Everson v. Lorenz

Everson, Michelle J. Paul J. Everson Plaintiffs, Company, Pekin Insurance Intervening Plaintiff-Respondent,

v. Development, Lorenz and Lorenz Land Richard J. Defendants-Third-Party Inc., Plaintiffs-Appellants, individually, Jean Sharon d/b/a Jeanquart, Realty quart American Insurance and ACE Third-Party Company, Defendants. Court

Supreme 14, 2005. Decided January argument Oral No. 2003AP1331. 22, 2005. April 2005WI 51 298.) (Also in 695 N.W.2d reported For the defendants-third-party plaintiffs-appellants there was a brief Mark S. Des Rockers Lawrence Rockers, S.C., Nazianz, & Des St. and oral argument by Mark S. Des Rockers.

For the intervening there was a plaintiff-respondent S.C., E. by brief Monte Weiss and Weiss Law Office, Milwaukee, and oral E. argument by Monte Weiss. by Troy Thomp-

An amicus curiae brief was filed D. Axley Brynelson, son, LLP, Jonathan M. Ward and Madison, on behalf of Civil Trial Counsel of Wisconsin and Wisconsin Insurance Alliance. CROOKS, 1. N. PATRICK J. This case comes appeals

before us on from the court of certification (Rule) (2001-02).1 § pursuant Ri- Wis. Stat. 809.61 Development, chard Lorenz and Lorenz Land Inc. (Lorenz) seek of an order of the review Circuit Court for County, Poppy, Judge, granting Calumet Donald A. (Pekin) Company's Intervenor Pekin Insurance motion summary judgment. presents for This case issue policy provides coverage whether Pekin's insurance responsibility misrepre- Lorenz, insured, its for strict negligent misrepresentation sentation claims and/or (Everson). filed it Paul and Michelle Everson appeals questions ¶ 2. The court of certified three (1) alleged responsibility to this court: an strict Does negligent misrepresentation and/or an a real estate transaction constitute "occurrence" general purpose liability for the of commercial insur- ance such that the insurer's to defend the (2) triggered?; allegations insured is What must a sufficiently plead contain to "loss of use" meaning general liability of a within the commercial (3) policy?; Under what circumstances misrepresentation, negligent responsi- does a or strict all Unless otherwise indicated references to Wisconsin Statutes are to the 2001-02 edition. (Rule) states, § part:

Wisconsin Stat. 809.61 relevant supreme may jurisdiction appeal "The court take of an or other proceeding appeals upon the court of certification or own motion." appeals upon supreme court court's property bility, of such that a cause the "loss use" of nexus" is "causation established? coverage that since there is no 3. We conclude language complaint and the of the

based on Everson's duty policy, no Pekin insurance Pekin has to defend indemnify against Lorenz Everson's claims no negligent misrepresenta- responsibility for strict and/or alleged misrepresentation tion. The was not an "occur- meaning policy. hold that rence" within the We plead "damages" more than in relation to Everson must plead sufficiently claims to a under the further conclude that "loss use" We complaint allege "property damage," fails to in since allegation "occurrence," there no of an no allegation clearly use," there is not a sufficient "loss allegation "property damage" of "causation nexus." The by any property, in the was caused defects misrepresentations of Lorenz.

I. FACTS purposes review, 4. For the of this the facts of undisputed. Lorenz, this case are a real estate devel- oper, purchased Brillion, vacant land in in Wisconsin eventually 1997. This became the subdivision bought parcel known as Deer Run Estates. Everson a purpose Lorenz, 31, the subdivision from Lot for the constructing single family accepted a home. Everson 29, on the offer June completed,

¶ 5. After the transaction was Everson portion determined that a of Lot 31 was located within 100-year plain. result, flood As a Everson filed a complaint 18, on March The Lorenz 2002.2 18, original 2002, on March complaint was filed However, County Outagamie parties stipu- Circuit Court. (1) alleged claims were as follows: (2) negligent misrepresentation; responsibility strict (3) misrepresentation; misrepresentation; intentional (4) Specifically, and of breach contract. Everson al- leged represented portion that Lorenz that no (Lot 31) property lay 100-year plain.3 within a flood As a result, the construction of the home would not be possible in the location to that Everson wished build. alleged complaint Everson's that the was "un- damages buildable," and asked for in the amount of $37,000.4 purchase,

¶ 6. At the time of the Pekin insured general liability policy. Lorenz Following a under commercial by Everson, the initiation of suit Lorenz tendered its defense to Pekin. Pekin moved has since to coverage intervene, bifurcate the insurance issues from liability damage stay liability issues, the and and all and damage coverage until issues the insurance issues have granted been decided. The motion, circuit court this lated plaintiffs that because the and in defendants reside County, County, Calumet and the land in question is Calumet appropriate changed. that it would be venue for the to be The Outagamie County Jardins, Court, Circuit John A. Judge, Des County ordered that the case be to on May transferred Calumet 13, 2002. complaint Everson attached to the a Real Condi Estate Report

tion was completed by prior purchase. that Lorenz to the affirmatively In the report, Lorenz states that lots as "[s]ome A part shown on Exhibit attached as of have their back lots land year the approximate lies within flood On plain. lots 14-22 this area falls the wooded ravine area and for lots 21 & 32 it falls within the 23-27, grassland area on the back of added.) the lots." (Emphasis damages were, the Everson claimed for most

part, construction, damages during preparation incurred the for windows, building plans, foundation, such permits, as etc. represent subsequently Pekin hired counsel and pending action on merits Lorenz Everson. February 2003, Pekin filed motion li, 7. On judgment summary on the issues of

for indemnify. coverage, including duty to defend and Poppy A. Donald court, The circuit Honorable granted summary judgment presiding, motion Pekin's (1) coverage No exists in a written order follows: complaint for insurance, under Pekin's (2) present matter; of Everson in the no causes action duty Lorenz for the exists on of Pekin-to defend behalf (3) present complaint matter; no filed Everson indemnify Lorenz for exists on behalf Pekin (4) matter; in this filed Everson stay discovery court's of memorialized the order the August hereby 8, is dissolved. dated 2002 grant appealed ¶ 8. Lorenz the circuit court's of appeals summary judgment. The certified court of the accepted this certification and case to court. We now the court. affirm the order of circuit

