841 N.W.2d 52
Wis. Ct. App.2013Background
- Multiple plaintiffs sued after allegedly contracting Legionnaire's disease from Legionella bacteria in a decorative water fountain installed in the lobby of Aurora St. Luke's South Shore Hospital.
- CBI contracted to construct and install the fountain; Aurora (owner) and insurers sued/third-partied CBI; CBI's insurers Midwestern and Hawkeye were joined under the direct-action statute.
- CBI had a Commercial General Liability policy (Midwestern) and an Umbrella policy (Hawkeye) that contained a Fungi or Bacteria Exclusion but a narrow "Consumption Exception": it does not apply to fungi/bacteria "that are, are on, or are contained in, a good or product intended for consumption."
- Midwestern and Hawkeye moved for summary judgment arguing the exclusion barred coverage; CBI argued the Consumption Exception applied because the fountain was "consumed" by observation/enjoyment as decorative art.
- The circuit court granted summary judgment for the insurers; CBI appealed on the sole issue whether the Consumption Exception reinstated coverage for the fountain-related claims.
Issues
| Issue | CBI's Argument | Insurers' Argument | Held |
|---|---|---|---|
| Whether a decorative water fountain is a "good or product intended for consumption" under the Consumption Exception | Fountain is "consumed" by observation/enjoyment (cites broader dictionary definition of "consumption") | "Consume" means to eat/drink/use up; fountain not intended to be eaten/drunk/used up, so exception does not apply | Court held the fountain is not a product "intended for consumption"; exception does not reinstate coverage |
| Whether the policy language is ambiguous | Ambiguous because "consumption" has multiple dictionary meanings including "enjoyment of art" | Not ambiguous in context; only one reasonable meaning accords with insureds' expectations — to eat/drink/use up | Court ruled the policy is not ambiguous; adopt ordinary meaning (eat/drink/use up) |
| Whether accepting CBI's reading would undercut the purpose of the exclusion | N/A (implicit) | CBI's reading would absurdly extend coverage to decorative building features, defeating exclusion's mold-remediation purpose | Court agreed it would be absurd; rejected CBI's reading |
| Whether out-of-state cases cited by CBI require a different outcome | Relied on cases finding pools/spas within exception | Insurers: those cases are non-binding and factually distinguishable (amenities intended for physical contact/use) | Court found those cases unpersuasive and distinguishable; they do not control |
Key Cases Cited
- American Family Mutual Insurance Co. v. American Girl, Inc., 268 Wis.2d 16 (2004) (three-step approach to insurance coverage questions)
- Green Spring Farms v. Kersten, 136 Wis.2d 304 (1987) (standards for reviewing summary judgment)
- State Farm Mutual Automobile Insurance Co. v. Langridge, 275 Wis.2d 35 (2004) (policy terms interpreted from reasonable insured's perspective; reject grammatically plausible but unreasonable readings)
- Froedtert Memorial Lutheran Hospital v. National States Insurance Co., 317 Wis.2d 54 (2009) (ambiguities construed in favor of insured)