owner clause). | Argued Frankenthal’s view renders the entire vacancy provision incapable of excluding true vacancies. | Found Frankenthal’s interpretation gives reasonable effect to all policy clauses and is viable. |
Key Cases Cited
- American Fam. Mut. Ins. Co. v. American Girl, Inc., 268 Wis. 2d 16 (Wis. 2004) (sets out insurance policy interpretation framework)
- Maxwell v. Hartford Union High Sch. Dist., 341 Wis. 2d 238 (Wis. 2012) (standard for summary judgment review)
- Secura Supreme Ins. Co. v. Estate of Huck, 406 Wis. 2d 297 (Wis. 2023) (insurance policy language must be interpreted to give effect to all provisions)
- Preisler v. General Cas. Ins. Co., 360 Wis. 2d 129 (Wis. 2014) (policy language ambiguous if subject to more than one reasonable interpretation)
- Frost ex rel. Anderson v. Whitbeck, 257 Wis. 2d 80 (Wis. 2002) (ambiguous policy language construed in favor of insured)
- Folkman v. Quamme, 264 Wis. 2d 617 (Wis. 2003) (ambiguous clauses construed against insurer)