II. STANDARD OF REVIEW grant summary a 9. We review circuit court's methodology judgment applying novo, the same de benefiting analysis. court, circuit from its the Family Center, 4, v. Fitness 2005 WI Atkins Swimwest According ¶ 11, 303, 277 2dWis. 691 N.W.2d 334. to 802.08(2), summary § judgment Stat. will be Wis. pleadings, depositions, granted "if to the answers inter- rogatories, together file, and admissions on with the any, genuine if no affidavits, show that there is issue as any moving party fact and that is material judgment to a as a matter of law." entitled

8 regarding ¶ 10. alsoWe address issues the inter- pretation interpretation, of an insurance Such contract. presents question held, we have of law we which Wrensch, de 105, review novo. Lambert v. Wis. 135 2d (1987). 115, 399 N.W.2d369

III. ANALYSIS presented ¶ 11. The determinative issue in this policy provides case is whether Pekin's insurance cov erage responsibility to Lorenz for the strict and/or negligent misrepresentation claims filed Everson. duty We have held that an insurer's to defend its triggered by comparing allegations insured is to the terms the insurance See Katz, Smith v. 2d 798, 806, Wis. 595 N.W.2d 345 (1999)." allegations 'These must state or claim a cause liability of action for the or insured for which indemnity paid in order for the suit come within '" any coverage policy.... Qualman defense v. (Ct. Bruckmoser, 364, 361, 163 Wis. 2d N.W.2d 1991) App. (quoting Casualty Co., Grieb v. Citizens (1967). 552, 557, 2d Wis. 148 N.W.2d 103 ¶ 12. Since Pekin's to defend is determined language policy provisions both the complaint, portions we set forth relevant of each. part: states 1-

SECTION COVERAGES COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY Insuring Agreement.

1. pay

a. We will those sums that the insured be- legally obligated pay damages comes to be- injury" damage" to "bodily "property or cause We have the applies. this insurance will which any seeking to defend "suit" right damages. mayWe at our discretion inves- those any claim any and settle or tigate "occurrence" may result. suit that ... . applies "property to . . dam-

b. This insurance age" only if:

(1) damage" ... is caused an "property "coverage place that takes

"occurrence" territory;" and

(2) during "property damage" occurs The ... period. - DEFINITIONS SECTION V accident, including continu- 12. "Occurrence" means an substantially the same repeated exposure ous or conditions. general harmful damage" means: "Property injury tangible property, including Physical a. resulting that All property. all loss use of occur at the such loss use shall be deemed to it; physical injury time caused or tangible b. of use of Loss physically injured. ... added.)

(Emphasis stated, the four claims that previously As Lorenz are strict responsibility Everson alleges inten- negligent misrepresentation, misrepresentation, misrepresentation, tional and breach of contract.5 The allegation relevant is as follows: Subsequently, the Plaintiffs discovered that a portion substantial lay of Lot 31 year within the 100 flood plain making the construction of the home which they wished to construct on impossible in the location in which the Plaintiffs wished to build based upon pre-sale representations LORENZ, rendering the property unbuildable for the Plaintiffs causing and the Plaintiffs damages to incur as a result $37,000.00. in excess of looking

¶ 14. at the four corners of the com- plaint policy, recognize "[o]ur the insurance we objective expecta- is to further the insured's reasonable coverage meeting tions of while the intent of both parties Benjamin to the contract." Dohm, v. 189 Wis. 2d (Ct. 1994) (citation 352, App. 359, 525 N.W.2d 371 omitted). Accordingly, we must not rewrite the insur- policy ance to bind an insurer to a risk which the contemplate insurer did not and for which it has not paid. been Id. at 365.

A. "OCCURRENCE" 15. Pekin's would cover liabil-

ity "property damage" for if it resulted from an "occur- policy, rence." In the "occurrence" is defined as "an including repeated exposure accident, substantially or continuous general

the same harmful conditions." Although the term "accident" was not defined

5 The relevant claims for this coverage inquiry are strict responsibility misrepresentation negligent misrepresenta tion. The claims for intentional misrepresentation and breach of contract are excluded from coverage under the terms of Pekin's insurance policy. dictionary

policy, on defini has often relied this court Fam. Ins. Co. See Am. Mut. v. for assistance. tions Inc., 2, 37, 16, 2d Girl, 2004 WI 268 Wis. American Doyle Engelke, 277, 289, 219 2d 65; v. Wis. 673 N.W.2d (1998). Dictionary Black's Law defines 245 580 N.W.2d injurious "[a]n unintended and unforeseen "accident" something in occurrence; does not occur the usual that reasonably that not be antici of events or could course (7th 1999). Dictionary pated." Addi Law 15 ed. Black's " '[a]n tionally, defined accident to mean unex we have " pected, event'" or 'an unforeseen undesirable " by a inten which is characterized lack of incident'" "Doyle, (quoting 2d American 219 Wis. at 289 The tion.' (3d Dictionary English Language Heritage the 11 ed. 1992)). relying definitions, ar- Lorenz, on these misrepresentation gues was an "accident." It that the expect a reasonable insured would that contends that policy an "acci- Pekin definition of "occurrence" as upon typographical would cover the error relied dent" representation. support pre-sale In Everson Maryland Appeals claim, cites a Court of this Lorenz Co., 679 A.2d case, Sheets v.Brethren Mutual Insurance (Md. 1996), negligent the court held that where cam be considered an "accident." Sheets, After sold their farmhouse. insureds buyers in- transaction, claimed that the insureds tentionally negligently misrepresented and that system "goodworking septic their farmhouse was in at alleged septic buyers Id. at 541. that condition." began leaking flooding, required system it which acknowledged "negligent replaced. The court be misrepresentation negligence," is a form of "an negligence an 'accident' under a act of constitutes liability policy resulting damage when the place [the insured's] 'an was event that takes without "6 foresight expectation.' (quoting Harly or Id. at 548 (Md. Brooks, esville v. Harris & 556, A.2d 1967)). negligence analysis 17. Lorenz insists that our Doyle, involving allegations negligent a case su-

