Rоbert STUART and Lin Farquhar-Stuart, Plaintiffs-Respondents, v. WEISFLOG‘S SHOWROOM GALLERY, INC. and Ronald R. Weisflog, Defendants-Respondents, AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant-Appellant-Petitioner.
No. 2005AP1287
Supreme Court of Wisconsin
Oral argument September 5, 2007. Decided July 10, 2008.
2008 WI 86 | 753 N.W.2d 448
For the plaintiffs-respondents there was a brief by James J. Carrig, Matthew R. Jelenchick, and Niebler, Pyzyk, Klaver & Carrig LLP, Menomonee Falls, and oral argument by Matthew R. Jelenchick.
An amicus curiae brief was filed by Jeffrey Leavell and Jeffrey Leavell, S.C., Racine, on behalf of the Civil Trial Counsel of Wisconsin.
¶ 3. The court of appeals reversed.3 The damage award and related issues raised in that appeal are the subjects of the companion case, Stuart v. Weisflog‘s Showroom Gallery, Inc., 2008 WI 22, 308 Wis. 2d 103, 746 N.W.2d 762 (Stuart I), which was released earlier this term.
¶ 4. The subject of the present opinion is a separate appeal by American Family, in which the insurance company asks us to determine whether WSGI‘s CGL insurance policy covers the damages awarded to the Stuarts.4 We agree with American Family that the
I
¶ 5. The facts of this case are identical to those set out in the companion case, Stuart I. Only those facts pertinent to the issues raised in this appeal will be repeated here.
¶ 6. In 1995 the Stuarts entered into a “Remodeling Architectural Contract” with WSGI for architectural drawings for a sizable home remodeling project.5 The next year, the Stuarts entered a “Remodeling Contract” with “Weisflog Homes” to perform the construction work on the project, which included, among other things, expansion of the living room, family room, master bedroom and garage, and the addition of a bedroom and a hot tub/spa room, at a cost of approximately $278,000.6
22, 308 Wis. 2d 103, 746 N.W.2d 762 (Stuart I). Therefore, we do not address those issues further in this opinion. Although those issues were also discussed in the court of appeals decision which we review in the present opinion, the mandate of that decision was limited to the issue of insurance coverage, and cоnsequently so is the mandate and ruling in this decision.
¶ 8. In its answer to the second amended complaint, American Family stated that the policy it issued “may not provide coverage” for the claims. In a motion filed on March 5, 2004, American Family asked the circuit court for a declaration that the Stuarts’ claims and damages were not covered by the policies issued to Weisflog and WSGI, and requested that American Family be summarily dismissed from the case. In an order signed on June 22, 2004, the court determined that the homeowners’ policies issued to Weisflog did not cover the damages, but the court denied the motion as to the CGL policy issued to WSGI. In a pretrial report, American Family again set forth its position that it had no responsibility to cover damages caused by WSGI.
¶ 9. In support of his misrepresentation claim, Robert Stuart testified at trial that Ronald Weisflog had made assurances that his products are high quality, that he understood local codes and regulations, and
All references to the Wisconsin Administrative Code are to the September 2001 register date unless otherwise noted. All subsequent references to the Wisconsin Statutes are to the 2005-06 version unless otherwise indicated.
¶ 11. The jury held WSGI liable for $95,000 in damages “resulting from the negligence” to the Stuarts. In accordance with the special verdict instructions, the jury then apportioned the damages between the mis-
contract” (emphasis added). Contrary to Justice Roggensack‘s representation of this question, it did not use the same wording of the later Special Verdict Question #13, which limited its inquiry to representations about future compliance with building codes, but rather asks about “any” misrepresentations. Because Question #1 is comparatively broad and not limited to specific misrepresentations, it is appropriate to turn to the record to review what evidence of misrepresentations was presented to the jury. Indeed, in her dissent to Stuart I, Justice Roggensack herself cites the record, and not just the special verdict, where it supports her argument to do so. See Stuart I, 308 Wis. 2d 103, ¶¶ 88-89 (Roggensack, J., dissenting) (referring to testimony of an expert witness to argue that such testimony provided the support for the jury‘s damage award for negligent construction).
¶ 12. In a post-verdict motion filed on October 27, 2004, American Family requested an order ruling that WSGI‘s CGL policy excluded coverage for the damages awarded to the Stuarts; dismissing the portion of damages related to misrepresentations because, American Family argued, the statute of limitations had expired; and dismissing the portion of damages related to negligence because, American Family argued, those claims were barred by the economic loss doctrine. The motion also requested that, in the alternative, a new trial be conducted to apportion those damages covered by insurance from those which are not.
¶ 13. In an order dated January 10, 2005, the circuit court denied the motion and concluded that insurance coverage existed under the CGL policy for the damages awarded. On February 10, 2005, judgment was entered against WSGI and American Family in the amount of $154,108. The award included the $95,000 awarded by the jury, in addition to double damages in the amount of $23,750 for the misrepresentation portion of the award, attorney fees of $15,675, and costs in the amount of $19,683.
¶ 14. The Stuarts filed an appeal on April 6, 2005; Weisflog and WSGI filed a cross-appeal. On May 9, 2005, American Family also filed a cross-appeal, which was subsequently designated a new appeal and given a separate case number.
