Acuity v. Soc'y Ins.
| Decision Date | 05 January 2012 |
| Docket Number | No. 2009AP2432.,2009AP2432. |
| Citation | 810 N.W.2d 812,339 Wis.2d 217,2012 WI App 13 |
| Parties | ACUITY, a mutual insurance company, Plaintiff–Appellant, VPP Group, LLC, Involuntary–Plaintiff, v. SOCIETY INSURANCE, a mutual company, Defendant–Respondent, Ron Stoikes d/b/a RS Construction and Terry Luethe d/b/a Flint's Construction, Defendants. |
| Court | Wisconsin Court of Appeals |
On behalf of the plaintiff-appellant, the cause was submitted on the briefs of James G. Curtis and Francis M. Doherty of Hale, Skemp, Hanson, Skemp & Sleik, LaCrosse.
On behalf of the defendant-respondent, the cause was submitted on the brief of James W. Mohr, Jr. of Mohr & Anderson, LLC, Hartford.
Before LUNDSTEN, P.J., VERGERONT and HIGGINBOTHAM, JJ.
¶ 1 This case arises out of damages suffered by VPP Group, LLC, stemming from construction work being performed by contractors on a building owned by VPP. VPP was insured by Acuity. Acuity paid the damage claims filed by VPP arising out of the construction work. Acuity then filed a subrogation action against the contractors and their insurer, Society Insurance. Society moved for summary judgment.
The circuit court granted the motion and declared that Society's CGL policies did not provide coverage for damages caused VPP by the contractors because there was no "occurrence" within the meaning of the policies under the facts of this case.1 Because we conclude that the damages suffered by VPP are a result of an "occurrence," the economic loss doctrine does not bar coverage and no business risk exception in the policy applies, we conclude there is coverage under Society's policy. We therefore reverse the circuit court's order for summary judgment and remand to the circuit court for further proceedings.
¶ 2 VPP, Ron Stoikes d/b/a RS Construction (RS), and Terry Luethe d/b/a Flint's Construction (Flint) entered into a contract to remove and reinstall a concrete wall on the south side of the "engine room" building which provided refrigeration and necessary utility services to VPP's entire animal processing plant. The contract, in the form of a "Bid Memo," was dated May 21, 2006, and set forth the following terms: "Bid to include labor for Removal & installation of 49' x 22' h concrete wall[;] Also include shoring & related work." The total contract price was $8500.
¶ 3 The work contracted for was limited to removal and replacement of the engine room's south wall. VPP supplied all materials; RS and Flint provided all labor. RS and Flint began work in late May 2006. RS first shored up the engine room and removed the existing wall to grade level. The VPP processing plant continued at full operation during this phase of the work.
¶ 4 On June 12, 2006, during Flint's excavation of a trench adjacent to the south wall site, the soil began to erode from under the concrete slab of the first floor of the engine room. As a result, the engine room's first floor slab cracked and a portion deflected downward. The part of the building above the compromised floor, including the second floor and roof, likewise deflected downward. The engine room's masonry walls adjacent to the south wall also sustained damage. As a result of this damage to the engine room, the utility service to the rest of the processing plant was disrupted, including electrical service, anhydrous ammonia, and the refrigeration functions of the engine room's roof top condenser. Also, the roof top condenser was disabled because the water required to run it was too heavy for the damaged roof. Due to this damage, the entire processing plant's refrigeration capacity was reduced by twenty-five percent. In addition to the engine room itself, an adjacent building which shared a common wall incurred large cracks in the cooler housed inside it, which impaired its ability to cool processed beef.
¶ 5 Beef being processed must be rapidly cooled, and the processing is monitored by United States Department of Agriculture (USDA) on-site inspectors during all processing shifts. Because of the reduced refrigeration capacity, VPP had to change its processing schedule, adding an extra animal "kill" day, to ensure that it could fill its customer orders. Because of the need to add another "kill" day, VPP incurred costs for additional personnel hours, additional USDA inspectors' hours, extra freight and fuel charges, and other expenses in the amount of approximately $380,000.