pervision employees, "strikingly similar" to the analysis Smith, in Sheets. See 226 Wis. 2d at 822. In Doyle, policy using we held that an insurance the term negligent policy "event" covered acts. The defined "event" the same as this defines "occurrence," as " including repeated 'an expo- accident, continuous or substantially general sure to the same harmful condi- " Doyle, tions.' 219 2dWis. at 289. The court then held "negligence" that both the definition for and "accident" leading "center on an unintentional occurrence to un- desirable results." Id. at 290. a result, As the court person expect found that a reasonable provision using would negligent the term "event" to cover acts. Id. at 289-90. Lorenz asks this court to extend that holding involving negligent misrepresentation. to acts specifically 18. This court has never held that responsibility negligent misrepresentation strict and/or 6 Co., The court in Sheets v. Brethren Mutual Insurance 679 (Md. 540, 1996), A.2d recognized 551 jurisdictions split on whether a negligent misrepresentation can constitute an "oc currence." The court stated: prefer negligent misrepresen-

We to follow those cases that treat negligence, tation like other forms of which are covered as acci- expect resulting damage. dents if the insured did not or foresee the precedent above, In accordance with our own outlined the ultimate inquiry resulting damage is whether the is "an event that takes place foresight expectation." without one's or (citation omitted). Id. negligence catego- as to to other kinds so

are similar Smith, 2d at as "accidents." See 226 Wis. rize them question open specifically Smith, We left the sufficiently if are different "these torts from determine categoriza- negligence preclude kinds of their other liability policies. tion as 'accidents'" in insurance Id. We misrepresentation cannot now conclude that Lorenz's purpose an for the of Pekin's be considered "accident" liability coverage.

¶ 19. Lorenz's can be defined making misleading "act of a false or statement an (7th something. Dictionary Black's Law about .. ." 1999). liable, To be Lorenz have asserted a ed. must requires degree statement, an false and such assertion accident. of volition inconsistent with term See (Karwacki, dissenting). Sheets, J., 679 A.2d at 552-53 may by Although prompted negli this assertion be gence, any suggestion it devoid of is nevertheless See C.Y.Thomason Co. v. Lumbermens Mut. accident. (4th 1950). specifically: Co., F.2d Cir. More Cas. by negligence "Injury that must be distin caused guished injury from that is caused a deliberate and contemplated part act at least in initiated actor's Leasing negligence point." Corp. at some earlier GATX (7th Co., 1112, 1118 v. Union Fire 64 F.3d Nat'l Ins. Cir. 1995). interpretation distinguishable This is from "negli- previous "event,"

our discussion terms gence," Doyle, which, centered on and "accident" an Doyle, unintentional, act. See volitional, rather than Accordingly, case, at we do 219 2d this Wis. injury damage prompted that or from determine ipso by negligent is facto caused meaning general "accident," within the commercial

14 Ludington, liability policies. Annotation, Li- See J.E ability "Accidental" as Includ- Accident or Insurance: Negligence Ordinary ing Resulting In- Loss from (1966). § Agent, 1262, 4 A.L.R. 3d We His sured or a volitional act that where there is conclude instead misrepresentation, removes that act in such a involved liability coverage an "occurrence" under the from it policy. holding to a case decided 21. This is similar Leasing, Inc. v. Circuit, Red Ball the Seventh Hartford (7th Indemnity Co., Cir. F.2d 306 & Accident 1990). financed the sale of four There, the insured repossessed the The later to a lessee. insured trucks that the lessee had on mistaken belief trucks based payments. The insured was sued on his defaulted defended and reimbursed claimed that it should be policy. The insurance terms of its insurance under the arguing company conver- defend, that the refused to duty. triggering such a an "accident" sion was not required coverage for the was not court held that act, and an intentional it was conversion because under the terms are not "accidents" intentional acts Transp. Co., Metals, Ins. Inc. v. See Mindis (11th 2000). Specifically, court 209 F.3d 1296 Cir. held: simply not become an accident

A volitional act does Injury the act. is prompted because insured distinguished directly by negligence must be caused and contem- injury is caused a deliberate from by the actor's part at act initiated least plated injury may The former negligence point. at earlier some However, injury, because the latter be an accident. ... negligence attenuated from intended and the it is act, accident. volitional is not an (citations Leasing, and footnote F.2d at 311 Ball Red omitted). Ball, determination Red several Since this holding positively. cited this See Mindis courts have (Plaintiff Metals, Inc., at 1301 intended to 209 F.3d damage scrap them for metal. This railcars and use may prompted a mistake as to action have been nothing ownership, there was "accidental" about but it.); City Employers Jasper Wausau, v. Ins. 987 F.2d 1993) (7th (finding company that an insurance 453 Cir. City Jasper against defend a suit had no to City negligently permits, alleging issued two that the issuing permits an intentional act and because was "accident"); Bay not an Massachusetts Ins. Co. v. thus (7th Leasing, Koenig Inc., 1116, 1125 Cir. Vic 136 F.3d 1998) ("(Defendant's) (wrongful) repossession of the certainly automobile, Ball, like that Red was an affirmative act... it cannot be con- intentional and policy"); of the strued an 'accident' under the terms (S.D. Supp. Norris, F. Ind. Allstate Ins. Co v. 1992) (no "accident" where the insured fired several "pin attempt man, in an down" an unidentified shots passerby). but instead struck may made Likewise, Lorenz have a mistake judgment, of fact error in but it later acted with and/or give It clear that Lorenz intended to Everson volition. is was within the information as to whether 100-year plain. Ball, Red 915 F.2d at 311. flood See stripped happened here, essentials, to its is that What gave "accident," of Lorenz Everson "action," an not an City Jasper, misleading F.2d information. See filling at if there was a mistake made out 457. Even Report, the Real Estate Condition and that mistake give Everson the reliance, induced the decision meaning report not an "accident" within the Ball, See Red 915 F.2d at 311. B. "LOSS OF USE" next we address is whether question contains complaint allegations "property

