Bertler v. Employers Ins. of Wausau

• Decision Date: 28 November 1978
• Docket Number: No. 76-361,76-361
• Citation: 86 Wis.2d 13,271 N.W.2d 603
• Parties: David J. BERTLER, Plaintiff-Appellant, v. EMPLOYERS INSURANCE OF WAUSAU, a Domestic Corporation, and Economy Fire and Casualty Company, a Foreign Corporation, and Kenneth A. Kulas, Defendants- Respondents.
• Court: Wisconsin Supreme Court

Page 603

271 N.W.2d 603

86 Wis.2d 13

David J. BERTLER, Plaintiff-Appellant, v. EMPLOYERS INSURANCE OF WAUSAU, a Domestic Corporation, and Economy Fire and Casualty Company, a Foreign Corporation, and Kenneth A. Kulas Defendants- Respondents.

No. 76-361.

Supreme Court of Wisconsin.

Argued Oct. 31, 1978.

Decided Nov. 28, 1978.

The judgment appealed from was entered upon a motion for summary judgment. The judgment dismissed the plaintiff's complaint against one of the insurance company defendants because of an exclusion provision of the policy. The plaintiff appeals.

Harry F. Peck, Milwaukee (argued), for appellant; Ralph Adam Fine and Petrie, Stocking, Meixner & Zeisig S. C., Milwaukee, on brief.

Robert C. Evans, Waukesha (argued), for respondents; Wimmer, Evans & Vollmar, Waukesha, on brief.

BEILFUSS, Chief Justice.

On May 7, 1974, the plaintiff David J. Bertler was working on the premises of his employer A. O. Smith Corporation in Milwaukee. Bertler was struck by a forklift vehicle operated by the defendant Kenneth A. Kulas, a co-employee. Both Bertler and Kulas were within the scope of their employment. Bertler was severely injured.

The plaintiff brought this action for his personal injury damages against Kulas and the defendant Economy Fire & Casualty Company, Kulas' homeowners liability insurer, ¹ alleging Kulas was negligent.

The action was brought pursuant to sec. 102.29, Stats., which provides in part as follows:

"Third party liability. (1) The making of a claim for compensation against an employer or compensation insurer for the injury or death of an employe shall not affect the right of the employe, the employe's personal representative, or other person entitled to bring action, to make claim or maintain an action in tort against any other party for such injury or death . . . ."

Economy Fire & Casualty brought a motion for summary judgment requesting the complaint be dismissed based primarily upon its policy's "business pursuit" exclusions. The exclusion in the policy is as follows:

"This policy does not apply:

"1. Under Coverage E Personal Liability and Coverage F Medical Payments to Others: . . .

"d. to bodily injury or property damage arising out of business pursuits of any insured except activities therein which are ordinarily incident to non-business pursuits."

The trial court concluded Kulas was engaged in a "business pursuit" at the time of the injury to the plaintiff and granted the motion for summary judgment.

The issues before us on appeal are (1) whether operating a forklift in the course of employment falls within the "business pursuit" exclusion contained in the personal liability or homeowners insurance policy, and (2) if so, whether the application in co-employee situations violates Wisconsin public policy.

Under the terms of the personal liability and homeowners insurance policy issued to defendant Kulas, Economy Fire & Casualty Company "agrees to pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury or property damage, to which this insurance applies, caused by an occurrence." It is not disputed that defendant Kulas is an "insured" and that the forklift accident in which plaintiff was injured is an "occurrence." The matter which is contested and the issue before this court on appeal is whether this occurrence falls within the "business pursuit" exclusion in the policy, thus relieving the insurer of the liability it would otherwise have incurred by virtue of the general provisions of the insurance agreement.

Insurance contracts are controlled by the same rules of construction as are applied to other contracts. Ehlers v. Colonial Penn Ins. Co., 81 Wis.2d 64, 74, 259 N.W.2d 718 (1977). These general principles were reiterated in D'Angelo v. Cornell Paperboard Products Co., 59 Wis.2d 46, 49, 207 N.W.2d 846, 848 (1973):

"In interpreting and construing an insurance contract, '. . . the objective should be to ascertain the true intention of the parties.' Home Mut. Ins. Co. v. Insurance Co. of North America (1963), 20 Wis.2d 48, 51, 121 N.W.2d 275, 277; Inter-Insurance Exchange v. Westchester Fire Ins. Co. (1964), 25 Wis.2d 100, 104, 130 N.W.2d 185. Ambiguities in an insurance contract are to be resolved against the insurer who drafted it and in favor of the insured. Kopp v. Home Mut. Ins. Co. (1959), 6 Wis.2d 53, 94 N.W.2d 224; Luckett v. Cowser (1968), 39 Wis.2d 224, 159 N.W.2d 94.

