8 N.W.3d 115
Wis. Ct. App.2024Background
- Plaintiffs (two couples) bought units at Gaslight Pointe Condominium and sued the condominium association (Gaslight) for alleged property damage due to water intrusion caused by failure to maintain and repair common areas.
- Plaintiffs claimed physical damage (rot, mold, leaks, etc.), loss of value, and out-of-pocket expenses for repair and mitigation.
- Gaslight had insurance from Auto-Owners Insurance Company, including a Commercial General Liability (CGL) Coverage Form and a Directors & Officers (E&O) Coverage Endorsement.
- Auto-Owners defended Gaslight under reservation of rights but sought a declaration of no duty to defend or indemnify for these claims.
- The circuit court held there was no coverage under either policy form and granted summary judgment to Auto-Owners; Gaslight appealed.
Issues
| Issue | Plaintiffs' Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does CGL provide coverage for the water intrusion claims? | Damage is covered "property damage" caused by an "occurrence" (accident). | No occurrence: decisions were intentional, not accidental. | Yes, decisions could lead to an accident (continued water intrusion); jury could find it unforeseen. |
| Do CGL exclusions ("Damage to Property" and "Fungi/Bacteria") bar coverage? | Exclusions do not bar claims for damage to individual units; fungi/bacteria exclusion overbroad. | Exclusions apply because owners are insureds and their property is thus excluded. | Exclusions do not eliminate all coverage; further fact-finding needed on fungi/bacteria exclusion. |
| Does E&O Endorsement cover the claims? | Some damages (e.g., legal fees, insurance payments) are not barred by property damage exclusions. | All claims are property damage or excluded costs/fees. | No E&O coverage; exclusion for property damage applies, and disputed expenses not covered. |
| Must Auto-Owners defend Gaslight against the underlying suit? | Yes, since some claims may be covered under CGL. | No, as there is no coverage. | Yes, Auto-Owners must continue defense for now. |
Key Cases Cited
- American Fam. Mut. Ins. Co. v. American Girl, Inc., 268 Wis. 2d 16 (faulty advice can result in covered "accident" causing property damage)
- Kalchthaler v. Keller Constr. Co., 224 Wis. 2d 387 (water intrusion from faulty installation can be covered occurrence)
- 5 Walworth, LLC v. Engerman Contracting, Inc., 408 Wis. 2d 39 (accidents can arise from intentional acts if the outcome is unforeseen)
- Riverback Farms, LLC v. Saukville Feed Supplies, Inc., 409 Wis. 2d 14 (unexpected consequences of intentional acts may constitute occurrence)