Everson's stated, As the terms of Pekin's define damage." injury tangible "property damage" "[pjhysical loss of use of that property, including... property." there no Both were acts or omissions parties agree in that resulted to the involved physical injury property here. our is confined to whether Accordingly, analysis a "loss of use." complaint alleges Everson's 24. Lorenz asserts that Everson's suf- complaint a claim for Lorenz ficiently "property damage." pleads that because Everson's mentions argues complaint from damages that resulted the misrepresentation, claim falls within Pekin's insurance For support claim, Lorenz relies on the court of appeals' of this Casualty Surety Budrus, & Co. v. decision Western in (Ct. 1983). There, 348, Wis. 2d 332 N.W.2d 837 App. mill Budrus, a farmer seed from a feed purchased mistakenly gave insured Western. Budrus operator seed, subsequently the farmer which was wrong The farmer sued for Budrus planted. negligence, counterclaimed Western Western demanding defend him on the claim. The court held that because construed, the farmer's liberally are to be pleadings claim claim, worded, included a although artfully use, created a for Western for loss of and therefore to defend. See id. at 352. Lorenz court, that this argues Budrus, Everson's like the court should interpret find claimed damages liberally, of use." sufficiently "loss plead are with Lorenz that we agree 25. While we we that Everson pleadings liberally, disagree construe sufficiently pleaded "property has "loss of use" and thus damage." The relief that Everson demands in his com plaint appeals' holding falls within the court of holding Qualman and this court's Qual Smith. In buyer man, a homeowner was sued of his property misrepresentation for breach of contract and concerning complaint, structural defects. plaintiff pled each count with the allegation having "damages." sustained The court damages proven, held: "The for claims, such if would be property the difference between the market value of the purchase actually paid. at the time of and the amount damages alleged by Therefore, the Qualmans are pecuniary in nature and do not constitute damage policy." as defined the Qualman, insurance (citation omitted). Accordingly, 163 Wis. 2d at 366 the analyzing policy court held that when the insurance allegations complaint, "[p]roperty the in the damage meaning within the of the was not alleged." Id. recently, Smith, 26. More the insured had plaintiffs. During

sold a vacant lot to the construction plaintiffs house, of a the uncovered the existence of underground springs. springs allegedly These caused collapse multiple the foundation to on occasions. When plaintiffs complaint alleged the property damage. suit, filed never complaint merely Instead, stated " 'plaintiffs damages.'" that the Smith, have sustained 226 Wis. 2d at result, 812. As a the court decided that complaint give did not the insurer fair notice that alleged misrepresentations, the claims, based on the "property damage." involved Id. at 816. The court complaint claiming responsibil- concluded that "a strict ity misrepresentation negligent misrepresentation or physical injury must contain some statement about tangible property, use', or some reference loss of some money damages beyond relief if the com- demand for satisfy requirement 'property plaint is to alleged damage' of the be within the four corners (footnote omitted). complaint." Id. at 817 Similarly, complaint, there is no in Everson's damage." complaint "property stated, As mention alleges simply for that the was "unbuildable" they plaintiffs "dam- and were forced to incur ages" complaints Qualman as a result.7 Like the only "damages" complaint Smith, Everson's mentions give alleged misrepresentation. this a language of the We result meaning plain that Everson's its conclude coverage trigger for Lorenz did a Pekin to Lorenz. Without and thus for defend alleging misrepresentation explicitly that Lorenz's damage," "property notice that Pekin was not on caused scope Smith, See claim falls within the this Smith, however, at as in a 2d 817. Just 226 Wis. provide differently complaint, one that would worded caused a claims fair notice that might yielded Id. result. at use," have different "loss of 817-18. holding the insuf- Our here is bolstered

ficiency support a claim for "loss of use." of evidence to if that "loss of use" was Therefore, even we decided pled, properly it is our of the record clear from review Particularly, supported. a claim could not be that such argument damages for decline that accept We also alleged complaint. Such were implicitly "loss of use" on notice that company not an insurance allegations put would damage." We not rewrite a "property will Everson sustained identify coverage is war clearly does that complaint ranted.

in Everson's deposition, he makes no allegation that his damages constituted a "loss of use":

Q eventually It was determined that the founda-

tion poured your that was on lot did not have to altered, be moved or that it was in compliance. Correct?

A Correct.

Q you And could you have built the home intended

to build on that foundation. Correct?

A Correct.

Q Why you is it that decided that it longer was no

workable to build that home. A The lot that purchased we was not the lot that

we up ended with. It represented was inaccu- rately. plans And our backyard for the for land- scaping, it would have affected what we wanted to do.