"However, where no such ambiguity exists, the rule of strict construction against insurers is not applicable. Leatherman v. American Family Mut. Ins. Co. (1971), 52 Wis.2d 644, 190 N.W.2d 904; Westerman v. Richardson (1969), 43 Wis.2d 587, 168 N.W.2d 851. To do otherwise would be '. . . to bind an insurer to a risk which it did not contemplate and for which it was not paid . . .' Inter-Insurance Exchange v. Westchester, supra, 25 Wis.2d at p. 104, 130 N.W.2d at p. 188."

While courts are to construe insurance contracts to give effect to the intentions of the parties, objective rather than subjective intent is the test. As was recently restated in Cieslewicz v. Mutual Service Casualty Ins. Co., 84 Wis.2d 91, 97-98, 267 N.W.2d 595, 598 (1978):

"We have also held that an insurance policy should be construed as it would be understood by a reasonable person in the position of the insured. Garriguenc v. Love, 67 Wis.2d 130, 226 N.W.2d 414 (1975). The language of the policy is to be given the common and ordinary meaning it would have in the mind of a lay person. Lawver v. Boling, 71 Wis.2d 408, 238 N.W.2d 514 (1976)."

Homeowner's insurance is a combination of many of the property and liability types of insurance coverages purchased by the average insured to protect against risks arising both in the home and away from the home. ²

While these policies combine both at-home and away-from home coverages, it has been said that "their primary function is to provide a package of coverage for the insured in his homeowner capacity." Donovan v. Nettles, 327 So.2d 433 (La.App. 4th Cir. 1976).

A concise statement of the function of general public liability insurance is provided in Long, The Law of Liability Insurance, sec. 10.01, p. 10-2:

"Sec. 10.01 In General

"The purpose of general public liability insurance is to indemnify the insured against loss by reason of legal liability to pay damages on account of bodily injury or property damage caused by accident and arising out of specified hazards. The coverage granted an insured under forms of public liability insurance depends on the insuring agreements, exclusions, and conditions of the policy purchased by him, but it may well not be coextensive with his legal liability to respond in damages on every occasion."

Frequently both the homeowner's and the public liability coverages are combined, as in the present case, in a single insurance agreement. The intended role of these two types of coverages should be kept in mind in construing the language in the exclusionary clause pertaining to business pursuits. The nature and purpose of the policy as a whole has an obvious bearing on how far the insured could reasonably expect the scope of the exclusion to extend and whether the risk involved here is one the insurance company had in fact contemplated (or should have contemplated) in computing its rates.

The "business pursuits" exclusion is a common exception to the broad coverage provided in homeowners and general liability insurance policies. The reasons for this particular exclusion from the general coverage provided in the policy have been analyzed and summarized by various commentators. They are in substantial agreement.

Mehr and Cammack, Principles of Insurance (4th ed. 1966), give the following explanation for the provision:

"The customary exclusions found in Section II of the homeowner's policy illustrate several of the . . . reasons for trimming down coverage. It excludes business and professional liability, a coverage not essential to every purchaser of this contract, and one requiring special underwriting and rating." Cited in Frazier, "The 'Business Pursuits' Exclusion in Personal Liability Insurance Policies," 572 Insurance Law Journal 519, 520 (1970).

Lawrence A. Frazier, in an article analyzing court decisions which dealt with the exclusion, made these assertions concerning its necessity and functioning:

". . . these exclusions are necessary for one or more of the following reasons: management of the moral hazard; keeping rates at a reasonable level; eliminating coverages that are provided by other contracts of insurance the insured is apt to have; eliminating coverages not needed by the typical purchasers of the contract; eliminating uninsurable perils; and eliminating specialized coverages that require special underwriting and rating." Frazier, "The 'Business Pursuits' Exclusion in Personal Liability Insurance Policies," 572 Insurance Law Journal 519 (1970), citing Kulp & Hall, Casualty Insurance, 4th ed. 1968 at p. 80.

In a 1977 update to his first article, Frazier amplifies his prior statement as follows:

"The comprehensive personal liability policy (and the several package policies that incorporate it) is designed to insure primarily within the personal sphere of the policyholder's life and to exclude coverage for hazards associated with regular income-producing activities. The hazards of personal activities are generally shared by, and common to, all those that constitute the pool being insured, but the hazards of their respective income-producing activities are diverse and involve different legal duties and a greater risk of injury or property damage to third parties than personal pursuits. Business activities can be insured by other types of policies. Their exclusion from personal liability policies avoids areas requiring specialized underwriting, prevents unnecessary coverage overlaps, and helps keep premiums low." Frazier, "The Business-Pursuits Exclusion...