¶ 6 VPP repaired the engine room by replacing that portion of the first floor concrete slab that had cracked, jacking up the second floor level to its original level and replacing portions of the roof slab that had cracked. Only after these repairs were made was RS able to complete the original job of rebuilding the south wall.
¶ 7 VPP contacted its insurer, Acuity, following the loss. After adjusting the losses, Acuity paid a total of $636,466.39 to VPP in final settlement of the loss claims, which amount included the $380,000 claimed for the extra expenses and the remainder representing the damages relating to repairs to the building. Not included in this amount were the costs to VPP related to replacing the south wall.
¶ 8 Acuity commenced this subrogation action against RS and Flint and their insurer, Society Insurance, seeking to recover damages arising from the engine room collapse, and alleging breach of contract and negligence. The applicable policy language states:
The policy defines "Property damage" as:
¶ 9 The policy also includes two exclusions which Society contends bars coverage:
¶ 10 Society moved for summary judgment, asserting that based on the above language of the CGL policy it issued to RS and Flint, there was no liability coverage for VPP's loss. The circuit court granted Society's motion for summary judgment, finding there was no "occurrence" under Society's policy. Acuity appealed. Additional facts, as necessary, are set forth in the discussion below.
¶ 11 The issue on appeal is whether there is coverage for VPP's claims under Society's CGL policies issued to RS and Flint. We review a grant of summary judgment de novo, applying the same methodology as the circuit court. State v. Bobby G., 2007 WI 77, ¶ 36, 301 Wis.2d 531, 734 N.W.2d 81. Summary judgment is appropriate when the affidavits and other submissions show that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. WIS. STAT. § 802.08(2). "We draw all reasonable inferences from the evidence in the light most favorable to the non-moving party." Burbank Grease Servs., LLC v. Sokolowski, 2006 WI 103, ¶ 40, 294 Wis.2d 274, 717 N.W.2d 781.
¶ 12 The interpretation of an insurance contract presents a question of law, which we also review de novo. Glendenning's Limestone & Ready–Mix Co. v. Reimer, 2006 WI App 161, ¶ 19, 295 Wis.2d 556, 721 N.W.2d 704. "Judicial interpretation of a contract, including an insurance policy, seeks to determine and give effect to the intent of the contracting parties." American Family Mut. Ins. Co. v. American Girl, Inc., 2004 WI 2, ¶ 23, 268 Wis.2d 16, 673 N.W.2d 65. "The language in an insurance contract should be given its ordinary meaning—the meaning a reasonable person in the position of the insured would give the terms." Kalchthaler v. Keller Constr. Co., 224 Wis.2d 387, 393, 591 N.W.2d 169 (Ct.App.1999). We do not interpret insurance policies, however, "to provide coverage for risks that the insurer did not contemplate or underwrite and for which it has not received a premium." American Girl, Inc., 268 Wis.2d 16, ¶ 23, 673 N.W.2d 65.
¶ 13 Acuity argues that the partial collapse of the engine room that resulted from faulty excavation techniques by Flint constitutes an "occurrence" under the CGL policy. Society contends that the circuit court correctly found that there was no "occurrence" under the policy. We agree with Acuity that the partial collapse of the engine room was an "occurrence" under Society's CGL policy.
¶ 14 To determine whether a claim is covered by a liability insurance policy, courts use a three-step process. See id., ¶ 24. "First, we examine the facts of the insured's claim to determine whether the policy's insuring agreement makes an initial grant of coverage." Id. "If an initial grant is triggered, we look to see if any exclusions apply." United Coop. v. Frontier FS Coop., 2007 WI App 197, ¶ 8, 304 Wis.2d 750, 738 N.W.2d 578 (quoting State Farm Fire & Cas. Co. v. Acuity, 2005 WI App 77, ¶ 8, 280 Wis.2d 624, 695 N.W.2d 883). "We strictly construe exclusions against the insurer." Id. Finally, if an exclusion applies, "we then look to see whether any...
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