¶ 15. On May 3, 2006, the court of appeals decided the Stuarts’ appeal and Weisflog‘s and WSGI‘s cross-appeal. In Stuart v. Weisflog‘s Showroom Gallery, Inc., 2006 WI App 109, 293 Wis. 2d 668, 721 N.W.2d 127, the
¶ 16. The court of appeals decided American Family‘s separate cross-appeal in Stuart v. Weisflog‘s Showroom Gallery, Inc., 2006 WI App 184, 296 Wis. 2d 249, 722 N.W.2d 766, affirming the circuit court‘s determination that the American Family policy covers the Stuarts’ damage award. Specifically, the court of appeals concluded that the general coverage provisions of the CGL policy do not exclude ATCP misrepresentation violations, because even though an “occurrence” is defined as “accidental” under the policy, the ATCP misrepresentation cause of action does not require proof of intent to deceive. Id., ¶¶ 1, 23-33. The court concluded that other damages would also be covered under the main coverage clause because “all the damages awards here flowed from the defendant‘s liability for property damage, in that but for the misrepresentations, the latter would not have occurred.” See id., ¶ 38. Finally,
¶ 17. In our separate Stuart I opinion, we affirmed the court of appeals decision remanding on the bases that the circuit court should not have required the jury to apportion damages between misrepresentation and negligence, that the attorney fees calculation erroneously failed to apply the correct rule of law, that neither the economic loss doctrine nor any statutes of limitations bars the negligence claims in this case, and that there remain unresolved issues regarding the personal liability of Ronald Weisflog. See Stuart I, 308 Wis. 2d 103, ¶¶ 4, 48. We now address the remaining insurance coverage issues, concluding for the below reasons that the damages caused by Weisflog and WSGI in this case are not covered by the CGL insurance policy issued by American Family.12
II
¶ 18. This case primarily involves interpretation of an insurance policy, which is ordinarily a question of law subject to de novo review. See Welin v. Am. Family Mut. Ins. Co., 2006 WI 81, ¶ 16, 292 Wis. 2d 73, 717 N.W.2d 690. An insurance policy‘s terms should be interpreted as they would be understood by a reason-
¶ 19. If an insurance policy‘s language is ambiguous, i.e., susceptible of more than one reasonable interpretation, we will construe it in favor of coverage. Cardinal v. Leader Nat‘l Ins. Co., 166 Wis. 2d 375, 382, 480 N.W.2d 1 (1992). Similarly, exclusions to insurance coverage are narrowly construed against the insurer, especially if their effect is uncertain. Id..
¶ 20. If, however, the language of a policy is unambiguous, and its terms plain on their face,
the policy should not be rewritten by construction to bind the insurer to a risk it was unwilling to cover, and for which it was not paid. Litigants should not be able to resort to rules of construction for the purpose of modifying the contract or creating a new contract; and a court need not resort to either construction or case law to bolster its recognition of that plain meаning.
Garriguenc v. Love, 67 Wis. 2d 130, 135, 226 N.W.2d 414 (1975). An otherwise unambiguous provision is not rendered ambiguous solely because it is difficult to apply the provision to the facts of a particular case. Lawver v. Boling, 71 Wis. 2d 408, 422, 238 N.W.2d 514 (1976).
III
¶ 21. This case requires us to determine whether the CGL policy issued by American Family to WSGI
A
¶ 22. We begin our examination of the coverage issue by reviewing the language of the “bodily injury and property damage liability” coverage clause of the CGL policy. The coverage clause provides in relevant part:
COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. . . .
b. This insurance applies to “bodily injury” and “property damage” only if:
(1) The “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory“; and
(2) The “bodily injury” or “property damage” occurs during the policy period.
¶ 23. Relying on this language limiting coverage to accidental occurrences, American Family argues that misrepresentation violations under
¶ 24. The plain text of the American Family CGL policy unambiguously defines “occurrence” as an “accident.” The meaning of “accident” itself is similarly unambiguous; we need look no farther than the common and ordinary meaning of the word as understood by a lay person. See Cieslewicz, 84 Wis. 2d at 97-98. To determine the common and ordinary meaning of a word, we often rely upon definitions from recognized dictionaries. See, e.g., State v. Polashek, 2002 WI 74, ¶ 19, 253 Wis. 2d 527, 646 N.W.2d 330. Webster‘s Third New International Dictionary defines an accident as “1.a. an event or condition occurring by chance or arising from unknown or remote causes . . . b. lack of intention or necessity . . .” (emphasis added). Webster‘s Third New International Dictionary 11 (3d ed. 1986). Therefore, applying the common and ordinary meaning that “accident” would have in the mind of a lay person, we conclude that an accident is an event or condition occurring by chance or one that arises from unknown causes, and is unforeseen and unintended.13
¶ 26. American Family argues that the language of
¶ 27. We agree with American Family that the ATCP misrepresentations in this case were not accidental occurrences, and that Everson controls.
¶ 28. The Stuarts do not take issue with the jury‘s findings that WSGI made misrepresentations “in order to induce” the Stuarts to enter into the architecture or remodeling contract. Applying a common and ordinary interpretation of the “in order to” language of the code and special verdict in this case, we conclude that this language evinces a clear element of volition. With the
(1998) (” ‘accident’ is defined as [a]n unexpected, undesirable event’ or ‘an unforeseen incident’ which is characterized by a ‘lack of intention’ “) (quoting The American Heritage Dictionary of the English Language 11 (3d ed. 1992)).
¶ 29. In support of this conclusion, we turn to Everson, which involved a similar insurance interpretation question. In that case, Everson, the plaintiff, brought negligent, strict liability, and intentional misrеpresentation claims against Lorenz after Lorenz misrepresented that the property he sold Everson was not within a flood plain. Everson, 280 Wis. 2d 1, ¶¶ 4-5, 13. As a result of the misrepresentation, Everson purchased land which was unsuited for the construction of the home he had intended to build on it. Id.
¶ 30. Among the questions the court of appeals certified to this court in Everson was the issue of “[whether] an alleged strict responsibility misrepresentation and/or negligent misrepresentation in a real estate transaction constitute an ‘occurrence’ for the purpose of a commercial general liability insurance policy such that the insurer‘s duty to defend the insured is triggered[.]” Id., ¶ 2. In Everson, we concluded that no coverage existed under the CGL policy, which defined “occurrence” in the same manner as the CGL policy in the present case. See id., ¶¶ 12, 41. The basis for our decision that the CGL policy did not provide coverage was our conclusion that a volitional misrepresentation could not be considered an accident for purposes of coverage. Id., ¶¶ 18-20.
