Bergquist v. Auto-Owners Ins. Co.
| Decision Date | 13 January 2020 |
| Docket Number | 19-cv-104-jdp |
| Parties | DONN BERGQUIST, Plaintiff, v. AUTO-OWNERS INSURANCE COMPANY, Defendant and Third-Party Plaintiff, v. SUPERIOR WATER LIGHT AND POWER COMPANY, Third-Party Defendant. |
| Court | U.S. District Court — Western District of Wisconsin |
Plaintiff Donn Bergquist brings this lawsuit against his insurer, defendant Auto-Owners Insurance Company, seeking coverage for water damage to his property. Dkt. 1. Auto-Owners denied coverage, and Bergquist has moved for partial summary judgment, asking the court to declare that his policy covers the damage under an endorsement for "Equipment Breakdown." Dkt. 12. He also asks the court to compel an appraisal of his property to determine the scope of his loss. Dkt. 13. The court concludes that Bergquist is not entitled to coverage under the Equipment Breakdown endorsement, so the court will deny Bergquist's motion for partial summary judgment on the merits, and it will deny his request for an appraisal as moot.
In its opposition to Bergquist's motion, Auto-Owners asks for summary judgment in its favor on the grounds that the policy provides no coverage for Bergquist's loss. Bergquist relied exclusively on the Equipment Breakdown endorsement, so it appears at this point that Auto-Owners may be right. The court will order Bergquist to identify any other provision of his policy that provides coverage for the damage to his property.
The following facts are undisputed.1
Auto-Owners insured a commercial property owned by Bergquist that sustained extensive water damage in 2018. Bergquist filed a claim with Auto-Owners, who hired an engineer to investigate the claim. The engineer determined that the damage was caused by a degraded underground pipe that ruptured. Dkt. 19-2. Auto-Owners denied Bergquist's claim in a letter, citing an exclusion for "damage caused by water under the ground surface that flows through floors, doors or windows." Dkt. 30-1. Auto-Owners said that its letter was not "an exhaustive statement" of its position regarding coverage under the policy. Id.
Bergquist contends that his loss is covered under the endorsement for "Equipment Breakdown." Dkt. 22-3 at 50-56.2 The endorsement says that Auto-Owners will pay for Equipment Breakdown subject to the policy limits. Section 1.a. Equipment Breakdown is defined in section 3.b. as follows:
Section 3.b. But the definition continues with several express exclusions. Those exclusions are stated, in relevant part, as follows:
Bergquist contends that the damage to his property is covered under the policy's Equipment Breakdown endorsement. The parties accept the engineer's report that the damage to Bergquist's property was caused by an underground water pipe connected to a fire hydrant that had degraded and ruptured. Dkt. 19-2, at 1.
The application of an insurance contract to undisputed facts presents a question of law for the court. Beerbohm v. State Farm Mut. Auto. Ins. Co., 2000 WI App 105, ¶ 8, 612 N.W.2d 338, 235 Wis. 2d 182. In determining the meaning of an insurance contract, the court's goal is to determine the intent of the parties and give effect to that intent. Folkman v. Quamme, 2003 WI 116, ¶ 16, 665 N.W.2d 857, 264 Wis. 2d 617. The court must determine how "a reasonable person in the position of the insured" would have understood the contract. Id., ¶ 20. The court must "construe ambiguities in favor of the insureds and narrowly construe exclusions against insurers." Id., ¶ 16.
The parties focus their arguments on the exclusions in section 3.b. of the endorsement, particularly the wear and tear exclusion. But the analysis must begin by determining whetherthe endorsement grants coverage in the first place. Connors v. Zurich Am. Ins. Co., 2015 WI App 89, ¶ 20, 872 N.W.2d 109, 365 Wis. 2d 528. If so, the court must then determine whether the policy contains an exclusion that would preclude coverage of the claim. Id. If an exclusion applies, then the court must determine whether any exceptions to that exclusion would require coverage of the claim. Id.
The endorsement defines "equipment breakdown" as physical loss or damage that meets two requirements. Dkt. 22-3, at 55. First, the loss or damage must originate within specified types of equipment. Second, the loss or damage must result from certain specified causes. The second requirement is met because the damage to Bergquist's property was caused by the rupture of a pipe. This falls within subsection 3.b.(2)(c), which applies to rupture or bursting.
But the first requirement is not met, because the damage to Bergquist's property did not originate within the specified types of equipment. The court will assume that the ruptured pipe constitutes "pressure piping" as specified in subsection 3.b.(1)(a). But that subsection continues with exclusions, and the exclusions include "any water piping." The exclusion for "any water piping" includes three exceptions: boiler feed piping, boiler condensate piping, and piping that is part of a refrigeration or air conditioning system. None of those exceptions apply. So subsection 3.b.(1)(a)(4) excludes coverage for damage that originates in water piping, which is the source of the damage to Bergquist's property.
Bergquist says that even if the initial cause of the damage to his property was excluded from coverage, the damage is covered because damage that results from an excluded cause might nevertheless be covered. Bergquist relies on the sentence that introduces the list of exclusions in the second half of section 3.b. That sentence says:
Section 3.b. (emphasis added).
The provision Bergquist invokes is an example of an "ensuing loss" provision. See Arnold v. Cincinnati Ins. Co., 2004 WI App 195, 688 N.W.2d 708, 276 Wis. 2d 762. An ensuing loss provision covers a loss that would otherwise be...
To continue reading
Request your trial