Q plans What specifically you would not have been

able to do. A going We were to do some landscaping along the

back lot line that would have created a berm- type thing flowers, graded, with some slowly graded the back of the away. house At most, Everson has stated that the existence of the flood plain has caused him inconvenience. By his expla- nation that the heart of the landscaping must plans altered, be it becomes quite clear that there is no claim of "loss of use." for "loss of claim Wisconsin, a sufficient rendered useless. be the property use" requires & Cas. Prop. v. Northbrook Label Corp. See Wisconsin 314, 607 2d Co., 50, 233 Wis. 26, Ins. 2000 WI Fid. & Indus., Inc. v. U.S. 276; Sola Basic N.W.2d (1979). 211 Co., 654, 280 N.W.2d 641, 2d 90 Wis. Guar. Basic. in Sola our decision look to we support, For transformer a repaired negligently insured There, in its removal resulted which buyer, sold to the it had it be required facility buyer's from the damage held that This court rebuilt. completely if the "loss of use" constitute can tangible property Id. the court Accordingly, useless.8 is made 8 Industries, Guaranty Fidelity & Inc. v. U.S. Basic In Sola (1979), court 211 this 641, 654, N.W.2d Co., 280 2dWis. derived four jurisdictions and from other precedent examined purposes For the policies. CGL principles pertaining basic It states: most relevant. review, principle the fourth our " that it is diminished damaged in may be 'tangible property injury to physical actual useless, irrespective or made value Corp. v. North Label See Wisconsin tangible property.'" 314, 44, 2d Co., 26, 233 Wis. Ins. 2000 WI Prop. & Cas. brook 607 N.W.2d Basic, we held in Sola developed principles these were

Since "diminution value" phrase that use of Label Wisconsin . held: we Specifically, context. proper in its must be read "property interpreting definition of the 1966 Basic was Sola "physi- injury be any requirement that an damage," which omitted held, coverage. the broad trigger Hauenstein As in order to cal" encompass in value" of "diminution could definition therefore injury. any physical tangible property, even without in the insurance the standard form was The 1966 post-1973 promulgated in 1973. The industry a new form was until specifically than the damage" more "property much forms define requires explicitly part definition of the 1973 form. The first damage determined that the and removal of the trans- plaintiff former constituted use," a "loss of because the longer operate could no the furnace until the trans- replaced. former was requirement origi- 30. This "uselessness" that accepted

nated in Sola Basic has been in similar cases. Engineering In McDowell-Wellman Co. v. Ac- Hartford (3d Indemnity 1983), Co., cident & 711 F.2d 521 Cir. collapse Third Circuit bridge discussed the of an ore company and a claim a collapse steel property damage resulted in to its furnace, blast which bridge shipment used the for of raw materials. The court held that the owner of the blast furnace did not suffer collapse of "loss use" because the of the ore bridge impair operation did not of the blast furnace contrary, or make collapse it useless. To the bridge only ore resulted in the "loss of use" of the ore bridge. Indus., See Hartzell Co., Inc. v. Fed. Ins. 168 F. (S.D. 2001). Supp. 2d 789 Ohio The court in this case "physical" injury; part requires tangible the second "loss of use" physically injured. that is not definition, Unlike the 1966 part neither enough the later encompass definition is broad product

mere "diminution of value" physical of a in the absence of injury or loss of use. (citations Id., omitted). ¶¶ 46-47 Our holding ultimate Label, in Wisconsin respect with follows; Basic, Sola was as [a]ny suggestion policies in Sola provide coverage Basic that CGL for diminution in physical injury value that is not caused or loss of use is inconsistent "property damage" with the definition of

post-1973 policies. Policy provides We therefore conclude that the coverage no for diminution physical in value in the absence of injury or loss of use. Id., 48. liability, distinguished Basic, Sola

did not find and thus removal the transformer Sola Basic because the Bay's inoperable until the Thunder furnaces "rendered collapse replaced. Here the ore was transformer [the plaintiffs] bridge furnaces did not so affect blast actually only operable contin- which not remained but plaintiff] interrup- [the operated by without ued to be Engineering Co., F.2d at McDowell-Wellman tion." Therefore, the blast was not because furnace damages to the "useless," no "loss of use" blast rendered covered under the furnace were requirement recently was "uselessness" case, there were reaffirmed in Wisconsin Label. damage from claims the insured that resulted wrong packages profits at the the of that were sold lost handling relabeling price cost and the unsold and the of packages. Label, ¶¶ 8-10; 2d, see Wis. Wisconsin § Law, 5.54 Anderson, Insurance Arnold P. Wisconsin (4th 1998). coverage, there no ed. We held that was they damages the of use" constitute "loss that for Label, 233 Wis. "rendered useless." Wisconsin must be 654). (citing Basic, 2d at 2d, Sola Wis. 50; Here, claim not amount to Everson's does property, anything approaching the uselessness provi- required satisfy Pekin's of use, of such as the loss use There must be a loss sions. Basic, 2d at In of Sola Wis. a transformer. See could have Everson that his house case, this testified already poured, was where the foundation been built landscaping only affected. While he desired was the may property useful, aesthetic now be less Everson's landscaping problems render the do concerns property useless.

C. CAUSATION NEXUS question

¶ 33. The next certified us to asks deter- mine under what circumstances property causes the Toss of use" that a such "causa- alleged tion the nexus" exists between misconduct and damage the nexus,' claimed. "Without such a 'causation alleged property damage." occurrence cannot cause Smith, 226 Wis. 2d at 823. We conclude that misrepresentation alleged in the is not suffi- cient to establish a nexus" "causation within terms of Pekin's argues complaint's language

¶ 34. Lorenz clearly shows causation: "construction of the home they [was] which wished to construct on the impossible in the location in which the Plaintiffs wished upon pre-sale representations to build based argues Lorenz that, Smith, LORENZ...." also unlike presented there is an unbroken chain causation "property damage." between the "occurrence" and the many Smith, we concluded that there were "too 'inter- ruptions' 'property between 'occurrence' and the — damage' many too decisions and actions other —people to show an chain unbroken of causation under policies." Id. at 824. Lorenz claims that a situa- alleged tion here, like the claim this court should find allegation there was a sufficient "causation nexus." support argument,