¶ 31. Everson is directly applicable to this case, particularly in light of the fact that both cases require us to address whether misrepresentations are covered under a CGL policy that limits coverage to accidental occurrences. In the present case, the jury found that
WSGI made misrepresentations in order to induce the Stuarts into the remodeling architectural contract and the remodeling contract. In addition, Ronald Weisflog knew at the time of the misrepresentations that he was not familiar with an applicable building code.14Stuart, 296 Wis. 2d 249, ¶ 3.¶ 32. Such evidence illustrates that WSGI‘s conduct was a volitional act, as opposed to an accidental occurrence. In Everson, we concluded that a false assertion “requires a degree of volition inconsistent with the term accident,” and we held that “where there is a volitional act involved in such a misrepresentation, that act removes it from coverage as an ‘occurrence’ under the liability insurance policy.” Everson, 280 Wis. 2d 1, ¶¶ 19-20. The same principle applies here. WSGI‘s false assertions to the Stuarts reflect a similar degree of volition, rendering the misrepresentations, along with the damage they caused, inapplicable for coverage as an accidental occurrence.
¶ 33. The Stuarts attempt to distinguish this court‘s ruling in Everson as limited to negligent or strict liability misrepresentation claims. They argue that the ruling does not preclude CGL policy coverage for damages resulting from misrepresentations under
¶ 34. We reject this argument. It defies logic to suggest that an ATCP misrepresentation claim, which
¶ 35. Indeed, Kailin, upon which the Stuarts rely, provides a helpful guide to the different types of misrepresentation claims, explaining that proof of intent to defraud is required for an intentional misrepresentation claim, while strict liability and negligent misrepresentation claims do not include actual intent elements at all. See id., ¶ 37 & n.22, ¶ 40 & n.23. In contrast,
¶ 36. Not only is the Stuarts’ proposed approach unreasonable, but it is also inappropriate in its failure to abide by the longstanding rule that we “must focus on the incident or injury that gives rise to the claim, not the plaintiff‘s theory of liability.” Berg v. Schultz, 190 Wis. 2d 170, 177, 526 N.W.2d 781 (Ct. App. 1994). In Berg, the court of appeals explained that this rule applies specifically to insurance coverage issues as well as to other situations. Id. (citing Bankert v. Threshermen‘s Mut. Ins. Co., 110 Wis. 2d 469, 480, 329 N.W.2d 150 (1983)). Most pertinently, this court held in Bankert that:
we need not speculate as to what was intended by the company when it issued the policy or by the insured when he acquired it. As pointed out above, the company becomes legally liable to pay only when the insured incurs liability for personal injury or property damage caused by an “occurrence.” An occurrence is defined as an accident. This is what is insured against—not theories of liability.
Bankert, 110 Wis. 2d at 480 (emphasis added).
¶ 37. Applying these principles to the arguments made by the Stuarts in this case, we conclude that the Stuarts place undue and inappropriate emphasis on the relative mens rea requirements of various misrepresentation causes of action. To determine whether an act is accidental within the meaning of the CGL policy in this case, we need only determine whether the occurrence giving rise to the claims16 was an unintentional act in the sense that it was not volitional.
¶ 38. Even if it were appropriate for us to distinguish among various types of misrepresentation claims,
¶ 39. The Stuarts’ other attempts to distinguish Everson as inapplicable to
¶ 40. The Stuarts have it backwards. As we have explained, the ordinary meaning of the word “accident,” as used in accident insurance policies, is “an event which takes place without one‘s foresight or expectation. A result, though unexpected, is not an accident“; rather, it is the causal event that must be accidental for the event to be an accidental occurrence. See Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, ¶ 37, 268 Wis. 2d 16, 673 N.W.2d 65 (citation omitted). See also Doyle, 219 Wis. 2d at 290 (The definitions of both negligence and accident “center on an unintentional occurrence leading to undesirable results. . . . [C]omprehensive general liability policies are ‘designed to protect an insured against liability for negligent acts resulting in damage to third-parties.’ “) (citations omitted); United Coop. v. Frontiers FS Coop., 2007 WI App 197, ¶ 13, 304 Wis. 2d 750, 738 N.W.2d 578, (describing the determinate factor for coverage as the event that caused the damage, i.e., the “causal ‘occurrence’ “). In this case, the jury found (and ensuing court opinions, including Stuart I, clarified) that the property damage arose from the misrepresentations made in order to induce the Stuarts to enter into the contracts with WSGI. It does not matter whether WSGI intended a specific result; what matters is whether the cause of the damage was accidental. Consequently, contrary to the Stuarts’ arguments, the defendants’ intent to induce at the time they engaged in misrepresentations, not their ability to predict the exact result of their actions, is the key to determining whether their conduct was accidental.
¶ 41. The Stuarts’ attempt to distinguish Everson by arguing that WSGI‘s representations became false only after the job performance had ended depends upon a condition not supported by the record: that the only misrepresentations by WSGI were assurances regarding future performance, as opposed to misrepresentations about existing conditions. In fact, the record shows that the Stuarts themselves alleged, argued to the jury, and produced supporting evidence that Weisflog made misrepresentations on behalf of WSGI about his then existing qualifications, knowledge, and abilities, not just about future performance. For example, Robert Stuart‘s testimony describes Ronald Weisflog‘s statements during their first meeting in the following terms:
[H]e professed a very high standard of quality, аnd he felt he could deliver exactly what we wanted. And he talked about his qualities. He understood Brookfield codes and regulations very well [emphasis added]. That process would be easy. He could provide architectural
service for us where he would do all the architectural design work for us. . . .
These statements constitute a representation of Weisflog‘s knowledge and WSGI‘s abilities at the time the statements were made, rather than merely being promises of future performance.
¶ 42. As such, with the Stuarts basing their ATCP claims in Stuart I largely on misrepresentations about the defendants’ already existing abilities, skills, and past work, the Stuarts have refuted their own argument in this case that the only “misrepresentations” made were promises of future actions, which Weisflog could not have known were “false” until after WSGI‘s performance.
¶ 43. The final “occurrence” argument by the Stuarts we address is their contention that the CGL policy‘s property damage coverage clause must include coverage for misrepresentation claims because the policy‘s business risk exclusions specifically refer to “warranties or representations.” The Stuarts cite this court‘s decision in American Girl in support of their argument that if a misrepresentation were not an occurrence, there would be no need for the policy‘s exclusions to expressly include representations. However, the American Girl passage cited by the Stuarts did not address misrepresentations. Rather, in that passage, we were rejecting American Family‘s contention that losses actionable in contract could never be CGL “occurrences,” pointing to business risk exclusions applicable to contractual relationships as indicative that in some cases actions in contract could be occurrences.
