978 N.W.2d 207
Wis. Ct. App.2022Background
- Homeowners Terry and Deborah Wiegert contracted TM Carpentry, which left the job; Stone Creek was later hired under a written scope to finish the basement renovation, including explicitly to lift the entire house ~3 feet, add block courses to the foundation, and lower the house onto the new foundation.
- Stone Creek raised the house on October 29, 2014; Mrs. Wiegert observed cracking and interior damage almost immediately after the lift; Stone Creek lowered the house mid-November and completed further work after Acuity’s policy expired.
- Stone Creek was insured by Acuity under a policy that ran through November 7, 2014; Auto-Owners insured Stone Creek from November 7, 2014 to November 7, 2015.
- Acuity relied on the standard CGL business-risk exclusion k.(5): no coverage for "property damage" to "that particular part of real property on which you … are performing operations, if the property damage arises out of those operations."
- The circuit court granted summary judgment to Acuity, concluding (1) any damage during Acuity’s policy period could only have arisen from Stone Creek’s lifting of the entire house, (2) Stone Creek’s contract made the whole house the "particular part" on which it was performing operations, and (3) the k.(5) exclusion therefore barred Acuity’s duty to indemnify. Stone Creek appealed.
Issues
| Issue | Plaintiff's Argument (Stone Creek) | Defendant's Argument (Acuity) | Held |
|---|---|---|---|
| Does the k.(5) business-risk exclusion bar coverage for damage during Acuity’s policy period? | Exclusion shouldn’t apply because damage affected interior components Stone Creek was not hired to work on; damage may have arisen from work distinct from lifting. | The contract required lifting the entire house; damage observed immediately after the lift arose out of that operation, so k.(5) bars coverage. | k.(5) bars coverage; summary judgment for Acuity. |
| How to construe "that particular part"—is it the smallest component or what the contract defines? | "That particular part" should be read narrowly to encompass only the specific component (e.g., foundation) that was defective. | The phrase is construed by reference to the scope of the construction agreement; where the agreement required lifting the whole structure, the whole house is the "particular part." | Court applies a narrow construction but finds the contract made the entire house the relevant "particular part." |
| Was the coverage determination premature (ripeness/discovery)? | Additional merits discovery (causation, other contractors’ work) is needed before deciding coverage. | Relevant facts (policy terms, contract scope, timing of lift, observed damage) are undisputed; further discovery would not change application of k.(5). | Decision was not premature; summary judgment was proper without further merits discovery. |
Key Cases Cited
- Acuity v. Society Ins., 339 Wis. 2d 217 (WI App. 2012) (interprets "that particular part" by reference to scope of construction agreement; exclusion narrowly focused)
- Wisconsin Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 233 Wis. 2d 314 (Wis. 2000) (describes CGL purpose and rationale for business-risk exclusions)
- American Family Mut. Ins. Co. v. American Girl, Inc., 268 Wis. 2d 16 (Wis. 2004) (business-risk exclusions eliminate coverage for liability for insured’s own work)
- Fortney & Weygandt, Inc. v. American Mfrs. Mut. Ins. Co., 595 F.3d 308 (6th Cir. 2010) (treats "that particular part" language as narrowly limiting exclusion)
- Lafayette Ins. Co. v. Peerboom, 813 F. Supp. 2d 823 (S.D. Miss. 2011) (applies comparable exclusion to entire residence when contractor raised the house)
- Grinnell Mut. Reinsurance Co. v. Lynne, 686 N.W.2d 118 (N.D. 2004) (applies k.(5)-type exclusion to the entire house after a structural failure during lifting)
- Olson v. Farrar, 338 Wis. 2d 215 (Wis. 2012) (insurer defending under reservation and seeking coverage determination may rely on extrinsic evidence)