¶ 35. For of this Lorenz relies appeals' on the of Ullrich, court decision in Jares v. App 156, 2003 322, WI 266 2d Wis. 667 N.W.2d 843.9 alleged misrepresentations This case involved the sur- 9 argues The other case Lorenz that supports the claimed America, "causation nexus" is Wood v. Insurance Co. Safeco of 24 The property. buyer's the sale rounding raccoons, infested the was with property stated that and animals, debris, animal that the seller- other and The court of failed to that information. insured disclose a sufficiently alleged that "complaint held the appeals and the alleged misrepresentation nexus the between Id., 24.10 loss." ensuing Jares, the at issue de- " to or injury damage" 'physical

fined "property including loss of destruction of tangible property, Id., There, court the interpreted the use....'" damages as "loss of use" "property damage" definition of (Mo. 1998). There, E.D. a Missouri court App. 980 S.W.2d 43 in a claim that that a nexus" appeals held there was "causation insured, Wood, The sold similar to the issue before us. is not buyer represented property that the was property to transaction, flooded and plain. property in a flood After the buyer buyer alleged The ar- negligent misrepresentation. of the flood gued if he had advised of the existence been bought property. not The court held: plain, he would have flooding damage causally related to the not "[w]hether or pursued by have Insurer on misrepresentations should been Buyer's litigation, rather than behalf of Insured Sheets, (citing litigation." Id. 679 A.2d at Insured in this at 53 544-45). 10 Katz, distinguished Smith v. 226 appeals The court (1999), v. 798, by finding 345 Jares 2d 595 N.W.2d Wis. 322, 843, Ullrich, 156, 266 2d 667 N.W.2d App 2003 WI Wis. shortly residence damage discovered after the was was full-ownership the defendant-sellers remained purchased, already existed at the closing, until and control residence allegation intervening closing, no time of and there was held that negligent party. a third court also acts (Ct. Bruckmoser, 361, Qualman 2d 471 N.W.2d v. Wis. 1991) Dohm, 352, 525 Benjamin v. 189 Wis. 2d N.W.2d App. (Ct. controlling, 1994), refer App. were because in those dicta. ences to causation cases were tangible property. that of flowed from the destruction complaint alleged plaintiffs the that Because the in- repair appeals costs, curred and restoration the of court injury "physical tangible prop- concluded that the to . . . erty" requirement "property damage" of met. was complaint alleged court also held that since the that the misrepresentations seller-insured's in the resulted loss property, of use of the the court determined that there allegation awas sufficient of "causation nexus." already case, 37. In this we have concluded that alleged misrepresentation the not was an "occurrence" provisions the within the and that complaint allege the not does a "loss of use." We con- clude, herein, for the reasons set forth that under such sufficiently circumstances, "causation nexus" is not alleged. appeals Qualman, the held court that pre-sale misrepresentation involving

the the structural "property damage." did defects not constitute Rather, preexisting damage. structural defects caused the "[t]here question The court that concluded is no defective condition the house is an element complaint. Qualman's Nevertheless, those defects can- damages, not Qualman's be considered the cause of the interpreting even when both the and the policy broadly." Qualman, 163 Wis. 2d at 367-68. Simi- larly, Benjamin, appeals the court of held that there misrepresenta- was no "causation nexus" between the damages tion claims insured and the sus- tained. In that case, seller-insured sold a prior closing, buildings on a and, was landfill began appeals to settle. The court of Qualman, relied on any damage" "property resulting and held that "loss of use" suffered were caused defects, the structural alleged misrepresentations. Id. at Benjamin Qualman 39. We relied on both in there no "causation nexus" when we decided that was "[t]here Smith, held is 'causation In we that no Smith. complaint negligent in the mis- nexus' Smiths' because ground pressure representations water or do not cause Smith, 2d in 226 Wis. cracks concrete foundations...." holdings Ben- Qualman, Like in at 824. the courts' "property jamin, Smith, and we conclude that preexisting damage" was this case caused 100-year plain, any presale misrepresen- not flood allege complaint of Since the fails to tation Lorenz.11 allegation "property damage" an in that there is no of allegation "occurrence," use," "loss of there is and no allegation clearly nexus." not a of a "causation sufficient D. EXCLUSIONS Lastly, although

¶ 40. decide this case on other we briefly policy's grounds, ex- we address the insurance clusionary provisions. that if the Pekin contends even allegations trigger complaint to cov- contains sufficient duty erage, to its defend accord with thus coverage policy, general this sections of its insurance duty is no hold that there such court should still applicable. are Since certain exclusions because exclusionary provisions no need to address the there pre- merely acknowledge has further, we that Pekin arguments, citing fed- Wisconsin and extensive sented support position of its two cases, eral court apply here. exclusions includes argues damage" the "property Lorenz also foundation, windows, building plans,

materials such as damages resulting from purchase permits. Because alleged to complaint, in the we decline those items were them here. address

IV CONCLUSION sum, we conclude that since there is no coverage complaint based on Everson's lan- and the guage policy, duty of the Pekin insurance Pekin has no indemnify to defend and no Lorenz responsibility negli- Everson's claims for strict and/or gent misrepresentation. alleged misrepresentation meaning not an was policy. "occurrence" within plead We hold that Everson must more than "damages" in relation to the claims plead sufficiently "loss of under the use" We allege further conclude that since the fails to "property damage," allegation in that no an there is allegation "occurrence," and no of use," of "loss there clearly allegation is not a sufficient of "causation "property damage" nexus." The was caused defects in property, any misrepresentations the of Lorenz. By judgment the Court.—The the of circuit court is affirmed. (concur

¶ 42. B. BUTLER, JR., LOUIS J. ring). Bradley's agree While I with of Part II Justice (that negligent misrepresentation dissent a can consti policy), tute an under "occurrence" Pekin's insurance I agree majority misrepresentation with the that the alleged complaint in the is to a insufficient establish "causation within nexus" the of that terms insurance Majority op., preexisting year ¶ 33. The 100— plain any "property damage," flood in case this caused presale misrepresentation. op., Majority not Lorenz's III(C) join Accordingly, parts I II I, the of majority opinion. respectfully I therefore concur. (dissenting).