¶ 44. The same logic does not necessarily extend to an analysis of whether a CGL policy which does not
¶ 45. In sum, each of the Stuarts’ attempts to paint WSGI‘s misrepresentations as accidental occurrences fail. Neither case law nor common sense supports an interpretation of “accidental occurrence” that would include misrepresentations volitionally made with the particular intent to induce. The CGL policy unambiguously limits coverage to accidental occurrences. Therefore, we cаnnot reasonably view the misrepresentations in this case as occurrences within the meaning of the CGL policy.
B
¶ 46. Having concluded that WSGI‘s misrepresentations are not the type of occurrence covered by the
¶ 47. The reason we do so is because the Stuarts raise an argument in this appeal that broadens the scope of the issues beyond just the misrepresentation claim. The Stuarts argue that even if
¶ 48. In Lawver, this court ruled that an insurance company “should not be excused from its obligation to defend the action or pay benefits until it has been determined the injuries did not result, even in part, from a risk for which it provided coverage and collected a premium.” Lawver, 71 Wis. 2d at 422. In Varda, the court of appeals similarly described the rule of concurrent risks in the following manner:
When an insurance policy expressly insures against loss caused by one risk, but excludes loss caused by another risk, coverage is extended to a loss caused by the insured risk even though the excluded risk is a contributory cause. An independent concurrent cause must provide the basis for a clаim in and of itself, and must not require the occurrence of the excluded risk to make it actionable.
Varda, 284 Wis. 2d 552, ¶ 24 (citations omitted).
¶ 49. Applying these precedents, the Stuarts argue that in the present case, the jury determined that
¶ 50. We also acknowledge that during oral arguments, WSGI‘s attorney asked us to consider two different things which might be considered “occurrences” within the meaning of the policy: the misrepresentations, and the physical damage (the “rot and mold“) to the Stuarts’ house. American Family also appeared to concede during oral arguments there could be residual insurance coverage issues arising from the negligence claims even if we resolved that there was no coverage for misrepresentations.
¶ 51. Therefore, although we concluded in Stuart I that neither the evidence in the record nor legal authority supports separating the statutory and negligence claims for purposes of damage apportionment, see Stuart I, 308 Wis. 2d 103, ¶¶ 25-31, there may be justification for treating the two types of claims sepa-
1
¶ 52. We first address American Family‘s argument that the damages in this case are economic damages, not property damage, and therefore do not trigger coverage under the CGL policy. We agree with the Stuarts that the damages in this case clearly correspond with the approximately $95,000 awarded by the jury, which in turn corresponded with the cost to remedy the property damage to their home.
¶ 53. In support, American Family cites several cases, including Smith v. Katz, 226 Wis. 2d 798, 816-17, 595 N.W.2d 345 (1999); Benjamin v. Dohm, 189 Wis. 2d 352, 360-61, 526 N.W.2d 371 (Ct. App. 1994); and Qualman v. Bruckmoser, 163 Wis. 2d 361, 366, 471 N.W.2d 282 (Ct. App. 1991), but American Family fails to explain the applicability of these cases, which involve “difference in value” damages as awarded to remedy failure to disclose preexisting defects in property sales. Id. In this case, in contrast, the Stuarts were awarded
¶ 54. Furthermore, contrary to American Family‘s apparent interpretation of Katz as labeling all misrepresentation-related damages as economic damages, not property damages, we explicitly stated in Katz that we were not making such a sweeping conclusion:
We are not saying that strict responsibility misrepresentations or negligent misrepresentations can never cause “property damage” as defined in the policies, particularly when “property damage” can include “loss of use of tangible property that is not physically injured.” But we recognize that the majority view in the cases is that misrepresentations and omissions do not produce “property damage” as defined in insurance policies. They produce economic damage.
Given this well established law, a complaint claiming strict responsibility misrepresentation or negligent misrepresentation must contain some statement about physical injury to tangible property, some reference to loss of use, or some demand for relief beyond money damages if the complaint is to satisfy the requirement that “property damage” be alleged within the four corners of the complaint.
Katz, 226 Wis. 2d 798, 816-17 (citations omitted). In this case, the Stuarts’ complaints clearly alleged property damage arising out of WSGI‘s misrepresentations and negligence, which falls within the parameters of Katz.
¶ 55. Because we reject American Family‘s argument that the damages in this case were economic
2
¶ 56. We next address American Family‘s argument that the “your product” business risk exclusion in WSGI‘s CGL policy bars coverage. The “your product” exception in the policy provides that the policy does not apply to “‘property damage’ to ‘your product arising out of it or any part of it.‘” The policy defines “your product” as “[a]ny goods or product, other than real property, manufactured, sold, handled, distributed, or disposed of by: (1) You; (2) Others trading under your name; or (3) A person or organization whose business or assets you have acquired . . .” (emphasis added).
¶ 57. The Stuarts argue that the CGL policy‘s “your product” exclusion does not apply here. Specifically, they argue that the plain text of the policy‘s “your product” definition explicitly omits services and real estate, thus allowing coverage in this case. The Stuarts explain that the addition to their house is real property, rendering the “your product” exclusion inapplicable by its terms. We agree.
¶ 58. A plain language interpretation of the “real property” exception to the “your product” exclusion results in no other reasonable conclusion than that the Stuarts’ home addition is “real property.” Black‘s Law
¶ 59. American Family argues that the cоurt of appeals’ rejection of the “your product” exclusion is contrary to other decisions in which, American Family claims, Wisconsin courts have held that remodeling or home construction projects fall within a CGL policy‘s “your product” exception. However, the cases American Family cites are inapposite; only one of them described a CGL policy with a “your product” exception matching the one in the present case, i.e., having a “real property” exception, and in that case, Nu-Pak, Inc. v. Wine Specialties International, Ltd., 2002 WI App 92, 253 Wis. 2d 825, 643 N.W.2d 848, the real property exception was not at issue. American Family therefore fails to meet its burden of establishing the applicability of the “your product” exclusion in the face of the obviously applicable “real property” exception to that exclusion.