¶ 43. BRADLEY, ANN WALSH J. Katz, v. 798, 822, Smith 226 Wis. 2d 595 N.W.2d 345 (1999), open question a the this court left whether negligent misrepresentation can constitute an "occur- liability general purposes for or "accident" rence" seemingly Today, majority this the resolves insurance. by skewing inquiry matter, the focus the but does so negligent "negligent" component ignoring and misrepresentation. alleged I Because conclude negligent case can constitute in this and because the Eversons' "occurrence," an sufficiently alleges necessary remaining elements trigger "causation," I defend, a "loss of use" respectfully dissent.

I majority that "where there is 44. The concludes misrepresentation, a a volitional act involved such coverage as an 'occurrence' act it from removes Majority liability policy." op., ¶ 20. under majority opinion problem lies not with with problem Rather, the arises when conclusion. this majority identifying act, shifts focus the relevant general specific to a a non-volitional act more from generality course, if act. the level volitional Of always enough, can far act be volitional extended down the line. found somewhere many here cases, As the relevant facts analysis. gave the Eversons a Real Lorenz drive Report typographical that contained Estate Condition agree parties mistaking 21 for 31. The Lot Lot error, portion property Lot 31 has a the that the Eversons' Report plain, the Real Estate Condition in the flood but report Instead, fact. errone- failed disclose plain. part ously flood 21 as listed Lot complaint the to the Eversons attached 46. The "[s]ome Report lots stated, which Real Estate Condition part as shown on A Exhibit attached have as of their approximate 100[- back lots land that lies within the ]year plain. flood On lots 14-22 this area falls in the wooded ravine area and for 23-27, lots 21 & 32 it falls grassland within the area on the back of the lots." added.) (Emphasis According complaint, to the the Eversons Report,

received the Real Estate Condition which provided portion lay that "no of Lot 31 within the plain." they purchased flood When Lot 31, 100[-]year Warranty incorporating Eversons received a Deed, representations reference the contained in the report. completed, After the transaction was the Ever- portion sons discovered that a substantial of Lot 31 100-year plain. was leged They located within a flood al- plain that the flood made "the construction of the they home which wished to construct on the impossible in the location in which the Plaintiffs upon pre-sale wished representa- to build based they tions of a result, LORENZ." As sustained dam- ages having already paid they for items that could no longer use. majority, away 48. The however, tucks in a foot- negligent

note misrepresenta- relevant facts of the doing Id., ¶ tion claim. 5, n. 3. In so, it shifts the focus away typographical from the accidental error contained report in the and instead focuses in the text on the general gave report action that Lorenz to Everson. Consequently, Id., ¶ majority opines then there is no accident here all at because the decision to give report Everson the is not an "accident."Id. Accord- ingly, majority concludes that because there is no coverage accident, there is no under the giving that the "act" No one asserts 49. report or it was volitional accident. Of course anwas part transaction, of the real estate As intentional. provide Estate Condition the Real Lorenz needed to Report. majority Stripped here essentials, its (a typographical act an accidental determines that error) an at such accident. How can it arrive is not an Only by skewing the focus conclusion? anomalous compo- "negligent" ignoring the and described above misrepresentation negligent claim. nent of a ¶ 51. open question Smith, left noted, As II today is whether 798, and that we address 2dWis. alleged negligent Lorenz can under Pekin's an "occurrence" constitute policy, "an defined as "occurrence" is In the exposure repeated including or accident, continuous general substantially conditions." harmful the same the term not elaborate on does Because majority proffers for two definitions "accident," the (1) injuri- "[a]n guidance: and unforeseen unintended something occur in the that does not occurrence; ous reasonably could not be of events or that usual course " (2) unexpected, '[a]n anticipated;" undesirable " charac- which is unforeseen incident'" event'" or 'an " Majority op., ¶ intention.'" a 'lack of terized omitted). (citations by majority cited Both of the definitions unforeseeable event

center on an unintentional alleged leading case, results. this to undesirable negligent misrepresentation cri- meets these of Lorenz the reader that efforts to convince However, its teria. only majority emphasizes accident, the no there was "misrepresentation" ignores "negligent" compo- negligent misrepresentation nent of the claim. It de- " misrepresentation making fines Lorenz's as an 'act of misleading something a false or statement about (7th (citing Dictionary Id., ¶ 19 Black's Law 1016 ed. 1999)). This characterization in itself is a "false and misleading statement," for the conduct at issue is alleged negligent misrepresentation. Lorenz's Negligent misrepresentation ¶ 53. is defined as "[a] careless or inadvertent false statement in circum- stances where care should have been taken." Black's (7th 1999). Dictionary major- Law 1016 ed. Unlike the ity, concluding I have little trouble that a reasonable expect insured would the term "accident" to include a "careless or inadvertent false statement." On this mat- ter, I find the case of Co., Sheets v. Brethren Mut. Ins. (Md. 1996), 679 A.2d 540 instructive. Maryland appeals Sheets, In court of was negligent misrepresentation

confronted with whether general liability constituted an "occurrence" under a policy. Ultimately, persuaded insurance the court was recognizing negligent a number of cases mis- representation can be considered an "occurrence" or (citing "accident." Id. at 550 SL Industries v. American (N.J. 1992) Co., Motorists Ins. 607 A.2d 1266, 1276-77 ("Courts generally although have held that the insurer must defend an insured who is accused of reckless, negligent, misrepresentations, or innocent no defense is required when the insured is accused of intentional misrepresentations."); Universal Underwriters v. (Ala. 1989) ("[t]he Youngblood, 76, 78, 549 So.2d 79 term 'accident' does not exclude events that occur through negligence," "[a]ctions and that for innocent or covered"); reckless have held to be Casualty First Newton Nat. Bank v. Co., Gen. 1988) ("[t]he (Iowa very definition 618, 625-26 N.W.2d negligent 'negligent misrepresentation' connotes '[W]here a com intentional conduct.... rather than negligence plaint ... an framed in terms of insured's defend.'")). there is Smith, 2d at stated in 226 Wis. 55. As this court "strikingly similar" to our