3
¶ 60. Finally, we address American Family‘s argument that the damages in this case “are not covered by a CGL policy which excludes coverage for ‘your work’ and which defines ‘your work’ to include representations about the quality of the work.” In particular, American Family argues that the following exclusion applies, denying insurance coverage for
1. Damage to Your Work
“Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard.”
This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.
¶ 61. We agree that this exclusion is applicable, but observe that American Family failed to complete its argument explaining why it is applicable. In order to see how the exclusion Americаn Family cites applies to damage arising out of WSGI‘s negligence, it is necessary to look at the policy‘s definition of “products-completed operations hazard“:
“Products-completed operations hazard” includes all “bodily injury” and “property damage” occurring away from premises you own or rent and arising out of “your product” or “your work” except:
(1) Products that are still in your physical possession; or
(2) Work that has not yet been completed or abandoned.
¶ 62. It is clear from the terms of the main exclusion (1) clause, read together with this definition,
¶ 63. The words of the policy are not ambiguous: the CGL‘s “products-completed operations hazard” “your work” exclusion applies to property damage arising out of “your work,” where that work occurs away from the premises owned or rented by the person doing the work, and where the work was completed at the time of the damage. “Your work” is defined as including “work or operations performed by you or on your behalf.” Such a description is clearly applicable to WSGI‘s negligent design and construction of the home remodeling project, which caused property damage, did not occur on WSGI‘s own property, and was completed at the time the damages arose.
¶ 64. As to the subcontractor exception, the Stuarts do not contend that the subcontractors committed the “misrepresentations” at all, which are the focus of American Family‘s “your work” exclusion argument, and from which, as we explained in Stuart I, the negligent work flowed in this case. We agree with the court of appeals that this issue is nongermane, as no subcontractors were involved with the initial design other than to implement the design by doing the construction. See Stuart, 296 Wis. 2d 249, ¶ 21 n. 5.
¶ 65. Furthermore, as this court previously noted in American Girl, cases in Wisconsin and other jurisdictions have consistently recognized that under this provision of the policy, the “your work” exclusion does not apply to “damage caused to construction projects by subcontractor negligence.” Id., 268 Wis. 2d 16, ¶ 69 (emphasis added). See also Kalchthaler v. Keller Const. Co., 224 Wis. 2d 387, 391, 591 N.W.2d 169 (Ct. App. 1999) (“The only reasonable reading of this exception is that it restores coverage to completed work caused by the work of a subcontractor.“). In this action, the subcontractors performed at the direction and under the supervision of WSGI. Absent a showing of independent subcontractor negligence, the subcontractor exception to the “your work” exclusion is simply not applicable here.
¶ 66. For the above reasons, we conclude that even if coverage might otherwise apply to the negligence claims in this case, the “your work” business risk exclusion cited by American Family would preclude coverage, and the subcontractor exception to that exclusion would not reinstate coverage.
IV
¶ 67. Because the property damage suffered by the Stuarts arose out of the volitional misrepresentations of WSGI, and because the CGL policy issued by American Family contains a business risk exclusion applicable to this case, we conclude that the policy does not cover the damages award to the Stuarts in this action. Consequently, we reverse the court of appeals’ ruling that coverage applies under the policy, and remand this matter for further proceedings сonsistent with this opinion and with Stuart I.
By the Court.—The decision of the court of appeals is reversed, and the cause is remanded to the circuit court for further proceedings consistent with this opinion and with Stuart I.
¶ 68. ANN WALSH BRADLEY, J. (concurring). I agree with the majority that the misrepresentations in
¶ 69. I write separately, however, to address the discussion in section III A of the majority opinion and to respond to the concurrence of Justice Roggensack.
¶ 70. The majority concludes in its discussion in section III A that “misrepresentations volitionally made” cannot constitute an occurrence within the meaning of a CGL policy. Id., ¶ 45. To the extent that the discussion in III A stands for the proposition that a volitional misrepresentation is synonymous with an intentional misrepresentation, and that damages resulting from volitional (i.e., intentional) misrepresentations are not covered by the CGL policy here, I am in complete accord.
¶ 71. To the extent that the discussion set forth in ¶¶ 39-44 of section III A suggests otherwise, I would not join that part of the discussion. I believe that “accident” should be construed as understood by the reasonable insured and, following the majority of jurisdictions, the determination should be based on whether the injury or damages are unexpected and unintentional.1
¶ 72. I turn next to аddress the interpretation of accident in Justice Roggensack‘s concurrence. The concurrence argues that the majority misreads Everson v. Lorenz, 2005 WI 51, 280 Wis. 2d 1, 695 N.W.2d 298. It attacks the majority‘s interpretation of the conclusion in Everson: “[I]n interpreting Everson, the majority asserts that we concluded that a false assertion requires a degree of volition inconsistent with the term accident.” Justice Roggensack‘s concurrence, ¶ 99 (internal quotes and cites omitted).
¶ 73. The concurrence advances that the majority misapprehends what was intended by Everson. Id. It takes the majority to task for concluding that “under Everson it is only the false assertion that must be volitional.” Id.
¶ 74. I submit that it is the majority that correctly interprets Everson and that it is the concurrence that misapprehends Everson‘s intent. The concurrence appears to interpret Everson as determining that any time there is a volitional act involved in causing damages—including the mere act of speaking—no accident has occurred.2 Id.
¶ 75. By implying that accidents involve only circumstances in which there are no volitional acts of any sort, the concurrence appears to not only misinterpret
¶ 76. The employer carried an insurance policy that covered an “event,” and which defined “event” as the CGL policy in this case defines “occurrence,” that is, as an accident. Id. at 289. We determined that there was coverage because a reasonable insured would expect negligent acts, including the negligent supervision of employees’ intentional acts, to constitute accidents. Accordingly, we concluded the policy covered the allеgations in the case as an accident, and therefore as an event. Id. at 290.