822, in Sheets is the decision analysis Doyle Engelke, negligence 277, 2d v. 219 Wis. (1998). Doyle, an we held that 580 N.W.2d negli- using policy the term "event" covered gent at issue 2d at 290. acts. Wis. policy defines "event" the same as this case defined " including or accident, continuous "occurrence," as 'an general substantially repeated exposure to the same Id. at 289. observed both harmful conditions.'" We "negligence" "accident" "center on for the definition leading to undesirable occurrence an unintentional that a reason- Thus, we concluded Id. at 290. results." using provision expect policy the the able insured would negligent the acts. Id. Because cover term "event" to Doyle negligent act, a in this case also involves conduct distinguished. meaningfully cannot be negli Accordingly, that a I conclude would 56. gent misrepresentation an "occurrence" can constitute liability general purposes insurance. for or "accident" policy language must be in an insurance all, After by person the a reasonable understood construed as Whitbeck, WI 129, position 2002 Frost v. of an insured. (citing Kremers- 225 80, 2d 654 N.W.2d 20, 257 Wis. Employers Ins., 722, 735, 119 2d Wis. Urban Co. v. Am. (1984)). a case, In this reasonable 351 N.W.2d split legal person hair advanced would not majority. majority op., ¶ Rather, a reasonable See

person expect would that the would cover the typological upon by pre-sale error relied Everson in the representation.1

h—H I—I I-H Having alleged negli determined that the gent misrepresentation can constitute an "occurrence," I complaint consider next whether the Eversons' suffi ciently alleges remaining necessary elements trigger to defend, "loss use" and "causation." Again, majority opinion inquiry by blurs focus ing sufficiency much of its discussion on the underlying evidence or the merits of the claim rather complaint than on the four corners of the and the terms policy. Id., ¶¶ "[t]he of the insurance 28-32. However, duty to defend focuses on the nature of the claim and nothing has to do with the merits Smith, claim." (citing Casualty 2dWis. at 806 Grieb v. Co., Citizens (1967)) (emphasis 552, 558, Wis. 2d 148 N.W.2d103 added). Accordingly, the fact that the Eversons' claim may anything approaching not amount to the standard of "uselessness" is irrelevant. question

¶ 58. The in this case is whether Pekin's policy provides coverage to Lorenz for the negligent claim filed Everson. question comparing The answer to this lies in allegations of the claim set forth in the to the (citing terms of the Id. School Dist. Shorewood v. Co., Wausau Ins. 170 347, Wis. 2d 364-65, (1992)). 488 N.W.2d82

1Alternatively, I note that to the extent the term "accident" ambiguous, it must be construed an insurer and in coverage. Whitbeck, favor of Frost v. 129, 2002 19, WI 257 ¶ 80, Wis. 2d 654 N.W.2d (citing Family Danbeck v. Am. Mut. Co., 91, 10, 150). Ins. 186, WI ¶ 245 Wis. 2d 629 N.W.2d focusing claim, on the nature of the 59. When liberally allegations in the must construe the courts Doyle, complaint and assume all reasonable inferences. majority mouths this 219 Wis. 2d at 284. While the Majority op., apply it here. 25. standard, it fails allegation paragraph The is set forth seven relevant complaint. It states: Subsequently, the Plaintiffs discovered a sub- lay year of Lot 31 within the portion 100[-] stantial making flood the construction of the home which plain they impossible property wished to construct on in which the Plaintiffs wished to build location LORENZ, upon pre-sale representations based rendering unbuildable for the Plaintiffs damages causing the Plaintiffs to incur result $37,000. in excess of Although paragraph does not use the this

"magic majority apparently seeks, it words" the should (a Smith, have to do so. See 226 Wis. 2d at 817 complaint claiming negligent misrepresentation need physical injury only about "contain some statement tangible property, use, reference or some some to loss ..."). beyond money damages Here, relief demand for allegations are to a claim for "loss of tantamount plaintiffs allege under a liberal construction. use" property lay portion of their within that a substantial making 100-year plain, the construction of flood they impossible in the location which the home They compensation based on to build. seek wanted negligent misrepresentation out-of-pocket for Lorenz's Accordingly, expenses, are now useless to them. which reasonably infer the "loss of use" various one can (e.g., relating failed construction excava- items to that etc.). plans, permits, tion, foundation, house concrete I am Likewise, 61. satisfied that the sufficiently alleges "causation" under a liberal construc- Again, language para- tion. the relevant is found they graph seven: of the home which "Construction impossible [was] wished to construct on the the location which the Plaintiffs wished to build upon pre-sale representations based majority language, LORENZ ...." The concluding dismisses this " 'property damage' in that the this case was 100-year preexisting plain, caused flood any presale misrepresentation Majority op., of Lorenz." summary purposes judgment, However, for I reasonably believe it can be inferred reliance on pre-sale representations Lorenz's caused the Eversons' damage. Accordingly, foregoing for the I reasons re- spectfully dissent. I am authorized to state that CHIEF JUS- joins

TICE SHIRLEY S. ABRAHAMSON this dissent.

Case Details

Case Name: Everson v. Lorenz

Court Name: Wisconsin Supreme Court

Date Published: Apr 22, 2005

Citation: 695 N.W.2d 298

Docket Number: 2003AP1331

Court Abbreviation: Wis.