¶ 77. The concurrence‘s analysis would appear to preclude coverage in Doyle. We were explicit that the employees’ acts were intentional. Nonetheless, it was an
¶ 78. The concurrence‘s view would also appear to conflict with Westfield Ins. Co. v. J.C. Penney Corp., Inc., in which a federal court interpreted Wisconsin law in addressing whether there was an accident for the purpose of insurance coverage. 458 F. Supp. 2d 953 (W.D. Wis., 2006). Westfield involved allegations that the negligent design and manufacture of a lamp and lamp cord were substantial factors in causing a fire. Id. at 956-57. Although the Western District of Wisconsin determined that there was an accident for the purposes of insurance coverage, it would seem that designing and manufacturing products are volitional acts, and were a cause of the damage. Would the concurrence‘s view preclude coverage in that case?
¶ 79. Similarly, the test set forth for determining whether there is an accident may conflict with Kalchthaler v. Keller Const. Co., 224 Wis. 2d 387, 591 N.W.2d 169 (Ct. App. 1999). That case involved damage to a building caused by negligent construction. Id. at 392 n.2. The court of appeals determined that the damage was an accident for the purposes of insurance coverage. Id. at 397. Was the cause of the damage intentional insofar as the construction was intended? Does the interpretation of accident in the concurrence suggest that the Kalchthaler court erred?
¶ 80. I agree with the majority‘s conсlusion that there is no accident here. As I see it, this is not a case of negligence. Rather, it is a case in which the misrepresentation was intended.
¶ 81. Accordingly, I respectfully concur.
¶ 82. I am authorized to state that Chief Justice SHIRLEY S. ABRAHAMSON joins this concurrence.
¶ 83. PATIENCE DRAKE ROGGENSACK, J. (concurring). I join only the majority opinion‘s conclusion that American Family Mutual Insurance Company‘s (American Family) policy does not provide coverage for the misrepresentations1 and the negligent construction that the jury found. I write separately because: (1) the
I. BACKGROUND
¶ 84. This lawsuit arises from the design and construction of an addition to the home of the Stuarts. It is the second decision of this court relative to the construction of the Stuarts’ addition, the first being Stuart v. Weisflog‘s Showroom Gallery, Inc., 2008 WI 22, 308 Wis. 2d 103, 746 N.W.2d 762 (Stuart I), to which I filed a separate opinion, concurring in part and dissenting in part.
¶ 86. Five months after entering into the Remodeling Architectural Contract, the Stuarts entered into a second contract with Weisflog‘s Showroom2 entitled, “Remodeling Contract,” in the amount of $278,076.96, to construct their home improvements.
¶ 87. Approximately four years after the construction was completed, the Stuarts commenced this action alleging negligence in the design and construction of their home addition and breach of contract. They later amended the complaint to allege that they were damaged because of Home Improvement Protection Act (HIPA) violations under
II. DISCUSSION
A. Standard of Review
¶ 89. Resolutiоn of the issues that I will address are questions of law, wherein we provide independent review, “but benefiting from the analyses of the court of appeals and the circuit court.” Marder v. Bd. of Regents of the Univ. of Wis. Sys., 2005 WI 159, ¶ 19, 286 Wis. 2d 252, 706 N.W.2d 110. The interpretation of an insurance contract is a question of law. Katze v. Randolph & Scott Mut. Fire Ins. Co., 116 Wis. 2d 206, 212, 341 N.W.2d 689 (1984). Whether the economic loss doctrine applies either to a particular type of claim or to a particular fact set presents a question of law. See Kaloti Enters., Inc. v. Kellogg Sales Co., 2005 WI 111, ¶ 10, 283 Wis. 2d 555, 699 N.W.2d 205; Kailin v. Armstrong, 2002 WI App 70, ¶ 43, 252 Wis. 2d 676, 643 N.W.2d 132.
B. Insurance Coverage
1. The misrepresentation verdicts’ effect on coverage
¶ 90. The Stuarts contend that they suffered property damage due to Weisflog‘s Showroom‘s representations that caused them to enter into the Remodeling Architectural Contract and the Remodeling Contract. The parties do not dispute that it is necessary to show that the property damage was caused by an “occurrence,” in order to come within the American Family CGL policy. “Occurrence” is defined in the policy.
¶ 91. We interpret the language of an insurance policy as “a reasonable person in the position of the insured would have understood the words.” Kremers-Urban Co. v. Am. Employers Ins. Co., 119 Wis. 2d 722, 735, 351 N.W.2d 156 (1984). In regard to property damage, the policy provides:
COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1. Insuring Agreement.
....
b. This insurance applies to “bodily injury” and “property damage” only if:
(1) the “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory“; and
(2) the “bodily injury” or “property damage” occurs during the policy period.
“Occurrence” is defined in the policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Therefore, the policy requirеs that the property damage be caused by an accident in order for damages to be covered by the policy. It follows that, in order for the property damage the Stuarts claim the HIPA-misrepresentations caused to fall within the policy, the defendants’ statements must be accidents.
¶ 92. We have reviewed insurance policies’ definitions of “accident” in a number of cases. We recently considered the meaning of “accident” in a case involving
¶ 93. Everson sued Lorenz based on theories of intentional, negligent and strict liability for misrepresentation due to a typographical error in a real estate condition report that Lorenz, the seller of the real estate, gave to Everson, the buyer. Id., ¶¶ 4-5. The condition report disclosed that portions of 16 of the lots that Lorenz was selling came within the 100-year floodplain. Id., ¶ 5. However, it failed to list the lot that Everson purchased, even though portions of it also came within the 100-year floodplain. Id., ¶ 5. When Everson discovered that a portion of his lot lay within the 100-year floodplain, he sued Lorenz, claiming that he could not build his home in the location that he desired due to Lorenz‘s misrepresentation. Id.
¶ 94. Lorenz tendered the defense of Everson‘s suit for property damage to his CGL insurer. Id., ¶ 6. We opined that coverage for property damage under Lorenz‘s CGL policy was dependent on whether the property damage was caused by an “occurrence.” Id., ¶ 15. Lorenz‘s CGL policy defined “occurrence” as an “accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Id.
¶ 95. Lorenz argued that a typographical error caused the omission of the lot Everson purchased from the list of 16 lots shown on the condition report as lying partially in the 100-year floodplain. Therefore, Lorenz argued the failure to disclose the true condition of the lot he sold to Everson was an “accident.” Id., ¶ 16.
¶ 96. We disagreed. We explained that while the condition report may have accidentally misrepresented
¶ 97. Everson is on all fours with the case before us. First, the policy definition of “accident” is the same in Everson as it is in the American Family CGL policy under review here. Second, the context here is similar to that in Everson, i.e., the Stuarts claim property damage caused by representations that the defendants made. Third, the defendants chose to promise the Stuarts that Weisflog‘s Showroom will design plans and construct an addition to the Stuarts’ home that will comply with the building codes. The defendants’ statements were part of the sales pitch to do business with the Stuarts, just as Lorenz‘s giving of the real estate condition report to Everson was part of Lorenz‘s sales pitch. Therefore, I сonclude that the defendants’ statements are volitional acts and not accidents within the meaning of the American Family CGL policy. Since the defendants’ statements are not accidents, they cannot be occurrences under the CGL policy. Accordingly, I conclude that there is no coverage under the American Family CGL policy for the misrepresentations that the jury found.
¶ 98. The majority opinion employs a somewhat different interpretation of Everson. It relates:
With the jury having found the presence of such volition and intent, in accordance with the requirements of
In support of this conclusion, we turn to Everson....5
¶ 99. It appears to me that the majority opinion misreads Everson and confuses Everson‘s discussion of “volitional act” by adding an intent to deceive to the volitional act.6 Everson did not address whether Lorenz knew the information he gave Everson was false. Everson focused on whether Lorenz gave Everson a real estate condition report that had a typo on it. Everson, 280 Wis. 2d 1, ¶ 22. We concluded that when Lorenz gave Everson the report, Lorenz‘s act was volitional because he intended to give Everson a copy of the report. Id. There is nothing in Everson that implies the court concluded Lorenz knew the report was inaccurate or intended to deceive Everson. However, in interpreting Everson, the majority asserts that “we concluded that a false assertion ‘requires a degree of volition inconsistent with the term accident.’ ”7 The majority‘s reading of Everson misapprehends what must be volitional to be deemed nonaccidental. The majority appears to conclude that, under Everson, it is only the false assеrtion that must be volitional. The majority is mistaken. The volitional act in Everson was not Lorenz‘s assertion, but rather, Lorenz‘s giving to Ever-
¶ 100. Furthermore, we are not free on this review to add questions and answers to the Special Verdict. Nor are we free to support our reasoning in an opinion by inserting facts that were disputed, but which the jury did not find. The majority opinion finds facts throughout the opinion.
¶ 101. The jury made two specific findings in regard to the defendants’ representations. In answering question number 13, the jury found representations were made that the addition “will comply” with the building codes. In answering question 4, the jury found the defendants did not represent that they were licensed architects. The jury did not find that Ronald Weisflog did not understand the Brookfield codes and regulations; yet that is the impression the majority opinion gives.
¶ 102. For example, the majority opinion quotes Robert Stuart‘s statement that Ronald Weisflog told him that he “professed a very high standard of quality.... He understood Brookfield codes and regulations very well. ... He could provide architectural service for us.”8 The majority opinion then says, “Ronald Weisflog knew at the time of the misrepresentations that he was not familiar with an applicable building code.”9 The jury did not find that Ronald Weisflog was not familiar with the building codes when he said that he would construct the addition in compliance with them. Ronald Weisflog repeatedly asserted that he was familiar with the relevant codes. However, the majority opinion supports some of its conclusions by
¶ 103. The majority opinion attempts to put aside my objection in this regard by citing Coney v. Milwaukee & Suburban Transport Corp., 8 Wis. 2d 520, 99 N.W.2d 713 (1959) and asserting, “we may refer to whatever facts in the record support the jury‘s findings.”11 Coney does not apply because Coney is a sufficiency of the evidence opinion where the jury‘s findings were challenged. When a claim is made that the evidence is not sufficient to support a jury‘s verdict, we do consider the record to determine whether there is credible evidence to support that verdict. D‘Huyvetter v. A.O. Smith Harvestore Prods., 164 Wis. 2d 306, 320, 475 N.W.2d 587 (Ct. App. 1991). However, the majority opinion is not evaluating the sufficiency of the evidence in this case. It is using portions of the trial transcript to support findings it chooses to make, not to support findings that the jury made.
¶ 104. By contrast with the majority opinion herein, the record cites I employed in my dissent in Stuart I relative to the jury‘s apportionment of damages (Stuart I, 308 Wis. 2d 103, ¶ 45) were necessary because the majority opinion concluded that the evidence was not sufficient to support the jury‘s verdict on damages. Stuart I, 308 Wis. 2d 103, ¶ 31. As many cases have explained, upon a challenge to the jury‘s verdict based on the sufficiency of the evidence, we
2. Economic loss doctrine
¶ 105. The Stuarts also assert that there is coverage under the CGL policy for property damage they sustained due to Weisflog‘s Showroom‘s negligent construction of the addition to their home.12 The majority addresses this contention by interpreting other provisions of the CGL policy.13 I address it under the economic loss doctrine because I conclude that the Stuarts’ negligent construction claim is precluded by the economic loss doctrine. Therefore, there are no damages that can be awarded for negligent construction and no coverage is needed.
a. General principles
¶ 106. The economic loss doctrine is a common law doctrine created by the courts to recognize that contract law and the law of warranty are better suited than tort law to deal with purely economic loss between two contracting parties. Kaloti, 283 Wis. 2d 555, ¶ 28.
¶ 107. In order to determine whether the economic loss doctrine applies to preclude common law claims for negligence between contracting parties where both a product and services are provided, a court must determine whether the predominant purpose of the contract is to provide a product or to provide services. 1325 N. Van Buren, 293 Wis. 2d 410, ¶ 24; Linden, 283 Wis. 2d 606, ¶¶ 18-22. We employ a totality of the circumstanсes test to determine the predominant purpose of a contract. Linden, 283 Wis. 2d 606, ¶ 22. The totality of circumstances includes both subjective and objective factors. Id. Those factors include,
¶ 108. The Stuarts entered into two separate contracts with Weisflog‘s Showroom, and the jury found Weisflog‘s Showroom was negligent in the design and in the construction of the addition.14 However, the jury awarded no damages for negligent design; it awarded damages only for negligent construction.15 The parties contracted to construct the addition to the Stuarts’ home in the Remodeling Contract.
b. The Remodeling Contract
¶ 109. The Remodeling Contract indisputably involved: (1) the creation of a product, the addition, and (2) services, the construction labor. Therefore, I review the totality of the circumstances to determine the predominant purpose of this contract.
¶ 110. First, the addition constructed included many facets: a new hot tub room; a new, expanded kitchen; a new, expanded master bedroom suite; a powder room and entry change; an add-on to the garage with a mudroom, bath and family room; and an outdoor in-ground swimming pool and surrounding deck. Accordingly, a product was created. Second, the Stuarts’ primary objective in entering into the Remodeling Contract was to nearly double the size of their home and significantly upgrade its amenities. The Stuarts sought a product. Third, the “remodeling contractor,”
¶ 111. I conclude that under the totality of the circumstances presented, the Stuarts contracted for much more than services with materials being merely incidental, in contrast with the circumstances in Cease Electric. The Remodeling Contract had as its predominant purpose the creation of a product, the Stuarts’ home addition. Accordingly, it falls squarely within the economic loss doctrine‘s proscription that the Stuarts may not maintain tort claims for the failure to complete the addition‘s construction in a workmanlike manner. Their claims sound in contract, not in tort. Linden, 283 Wis. 2d 606, ¶ 22.
¶ 112. My analysis of the Remodeling Contract for the Stuarts’ home follows the analysis we employed in 1325 North Van Buren. There, we applied the totality of circumstances test to the remodeling of a warehouse and concluded that the parties bargained to produce a product: 42 residential condominiums and adjacent parking garages. 1325 N. Van Buren, 293 Wis. 2d 410, ¶ 46. My conclusion here is consistent with 1325 North Van Buren and with Linden. Accordingly, in compliance with that precedent, I conclude that the predominant
III. CONCLUSION
¶ 113. Although I respectfully concur, I join none of the majority opinion except its ultimate conclusion that the American Family policy provides no coverage for the claims on which the Stuarts prevailed before the jury.
¶ 114. I am authorized to state that Justice ANNETTE KINGSLAND ZIEGLER joins this concurrence.
Notes
Because the majority opinion in Stuart I chose not to address the issue of whether a promise of future performance is actionable as a misrepresentation and simply assumed that it was actionable, that issue is not before the court in regard to the coverage questions relating to the American Family CGL policy for the same conduct as Stuart I addressed. Therefore, I do not address it further in this opinion, except to note that the Stuarts’ own argument in regard to coverage at once refutes their claim for misrepresentation and supports my view of the law.
This is so because the Stuarts argue in this review that “Weisflog‘s Showroom‘s representations became false after poor
Failure to keep a promise of future performance is actionable as a breach of contract. Eli Envtl. Contractors, Inc. v. 435 Partners, LLC, 2007 WI App 119, ¶ 6, 300 Wis. 2d 712, 731 N.W.2d 354. Accordingly, I continue to stand by my separate opinion in Stuart I as a correct statement of the law of actionable misrepresentation.
- Did Weisflog‘s Showroom Gallery, Inc., make any false, deceptive, or misleading representations in order to induce the Plaintiffs, Robert & Lin Stuart to enter into a remodeling architecture contract, or to obtain or keep any payment under the remodeling architecture contract?
ANSWER: Yes. - Did the remodeling contractor or its agents make false, deceptive or misleading representations that remodeling work will comply with the building codes in order to induce the Plaintiffs Robert and Lin Stuart to enter the remodeling contract?
ANSWER: Yes.
Id., ¶ 32.Prohibited Trade Practices. No seller shall engage in the following unfair methods of competition or unfair trade practices:
. . . .
(11) Misrepresentations; general. Make any false, deceptive or misleading representation in order to induce any person to enter into a home improvement contract, to obtain or keep any payment under a home improvement contract, or to delay performance under a home improvement contract.
Id., ¶ 31.Any person suffering pecuniary loss because of a violation by any other person of any order issued under this section may sue for damages therefor in any court of competent jurisdiction and shall recover twice the amount of such pecuniary loss, together with costs, including a reasonable attorney‘s fee.
Justice Roggensack‘s concurring opinion describes our reference to such statements in the record as inappropriate references because, she contends, we may not refer to facts in the record beyond the words of the jury‘s special verdict answers to support our opinion. Justice Roggensack‘s concurrence, ¶ 100. However, this limited approach to appellate review is not supported by legal authority. It is well established that upon reviewing a jury‘s special verdict answers or other findings, we may refer to whatever facts in the record support the jury‘s findings. See Coney v. Milwaukee & Suburban Transp. Corp., 8 Wis. 2d 520, 528, 99 N.W.2d 713 (1959); Huffman v. Reinke, 268 Wis. 489, 490, 67 N.W.2d 871 (1955). Similarly, we may turn to supporting documents in the record to interpret a jury‘s findings. See U.S. v. Bass, 327 F. Supp. 959, 960 (E.D. Wis. 1971). Here, the jury answered “yes” to Special Verdict Question #1, which asked whether Weisflog Showroom Gallery, Inc. made “any false, deceptive, or misleading representations in order to induce the Plaintiffs, Robert & Lin Stuart to enter into a remodeling architecture contract, or to obtain or keep any payment under the remodeling
Other portions of the majority opinion make similar factual findings. I have chosen not to detail all of them here, except to repeat that we are bound by the jury‘s findings. See id., ¶ 9 n.10, 41-42.